· Dollar in doldrums as recovery optimism thrives
The U.S. dollar was pinned down on Tuesday, as vaccine optimism boosted the British pound to an almost three-year high, while rising oil prices and buoyant expectations for global recovery supported commodity and trade-exposed currencies.
In trade thinned by Lunar New Year holidays in China and Monday’s U.S. holiday, the positive mood also weighed on the safe-haven yen which made a one-week low on the dollar overnight and fell to more than two-year lows on the euro and the Aussie.
The U.S. dollar index, which measures the dollar against a basket of six major currencies, sat at 90.351, not far above a two-week low it struck last Wednesday.
The Chinese yuan, a favored vehicle for playing the dollar’s weakness in Asia, was on the brink of strengthening past 6.4 per dollar for the first time since mid-2018 and last stood at 6.4033 in offshore trade.
The risk-sensitive Australian dollar held near Monday’s one-month high at $0.7785.
Bitcoin hovered just short of $50,000 as profit taking paused the cryptocurrency’s steep rally that has carried it more than 60% higher in 2021 so far.
The yield on benchmark ten-year U.S. Treasuries <US10YT=RR> leapt five basis points to 1.2501% in early Asia trade on Monday, while most major currencies were steady.
Sterling, which broke past $1.39 for the first time in almost three years on Monday, held at $1.3912. It also held steady at 87.15 pence per euro, its highest since May 2020.
Sterling has gained as much as 2.5% on the dollar in less than two weeks as the aggressive rollout of Britain’s COVID-19 vaccination programme has raised expectations its economy will be able to recover more swiftly than European peers’.
The euro was steady at $1.2132 on Tuesday while the yen, which has dropped 2% so far this year, nursed losses at 105.36 per dollar. The yen also hit its lowest since late 2018 against the euro and the Australian dollar and hit a three-year low on the Swiss franc.
“The yen has been the worst performing currency of 2021
Ahead on Tuesday, investors are looking to eurozone growth estimates, a German sentiment survey and U.S. manufacturing data to gauge the relative pace of the world’s pandemic recovery.
· Bank of America names the emerging market currencies to back as inflation risks mount
Rising shipping rates, energy and food prices create short-term upside inflation risks, according to Bank of America strategists.
Though the long-term outlook is more balanced, BofA analysts said the evidence tilts in favor of investors at least adding some protection against higher inflation in emerging markets.
· Southeast Asia would choose the U.S. over China if forced to pick sides, survey shows
Southeast Asia’s support for the U.S. appeared to increase after Joe Biden won the presidential election, according to an annual survey by Singaporean think tank ISEAS Yusof-Ishak Institute.
The State of Southeast Asia survey released last week found that 61.5% of respondents favor aligning with the U.S. over China if the region was forced to pick sides. That’s an increase from 53.6% who chose the U.S. over China in the same survey a year ago.
· BHP posts best first-half profit in 7 years, sees strong demand from China
· Bank of Japan’s Kuroda says stock boom reflects economic optimism, defends ETF scheme
Bank of Japan Governor Haruhiko Kuroda said on Tuesday the recent stock price rally reflected market optimism over the global economic outlook, brushing aside views its ultra-loose monetary policy was fueling an asset price bubble.
Kuroda said the central bank would be vigilant for financial risks associated with prolonged easing, nodding to growing concern among some lawmakers that prolonged easing was sowing the seeds of a bubble.
But he stressed that it was premature to debate an exit from super-loose policy including the BOJ’s huge purchases and holdings of exchange-traded funds (ETF), as the coronavirus pandemic continues to ravage the economy.
“It’s likely to take significant time to achieve our price (inflation) target. As such, now is not the time to think about an exit including from our ETF buying,” Kuroda told parliament.
The BOJ has unveiled a plan to review its policy tools, including its ETF-buying programme, in March to make it more sustainable as the pandemic forces it to maintain its stimulus for a prolonged period.
The plan reflects a growing concern among policymakers over the rising cost of extended easing. Some analysts also criticize the BOJ for continuing its huge ETF buying at a time Tokyo stock prices have set new highs.
Kuroda said it was hard to predict whether stock markets were in a bubble.
· UK retail must stay open when third lockdown ends - Ocado chairman
· Syringe shortage hampers Japan's COVID-19 vaccination roll out
Fears are growing in Japan, where an inoculation drive against COVID-19 will begin on Wednesday, that millions of doses of Pfizer vaccine could be wasted due to a shortage of special syringes that maximise the number of shots used from each vial.
The government has made urgent requests, but manufacturers are struggling to ramp up production fast enough, creating the latest headache for Prime Minister Yoshihide Suga, who suffers from weak public support.
· Australia approves AstraZeneca vaccine, bolstering inoculation programme
Australia’s medical regulator granted provisional approval for AstraZeneca Plc’s COVID-19 vaccine on Tuesday, bolstering a national inoculation programme it plans to begin rolling out next week.
· Australia’s central bank says tighter labor market needed to lift inflation to ‘comfortable levels’
Australia’s central bank believes it will take a significant and sustained tightening in the labor market to lift inflation to more comfortable levels, a tough task that could take years to achieve.
Minutes of the Reserve Bank of Australia’s (RBA) February policy meeting released on Tuesday showed the Board recognized that wage growth had been too subdued for years before the pandemic imposed its own restraints on pay.
Firms had responded to the global uncertainty by delaying wage hikes or freezing wages, and the bank’s liaison suggested it would be some time before such freezes ended.
The government had also responded by limiting public sector pay raises, a trend that could take some time to reverse given rapidly rising borrowing loads.
The RBA’s own forecast is that underlying inflation will not even reach 2% by the middle of 2023, a major reason it does not expect to start raising interest rates until 2024 at the earliest.
Rates were slashed to a record low of 0.1% last year as part of a major monetary and fiscal stimulus plan that saw the economy revive much quicker than first feared.
· Myanmar security forces intensify crackdown on protesters
Security forces in Myanmar pointed guns toward anti-coup protesters and attacked them with sticks Monday, seeking to quell the large-scale demonstrations calling for the military junta that seized power this month to reinstate the elected government.
More than 1,000 protesters rallied in front of the Myanmar Economic Bank in Mandalay, the country’s second-largest city, when at least 10 trucks full of soldiers and police arrived and immediately started firing slingshots toward the protesters, according to a photographer who witnessed the events.
· Singapore says does not support widespread sanctions on Myanmar
Singapore’s foreign minister Vivian Balakrishnan told parliament on Tuesday he did not support slapping “widespread generalised indiscriminate sanctions” on Myanmar in response to a military coup, because they could hurt ordinary citizens.
The island state is a major investor in Myanmar and a member of the Association of Southeast Asian Nations. Other ASEAN members like Indonesia and Malaysia have been calling for a special meeting to discuss the situation in Myanmar.
· European countries could see a ‘tremendous acceleration of growth’ in the summer, Dutch finance chief says
European countries could experience a “tremendous acceleration of growth” in the summer, as vaccinations are stepped up, Dutch Finance Minister Wopke Hoekstra told CNBC.
European economies are wrestling against one of the deepest shocks in history. The coronavirus pandemic has halted much of Europe’s economic activity and the Covid-19 vaccine rollout has been bumpy. Euro zone member states contracted by almost 7% in 2020 and strict social restrictions are still in place, clouding the prospects for 2021.
The European Commission, the EU’s executive arm, turned more negative on the economic recovery, cutting its GDP forecast for the year to 3.8%, from the 4.2% estimated in November. However, the Dutch finance chief is confident that economic activity will pick up in the summer.
· India’s economy could recover and grow 10% in fiscal 2022, ratings agency S&P predicts
Ratings agency S&P Global Ratings said Tuesday that India is on track to recover from a pandemic-led economic contraction by next year.
South Asia’s largest economy could grow 10% in fiscal 2022, the ratings agency predicted in a report. India’s fiscal year begins on April 1 and ends on March 31 in the following year.
“The Indian economy is on track to recover in fiscal 2022,” the report said. “Consistently good agriculture performance, a flattening of the Covid-19 infection curve, and a pickup in government spending are all supporting the economy.”
In 2020, India slipped into a technical recession due to the economic fallout from a lengthy lockdown to slow the spread of the coronavirus outbreak — in aggregate, the country has reported the second-highest number of cases, with over 10.9 million infections.
For the full fiscal 2021, which ends on March 31, India’s economy is expected to shrink 7.7%.
· French fourth-quarter unemployment rate fell to 8% from 9.1% in third-quarter
France’s unemployment rate improved slightly in the fourth quarter compared to the previous quarter, with the rate coming in at 8% compared to a two-year high of 9.1% in the third quarter, the INSEE statistics office said on Tuesday.
· Iran’s uranium metal production is ‘most serious nuclear step’ to date, but deal can still be saved
Iran’s latest move in violation of the 2015 nuclear deal has caught international powers’ attention, raising the stakes for a return to the multi-country agreement as it demands the lifting of U.S. sanctions.
UN nuclear watchdog the International Atomic Energy Agency (IAEA) last week confirmed a report that Iran has begun producing uranium metal, a step that violates the parameters of the 2015 deal — also known as the JCPOA — which lifted sanctions on Iran in return for curbs to its nuclear program
· Oil prices climb as deep freeze shuts U.S. oil wells, curbs refineries
Oil prices rose on Tuesday as a cold front shut wells and refineries in Texas, the biggest crude producing state in the United States, the world's biggest oil producer.
Prices also gained as Yemen's Iran-aligned Houthi group said it struck airports in Saudi Arabia with drones, raising supply concerns in the world's biggest oil exporter, and on optimism for a global economic recovery amid accelerated COVID-19 vaccine rollouts.
Brent crude was up 14 cents, or 0.2%, at $63.44 a barrel at 0740 GMT, after rising to its highest since January 2020 in the previous session.
U.S. West Texas Intermediate (WTI) crude futures gained 61 cents, or 1%, to $60.08 a barrel. WTI did not settle on Monday because of a U.S. federal holiday. Prices will settle at the close of trading on Tuesday.
Reference: CNBC,Reuters
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