· Dollar hits 4-month high against yen as yields jump on inflation bets
The dollar advanced on Wednesday, hitting a four-month high against the yen as U.S. bond yields jumped on the prospects of further economic recovery and a possible acceleration in inflation
The dollar’s index against six other major currencies jumped back to 90.681, from a three-week low of 90.117 hit on Tuesday.
Boosting the dollar was soaring U.S. bond yields, with the 10-year yield rising to 1.331% from around 1.20% at the end of last week.
“The move up in yields has been driven by increasing inflationary concerns amid a rise in energy prices along with the prospect of a big U.S. fiscal stimulus and the global recovery entering a more solid stage as vaccine roll out lead to the reopening of economies,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney.
The yen, which is sensitive to U.S. yields, reacted the most with the dollar jumping to a four-month high of 106.225 yen. It last stood at 106.13 yen.
The euro slipped slightly to $1.2085 though its fall was less pronounced due to its gains earlier on Tuesday following strong German economic sentiment data.
The British pound held firm at $1.3863, having reached its highest level since April 2018 on Tuesday. Against the euro, the pound traded at its highest level since early May at 87.07 pence per euro.
The offshore Chinese yuan also stepped back after hitting a 2-1/2-year high of 6.4010 per dollar and last stood at 6.4269.
· Rising U.S. yields takes edge off stocks rally
U.S. Treasury yields hit one-year highs on Wednesday, lending support to the dollar but pressuring lofty valuations for stocks, as investors reckoned that a stimulus-fuelled global recovery will eventually bring rising inflation.
Benchmark ten-year U.S. Treasury yields rose as far as 1.3330% in Asia, the highest since February 2020, although they later eased back to 1.2989%.
The gap over two-year yields also opened to its widest in nearly three years, as traders figure that short-term monetary policy will stay accommodative, even as the world bounces back from the pandemic.
· Democrats move to pass relief bill
The House is preparing to stay in session through the end of February to pass Democrats’ $1.9 trillion coronavirus relief package.
The party aims to approve its aid bill — likely without any Republican votes — before key unemployment programs expire on March 14. Democrats are pushing the proposal through under budget reconciliation, a process that allows legislation to pass with a simple majority in the Senate.
The House Budget Committee will move in the coming days to combine pieces of legislation drafted by separate panels into one massive bill. Once the full House approves the legislation, it goes to the Senate, which will determine whether the proposal complies with strict budget rules.
The plan as put forward by House Democrats includes $1,400 direct payments to most Americans, a $400 per week unemployment supplement through Aug. 29, $350 billion in state local and tribal aid, and $20 billion for a national Covid-19 vaccination program, among other provisions.
The Senate has one less responsibility to juggle after it completed former President Donald Trump’s second impeachment trial over the weekend. The chamber fell short of the two-thirds vote needed to convict him of inciting an insurrection against the government.
· Biden suggests more police funding, no jail for drug offenders
President Joe Biden outlined changes he hopes to make to criminal justice and policing in the United States during a town hall Tuesday night, highlighting issues that his administration may tackle after COVID-19 relief.
· Pandemic pushes annual airline passenger traffic to 36-year low
U.S. passenger airlines carried 371 million people in 2020, the fewest since 1984, according to new data from the Department of Transportation.
In December, passenger traffic on U.S. carriers fell 62% from the year earlier to 30.4 million. The annual total was more than 60% lower than in 2019.
Airlines have said they expect weak demand to continue in early 2021 because of persistent Covid-19 cases and a slow rollout of vaccines, but that travel demand will likely perk up in the second half of the year.
· U.S. Treasury's Yellen vows to boost transatlantic cooperation
Treasury Secretary Janet Yellen stressed the importance of cooperation with the European Union in a call with the European Commission’s vice president for the economy, Valdis Dombrovskis, on Tuesday, the U.S. Treasury Department said.
Earlier on Tuesday, Yellen in a conversation with European Central Bank President Christine Lagarde had also underscored ways to deepen transatlantic cooperation on economic and financial issues.
In her discussion with the EU executive, Yellen emphasized the importance of the transatlantic partnership and said she aimed to work more closely with Brussels on key challenges, including “ending the pandemic, supporting a strong global economic recovery, fighting income inequality, and forcefully addressing the threat of climate change,” the Treasury said.
Yellen committed to re-engaging in discussions on international taxation to forge a timely international accord, and to seek solutions to key bilateral trade issues, it said.
· Analysis: Europe braces for pandemic reality to hit banks
Unpaid debt from pandemic-stricken borrowers has ravaged profits at Europe’s big banks and kick-started a debate among politicians about whether they may ultimately need state help.
Reflecting on the pandemic impact, many bank executives say the worst is behind them, with Societe Generale CEO Frederic Oudea and BNP Paribas CEO Jean-Laurent Bonnafe predicting an imminent rebound.
All three French lenders saw profits shrink last year and profits at Spain’s Santander and Dutch bank ING also dipped.
While executives voice confidence, European officials worry the banks’ problems have barely begun.
They fear more borrowers will default when government support, including billions of euros of loan guarantees in France, Spain and elsewhere, is unwound.
Officials spelt out their concerns in a report presented to euro zone finance ministers who met on Monday, warning of “wide-scale corporate distress”.
· European new car sales drop by 25.7% year-on-year in January: ACEA
European car registrations dropped in January, industry data showed on Wednesday, as measures to restrict a second coronavirus wave hit sales in the region’s largest markets.
New car registrations dropped by 25.7% year-on-year to 842,835 vehicles in the European Union, Britain and the countries of the European Free Trade Association (EFTA), figures from the European Automobile Manufacturers’ Association (ACEA) showed.
· UK inflation up by 0.7% in January
British inflation rose a little more than expected in January as the country went back into a coronavirus lockdown, official data showed on Wednesday.
Consumer prices rose 0.7 in annual terms after a 0.6% increase in December, the Office for National Statistics said.
A Reuters poll of economists had pointed to the annual rate remaining at 0.6%
· U.S. vaccination progress, by state
· Dr. Fauci slightly delays timeline for widespread vaccine availability in the U.S. to May
Most Americans will have access to a Covid-19 vaccine by mid- to late May or early June, White House chief medical advisor Dr. Anthony Fauci said on Tuesday, a slight delay compared with earlier predictions.
The infectious disease expert had previously forecast the lifesaving drugs would be widely available to the general public by late March or early April. So far, distribution of the vaccines has been limited to workers in essential industries, those age 65 and older and those with underlying health conditions, depending on the state.
However, Fauci said the federal government was expecting “considerably more” initial doses from Johnson & Johnson, which has applied for an emergency authorization in the U.S. The New Jersey-based company has previously said it will provide the U.S. with 100 million doses by the end of June.
Vaccination
So far 81 countries have begun vaccinating people for the coronavirus and have administered at least 177,523,000 doses of the vaccine.
Gibraltar leads the world and has administered enough vaccine doses for 38% of its population, assuming every person needs two doses.
· Japan begins COVID-19 vaccination in 'first major step' to halt pandemic
Japan launched its COVID-19 inoculation drive on Wednesday, administering the Pfizer-BionTech vaccine to Tokyo hospital workers, as Prime Minister Yoshihide Suga attempts to beat the odds and host the Olympics this summer.
· South Korea warns against lax distancing as daily COVID-19 count hits one-month high
South Korea’s Prime Minister Chung Sye-kyun on Wednesday warned against loosening enforcement of social distancing rules after the number of new coronavirus cases hit the highest levels in nearly 40 days.
· Taiwan says BioNTech vaccine deal on hold, cites potential Chinese pressure
A deal for Taiwan to buy 5 million doses of a COVID-19 vaccine developed by Germany’s BioNTech SE is on hold, the island’s health minister said on Wednesday, citing potential Chinese pressure for the delay.
Taiwan Health Minister Chen Shih-chung said officials were on the verge of announcing the deal in December when BioNTech pulled the plug.
While he did not directly say China was to blame, Chen implied there was a political dimension to the decision and that he had been worried about “outside forces intervening”, hence his caution in discussing the planned deal publicly.
· Mexico surpasses 2 million coronavirus cases; more than 175,000 deaths
· New Zealand releasing Auckland from brief COVID-19 lockdown
· Biden says China to face repercussions on human rights
China will pay a price for its human rights abuses, U.S. President Joe Biden warned on Tuesday, responding to queries at a televised event on the Asian nation’s handling of Muslim minorities in its far western region of Xinjiang.
Chinese President Xi Jinping has drawn global criticism for holding the minority Uighurs in internment camps and other human rights abuses.
“Well, there will be repercussions for China and he knows that,” Biden said of Xi, when pressed on the issue at the town hall event televised on broadcaster CNN.
The United States will reassert its global role in speaking up for human rights, Biden said, adding that he would work with the international community to get China to protect them.
“China is trying very hard to become a world leader and to get that moniker and be able to do that they have to gain the confidence of other countries,” Biden said on his first official trip since taking office as president in January.
· U.S. ship sails in South China Sea by China-claimed islands
A U.S. Navy warship sailed by islands claimed by China in the South China Sea on Wednesday in a freedom of navigation operation, marking the latest move by Washington to challenge Beijing’s territorial claims in the contested waters.
The U.S. Navy’s 7th Fleet said destroyer USS Russell “asserted navigational rights and freedoms in the Spratly Islands, consistent with international law.”
China claims sovereignty over the entire archipeligo, but Brunei, Malaysia, The Philippines, Taiwan and Vietnam also have lodged competing claims for some or all of the islands.
· Australia’s Treasury Wine to sell assets, cut costs as Chinese tariffs bite
Treasury Wine Estates plans a major overhaul of its business that includes the likely sale of low priority brands and other assets, aiming to gain at least A$300 million ($230 million) as it reels from the impact of steep Chinese tariffs on Australian wine.
The restructuring was unveiled on Wednesday as the world’s largest listed winemaker reported a 43% slump in first-half net profit to A$120.9 million ($94 million) and cut its interim dividend by a quarter to 15 Australian cents per share.
Second-half earnings are expected to come in below first-half earnings, it added.
· Myanmar coup opponents gather for big protest to counter military claims
Opponents of Myanmar’s military coup gathered on Wednesday for what they hope will be a major show of opposition to the army’s assertion of public support for overthrowing elected leader Aung San Suu Kyi, despite its promise of new elections.
· U.S. shale could face weeks of depressed oil production due to cold
The U.S. deep freeze will wreak havoc on oil and gas production for several days if not weeks, according to industry experts, as companies deal with frozen equipment and a lack of power to run operations.
Texas produces more oil and natural gas than any other U.S. state, and its operators, unlike those in North Dakota or Alaska, are not accustomed to dealing with frigid temperatures. Numerous refineries in Texas have also been shut, though weather events rarely knock substantial amounts of production offline in oil patches far from the Gulf coast.
Roughly 500,000 to 1.2 million barrels per day of the state’s crude production has been shut-in by the weather, which hit Texas with the coldest temperatures in 30 years, analysts at Rystad Energy said. The ripple effect from the cold is likely to reduce output for several weeks.
· Myanmar coup opponents gather for big protest to counter military claims
Opponents of Myanmar’s military coup gathered on Wednesday for what they hope will be a major show of opposition to the army’s assertion of public support for overthrowing elected leader Aung San Suu Kyi, despite its promise of new elections.
· Oil steady amid Texas supply disruptions, potential OPEC+ moves
Bullish oil prices marked time on Wednesday, as support from supply disruptions in the U.S. south caused by an Arctic blast was offset by expectations that OPEC+ producers may ease their output curbs after April.
U.S. West Texas Intermediate (WTI) crude futures dipped 3 cents to $60.02 a barrel at 0510 GMT, retreating from a 13-month high of $60.95 hit on Tuesday.
Brent crude futures gained 11 cents, or 0.2%, to $63.46 a barrel, adding to three days of gains.
Oil prices have run up strongly in recent months and supply disruptions caused by a historic winter storm in Texas, the country’s largest oil producing state, continued to keep prices supported, analysts said.
· U.S. shale could face weeks of depressed oil production due to cold
The U.S. deep freeze will wreak havoc on oil and gas production for several days if not weeks, according to industry experts, as companies deal with frozen equipment and a lack of power to run operations.
Texas produces more oil and natural gas than any other U.S. state, and its operators, unlike those in North Dakota or Alaska, are not accustomed to dealing with frigid temperatures. Numerous refineries in Texas have also been shut, though weather events rarely knock substantial amounts of production offline in oil patches far from the Gulf coast.
Roughly 500,000 to 1.2 million barrels per day of the state’s crude production has been shut-in by the weather, which hit Texas with the coldest temperatures in 30 years, analysts at Rystad Energy said. The ripple effect from the cold is likely to reduce output for several weeks.
Reference: CNBC, Reuters
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