The US dollar extended its biggest advance since January to a third week as traders weighed the possibility of tighter monetary policy in the US against stimulus in Japan and other major economies.
The US currency has rallied since the minutes of the US Federal Reserve’s most recent meeting prompted traders to add to bets on a rate hike next month.
The greenback surged for the past three weeks in its longest run of gains since January as traders renewed expectations for the US central bank to raise borrowing costs. The currency’s rebound snapped three months of losses, during which markets questioned the Fed’s ability to tighten monetary policy amid a softening global growth outlook.
IMF researchers say Japan monetary easing has benefits for Asia
Japan’s extraordinarily easy monetary policy, a source of friction with the United States for pushing the yen’s value down, has had some positive effects on emerging Asian economies, including increased growth and equity prices, International Monetary Fund researchers have found.
The IMF findings were released in a paper on Friday, as Group of Seven finance ministers and central bank governors began meeting in Japan, where divergent views on Japan’s monetary policy and currency market interventions were expected to be a hot topic.
The paper claims to be the first to model the spillover effects of Japan’s qualitative and quantitative easing programme (QQE) on South-East Asian countries.
The programme has helped push down the yen from 82 to the dollar in 2012 to 119 to the dollar by August 2015. Japanese equity prices surged and inflation also strengthened during this period.
“Our results show that implementation of QQE in Japan, when estimated by a positive shock to Japanese equity prices, consistently caused an increase in equity prices across emerging Asian countries, as well as an appreciation of their currencies,” they wrote.
“Most (South-East Asian) countries experienced an increase in output and a temporary increase in inflation. Capital inflows surged in many countries.”
The researchers said that Japan’s QQE caused a significant increase in equity prices in emerging Asia, with increases in the 2% to 5% range for China, Indonesia, Malaysia, Singapore, Thailand, and Indonesia.
Wells Fargo - US : Economic Data Better Than Expected, Global : Some Upside Surprises in the Global Economy
U.S. Review - Economic Data Better Than Expected
Economic data largely beat consensus expectations over the past week, with positive signs from the factory sector and homebuilding.
Industrial production rose for the first time in three months on the back of solid gains in utilities and manufacturing. Housing starts also rebounded, setting the stage for further improvement moving into the important summer months.
Consumer price inflation rose sharply on the back of higher energy prices. Core inflation also ticked up, however, as inflation continues to firm
Global Review - Some Upside Surprises in the Global Economy
In a year that has thus far been characterized by a deteriorating outlook for the global economy, this week brought a few indicators that surprised on the upside.
Japan posted an annualized growth rate of 1.7 percent which comfortably surpassed the 0.3 percent growth rate expected by the consensus.
Consumers in the United Kingdom do not appear to be overly concerned about Brexit. U.K. retail sales shot up 1.3 percent on the month, more than double the expected gain.
The Canadian CPI climbed closer to the BoC’s target.
Oil prices dip after Iran says it won't freeze output
US benchmark West Texas Intermediate (WTI) for delivery in July, a new contract, was down 28 cents, or 0.58%, at $48.13 a barrel.
Bloomberg said that Rokneddin Javadi, managing director of National Iranian Oil, told the Mehr news agency of Iran that "the government has no plans for the time being to freeze or interrupt its increase in oil output and exports based on plans that are being carried out."
"In the current context, the oil ministry and the government have issued no policy or programme to halt the increase in production and exports and so, the country's plans to increase crude output continues," he added.
Analysts said that the news out of Iran dashed rising confidence among traders on a tightening of the supply-demand equation, with US output steadily falling and Nigeria and Canada suffering temporary cutbacks.
The Organisation of the Petroleum Exporting Countries (OPEC), of which Iran is a member, is due to meet in Vienna on June 2.
Reference: Bloomberg,Reuters,Well Fargo,RTE News
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