· The dollar firmed on Thursday after the euro retreated to a five-month low on concerns political developments in Italy could cause wider disruptions in the euro bloc, while rising U.S. Treasury yields knocked emerging market currencies lower.
The euro was last at $1.1827 EUR=, up 0.15 percent on the day, after sliding overnight to $1.1763, its lowest since Dec. 18. The common currency has shed nearly 1 percent this week.
The dollar index against a basket of six major currencies dipped 0.2 percent to 93.180 .DXY but was in close reach of 93.632, its highest since Dec. 19 marked on Wednesday.
· A second round of U.S.-China trade negotiations kicks off in Washington on Thursday and although the bilateral talks are expected to be tough, there might still be scope to resolve some issues.
Ahead of the talks, both U.S. and Chinese officials have said the differences that remain are significant, with U.S. Ambassador to China Terry Branstad describing the two sides as "very far apart" earlier this week.
"The U.S. side said they want us to reduce a certain amount of the deficit within a limited time. This is not something a government can do through administrative interference, so I think it's not realistic and not logical," Wei Jianguo, deputy director of the Beijing-based Center for China and Globalization think tank, told CNBC's Eunice Yoon.
The U.S. has requested that its trade deficit with China be reduced by $200 billion by 2020, media reports said. In 2017, China had a $275 billion trade surplus with the U.S.
Still, that did not mean the two sides would be unable to work out some compromise to resolve the problem, said Wei, a former vice minister of commerce in China.
· A surging dollar and the highest 10-year U.S. Treasury yields since 2011 are fueling bets that policy makers in key developing nations from India to Mexico will raise interest rates faster than economists previously anticipated.
The turnaround is led by concern that a failure to tighten monetary policy risks the possibility investors will zero in on swollen current-account deficits, spurring currency selloffs and sending inflation soaring.
The fallout is most evident in crisis-hit Argentina, which jacked up its benchmark borrowing rate to 40 percent, but is also pronounced in Asia, where analysts are now predicting rate hikes in Indonesia, India and the Philippines.
“When the Fed’s on the move, central banks in emerging markets try to play catch-up,” said Frederic Neumann, the co-head of Asian economics research at HSBC Holdings Plc in Hong Kong.
· Italy’s two anti-system parties appeared on the verge of clinching a deal to form a coalition government, rattling markets with radical ideas to free up billions of euros for tax cuts and welfare.
Investors seized on a report that the anti-establishment 5-Star Movement and the far-right League party plan to ask the European Central Bank to forgive 250 billion euros ($296 billion) of Italian debt, according to a draft the parties are working on.
· European leaders sought unity on Wednesday toward threatened U.S. import tariffs on steel and aluminium, balancing the views of those most fearful of a trade war and those determined not to be bullied into concessions.
The European Union is willing to discuss cutting trade barriers with the United States, but only in a reciprocal way and only if Washington does not impose import tariffs on EU metals, German Chancellor Angela Merkel said on Thursday.
· Japan is considering slapping tariffs on U.S. exports worth $409 million in retaliation against steel and aluminium import tariffs imposed by President Donald Trump, public broadcaster NHK said on Thursday.
The government is preparing to notify the World Trade Organization of the plan, a necessary procedure under global trade rules, this week, NHK said.
The move is likely to be part of efforts to have Washington add Japan to a list of countries exempted from the U.S. tariffs.
· China does not want to see escalation in Sino-U.S. trade tensions, its commerce ministry said on Thursday, expressing hope that the two sides could minimize conflict during talks being held in the United States.
China hopes the U.S. will take action as soon as possible on the case of Chinese technology company ZTE and resolve it in a fair manner, ministry spokesman Gao Feng told reporters at a regular briefing.
U.S. President Donald Trump pledged on Sunday to help ZTE Corp “get back into business, fast” after a U.S. ban crippled it, offering a job-saving concession to Beijing ahead of this week’s talks.
· Trade in Chinese yuan-denominated crude oil futures has surged since President Donald Trump pulled the U.S. out of the Iran nuclear deal.
Launched on March 26, crude oil futures on the Shanghai International Energy Exchange (INE) were met with fanfare — and skepticism about how much a state-managed marketplace could displace the well-established crude trade in the New York Mercantile Exchange's West Texas Intermediate (WTI) and the Intercontinental Exchange's Brent futures.
But Trump's move to reimpose sanctions on Iran may have spurred interest in the Chinese oil futures. Last Wednesday, daily trade volumes in INE oil futures hit a record of over 240,000 lots, double what they were on Tuesday in Asia, before news of the renewed sanctions broke.
· South Korea said on Thursday it would seek to mediate between the United States and North Korea after Pyongyang threatened to pull out of an unprecedented summit between its leader Kim Jong Un and President Donald Trump on June 12 in Singapore.
· Oil prices hit their highest level since November 2014 on Thursday, with Brent crude creeping ever closer to $80 per barrel as supplies tighten and demand remains strong.
Brent crude futures LCOc1 were at $79.40 per barrel at 0655 GMT, up 0.12 percent from their last close. They earlier touched their highest in more than 3-1/2 years at $79.49 a barrel.
U.S. West Texas Intermediate (WTI) crude futures were at $71.67 a barrel, up 18 cents, or 0.3 percent, from their last settlement. That was not far off Tuesday’s $71.92 a barrel - also a level not seen since November 2014.
· Oil prices are poised to break through $80 per barrel and Asia’s demand is at a record, pushing the cost of the region’s thirst for crude to $1 trillion this year, about twice what it was during the market lull of 2015/2016.
Oil prices have gained 20 percent since January to just shy of $80 per barrel LCOc1, a level not seen since 2014. [O/R]
With the U.S. dollar .DXY - in which virtually all oil is traded - also growing stronger, concerns are rising that economies will take a hit, especially in import-reliant Asia. Surging costs could have an inflationary effect that will hurt both consumers and companies.
Reference: Reuters, CNBC
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