· Dollar holds near multi-month high on U.S. growth bets
The dollar held near a multi-month high against other major currencies on Thursday as investors bet fiscal stimulus and aggressive vaccinations will help the United States grow faster than other economies.
The dollar’s index against a basket of six major currencies hit a five-month high of 93.439 on Wednesday and last stood at 93.209.
The gains came as the euro, by far the biggest component in the index, suffers from concerns the euro zone’s economic recovery is being hampered by a third wave of COVID-19 infections.
President Emmanuel Macron ordered France into its third national lockdown and said schools would close for three weeks while the currency bloc also lagged the United States in vaccination programs.
The euro changed hands at $1.1726, after hitting a near five-month low of $1.1704.
Against the British pound, the common currency hit a 13-month low of 0.8503 pound and last stood at 0.8509.
The U.S. currency held firm against the yen after ending March with its biggest monthly gains since November 2016.
The dollar traded at 110.74 yen, having risen to as high as 110.97, its highest level in a year.
“Rises in U.S. bond yields on hope of vaccine rollouts and fiscal stimulus are boosting the dollar, as the dollar/yen is known to be particularly sensitive to interest rates differentials,” said Yujiro Goto, chief FX strategist at Nomura Securities.
“Yen-selling due to Japanese companies’ foreign direct investment is coming back after a slowdown due to the pandemic last year,” he added.
Japanese conglomerate Hitachi on Wednesday announced $9.6 billion acquisition of U.S. software company GlobalLogic Inc.
Some traders speculated flows related to the deal could be behind some of the dollar’s recent rises.
U.S. President Joe Biden announced his long awaited $2 trillion-plus job plan, including $621 billion to rebuild infrastructure.
Coupled with his recently enacted $1.9 trillion coronavirus relief package, Biden’s infrastructure initiative would give the federal government a bigger role in the U.S. economy than it has had in generations, accounting for 20% or more of annual output.
But the effort sets the stage for the next partisan clash in the Congress where members are divided on the total size and inclusion of programs traditionally seen as social services.
That leaves big uncertainties on how the plan will end up, helping to keep immediate market reactions to minimum.
“On the detail to hand, this new package would certainly be a big positive for the U.S. economy if passed by Congress,” said Elliot Clarke, senior economist at Westpac in Sydney.
“However, the $2 trillion of the proposed infrastructure and investment initiatives would be spread across eight years. Further, this is not $2 trillion in net stimulus. Rather it is to be offset over 15 years by an increase in the corporate tax rate from 21% to 28% as well as the rate multi-national companies pay on overseas profits,” he added.
While currency trading is expected to slow towards the Easter holidays in many parts of the world, the dollar could gain further if upcoming key U.S. economic indicators surprise on the upside.
A survey by the Institute for Supply Management (ISM) on Thursday is expected to show a further improvement in the manufacturing activity.
Economists expect Friday’s job data to show an increase of about 650,000 payrolls in March while the latest chatter in the market is it could swing higher, and even top one million.
The ADP National Employment Report showed on Wednesday U.S. private payrolls increased by 517,000 jobs last month, slightly lower than market forecasts.
In the crypto asset market, bitcoin maintained its firmness over the past several days to trade at $58,766.
· Yellen revives regulatory group to scrutinize hedge fund risks
U.S. Treasury Secretary Janet Yellen is reviving a regulatory working group to study risks that hedge funds pose to the financial system, she announced Wednesday.
Yellen told regulators at the Financial Stability Oversight Council greater scrutiny was needed after the pandemic showed hedge funds can sometimes increase market instability.
The announcement came after the meltdown this week of leveraged hedge fund Archegos Capital Management, which inflicted losses on Credit Suisse, Nomura and other intermediaries.
· World trade to see strong but uneven recovery, to grow by 8% in 2021: WTO
The World Trade Organization (WTO) said on Wednesday that global trade is primed for a strong but uneven recovery after the Covid-19 pandemic shock, forecasting an increase in the volume of world merchandise trade of 8 per cent this year.
"World merchandise trade volume is expected to increase by 8 per cent in 2021 after falling 5.3 per cent in 2020, a smaller decline than previously estimated," the WTO said in a press release, Xinhua reported.
· Boeing urges U.S. to separate China trade and human rights
Boeing Co urged the United States on Wednesday to keep human rights and other disputes separate from trade relations with Beijing, and warned European rival Airbus would gain if the U.S. planemaker were locked out of China.
· UK opposition leader says 'British instinct' likely to oppose COVID passports
Britain’s opposition Labour leader Keir Starmer has expressed scepticism about the use of so-called vaccine passports to allow people to access hospitality and entertainment venues, saying the “British instinct” could be against such documents.
The government is reviewing the idea of asking people to show proof of a COVID-19 vaccination to access crowded spaces such as pubs or sports events to help with the reopening of some sectors of the economy.
Starmer said he would not make any formal decision on whether to support the initiative before studying government proposals but indicated there could be opposition to the idea from the public if death rates are near zero and hospital admissions are very low.
· China’s Vaccination Plan Could Lift GDP Growth to 9.3%
China’s ambitious plan to vaccinate 40% of its population by the end of June could pave the way for lifting the economy’s growth rate to 9.3% this year, Oxford Economics forecast.
· Japan business confidence rebounds to pre-pandemic levels
Japanese big manufacturers’ sentiment improved to pre-pandemic levels in the first quarter while companies stepped up capital spending plans, suggesting the export-reliant economy was benefiting from a solid recovery in global demand.
· Japan announces emergency measures in Osaka area to curb COVID-19 cases
Japan’s government said on Thursday it will impose emergency measures, such as shorter business hours and asking people to work from home and refrain from activities like karaoke, in the western region of Osaka to halt a rebound in COVID-19 cases.
· South Korea exports jump 16.6% in March, beating forecasts
Robust demand for chips and petrochemical products helped South Korean exports to expand for a fifth consecutive month in March, charting a stable recovery path for Asia's fourth-largest economy.
Exports jumped 16.6 per cent from a year earlier, exceeding a 16.2 per cent forecast by analysts, data from the trade ministry showed on Thursday (April 1).
· South Korea said on Thursday it will issue so-called COVID-19 vaccine passports to immunized citizens.
At a government meeting, Prime Minister Chung Sye-kyun said a mobile app, which will allow international travelers to show digital proof of vaccination, will be officially launched in April.
"The introduction of a vaccine passport or 'Green Pass' will only allow those who have been vaccinated to experience the recovery to their daily lives," Chung said.
· India opens up immunisation to more people, vaccine exports to dwindle
India opened up its coronavirus inoculation programme to people above 45 on Thursday as infections surge, which will delay vaccine exports from the world’s biggest maker of the drug.
· Oil gains ahead of OPEC+ meeting on output policy
Crude prices rose on Thursday, recouping some of the previous session’s losses on expectations that a meeting of OPEC and its allies later on Thursday would yield output constraint in the face of resurgent COVID-19 infections in some regions.
Brent crude for June delivery was up by 31 cents, or 0.5%, at $63.05 a barrel by 0159 GMT after falling 2.2% overnight. U.S. oil was up 38 cents, or 0.6%, at $59.54 a barrel, having dropped 2.3% on Wednesday.
Reference: CNBC, Reuters, Bloomberg
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