· Dollar slides to 2 1/2-year low on vaccine, stimulus optimism
The dollar slid to a 2-1/2-year low against a basket of major currencies on Thursday as investors wagered that more economic stimulus from Washington and the expected start of Covid-19 vaccinations would support riskier assets.
While U.S. legislators have failed to reach agreement on fresh relief for a pandemic-hit U.S. economy, there were early signs that a $908 billion bipartisan proposal could be gaining traction.
Investors expect lawmakers to reach a deal eventually with the two parties also facing a Dec. 11 deadline to pass a $1.4 trillion budget or risk a shutdown of the government.
Britain on Wednesday approved a Covid-19 vaccine developed by Pfizer and BioNTech and said it would start vaccinating those most at risk early next week.
That optimism more than offset disappointing U.S. jobs numbers for November and helped boost the euro despite widespread expectations the European Central Bank will enhance its quantitative easing next week.
The common currency ticked up slightly to $1.2119, touching its loftiest level since late April 2018.
The dollar index slipped to 2 1/2-year low of 90.948 and last stood at 90.992.
“On the whole, the new U.S. economic team under President Biden will be dovish, if not directly pursing a weaker dollar per se,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
“The next target for the euro should be its February 2018 peak of $1.2555.
When the ECB eases its policy next week as expected, I bet the euro will gain rather than fall,” he added.
The U.S. currency was on the back foot against most other currencies, apart from the safe-haven yen, against which the dollar held firmer at 104.47 yen.
The Australian dollar traded at $0.7409, having hit a 26-month high in the previous session after data showed Australia’s economy rebounded more than expected in the third quarter.
The offshore Chinese yuan changed hands at 6.5478 per dollar, near its 2-1/2-year high touched last month, maintaining strength on expectations a Biden White House would be more conducive for China’s economic growth.
The British pound held near a three-month high, last traded flat at $1.3387 after a choppy Wednesday trade as markets looked to whether Britain and the European Union can clinch a trade deal.
The negotiators may have enough progress to agree on a deal in the next few days, the BBC’s political editor said, giving the pound a slight lift.
Four diplomats told Reuters after a briefing by Michel Barnier the talks remained snagged on fishing rights in British waters, ensuring fair competition guarantees and ways to solve future disputes.
As traders also brace for a make-or-break moment, the pound’s implied volatilities have risen. Both the overnight and one-month volatilities have hit one-month highs, an indication investors expect choppy trade.
Bitcoin dipped 1.0% to $19,043, but stayed near its record high of $19,918 hit earlier this week.
· 1.4 Million Doses of COVID-19 Vaccine Headed to Texas This Month: Gov. Abbott
Texas Gov. Greg Abbott (R) says more than 1.4 million doses of COVID-19 vaccines are headed to the Lone Star State this month.
Abbott said the vaccines, the initial allotment from the Centers for Disease Control and Prevention, should begin arriving the week of Dec. 14 and that additional allotments may be made later in the month.
The statement from the governor's office did not say which vaccine, or vaccines, would be sent to Texas.
· United States issues travel curbs for Chinese Communist Party members: NYT
U.S. President Donald Trump’s administration on Wednesday issued new rules to restrict travel by Chinese Communist Party members’ and their families’ to the United States, the New York Times newspaper reported on Thursday.
The new policy limited the maximum validity of travel visas for party members and their families to one month and a single entry, the paper reported here, citing people familiar with the matter.
· Chinese firms on U.S. exchanges threatened by bill headed to Trump's desk
The U.S. House of Representatives passed a law to kick Chinese companies off U.S. stock exchanges if they do not fully comply with the country’s auditing rules, giving President Donald Trump one more tool to threaten Beijing with before leaving office.
The measure passed the House by unanimous voice vote, after passing the Senate unanimously in May, sending it to Trump, who the White House said is expected to sign it into law.
“The Holding Foreign Companies Accountable Act” bars securities of foreign companies from being listed on any U.S. exchange if they have failed to comply with the U.S. Public Accounting Oversight Board’s audits for three years in a row.
· Cramer urges Biden to heed lessons of Trump’s China trade war: ‘Taking a hard line gets results’
CNBC’s Jim Cramer on Wednesday made a plea for Joe Biden to stay tough on China once the Democrat moves into the White House in the new year.
“I hope the incoming Biden administration can look at Trump’s trade war objectively, because in many ways, really, it worked,” the “Mad Money” host said. “We made real progress on getting China to finally play by the rules and it would be a shame to throw it all away.”
Cramer made the comments in reaction to a New York Times opinion piece that came out earlier Wednesday, in which President-elect Biden gave some insight into his U.S.-China strategy.
· U.S. Republicans balk as Trump uses defense bill for leverage on Big Tech
President Donald Trump’s threat to veto a defense bill if it does not repeal legal protections for social media companies faced stiff bipartisan opposition on Wednesday, setting the stage for a confrontation with lawmakers scrambling to pass the massive bill by year-end.
Unusually, members of Trump’s Republican Party broke from the president to join Democrats in objecting to his threat to veto the annual National Defense Authorization Act, or NDAA, a $740 billion annual bill setting policy for the Pentagon, if it does not include a measure eliminating a federal law - known as Section 230 - protecting tech companies such as Facebook Inc and Twitter Inc.
· Bill forcing Chinese firms to meet U.S. accounting standards passes Congress
· Biden could rebuild trade deal with Asia-Pacific to counter China’s dominance, says think tank
Negotiating a new and improved trade deal with Asia-Pacific countries would help the U.S. to reassert its leadership in the region while countering China’s growing dominance, said think tank Peterson Institute for International Economics.
Frayed U.S. ties with Asian allies is an issue that President-elect Joe Biden should work to reverse “perhaps sooner rather than later,” said Jeffrey Schott, PIIE’s senior fellow. That’s especially if tensions with China escalate and the U.S. needs a “concrete” joint response with its allies, Schott wrote in a Monday report.
“The incoming Biden administration’s domestic policies to strengthen US output and employment and to support the most vulnerable in society should not deter it from attending to the dramatic changes in the Asia-Pacific region,” he said.
Biden has said he wants to consult with traditional U.S. allies in Asia and Europe “so we can develop a coherent strategy” in dealing with China, according to a New York Times column published Wednesday.
Several analysts have raised the possibility of the U.S. joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) mega trade deal as a counter to RCEP. CPTPP is the renegotiated and renamed version of the Trans-Pacific Partnership (TPP) led by the Obama administration — but abandoned by President Donald Trump in 2017.
But “simply acceding to the CPTPP would not suffice,” said Schott. The TPP was widely criticized domestically in the U.S., even though the renegotiated CPTPP now “largely resembles” the United States-Mexico-Canada Agreement that Congress passed with bipartisan support, he added.
“The name TPP still evokes bad memories among critics, and CPTPP isn’t much better,” he said.
A rebranded and restructured Asia-Pacific initiative would allow the U.S. to build on the CPTPP, said Schott. The biggest improvement the U.S. could make to the trade pact is on environment, he said.
· Brexit trade deal could come in the next few days, BBC says
The United Kingdom and the European Union might have made enough progress to agree a trade deal in the next few days, the BBC's political editor Laura Kuenssberg said on Wednesday.
"After months and months, and yes, months, of talks, several sources have told me today that the process is likely to be concluded in the next few days," she said. "One ambassador told me there was a hope the agreement could be finalised on Friday."
· Good progress being made on Brexit trade deal, British minister says
· Germany to extend COVID-19 restrictions until January 10 - Merkel
Germany will extend restrictive measures designed to stem a tide of new COVID-19 infections until Jan. 10, Chancellor Angela Merkel said on Wednesday after talks with German state leaders.
The measures, which had been due to expire on Dec. 20, include keeping restaurants and hotels shut and limiting private gatherings to five people from two households.
"The states will extend their measures from December 20 until January 10," Merkel told a news conference, adding that another round of consultations would be held on Jan. 4. "In principle things will remain as they are."
Other than a few, mainly northern areas, the entire country is well above the rate of 50 new infections per 100,000 population per week that the government says is the fastest the virus can spread without overwhelming track and trace systems.
· Iran watchdog passes law on hardening nuclear stance, halting U.N. inspections
Iran’s Guardian Council watchdog body approved a law on Wednesday that obliges the government to halt U.N. inspections of its nuclear sites and step up uranium enrichment beyond the limit set under Tehran’s 2015 nuclear deal if sanctions are not eased in two months.
In retaliation for the killing last week of Iran’s top nuclear scientist, which Tehran has blamed on Israel, Iran’s hardline-dominated parliament on Tuesday approved the bill with a strong majority that will harden Iran’s nuclear stance.
The Guardian Council is charged with ensuring draft laws do not contradict Shi’ite Islamic laws or Iran’s constitution. However, the stance of Supreme Leader Ayatollah Ali Khamenei, who has the last word on all matters of state, is not known.
· As debt defaults rise, China’s government bonds might be a safer bet for investors
With the recent spate of bond defaults in China, investors should be looking to put their money into Chinese central government bonds which are “unlikely to default,” according to an economist from research firm TS Lombard.
Last month, a series of high-profile defaults involving state-owned companies in China — normally a safe bet for investors — jolted the credit market and rattled investors.
It led to a bond market sell-off in China. China’s onshore bond market is worth $13 trillion and is the world’s second largest.
Bonds to buy
Global investors should go for central and local government bonds, Bo Zhuang, chief China economist at TS Lombard, told CNBC’s “Street Signs Asia” on Wednesday.
“It’s quite unlikely to have a default, even though other segments of China might be facing all these default risks,” he said, comparing government bonds to corporate bonds. “Even (state-owned enterprises) are not actually immune (to) the defaults.
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