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NEW YORK, Feb 1 (Reuters) - The dollar extended losses on Wednesday and fell to a nine-month low against a basket of currencies after Federal Reserve Chair Jerome Powell spoke of making progress in bringing down inflation pressures, even as the U.S. central bank warned of further monetary policy tightening. He also noted progress on disinflation, which he said is in its early stages, and said the Fed will continue to make decisions on a meeting-by-meeting basis. The Fed's last "dot plot" in December showed that Fed officials expected the rate to rise above 5%. The dollar fell as low as 101.03 against a basket of currencies , the lowest since April 22. (USAVGE=ECI), (USAVHE=ECI)The European Central Bank (ECB) and the Bank of England are both expected to raise interest rates by 50 basis points on Thursday.
Dollar gains as central banks take central stage
  + stars: | 2023-01-30 | by ( Karen Brettell | ) www.reuters.com   time to read: +3 min
The U.S. central bank is widely expected to hike interest rates by an additional 25 basis points this week, and investors will be watching for any new indications on how many more rate increases are likely. The question now is "does the dollar bounce or is this a nesting pattern before the next leg down," Chandler said. The euro fell 0.22% to $1.0844, erasing earlier gains after Spain's consumer prices rose 5.8% on a year-on-year basis in January, the first increase in six months. The dollar rose 0.57% against the Japanese yen to 130.53 . The BoE and ECB are both expected to raise rates by 50 basis points each this week.
Jan 26 (Reuters) - The U.S. Treasury Department next week is likely to announce that it will offer fewer Treasury bills in the second quarter, after hitting its statutory borrowing limit. Next week, the Treasury is likely to say that it will reduce its issuance of Treasury bills, debt that matures in one year or less, and run down its cash balance to buy more time. That is because the U.S. government wants to increase bills as a percentage of overall debt to meet its long-term goals. BofA’s Swiber said that Treasury buybacks, which the Treasury queried dealers about in a previous survey, are a better solution to boost liquidity during times of market stress. These “allow Treasury to more directly manage Treasury liquidity, to more directly manage the outstanding supply of securities and they can effectively buy back things that are cheap on the curve and help support liquidity in the more liquid parts of the curve as well,” she said.
Here are some key moments in the months ahead:FEB. 1The Treasury Department will release a quarterly document next week laying out how it plans to fund the government over the next three months. The document, which includes information on debt the Treasury will issue, could shed light on the timing of a possible default. Data regarding government income could be an important factor in determining the so-called "X date," or the day when the government will stop paying its bills. Normally, these funds would be reinvested, but the Treasury Department has said it could use the proceeds to help make needed payments. JULY-OCTOBERMost analysts see the true X date occurring somewhere between July and October.
[1/3] Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 7, 2022. U.S consumer prices fell in December for the first time in more than 2-1/2 years as prices fell for gasoline and other goods, suggesting inflation was on a sustained downward trend. Many market participants are looking for signs of weakness in the labor market as a signal of slowing inflation. On Wall Street, equities were choppy after the data, with the S&P 500 falling as much as 0.8% and then rebounding. Crude prices rose in the wake of the data, getting an additional boost from optimism over China's emergence from its COVID-19 restrictions creating additional demand.
Still, a separate reading on the labor market showed weekly initial jobless claims came in at 205,000, below expectations of 215,000. Many market participants are looking for signs of weakness in the labor market as a key sign of slowing inflation. On Wall Street, equities were choppy after the data, with the S&P 500 falling as much as 0.8% before rebounding. Richmond Federal Reserve president Tom Barkin echoed the sentiment about the data and said it allowed the Fed to "steer more deliberately". Crude prices rose in the wake of the data, getting an additional boost from optimism over China's emergence from its COVID-19 restrictions creating additional demand.
Stocks gain, yields fall after U.S. inflation data
  + stars: | 2023-01-12 | by ( Chuck Mikolajczak | ) www.reuters.com   time to read: +3 min
Still, a separate reading on the labor market showed weekly initial jobless claims came in at 205,000, below expectations of 215,000. Many market participants are looking for signs of weakness in the labor market as a key sign of slowing inflation. On Wall Street, equities were choppy after the data, with the S&P 500 falling as much as 0.8% before rebounding. "The fact that we have seen core inflation decelerate to 5.7% year-over-year, from 6% in November, reinforces the peak inflation argument." Crude prices rose in the wake of the data, getting an additional boost from optimism over China's emergence from its COVID-19 restrictions creating additional demand.
The Bank of England also raised its key interest rate by a further half-percentage point on Thursday and indicated more hikes were likely. "Both the Fed and ECB delivering more hawkish rate steers are compounding recession fears," said Joe Manimbo, senior market analyst at Convera in Washington. Powell was also particularly hawkish in his comments, noting that ongoing rate hikes are appropriate to get sufficiently restrictive. In afternoon trading, the dollar rose to two-week highs against the yen, and last traded up 1.6% at 137.665 . Sterling also fell sharply as investors believe the BOE is nearing the end of its rate hikes.
The U.S. Labor Department reported that nonfarm payrolls increased by 263,000 jobs last month compared with economist expectations for 200,000 jobs. "That sentiment shift has been more powerful than any 'negativity' to be taken from today's jobs report," he said. MSCI's gauge of stocks across the globe (.MIWD00000PUS) shed 0.15% on the day but added 1.5% for the week. Earlier it had jumped sharply in response to the jobs data, gaining as much as 0.82%. Gold prices also regained some lost ground from their earlier reaction to the jobs data.
Dollar rebounds on Fed expectations, Aussie drops
  + stars: | 2022-11-29 | by ( Karen Brettell | ) www.reuters.com   time to read: +3 min
[1/2] U.S. dollar banknotes are seen in this illustration taken July 17, 2022. The dollar index has fallen to 106.65 from a 20-year high of 114.78 on Sept. 28 on expectations that its rally may have been over stretched and as the Fed looks to slow its pace of rate increases. The greenback was also likely supported after the dollar index reached the 200-day moving average at 105.369. The dollar had dipped earlier on Monday despite other safe-haven currencies the Japanese yen and the Swiss franc gaining on concerns about China. The risk sensitive Aussie dollar , which is strongly tied to Chinese growth, was the worst performing major currency, falling 1.61% to $0.6649.
The Dow Jones industrial average (.DJI) for example had risen more than 10% in the last month and almost 20% since September. "Some of this is just a bit of consolidation from the last few weeks," she said, noting that stocks had taken a leg lower when Treasury yields gained and oil prices switched from red to green on Monday as the prospect of higher oil prices brought inflation concerns back to the forefront. Along with inflation trends, investors are also monitoring Federal Reserve commentary for any clues on its future rate hiking path. Earlier, U.S. crude oil futures had fallen to December 2021 levels on concerns about demand in China - the world's biggest crude importer. A view of a giant display of stock indexes, following the coronavirus disease (COVID-19) outbreak, in Shanghai, China, October 24, 2022.
The pan-European STOXX 600 index (.STOXX) slipped 0.50% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) shed 0.71%. Emerging market stocks (.MSCIEF) dropped 0.94%. In currencies, the safe-haven Swiss franc and Japanese yen gained, while the Aussie dollar and Chinese yuan underperformed. CHINA FEARSIn Treasuries Benchmark 10-year notes were down 2.8 basis points to 3.674%, from 3.702% late on Friday. The 30-year bond was last down 2.7 basis points to yield 3.725%, from 3.752%, while the 2-year note was down 3.9 basis points to yield 4.4402%.
The fragile yen briefly weakened past 150 per dollar for the first time since August 1990. It was last trading at 149.76 yen per dollar. This has sent U.S. yields and the dollar higher, particularly against the yen as the Bank of Japan is committed to keeping interest rates near zero. The pound rallied ahead of the announcement, before paring gains and then again moving higher. The dollar index dipped 0.50% against a basket of major currencies to 112.40, which analysts said was likely due to consolidation.
British Pound Sterling and U.S. Dollar notes are seen in this June 22, 2017 illustration photo. Benchmark 10-year Treasury yields resumed their march higher as investors maintained expectations that the Federal Reserve will continue to aggressively raise rates to bring down soaring inflation, boosting demand for the U.S. currency. Register now for FREE unlimited access to Reuters.com RegisterThe U.S. central bank is expected to lift rates by another 75 basis points when it meets on November 1-2, with an additional 50 basis points or 75 basis points increase also likely in December. Japanese Finance Minister Shunichi Suzuki said on Wednesday that he was checking currency rates "meticulously" and with more frequency, local media reported. The BOJ remains an outlier among a global wave of central banks tightening monetary policy to combat soaring inflation, as it focuses on underpinning a fragile economy.
British Pound Sterling and U.S. Dollar notes are seen in this June 22, 2017 illustration photo. Register now for FREE unlimited access to Reuters.com RegisterBritish gilts rallied sharply after the news, helping to also send U.S. Treasury yields lower. Hunt replaced Kwasi Kwarteng, whose package of unfunded tax cuts on Sept. 23 unleashed a bond market sell-off. "For now, the market seems happy to give the new chancellor time and space to put the government's house back in order," said Chris Beauchamp, chief market analyst at IG. Traders are also on watch for any intervention from the Bank of Japan after the yen fell to a 32-year low.
Oct 14 (Reuters) - The U.S. Treasury Department is asking primary dealers of U.S. Treasuries whether the government should buy back some of its bonds to improve liquidity in the $24 trillion market. The Treasury is also querying whether reduced volatility in the issuance of Treasury bills as a result of buybacks made for cash and maturity management purposes could be a "meaningful benefit for Treasury or investors." But it let that exclusion expire and big banks had to resume holding an extra layer of loss-absorbing capital against Treasuries and central bank deposits. The Treasury Borrowing Advisory Committee, a group of banks and investors that advise the government on its funding, has said that Treasury buybacks could enhance market liquidity and dampen swings in Treasury bill issuance and cash balances. The Treasury is posing the questions as part of its regular survey of dealers before each of its quarterly refunding announcements.
Oct 14 (Reuters) - The U.S. Treasury Department is asking primary dealers of U.S. Treasuries whether the government should buy back some U.S. government bonds to improve liquidity in the $24 trillion market. Investors are worried about rising volatility in bonds as the Federal Reserve rapidly raises interest rates to bring down inflation. The Treasury is also querying whether reduced volatility in the issuance of Treasury bills as a result of buybacks made for cash and maturity management purposes could be a "meaningful benefit for Treasury or investors." The Treasury Borrowing Advisory Committee (TBAC), a group of banks and investors that advise the government on its funding, has said that Treasury buybacks could enhance market liquidity and dampen swings in Treasury bill issuance and cash balances. The Treasury is posing the questions as part of its regular survey of dealers before each of its quarterly refunding announcements.
“Credit spreads are too tight, they are not adequately reflecting the risk of recession. Leveraged loans and junk bonds are high-risk corporate debt. Their borrowing rates have been held in check by solid liquidity while default rates are near historical lows and not seen likely to spike significantly near-term. Earnings were better than expected in the second quarter on average, but higher rates and slowing growth are expected to make a bigger dent in profits soon, which could bring rating downgrades and higher default risk. “For now the credit market's still taking comfort from in place fundamentals and a slow pace of deterioration.
read moreIt also made it more likely that the Fed will hike rates by another 75 basis points when it concludes its two-day meeting on Wednesday. Traders are now pricing in a 77% chance of a 75 basis points hike and a 23% likelihood of a 100 basis points increase. Benchmark 10-year yields reached a high of 3.518%, the highest since April 2011, before falling back to 3.479%. The closely watched yield curve between two-year and 10-year notes inverted as far as negative 48 basis points. The Treasury will sell $12 billion in 20-year bonds on Tuesday, and $15 billion in 10-year Treasury Inflation-Protected Securities (TIPS) on Thursday.
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