· The yen rose to a five-month high versus the dollar on Friday on growing tensions between Iran and the United States, while the dollar slipped to a two-week low against a basket of currencies on bets the Federal Reserve would start lower interest rates.
The euro hit a 1-1/2 week peak versus the greenback after French and German business activity strengthened more than expected in June, according to surveys.
The yen moved to 107.045 per dollar during Asian trading, which was its strongest level since Jan. 3. It was last down 0.07% at 107.37 per dollar.
The dollar reversed some of its losses from the prior two sessions after the Federal Reserve on Wednesday signaled it was prepared to lower interest rates later this year.
· The focus now shifts to whether the United States and China can resolve their trade row at a summit in Japan next week of leaders from the Group of 20 leading world economies. Trump and Chinese President Xi Jinping are due to meet at the G20 next weekend, but analysts say chances of a decisive breakthrough are low.
· The greenback was 0.67% lower at $1.1367 per euro after touching $1.1334, the lowest since June 12.
Against a basket of currencies, the dollar was 0.43% lower at $96.21.
The dollar got a lift on news of stronger-than-forecast sales in U.S. existing homes in May. The encouraging news offset IHS Markit data that showed a manufacturing growth weakened to its most sluggish level since September 2009 in June, while services sector activity slumped to its lowest level since February 2016.
Friday’s U.S. data did not change traders expectations the Fed would lower key lending rates, as early as July. They priced in the probability policy-makers may reduce borrowing rates by at least 75 basis points at year-end, based on calculations by CME Group’s FedWatch tool on its interest rates futures.
· U.S. government debt yields posted weekly losses Friday after many investors took the Federal Reserve policy announcement earlier in the week as a sign the central bank could cut rates in the coming months.
Though yields rose on the week’s final day of trading, the yield on the benchmark 10-year Treasury note posted a 4-basis-point decline for the week as it hovered around 2.06%. The 10-year yield fell below 2% for the first time since 2016 on Thursday.
The 2-year Treasury note yield rose slightly on Friday to about 1.76%.
· By the end of September, the European Central Bank will either cut its deposit rate or ease its forward guidance further by pledging to keep interest rates lower for longer, according to a majority of economists in a Reuters poll.
Of those who expect easing, about 80% forecast it to come before the end of September, including almost one-third predicting it to happen as early as next month.
· U.S. President Donald Trump said on Sunday on NBC’s ‘Meet the Press’ news program that he has the power to demote Federal Reserve Chairman Jerome Powell but has not threatened to do so.
· The Trump administration said over the weekend that the United States is prepared to negotiate with Iran without preconditions, days after the two countries nearly came to blows over a downed American surveillance drone.
President Donald Trump, when asked whether he had conditions for talking with Iran, said “not as far as I’m concerned, no preconditions,” though he reiterated that his administration expected Iran to discuss its nuclear program
The United States is provoking Iran and growing risks of miscalculation could lead to a “world war,” according to Malaysia’s Prime Minister Mahathir Mohamad
· U.S. Secretary of State Mike Pompeo said on Sunday that he hopes a letter sent by President Donald Trump to North Korean leader Kim Jong Un can pave the way for new talks aimed at ending North Korea’s nuclear program.
Earlier North Korea’s state-run news agency KCNA said Kim had described the letter as being “of excellent content” but did not disclose any details about Trump’s message.
Pompeo did not discuss the contents of Trump’s letter, but said the United States has been working to lay foundations for discussions since the Hanoi summit abruptly ended by Trump. He added: “I think we’re in a better place.”
· Oil futures rose 1% on Friday, with U.S. crude up more than 9% in the week and global benchmark Brent gaining 5%, on fears the United States could attack Iran and disrupt flows from the Middle East, which provides more than a fifth of the world’s oil output.
U.S. gasoline futures, meanwhile, jumped around 4% following a massive fire at Philadelphia Energy Solutions’ refinery in Philadelphia, the largest on the U.S. East Coast.
While the rise in U.S.-Iranian tensions has largely driven the crude price gains, analysts said an early July meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies to reassess production targets, a potential softening of trade tensions between the United States and China and the refinery fire were also supporting prices.
Brent futures were up 69 cents, or 1.1%, to $65.14 a barrel, while the most active U.S. West Texas Intermediate (WTI) crude contract settled up 0.6% at $57.43.
That put Brent on track to gain about 5% for the week, its first weekly gain in five weeks, and WTI to jump more than 9%, which is its biggest weekly percentage gain since December 2016.
· U.S. President Donald Trump said on Friday he aborted a military strike to retaliate for Iran’s downing of an unmanned U.S. drone because it could have killed 150 people, and signaled he was open to talks with Tehran.
Reference: CNBC, Reuters
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