· Dollar heavy amid stimulus progress, pound buoyed by Brexit deal hopes
The dollar traded near 2 1/2-year lows against major peers on Tuesday as demand for the safest assets flagged amid progress toward agreeing U.S. fiscal stimulus and optimism for a Brexit deal.
The greenback was near its weakest since mid-2018 against the euro and UK pound with U.S. lawmakers scurrying to ready $1.4 trillion in spending.
A $908 billion bipartisan Covid-19 relief plan will be split into two packages, a person briefed on the matter said, raising hopes that at least a large part of the plan that already has bipartisan support will be approved.
“The big picture is that 2021 looks increasingly promising for global growth, and while the U.S. will certainly be a part of that, the global reflation trade is going to support the risk-sensitive currencies like the Australian dollar,” said Westpac currency analyst Sean Callow.
“The dollar is likely to be in the group of laggards, along with the likes of the yen.”
Across the Atlantic, European Union Brexit negotiator Michel Barnier said that sealing a trade pact with Britain was still possible, sowing hope that a deal can be reached with just days to avert a turbulent exit for the UK from the trade bloc at the end of the month.
The British pound rose 0.1% against the dollar to $1.3332, after jumping 0.8% on Monday. It reached a 2 1/2-year high of $1.3540 earlier this month.
The greenback slipped 0.1% to $1.2150 per euro, trading near a 2 1/2-year low of $1.2177 touched again on Monday.
Covid-19 vaccine roll-outs in the United States and Britain also buoyed risk sentiment, but optimism was tempered by spikes in infection and death rates. London will go into a tighter lockdown amid the discovery of a new variant of the virus.
The dollar index was little changed at 90.705 after Monday sinking as low as 90.419, a level unseen since April 2018.
The currency added 0.1% to 104.125 yen, another traditional safe-haven asset.
The offshore Chinese yuan weakened 0.2% to 6.5444 per dollar. It reached 6.4975 earlier this month for the first time since June 2018.
The onshore yuan traded at 6.5549.
A Chinese official said Tuesday that the country could make targeted policy adjustments as the economy improves.
· China's factory recovery steps up as export, consumer demand grows
China’s factory output grew at the fastest pace in 20 months in November, as revived consumer spending and a gradual easing of COVID-19 restrictions in major trading partners lifted demand for the country’s manufactured goods.
Industrial output growth quickened to 7.0% in November from a year earlier, data from the National Statistics Bureau (NBS) showed on Tuesday. That was in line with analyst expectations in a Reuters poll and faster than the 6.9% expansion in October.
China’s economy has staged an impressive recovery from its COVID-19 paralysis earlier this year, mainly driven by robust exports that have fired up the nation’s factories again.
· China's surveyed urban unemployment rate drops in November
China's surveyed urban unemployment rate stood at 5.2 percent in November, 0.1 percentage points lower than that of October, data from the National Bureau of Statistics (NBS) showed Tuesday.
The unemployment rate has dropped for four months in a row, as the Chinese economy continues to strengthen its recovery from the COVID-19 slump.
A total of 10.99 million new urban jobs were created in the first 11 months, completing 122.1 percent of the target set for the whole year, said the NBS.
The surveyed unemployment rate among those aged between 25 and 59, the majority of the labor market, stood at 4.7 percent last month, down 0.1 percentage points.
Meanwhile, the surveyed unemployment rate in 31 major cities was 5.2 percent last month, which was also down 0.1 percentage points from October, according to the NBS.
· Fed will be tested in 2021 as vaccines boost U.S. economic outlook
In its final policy meeting of the year this week, the U.S. central bank is expected to keep its key overnight interest rate pinned near zero and to signal it will stay there for years to come; many analysts also expect new guidance on how long the Fed will keep up its massive bond-buying program.
The super-easy monetary policy is part of a long-term strategy the Fed adopted in August to help it navigate a world of persistently low interest rates that limits the central bank’s options for fighting downturns and makes it difficult to hit its 2% inflation goal.
The idea is to counteract any unhealthy downward drag on prices by letting the economy run hotter than in the past. The Fed now plans to keep rates near zero until the economy reaches full employment and inflation hits 2% and is on track to exceed it.
A sharp increase in demand as COVID-19 inoculations allow more of the economy to reopen could push inflation above the Fed’s 2% target, at least for a time, says Andrew Hunter, senior U.S. economist at Capital Economics.
Re-upping that bold promise this week won’t seem out of place amid the alarming U.S. rise in COVID-19 cases and deaths that threatens to stall a still-partial recovery. The labor market has regenerated only about half of the 22 million jobs lost since the pandemic began.
But next year, when a full rollout of new coronavirus vaccines is expected to make it gradually safer to dine out, travel, and resume other activities put on hold during the crisis, the Fed’s new framework will be tested.
Economic growth is expected to pick up, and job gains with it, both views that are likely to be reflected in fresh economic projections released after the Fed wraps up its two-day meeting on Wednesday.
But the central bank’s so-called “dot plot” of interest rate expectations, included in those projections, will likely show most policymakers still see rates at zero through 2023.
That’s consistent with the new framework if the economy hasn’t achieved sustained 2% inflation by then.
If traders begin pricing in earlier rate hikes, the Fed would need to react, either by correcting the market’s misperception verbally or, if needed, by tweaking its bond-buying program to push down further on longer-term borrowing costs through purchases of longer-term securities.
If the Fed issues new guidance on its asset purchase program this week, it may need to leave the door open to doing exactly that, in part as insurance against any market overreaction to an improving economic outlook next year.
· Olympics-A third of Japanese want Tokyo Games cancelled: NHK poll
A third of Japanese residents want the Tokyo Olympics to be scrapped amid fears that an influx of foreign arrivals may cause a further spike in COVID-19 cases, a poll by public broadcaster NHK showed on Tuesday.
The Japanese government and International Olympic Committee (IOC) decided in March to postpone the 2020 Olympics by a year due to the novel coronavirus pandemic, with the global showpiece now slated to take place from July 23-Aug. 8.
But as Japan grapples with a third wave of infections, the NHK poll, conducted from Dec. 11-13, showed 32% of respondents wanted the Summer Games to be cancelled entirely.
Only 27% said they should go ahead as scheduled while 31% favoured another delay.
According to an NHK poll in October, 40% said the Olympics should be held as planned with only 23% favouring cancellation and 25% preferring further postponement.
· S Korea reports 880 more COVID-19 cases, 44,364 in total
Seoul [South Korea], December 15 (ANI/Xinhua): South Korea reported 880 more cases of COVID-19 as of 0:00 AM Tuesday local time compared to 24 hours ago, raising the total number of infections to 44,364.
The daily caseload was higher than the previous day's 718, staying above 100 for 38 days since Nov. 8 due to small cluster infections in Seoul and its surrounding Gyeonggi province as well as imported cases.
· Singapore to open business travel bubble for all countries from January
Singapore will open a new segregated travel lane for a limited number of business, official and high economic value travellers from all countries, the government said on Tuesday, as part of efforts to revive its key travel and hospitality sectors.
Singapore has spent billions of dollars in a bid to shield its economy from its worst-ever downturn and is trying to reopen international travel as it prepares to host the World Economic Forum's annual gathering of political and business leaders next year.
The first travellers will be able to arrive from the second half of January through the new lane, which will be open to those who are coming for short-term stays of up to 14 days, the ministry of trade and industry said in a statement.
· In frozen north, a Japanese city's coronavirus crisis maps out winter vulnerability
A freezing northern city that has become a red flag for Japan’s winter vulnerability to the coronavirus pandemic is weathering the worst of its COVID-19 crisis, local medical officials say, as military nurses take the strain from drained hospital staff.
Asahikawa city was hit by outbreaks at two major hospitals, exacerbated by sub-zero temperatures and restricted ventilation that can promote the virus’ spread. But a voluntary lockdown, combined with medical reinforcements sent by central government last week, have helped the city stabilise - for now.
· UK jobless rate rises by less than expected to 4.9%
Britain’s unemployment rate rose to 4.9% in the three months to October from 4.8% in the three months to September, official data showed on Tuesday.
Economists polled by Reuters had expected the jobless rate to rise to 5.1%.
· Australia says it will pursue all avenues on reports of China coal restrictions
Australian Prime Minister Scott Morrison said any shift by China away from imports of high quality Australian coal would be a “lose-lose” for the environment and trading relationship.
Chinese media outlets including The Global Times and Caixin on Monday reported China’s top economic planner had granted approval to power plants to import coal without clearance restrictions, except for Australia.
Australia on Tuesday urged China to clarify the reports, which it said would breach international trade rules if true.
Coal is the third biggest export from Australia, which has been embroiled in a worsening diplomatic dispute with its largest trading partner China. Beijing has imposed a series of trade reprisals after Canberra called for an international inquiry into the source of the coronavirus.
Although A$4 billion of A$13 billion ($3 billion of $9.8 billion) in thermal coal exports went to China, it was not Australia’s largest customer, said Morrison, adding any restrictions on Australian coal would be in breach of World Trade Organization (WTO) rules.
Shares of Australian pureplay coal exporters fell sharply.
Shares of New Hope Corp and China-controlled Yancoal Australia were down 12% in morning trading, while shares of Whitehaven Coal were down 9%, against a slightly weaker overall market.
Diversified mining giant BHP Group, which has coal mining interests, was down 2.5%.
· Britain needs EU to move for mutually beneficial trade deal, minister says
The European Union will need to move in negotiations but it is in the interests of both Britain and the bloc to get a trade deal, British minister Steve Barclay said on Tuesday.
“The fundamentals remain the same, it is in both sides interest to have a deal,” Barclay, Chief Secretary to the Treasury, told Sky News.
“Whether there is a deal is not simply down to the actions of the Prime Minister. It needs the EU to move.”
· Oil dips on demand worries as COVID-19 lockdowns tighten
Oil prices edged down on Tuesday as tighter lockdowns in Europe and an OPEC forecast for a slower recovery in demand next year outweighed relief from the roll-out of coronavirus vaccines.
U.S. West Texas Intermediate (WTI) crude futures fell 18 cents, or 0.38%, to $46.81 a barrel by 0737 GMT. Brent crude futures fell 20 cents, or 0.4%, to $50.09 a barrel.
Further marring the demand outlook, Italy said it was considering more stringent restrictions over the Christmas holidays, while most stores in Germany have been ordered to shut until Jan. 10.
Reference: CNBC, Reuters
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