· Investors take some money off table after week of dollar selling
The dollar took a breather on Friday after enduring a week-long beating that has pushed it below major support levels as its slide sucked in more short sellers keen to make an easy buck.
Traders in Asia skimmed some profits from the big moves, which had even sent the greenback to a nine-month low against the safe-haven yen while the Japanese currency was falling against the likes of the rallying euro, Aussie and kiwi.
The dollar was 0.3% stronger at 103.39 yen on Friday and rose by about the same margin against the Australian and New Zealand dollars. It gained about 0.2% against the euro.
Still, it is down 0.6% against the yen for the week and had fallen below September’s low of 103.18 yen on Thursday. It is also set for a seventh consecutive weekly drop against the Antipodeans and a 1.1% drop against the euro.
Sterling is on course for a 2.4% weekly gain on the dollar, its best weekly rise in six months, fueled by hopes of a Brexit trade deal breakthrough before the end of the year.
Even soft U.S. economic data, rather than driving a safety bid for dollars, is increasing investors’ expectations for a government spending package, Sim said, which would lift consumption and risk appetite and weigh on the greenback.
Against a basket of currencies the dollar rose 0.15% to 89.986 – barely above the 2-1/2-year low of 89.723 it made on Thursday. The dollar index is down 1% for the week so far and has fallen 12.6% from a three-year peak in March.
Bitcoin was steady in Asia but has rocketed almost 20% this week to record levels above $23,000 as flows have poured in from mainstream investors who are beginning to view it as an inflation-protected wealth store.
Deal talk
Heading into the weekend traders are keenly focused on the progress of U.S. fiscal stimulus talks and Brexit trade negotiations to set the tone for the last weeks of the year.
A new potential roadblock to a $900 billion U.S. relief bill emerged in the Congress on Thursday as some Senate Republicans insisted on ensuring that expiring Federal Reserve lending programs cannot be revived.
Britain and the European Union also struck a downbeat tone about the likelihood of an agreement on Thursday, but traders are choosing to stick with bets on resolution in both cases.
The Thai baht rose to a seven-year high on hopes for inflows after Thailand eased travel restrictions on Thursday and as investors bet a warning from Washington may temper central bank efforts to restrain the baht’s recent rise.
A German sentiment survey and U.S. consumer sentiment data are also due later on Friday.
· USD/JPY retains bid as BOJ extends funding package
USD/JPY continues to trade near the session high of 103.42, with the Bank of Japan (BOJ) deciding to extend the March 2021 deadline for the package of measures to ease corporate funding strains by six months.
The policy statement released soon before press time showed:
- The central bank decided to keep the interest rate unchanged at -0.1% and maintain the 10-year JGB yield target around 0%.
- The bank sees no need to change the yield curve control framework.
The policymakers will consider further extending the fund-aid program if needed (dependent on the pandemic impact).
- While Japan's economy is picking up, the central banks expect the recovery pace to be moderate.
- Overall, the monetary policy decision was in line with expectations. As such, it has failed to have any impact on USD/JPY.
The US dollar's broad-based recovery pushed USD/JPY higher from 103.05 to 103.43 ahead of BOJ's decision. The greenback looks poised for a bounce as market positioning appears wildly short, and technicals look a touch oversold. As such, USD/JPY may see further gains.
· Asian currencies will remain strong against the US dollar in 2021: Analyst
RBC Capital Markets’ Alvin Tan says Asian currencies will continue to gain against the greenback next year as he expects a strong recovery to take hold in the region.
· Biden’s pick for top U.S. trade official will continue tough line on China, says ex-Trump official
U.S. President-elect Joe Biden’s pick for his incoming administration’s top trade official will likely carry on a tough line against China, according to former Trump trade negotiator Clete Willems.
Biden last week named Katherine Tai, a trade lawyer, as his choice for the U.S. trade representative — a critical Cabinet-level position tasked with enforcing U.S. import rules as well as negotiate trading terms with China and other countries.
“Katherine Tai is an excellent choice for USTR and the right person for the moment,” Willems, who’s now partner at law firm Akin Gump Strauss Hauer & Feld, told CNBC in an email.
· Coca-Cola will cut 2,200 jobs worldwide as part of restructuring plan
Coca-Cola will cut about 2,200 jobs in its global workforce as part of a broader restructuring plan that was accelerated by the coronavirus pandemic.
· Prepare for 'real risk' of another recession in 2021 - Danielle DiMartino Booth
The economy could contract again in 2021, as many small business losses are permanent, and rising unemployment appears to be a trend, said Danielle DiMartino Booth, CEO of Quill Intelligence.
“Between the retail sales report that was weak and the jobless claims…it’s clearly a trend. If you ask an economist, they need three prints of data for something to be established as a trend. We have a trend of rising unemployment claims in this country and we’re seeing more of the country shutting down involuntarily and voluntarily, people are less mobile going into the critical holiday shopping season, so there is a real risk growing that the United States could slip back into contraction,” Booth said.
Booth’s comments come as the Federal Reserve stated this week that monetary policy would continue to be accommodative.
“The last statement said that the coming months, policy would remain accommodative. Now it’s completely subjective for the foreseeable future,” she said.
The key to determining whether inflation will rise above the Fed’s 2% target is the outcome of the Georgia Runoff elections, Booth said.
· UK retail sales fell in November as lockdown hit stores
British retail sales fell sharply last month when a four-week lockdown in England closed stores which sold non-essential goods to the public, official figures showed on Friday.
Retail sales volumes dropped by 3.8% on the month in November, their biggest decline since the first lockdown in April and broadly in line with the forecast in a Reuters poll of economists, after a 1.3% increase in October.
Annual sales growth halved to 2.4% from 5.8%, the Office for National Statistics said.
Retail has been one of the few bright spots in Britain’s economy since the COVID pandemic, which the Bank of England estimates has caused Britain’s economy to shrink 11% over the course of 2020, the biggest slump since 1709.
· New English lockdown can't be ruled out after Christmas, minister suggests
· UK wants Brexit trade deal but we'll walk unless EU moves - minister says
Britain and European Union negotiators will resume trade talks on Friday with both sides warning that they remained far apart on a number of issues and that it was becoming more likely they would fail to reach an agreement.
Less than two weeks before Britain finally leaves the bloc’s orbit, both say big difference remain, with fisheries seen as a major stumbling block to a deal which would safeguard almost a trillion dollars worth of trade from tariffs and quotas when a so-called transition period ends on Dec. 31.
“It is a very serious situation. We will test every route to seeking a free trade agreement with the European Union, but we cannot do so at the expense of our national sovereignty,” Britain’s schools minister Nick Gibb told Sky News.
· French scientist sees no return to post-COVID-19 normal before autumn 2021
· Russia banned from using its name, flag at next 2 Olympics
Russia will not be able to use its name, flag and anthem at the next two Olympics or at any world championships for the next two years after a ruling Thursday by the Court of Arbitration for Sport.
The Lausanne-based court halved the four-year ban proposed last year by the World Anti-Doping Agency in a landmark case that accused Russia of state-ordered tampering of a testing laboratory database in Moscow. The ruling also blocked Russia from bidding to host major sporting events for two years.
Russian athletes and teams will still be allowed to compete at next year’s Tokyo Olympics and the 2022 Winter Games in Beijing, as well as world championships including the 2022 World Cup in Qatar, if they are not banned for or suspected of doping.
One win for Russia is the proposed team name at major events. The name “Russia” can be retained on uniforms if the words “Neutral Athlete” or equivalents like “Neutral Team” have equal prominence, the court said.
Russia is scheduled to host the 2022 world championships in men’s volleyball and shooting. The president of the shooting federation is Vladimir Lisin, a billionaire with close ties to the Kremlin.
Last year, the International Olympic Committee described the database tampering as “flagrant manipulation” and “an insult to the sporting movement.”
· China urges U.S. to stop crackdown following company blacklist report
China’s foreign ministry on Friday urged the United States to stop its “unjustified” crackdown on Chinese companies, after Reuters reported that Washington plans to add dozens of Chinese companies to a trade blacklist.
China will continue to take necessary measures to ensure its companies’ legitimate rights and interests, ministry spokesman Wang Wenbin told a daily news briefing in Beijing.
· Japan's retail recovery seen slowing in November: Reuters poll
Japan’s retail sales likely rose at a slower pace in November than the previous month, a Reuters poll found on Friday, as the coronavirus weighed on the recovery in consumer spending.
Retail sales are expected to have risen 1.7% in November from a year earlier, the poll of 14 economists showed, having risen 6.4% in October.
· Australia imposes border curbs as Covid cluster tied to Sydney’s beaches grows
· Oil retreats from 9-month high as COVID-19 surge stokes demand fears
Oil prices eased on Friday but stayed within touching distance of nine-month highs hit in the previous session as soaring COVID-19 cases weigh on fuel demand and U.S. lawmakers battle over a $900 billion economic stimulus package.
U.S. West Texas Intermediate (WTI) crude futures slipped 17 cents or 0.4%, to $48.19 a barrel at 0513 GMT, while Brent crude futures fell 26 cents, or 0.5%, to $51.24 a barrel.
More than 73.65 million people have been reported to be infected by the novel coronavirus globally and 1,654,920 have died, according to a Reuters tally on Friday.
The spike in cases is leading to tough restrictions on travel, weighing on near-term fuel demand and market sentiment, analysts said.
Reference: Reuters, CNBC, FXStreet
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