· Dollar slips, yen inches higher as Fed rhetoric in focus
The dollar slipped and yen and yuan led Asia’s currencies a little higher on Monday, as investors looked ahead to a slew of U.S. Federal Reserve speakers this week and to a decision on the inclusion of Chinese government bonds in a global index.
Moves were slight and volumes light due to a public holiday in Japan. The dollar index, which tracks the greenback against a basket of six major currencies, dipped 0.2% to 92.779.
The yen and yuan rose about 0.3% each, with the yen touching a seven-week peak of 104.27 per dollar and the yuan hovering just below a 16-month high it hit last week.
Foreigners’ Chinese bond buying has helped put the yuan on a tear, lifting it nearly 6.5% in four months.
Investors are expecting FTSE Russell will include China in its World Government Bond Index on Thursday, likely triggering even more inflows and supporting the currency.
The yuan edged back toward last week’s 16-month high in Asia, rising to 6.7570 in onshore trade.
The euro and sterling crept toward the top of ranges they have occupied for a couple of weeks, with the euro last at $1.1867 and sterling at $1.2958.
The yen looked to break new ground, extending a week of solid gains amid trepidation about the global economic outlook and perhaps a shift in the yen’s drivers as central banks pin rates around the world at or below zero.
The yen is up nearly 2% in five consecutive weeks of gains.
“The yen is deeply undervalued on standard metrics, private sector portfolio outflows appear to have slowed, and the Bank of Japan seems to have little appetite for more deeply negative rates,” Goldman Sachs analysts said in a note.
“For these reasons we see downside risk to our 12-month dollar/yen target of 105.”
In the short term, analysts said the Fed’s lower-for-longer commitment on rates would drag on the dollar, though close attention will be paid to remarks from committee members this week for any more clues on the new approach to inflation.
Fed Chairman Jerome Powell is due to appear before Congressional committees later this week while Fed committee members Lael Brainard, Charles Evans, Raphael Bostic, James Bullard, Mary Daly and John Williams also make public speeches.
“The dovish Fed will remain a background negative for the dollar,” said Terence Wu, strategist at Singapore’s OCBC Bank.
“Powell’s testimony (on Tuesday) will draw attention, but for now the Fed is likely done playing their cards.”
· Treasury yields mixed with stimulus progress, Fed speakers in focus
U.S. government debt prices were mixed in the early hours of Monday morning, with investors monitoring progress toward a new coronavirus relief bill and a slew of Federal Reserve speakers scheduled this week.
At around 2:05 a.m. ET, the yield on the benchmark 10-year Treasury note was lower at 0.6871% and the yield on the 30-year Treasury bond was up marginally at 1.4551%. Yields move inversely to prices.
Investors will also be looking ahead to a host of speeches from Federal Reserve policymakers this week for further signals on the health of the economic recovery. Lael Brainard is due to speak at 1 p.m. ET on Monday, before Robert Kaplan and John C. Williams deliver addresses at 6 p.m.
· After a tumultuous month of news, Biden maintains national lead over Trump
After a month of political conventions, fresh controversies, more protests and additional deaths from the coronavirus, the 2020 presidential race remains where’s it’s been for months — with Joe Biden leading President Trump nationally by nearly double digits, and with a majority of voters opposing the president.
Those are the results of a new national NBC News/Wall Street Journal poll, which finds Biden ahead by 8 points among registered voters, 51 percent to 43 percent, with more than 50 percent of voters disapproving of Trump’s job performance and with Trump holding the advantage on the economy and Biden holding the edge on the coronavirus.
The NBC News/WSJ poll — conducted Sept. 13-16 — comes after a turbulent and eventful month of news, including the Democratic and Republican conventions, the police shooting of Jacob Blake in Wisconsin, some 30,000 more deaths from the coronavirus, the Atlantic report alleging the president disparaged fallen military service members and the coverage of Bob Woodward’s new book on Trump.
But the poll was conducted before the passing of Supreme Court Justice Ruth Bader Ginsburg on Sept. 18.
According to the survey, Biden leads Trump, 51 percent to 43 percent, among registered voters — essentially unchanged from Biden’s 9-point lead last month, 50 percent to 41 percent.
Six percent in the current poll say they’re undecided or supporting another candidate.
Biden’s biggest advantages in the poll are among Black voters (he gets support from 90 percent of them to 5 percent for Trump), voters ages 18-34 (60 percent to 31 percent), women (57 percent to 37 percent), whites with college degrees (54 percent to 41 percent), independents (45 percent to 39 percent) and seniors (50 percent to 46 percent).
Trump, meanwhile, has the edge among all white voters (52 percent to 43 percent), men (50 percent to 45 percent) and whites without college degrees (59 percent to 36 percent).
· Bill Gates says it’s ‘outrageous’ that Americans still can’t get coronavirus test results in 24 hours
Microsoft co-founder and global health philanthropist Bill Gates criticized the current state of the United States’ response to the Covid-19 pandemic on Sunday, including slow turnaround times for tests.
Gates told “Fox News Sunday” that the access to fast testing is still inadequate more than six months into the pandemic and that the U.S. was set up for a rough fall of virus cases.
“Even today, people don’t get their results in 24 hours. It’s outrageous that we still have that,” Gates said.
· China’s yuan is rallying sharply against the dollar — and analysts say there’s room to run
The Chinese yuan strengthened sharply against the U.S. dollar this week, following gains seen in recent months as the country’s economy recovers and the greenback weakens.
The offshore yuan has jumped more than 1% since last Friday, from levels above 6.83 to as much as 6.74 on Friday. The currency hit its strongest level against the dollar since May 2019. The onshore yuan also gained more than 1% over the same period. Overall, both the onshore and the offshore yuan have spiked more than 5% against the greenback since May.
Analysts say recent strength in the yuan is due to a weakening dollar, which has slumped significantly this year, as well as China’s economic recovery after the worst of the coronavirus hit.
In fact, there’s more room for the currency to gain against the greenback, they say.
“As the dollar has entered this dollar depreciation, this weaker dollar environment, the (yuan) has somewhat lagged,” said JPMorgan Private Bank’s Alex Wolf.
“When we’re looking at the (yuan), we actually haven’t seen a move up that much until recently,” Wolf, head of investment strategy for Asia at the firm, told CNBC’s “Squawk Box Asia” on Friday. He added that the Chinese currency likely has “more catch-up to go.”
· USD/CNY: Oversold pair sees little action after PBOC's status quo rate decision
The People's Bank of China's (PBOC) decision to keep interest rates unchanged fails to elicit a reaction from the USD/CNY pair.
The central bank retained one and five-year loan prime rates (LPR) at 3.85% and 4.65%.
A status quo decision was expected, given the recent improvement in the forward-looking economic indices. For instance, the Caixin China purchasing managers index, which focuses on small, private manufacturers, rose to a nine-year high of 53.1 in August from 52.8 in July.
As such, the CNY hasn't seen notable moves since the rate decision. The USD/CNY pair is trading in the sideways manner near 6.7636 at press time. The pair has declined by over 5% since topping out at 7.1766 in May.
The 14-day relative strength index is hovering below 30 or in the oversold region for the fourth straight week. Therefore, a corrective bounce could be in the offing.
The case for a bounce would strengthen if the US stocks extend the recent risk aversion, boosting the greenback's haven demand. The futures tied to the S&P 500 are currently down 0.20%.
The official data released Friday showed speculators boosted their short positions in the tech-heavy Nasdaq 100 to the highest level since 2008 int he week ended Sept. 15.
· China keeps one-year loan prime rate unchanged at 3.85%, as expected
China keeps its one-year loan prime rate unchanged at 3.85%, as expected and its five-year loan prime rate unchanged at 4.65%, as expected.
The People’s Bank of China has held the 1-year and 5-year loan prime rates at their current levels - 3.85% and 4.65% respectively, since April.
China's expected growth in 2021 is expected to be in double digits which will be a positive for the Australian dollar going forward which has benefitted from a robust bounce back from its Ausyralias largets trade partner.
· Tencent says WeChat will struggle to attract new U.S. users while White House, courts spar over ban
Chinese social media leader Tencent Holdings Ltd has said its WeChat may not be able to win new users in the United States while the White House challenges a court ruling preventing a ban on the messaging app.
Tencent, in a statement filed at Hong Kong’s stock exchange late on Sunday, said it has been evaluating the potential impact of a ban since the U.S. Department of Commerce on Friday issued an order to block WeChat downloads on national security grounds.
· UK ponders second COVID-19 lockdown as outbreak accelerates
British Prime Minister Boris Johnson is pondering a second national COVID-19 lockdown as the novel coronavirus outbreak accelerates.
New COVID-19 cases are rising by at least 6,000 per day in Britain, according to week old data, hospital admissions are doubling every eight days and the testing system is buckling.
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