· The dollar edged lower but held close to its recent highs on Thursday as investors struggled to make sense of U.S. President Donald Trump’s mixed signals on a trade deal with China.
The dollar index, which measures the greenback against a basket of currencies, was last down 0.1% at 98.985 but was only a whisker away from a two-week high and the two-year peak of 99.37 hit earlier this month.
The euro rose 0.1% to $1.0947.
The Japanese yen, perceived as a safe haven currency, rose 0.1% to 107.68 yen per dollar.
Sterling steadied at $1.2354 after plunging more than 1% on Wednesday as traders fretted about the deepening confrontation in the British parliament over Brexit.
“We need new direction,” said Neil Mellor, a markets analyst at BNY Mellon, citing a pushback from central banks to markets expecting more monetary stimulus and confusion over whether the United States can strike a deal with China for the current range-bound moves in FX markets.
· USD/JPY technical analysis: Under pressure, bull flag seen on 15-min chart
USD/JPY is currently trading at 107.65, representing 0.10% losses on the day. The pair is trading in the red amid a marginal decline in the futures on the S&P 500 index.
The Bank of Japan (BOJ) trimmed purchases of bonds maturing in five to 10 years, but the move failed to move the needle on the JPY pairs. After all, the reduction was part of routine operations.
Looking forward, the pair may rise well above 108.00 if the bull flag seen on the 15-minute chart is breached to the higher side.
· The United States is imposing new sanctions on certain Chinese entities and people who it accuses of knowingly transferring oil from Iran in violation of Washington’s curbs on Tehran, U.S. Secretary of State Mike Pompeo said on Wednesday.
The U.S. Treasury Department announced that it placing sanctions on five Chinese nationals and six entities, including two Cosco Shipping Corporation subsidiaries.
China’s Foreign Ministry deplored on Thursday sanctions imposed by the United States on Chinese entities and individuals it accuses of knowingly transferring oil from Iran in violation of Washington’s curbs on Tehran.
Ministry spokesman Geng Shuang made the comments at a daily news briefing in Beijing, adding that China’s cooperation with Iran was legitimate and legal.
· The new sanctions show that Iran is still a “potential flashpoint” between the U.S. and China, said analysts at risk consultancy Eurasia Group.
The latest American sanctions “indicate that the US is keeping a close eye on Chinese activities, even with Iran hawk John Bolton out of the White House,” Eurasia said.
However, the consultancy group warned there are other risks that could lead to further escalation.
“Triggers for a major US escalation would include: more overt Chinese support for Iran and/or a deterioration in US-China trade talks such that Trump allows hawks in the administration to pursue more impactful sanctions,” Eurasia Group said.
· Bank of Japan Governor Haruhiko Kuroda said on Thursday that he would guide monetary policy appropriately without any preset conditions in mind, while warning against heightening risks from the global economy and the Chinese-U.S. trade war.
Kuroda also said it was important for the central bank to stick patiently to its powerful monetary easing to maintain momentum toward achieving its 2% inflation target.
“Risks are skewed to the downside, mainly from overseas economies,” he said in a speech at an annual meeting for Japan’s securities industry.
· China’s economic numbers in the last few months have disappointed expectations but the worst is not over — analysts are expecting third quarter data to come in even weaker than before.
A quarterly survey by China Beige Book released Wednesday showed that growth slowed in the third quarter while debt levels soared.
“Nationally, revenue, profits, output, sales volumes, and job growth all slowed from a quarter ago, as did both domestic and export orders,” the report said, citing China Beige Book’s survey of more than 3,300 Chinese businesses.
Critically, the firm found that debt levels remain on the rise, with bond issuance climbing to its highest in the history of the survey.
The ratio of the so-called “shadow banking” to overall borrowing was also at the second-highest on record. Shadow banking refers to unregulated lending activities that are often present higher risks as they are subjected to less regulatory oversight.
Yuxian Zhang, director general at the State Information Center’s economic forecasting department, also said the third quarter would mark a low point for China this year.
Zhang expects gross domestic product to increase 6.1% in the third quarter and 6.2.% in the fourth, bringing the annual total to between 6.2% and 6.3%.
Percentage points aside, it’s unclear how effective the Chinese government will be in its efforts to balance supporting the economy with reducing reliance on debt for growth.
Trade tensions with the U.S., once China’s largest trading partner, have significantly added to economic uncertainty in the last year.
· China’s factory activity is expected to have contracted for a fifth straight month in September, a Reuters poll showed, adding to the country’s economic woes as Beijing remains locked in an escalating trade war with the United States.
The official Purchasing Managers’ Index (PMI) for September is expected to remain flat at 49.5 from August, according to the median forecasts of 22 economists, below the 50-point mark that separates expansion from contraction on a monthly basis.
· India’s economy may not be as big as China’s, but it could still be a good partner for the U.S. amid a protracted trade war, one global political analyst told CNBC on Tuesday.
“India is still a very large country. It has a relatively robust economy, (it has) a lot of potential down the road. It is not a true counterbalance to China in the Indian Ocean basin but it is certainly a country that can be a strategic partner with the United States in that region,” said Rodger Baker, senior vice president of strategic analysis at geopolitical intelligence firm Stratfor.
On Sunday, U.S. President Donald Trump and Indian Prime Minister Narendra Modi appeared together at a Texas rally, increasing hopes for a trade deal between the world’s largest and sixth largest economies. Negotiators are trying to hash out a deal for Modi and Trump to sign at the United Nations General Assembly in New York this week, Reuters reported citing people familiar with the matter.
· Hong Kong leader Carrie Lam will hold her first talks with the public on Thursday in a bid to resolve a political crisis that has fueled nearly four months of sometimes violent protests and plunged the Chinese-run city into chaos.
Beijing-backed Lam will hold a dialogue with 150 members of the community, with each participant given around three minutes to express their views, city authorities have said.
· Oil prices edged lower on Thursday, extending losses from the previous two sessions, as Saudi Arabia quickly regained production volumes after an attack on its oil facilities and amid increasing signs of slowing demand.
Brent crude LCOc1 futures were at $62.36 a barrel, down 3 cents, or 0.1%, from the previous close, by 0659 GMT.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were 9 cents lower, or 0.2%, to $56.40 a barrel.
Analysts said there was little else besides the slightly more positive outlook on the trade talks to help lift crude futures higher.
Reference: Reuters, CNBC, FX Street
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