· Dollar plumbs two-year low as Fed comes into focus
The dollar touched a more than two-year low on Monday and is set to log its largest monthly fall since July as a combination of vaccine optimism and bets on more monetary easing in the United States drove investors out of the world’s reserve currency.
Against a basket of currencies, the greenback slipped 0.1% to 91.707, its lowest since April 2018. The risk-sensitive New Zealand dollar hit a two-and-a-half year high and is headed for its best monthly percentage gain in seven years.
“The themes remain familiar: broad dollar weakness amid improving risk appetite,” ANZ Bank analysts said in a note.
“This sentiment is likely to continue into December and the (U.S. Federal Reserve) meeting, at which some further action is likely, given the near-term virus risks in the United States.”
The euro and Australian dollar each rose slightly to hit three-month peaks, though moves were small as world stocks took a breather at the end of the biggest calendar month rally on record.
The Aussie is up more than 5% for the month, the kiwi 6.3% and the euro 2.8%.
Sterling stood at $1.3325 and is up nearly 3% on the dollar this month as investors wager a Brexit deal will be brokered even as the deadline for talks loomed ever larger.
The dollar index has dropped about 2.5% in November as promising trial results for major vaccine candidates excited investors about an eventual end to the coronavirus pandemic. It is nearly 11% below a March peak of 102.990.
Nervousness about a wave of new infections across Europe and the United States and fresh lockdowns have provided some support to safe-haven currencies and a slight brake on the dropping dollar.
However, as the drawn-out U.S. election has distracted lawmakers from passing any sort of fiscal spending package, investors have begun to expect that the Fed will step in, probably with more bond buying, when it next meets in December.
Testimony from Fed chair Jerome Powell before Congress on Tuesday and Wednesday, as well as U.S. labor market data this week will be closely watched for clues as to the central bank’s thinking and the broad shape of the economy recovery.
The Japanese yen was 0.3% firmer at 103.87 per dollar on Monday and has gained a little over half a percent through November as the death toll from the pandemic climbed towards 1.5 million people.
November also marks a sixth consecutive monthly gain for the Chinese yuan, which has soared some 9% from a low in May.
That equals a similar run of monthly gains six years ago, but it is far larger in magnitude as global capital flows in to ride China’s remarkable coronavirus recovery.
Month-end dollar demand weighed on the Chinese currency on Monday, offsetting another month of strong economic data, and the yuan fell 0.2% to 6.5851 per dollar.
The greenback was broadly steady elsewhere, although bitcoin advanced 2% to $18,557. It is up 34% this month, its largest monthly gain since April.
Later in the day, investors are awaiting European inflation data and, at 1030 GMT, a speech from European Central Bank President Christine Lagarde.
· Trump to add China’s SMIC and CNOOC to defense blacklist: Reuters, citing sources
The Trump administration is poised to add China’s top chipmaker SMIC and national offshore oil and gas producer CNOOC to a blacklist of alleged Chinese military companies, according to a document and sources, curbing their access to U.S. investors and escalating tensions with Beijing weeks before President-elect Joe Biden takes office.
Reuters reported earlier this month that the Department of Defense was planning to designate four more Chinese companies as owned or controlled by the Chinese military, bringing the number of Chinese companies affected to 35.
It was not immediately clear when the new tranche, would be published in the Federal Register. But the list comprises China Construction Technology and China International Engineering Consulting, in addition to Semiconductor Manufacturing International Corp (SMIC) and China National Offshore Oil Corp (CNOOC), according to the document and three sources.
The Defense Department (DOD) did not respond to a request for comment.
SMIC was already in Washington’s crosshairs. In September, the U.S. Commerce Department imposed restrictions on exports to the company after concluding there was an “unacceptable risk” that equipment supplied to it could be used for military purposes.
· Covid infections in England down by nearly a third since second lockdown
There was a 30% drop in cases across the country over almost a fortnight this month, with 96 people infected per 10,000 between 13-24 November, down from 132 per 10,000 between 26 October and 2 November.
The findings, from the government-funded React mass surveillance study, have been welcomed as proof that both the England-wide lockdown that began on 5 November, and the system of different tiered restrictions that preceded it, succeeded in reducing transmission of the virus.
· China central bank offers salve to jittery markets with surprise medium-term lending facility injection
China’s central bank surprised markets on Monday with an injection of medium-term cash into the banking system, in what traders and analysts viewed as a move to calm nerves rattled by a string of recent bond defaults.
The People’s Bank of China (PBOC) injected 200 billion yuan ($30.4 billion) through one-year medium-term lending facility (MLF) loans to financial institutions on Monday, it said in a statement. The bank kept the rate on the loans unchanged from the previous such injection, at 2.95%.
The PBOC also said it would conduct another MLF operation on Dec. 15 to roll over maturing loans for December, with volume dependent on market demand.
· China’s vaccines may have ‘appeal’ in developing countries, economist says
Developing countries may face a long wait if they want a vaccine made in the West, but there’s always the option of turning to China , says an economist from DBS.
“Considering the billions of doses needed, and the risk [of] falling at the back of a very long line for Western vaccines, the appeal of the Chinese vaccines is apparent,” Taimur Baig, chief economist and managing director at DBS Group Research, said in a note.
There will be a rush to procure Western vaccines when they’re approved by regulators, and poorer countries may find them unaffordable.
· Australia’s Treasury Wine to redirect wine after China tariffs, shares tumble
Australia’s Treasury Wine Estates said on Monday it would divert hundreds of thousands of cases of China-bound wine to other countries to avoid hefty tariffs, battering its shares as it acknowledged its future in its biggest market was unclear.
After Beijing imposed a 169.3% mark-up as part of an industry-wide anti-dumping investigation, the world’s largest listed winemaker said it would redirect sales of its prized Penfolds label to the U.S., Europe, elsewhere in Asia and domestically.
The move shows a star of Australian consumer exports to China rewriting its strategy almost overnight as a 5-year-old free trade agreement between the countries — which had eliminated wine tariffs — gives way to strained diplomatic relations.
Some of the wine to be redirected was already in port in Shanghai, Ford added. A quarter of the company’s upper-range Penfolds wine would be affected by the about-face, added the company, which makes about a third of its profit in China.
Treasury shares fell as much as 12% in early trade on Monday, against a slightly weaker broader market. The stock is down a third since China announced the anti-dumping investigation in August.
· Oil prices slip in cautious trade ahead of OPEC+ meet
Crude oil prices fell on Monday, amid investor jitters ahead of a meeting of producer group OPEC+ to decide whether to extend large output cuts to balance global markets, but vaccine hopes helped keep them on track to rise more than a fifth in November.
January Brent crude futures, which will expire later on Monday, dropped 46 cents, or 1%, to $47.72 a barrel by 0355 GMT. The more actively traded February Brent contract was at $47.83 a barrel, down 42 cents.
U.S. West Texas Intermediate crude futures for January fell 48 cents, or 1.1%, to $45.05 a barrel.
However, both benchmarks are still set for a rise of more than 20% in November, the strongest monthly gains since May, boosted by hopes for three promising coronavirus vaccines to limit spread of the disease and thus support fuel demand.
Reference: CNBC, Reuters
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