· The euro held steady on Tuesday, taking a breather after having rallied on the back of optimism about the euro zone’s economic outlook and expectations for the European Central Bank to wind down its massive monetary stimulus.
The euro last changed hands at $1.2263, staying within sight of Monday’s peak of about $1.2296, its strongest since December 2014.
The dollar’s index against a basket of six major currencies stood at 90.509, having pulled up from Monday’s three-year low of 90.279.
Against the yen, the dollar rose 0.4 percent to 110.93 yen, edging away from a four-month low of 110.32 yen set on Monday.
· Despite a U.S. holiday, the dollar dominated trading on Monday as it headed for a fourth day of declines, weakening against every major currency. The euro’s jump weighed on European stocks, while gold gained.
Bloomberg’s dollar index approached its lowest level in three years as the euro extended gains that have pushed it to the strongest since 2014. The Stoxx Europe 600Index struggled, ending lower as the common currency provided a headwind to the region’s exporter-heavy gauge. Mexico’s peso was the big outperformer as emerging currencies gained, while the yuan touched a two-year high as the People’s Bank of China raised the currency’s fixing. West Texas oil fluctuated before climbing for a sixth day.
The dollar remains under pressure after capping five straight weeks of declines, even against a backdrop of solid U.S. growth. Traders appear to be more excited by potentially hawkish policy shifts from central banks in Europe and Japan, the improving political outlook in the euro area, and the synchronized nature of global expansion that’s also propelling emerging-market economies and assets.
The common currency -- which already has momentum after last week’s progress toward a German government -- got a further boost as economists polled in a monthly Bloomberg survey bumped up their 2018 outlook for euro-area growth to 2.2 percent. That’s close to the decade-high 2.4 percent pace estimated for last year.
· A meeting of states that backed South Korea in the Korean war will look at ways to better implement sanctions to push North Korea to abandon its nuclear weapons, officials said, even as the North and South explore detente ahead of next month’s Winter Olympics.
Foreign ministers and senior officials from 20 nations will hold a full-day meeting in Vancouver on Tuesday, hosted by the United States and Canada, looking to increase diplomatic and financial pressure on North Korea to give up development of nuclear missiles capable of hitting the United States, a programme that has raised fears of a new war.
· Germany may be a step closer to forming a new government, but there are doubts that Chancellor Angela Merkel will be its leader for the full mandate, a political analyst told CNBC on Monday.
· The strongest yuan in more than two years is prompting speculation about possible steps to cool its gains.
The currency rose to as high as 6.4138 per greenback on Monday, its strongest level since December 2015, before easing to 6.4440 as of 9:39 a.m. Tuesday. When the yuan rallied beyond 6.5 in September, policy makers made it easier to bet against the currency.
The central bank’s decision to change the way the yuan’s daily reference rate is set, as reported by Bloomberg News last week, was seen by some analysts as a way of slowing the pace of the currency’s gains. While the yuan initially slumped on the news, it’s since rallied 1.3 percent in one of Asia’s biggest advances. For Mizuho Securities Asia Ltd., the next level to watch is 6.4.
· The German central bank’s decision to include the Chinese yuan in its own reserves was another factor dragging on the dollar.
· China’s economy is expected to cool this year as a government-led crackdown on debt risks and factory pollution drag on overall activity, a Reuters poll showed on Tuesday.
Beijing is in the second year of a relentless campaign to wean China off its debt-heavy investment model, clamping down on everything from speculative property lending to shadow-bank financing activities as policy makers look to foster sustainable longer term growth.
That has pushed up borrowing costs and taken some of the momentum off the world’s second-largest economy, especially in the final months of 2017, with growth forecast at 6.5 percent this year, according to economists from 70 institutions surveyed by Reuters.
· “While we remain comfortable about China’s export outlook for 2018, there are still uncertainties about Sino-US trade ties which may suddenly erupt,” Betty Wang, a Hong Kong-based analyst at ANZ, wrote in a note.
· South Korea will make a decision on a proposed ban on cryptocurrency exchanges after "sufficient consultation and coordination of opinions," the country's government said Monday.
Last week, South Korean Justice Minister Park Sang-ki said the government was preparing a bill to ban trading via cryptocurrency exchanges. Two of the country's largest crypto exchanges, Coinone and Bithumb, were also raided on the day Park's comments were made.
· Brent crude oil prices held near $70 a barrel on Tuesday, a level not seen since 2014’s dramatic market slump.
Prices have been driven up by production curbs in OPEC nations and Russia, as well by strong demand thanks to healthy economic growth.
Brent crude futures LCOc1 dipped 30 cents, or 0.4 percent, to $69.96 per barrel by 0748 GMT on Tuesday from the previous day’s close. But traders said Brent was well supported overall around $70 a barrel.
Brent hit $70.37 a barrel on Monday, a December 2014 high, when markets were at the beginning of a three year-long slump.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $64.47 a barrel, up 17 cents, or 0.3 percent from their last settlement. WTI hit a December-2014 peak of $64.89 a barrel in early trading.
Reference: Reuters, CNBC
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