· Dollar retreats again in Asia as solid data offsets virus worries
The dollar handed back some recent gains against most of its major rivals on Tuesday, as strong regional economic data helped to offset worries about a second wave of Covid-19 cases in Europe and the United States.
Profits at China’s industrial firms rose for a fifth straight month in September and South Korea’s economy roared back to growth, official data showed.
That supported the yuan and sent the won soaring close to a seven-month peak. It also unwound some of the previous day’s modest dollar gains against major currencies amid an equities selloff driven by a resurgence in coronavirus infections.
Against a basket of currencies the dollar fell 0.1%.
Growing wariness about the U.S. presidential election kept a lid on large currency movements, however. Since the vote is just a week away many investors appear to have already figured out their positions.
Data shows long bets on the yen shrank for a fourth straight week last week, as investors wagered on a victory for Democrat Joe Biden, though short bets against the yen also fell pointing to heightened uncertainty around the vote.
“People are wary of putting on fresh positions given the event risk,” said Mayank Mishra, an FX strategist at Standard Chartered Bank in Singapore. “Price action over the next one week may remain choppy,” he said.
“The view we’ve taken is that the medium-term dollar bearish dynamics remain in place, irrespective of who comes to the White House. The short-term part may be affected by the outcome, and we believe that a Biden win is likely to accelerate the dollar downside.”
If the Democrats also secure the Senate, a Biden-led administration is likely to press for a larger coronavirus aid package, lifting sentiment, widening the U.S. current account deficit and weakening the dollar.
Ahead on Tuesday, investors are looking to U.S. consumer confidence figures and the Richmond Fed manufacturing index at 1400 GMT, as well as the progress of the virus in Europe and the United States.
· Morgan Stanley says it’s time to go ‘all-in’ on emerging market currencies
It is time for investors to position for a year-end rally in emerging market currencies and sovereign credit, Morgan Stanley analysts have said, citing less time for surprises ahead of the U.S. presidential election and supportive seasonal factors.
It comes with little over a week before the U.S. vote, with some market participants increasingly pricing in the prospect of a Democratic president.
“The market appears to be underpricing the possibility of a Blue sweep,” analysts at Morgan Stanley said in a research note on Friday, referring to the possibility that the Democratic Party wins the White House, the Senate, and the House of Representatives.
· Covid: Protests erupt across Italy over anti-virus measures
Violent protests broke out across Italy on Monday over new restrictions to curb the country's second wave of Covid.
Clashes were reported in several major cities - including Turin, where Molotov cocktails were thrown at officers.
In Milan tear gas was used to disperse protesters, while violence was also reported in Naples.
The demonstrations began soon after the national government's order to close restaurants, bars, gyms and cinemas came into effect at 18:00 local time.
Many regions have also imposed night-time curfews - including Lombardy, where Milan is, and Piedmont, where Turin is.
· U.S. State Department approves $2.37 billion more in potential arms sales to Taiwan, Pentagon says
The U.S. State Department has approved the potential sale of 100 Boeing-made Harpoon Coastal Defense Systems to Taiwan in a deal that has a potential value of up to $2.37 billion, the Pentagon said on Monday.
The move comes days after the State Department approved the potential sale of three other weapons systems to Taiwan, including sensors, missiles and artillery that could have a total value of $1.8 billion, which prompted a sanctions threat from China.
· China's industrial profit growth slows as factory-gate deflation weighs
Profits at China’s industrial firms rose for a fifth straight month in September, but at a slower pace as factory-gate deflation and rising raw materials costs undercut a recovery in the manufacturing sector.
China’s economic rebound has been gaining momentum following the sharp COVID-19-driven downturn thanks to strong exports, pent-up demand and government stimulus, but slower-than-expected third quarter gross domestic product growth highlighted pockets of weakness for one of the few drivers of global demand.
Profits at Chinese industrial firms in September rose 10.1% year-on-year to 646.43 billion yuan ($96.34 billion), National Bureau of Statistics (NBS) data showed on Tuesday.
That marked the fifth month of profit growth albeit slower than a 19.1% increase in August.
For January-September, industrial firms’ profits fell 2.4% on an annual basis to 4.37 trillion yuan, with the downturn easing from a 4.4% decrease in the first eight months.
· Oil advances, but outlook gloomy as coronavirus cases, supply grow
Oil prices rose on Tuesday after recent sharp losses, but market sentiment remains muted as surging COVID-19 cases around the world hurt the outlook for crude demand while supply is rising.
Brent crude LCOc1 was up 42 cents, or 1%, at $40.88 a barrel by 0651 GMT. U.S. oil CLc1 gained 37 cents, or 1%, to $38.93 a barrel. Both contracts fell more than 3% on Monday.
A lack of progress on agreeing a U.S. coronavirus relief package added to market gloom, although U.S. House of Representatives Speaker Nancy Pelosi said on Monday she hoped a deal can be reached before the Nov. 3 elections.
A wave of coronavirus infections sweeping across the United States, Russia, France and many other countries has undermined the global economic outlook, with record numbers of new cases forcing some countries to impose fresh restrictions as winter looms.
Reference: CNBC, Reuters, BBC
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