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·         Dollar gains on hold as risks keep speculators at bay

 

The U.S. dollar held on to gains against most currencies on Wednesday as renewed questions about a coronavirus vaccine and lack of an agreement on additional U.S. fiscal stimulus prompted a shift to safer assets.

 

The euro and British pound are likely to extend declines, analysts said, as a return of restrictions on economic activity in Europe and Britain to battle a second wave of coronavirus infections unnerves investors.

 

“U.S. stimulus may not come until after the election. The People’s Bank of China is halting the yuan’s rise. There’s no reason to buy the euro, and there are a lot of euro longs that need to be unwound.”

 

The dollar last stood at $1.1743 per euro EUR=D3, holding on to a 0.6% gain from the previous session.

 

The pound GBP=D3 traded at $1.2926, nursing a 1% loss from Tuesday.

 

Sterling also took a hit due to worries about little progress in trade talks between Britain and the European Union and the chance the Bank of England will adopt negative interest rates.

 

 

·         Global regulators eye 'actions' to ease capital burden on banks

 

Regulators will discuss next month how to ease pressure on global banks to hold unnecessarily large levels of capital in every country they operate, the Financial Stability Board said on Wednesday.

 

 

·         Wife of U.S. Secretary of Labor Eugene Scalia tests positive

 

·         U.S. pauses Eli Lilly’s trial of a coronavirus antibody treatment over safety concerns

·         EU summit to say progress 'still not sufficient' for Brexit trade deal

·         EU would prefer a Brexit deal but ready for no deal, says Breton

 

 

·         China is snapping up Japanese government bonds, and it’s not just for the returns

China’s recent purchase of Japanese government bonds surged to the highest level in more than three years – as the country more than tripled its holdings between April and July this year, compared to the previous year.

During those three months in 2020, China bought 1.46 trillion yen ($13.8 billion) of medium- to long-term JGBs on a net basis, according to Japanese media Nikkei, which cited data from Japan’s finance ministry and its central bank. That was 3.6 times more than the same period last year.

In comparison, the U.S. increased its purchases by only 30% in the same period, that data reportedly showed. Europe, meanwhile, sold off 3 trillion yen worth of JGBs, according to Nikkei.

Longer term bonds typically have higher yields as investors need to take on higher risks for holding on to them for a longer period of time.

“Many reserve managers buy JGBs and then swap or hedge the currency back into dollars, earning an additional ‘basis’ premium,” said David Nowakowski, a senior strategist of multi-asset and macro at Aviva Investors.

It’s also possible that China may be trying to manage the appreciation of the yuan, as the Chinese currency spiked against the Japanese yen in June, Hutchison pointed out. Selling off the yuan to buy JGBs, which are denominated in yen, could help to curb some of that appreciation.

 

·         South Korea’s central bank keeps rates steady as growth outlook sours

South Korea’s central bank kept its policy rate steady on Wednesday as it sought to keep a lid on red-hot property prices, even as it expects the economy to see the worst contraction in over two decades in

2020 due to the coronavirus pandemic.

But the BOK has said it expects the economy to shrink 1.3% in 2020 — which would be the biggest full-year contraction in over two decades.

 

·         India announced nearly $10 billion to prop up growth. Economists are not impressed

 

Economists were not impressed by India’s latest economic stimulus aimed at boosting domestic demand by about 730 billion rupees ($9.94 billion) — and some questioned if the new measures can spur long-term growth.

 

·         Southeast Asia struggles to kickstart its battered tourism industry as the pandemic chokes demand

 The World Tourism Organization, a United Nations specialized agency, predicts that international tourist numbers could plunge by as much as 80% for all of 2020. A May report by the UNWTO showed that Asia and the Pacific saw the “highest impact in relative and absolute terms” in the first three months of this year, with visitor arrivals falling some 33 million.

 
‘Travel bubbles’ in Southeast Asia

 
Although the pandemic remains largely under control in most parts of Southeast Asia, the unpredictability of infections have largely discouraged authorities from opening up their borders more quickly.

   

 

·         Oil prices slipped on Wednesday on concerns that fuel demand will continue to falter as rising coronavirus cases across Europe and in the United States, the world’s biggest oil consumer, could impede economic growth.

 

The Organization of the Petroleum Exporting Countries (OPEC) said in its monthly report on Tuesday that oil demand in 2021 will rise by 6.54 million barrels per day (bpd) to 96.84 million bpd, 80,000 bpd less than its forecast a month ago, as a result of the economic dislocations caused by the coronavirus pandemic.

 

Brent crude futures LCOc1 for December fell by 17 cents, or 0.4%, to $42.28 a barrel by 0649 GMT while U.S. West Texas Intermediate CLc1 futures were down 18 cents, or 0.5%, to $40.02.

 Reference: Reuters, CNBC