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☆ Dollar holds gains after U.S. data; traders eye Fed next week
▼ + stars: | 2023-01-27 | by ( Saqib Iqbal Ahmed | ) www.reuters.com time to read: +3 min

REUTERS/Dado Ruvic/Illustration/File PhotoNEW YORK, Jan 27 (Reuters) - The dollar clung to modest gains against the euro on Friday after data showed falling U.S. consumer spending and cooling inflation, and as investors awaited a slew of central bank meetings next week. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 0.2% last month, the Commerce Department said on Friday. Data for November was revised lower to show spending slipping 0.1% instead of gaining 0.1% as previously reported. Data showed consumer price inflation in Japan's capital accelerated to a nearly 42-year peak this month, piling pressure on the BOJ to step away from stimulus. Attention now turns to a slew of central bank policy decisions, with the Fed, European Central Bank and Bank of England (BoE) all due to make rate decisions next week as they judge what policy adjustments may be required in their battle with rampant inflation against a tough global economic backdrop.

☆ Dollar ticks up ahead of central bank meetings next week
▼ + stars: | 2023-01-27 | by ( Iain Withers | ) www.reuters.com time to read: +2 min

REUTERS/Dado Ruvic/Illustration/File PhotoLONDON, Jan 27 (Reuters) - The dollar edged up on Friday to pull away from multi-month lows against the euro and sterling, as investors began to train their sights on a slew of major central bank meetings next week. The U.S. Federal Reserve, European Central Bank and Bank of England are all due to make rate decisions next week as they judge what policy adjustments may be required in their battle with rampant inflation against a tough global economic backdrop. The euro was last down 0.1% versus the dollar at $1.08760 , while sterling was down 0.4% at $1.23670 . The yen, meanwhile, rose against the dollar as heated Tokyo inflation readings spurred bets that a hawkish pivot from the Bank of Japan (BOJ) could be in the offing. The bank will make its next policy decision on Thursday, and is seen increasing by a half point.

☆ Dollar drops vs yen, near 9-month low to euro on central bank bets
▼ + stars: | 2023-01-27 | by ( Kevin Buckland | ) www.reuters.com time to read: +3 min

The dollar also sagged close to a nine-month low versus the euro, amid market expectations the European Central Bank next week will implement a rate hike twice as big as the Federal Reserve's. However, that was still well away from the 7-1/2-month trough of 127.215 reached last week as expectation built then for the central bank to tweak policy. When BOJ officials voted unanimously on Jan. 18 to keep stimulus settings unchanged, the currency pair bounced as high as 131.58. "If there are any bouts of yen weakness, I think the topside will continue to be capped by those expectations," Kadota said. For the week, the dollar is about flat against the yen, after swinging between gains and losses.

☆ Dollar clings to gains after U.S. data; traders eye Fed next week
▼ + stars: | 2023-01-27 | by ( ) www.cnbc.com time to read: +3 min

The dollar clung to modest gains against the euro on Friday after data showed falling U.S. consumer spending and cooling inflation, and as investors awaited a slew of central bank meetings next week. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 0.2% last month, the Commerce Department said on Friday. Data for November was revised lower to show spending slipping 0.1% instead of gaining 0.1% as previously reported. Data showed consumer price inflation in Japan's capital accelerated to a nearly 42-year peak this month, piling pressure on the BOJ to step away from stimulus. Not necessarily in terms of rates for next week, but more the forward guidance central banks will provide," Harvey said.

☆ Japan PM says can't rule out return of deflation despite price spike
▼ + stars: | 2023-01-27 | by ( Kantaro Komiya | ) www.reuters.com time to read: +2 min

TOKYO, Jan 27 (Reuters) - Japanese Prime Minister Fumio Kishida said on Friday that a return to deflation in the world's third-largest economy cannot be ruled out, because domestic demand remains weak. But Kishida described the move as an operational tweak to smooth the impact of monetary easing, which is distorting the country's bond markets. Policymakers are hoping that wage increases this spring will cushion higher living costs and boost consumer spending. Kishida on Sunday said he would nominate the next BOJ leader next month before the incumbent Haruhiko Kuroda's second five-year term expires on April 8. Reporting by Kantaro Komiya; Editing by Jacqueline Wong and Kim CoghillOur Standards: The Thomson Reuters Trust Principles.

☆ IMF: BOJ should let long-term yields rise, be ready to raise rates
▼ + stars: | 2023-01-26 | by ( Leika Kihara | ) www.reuters.com time to read: +4 min

REUTERS/Kim Kyung-HoonTOKYO, Jan 26 (Reuters) - The Bank of Japan should let government bond yields move more flexibly and be ready to raise short-term interest rates swiftly if "significant" upside risks to inflation materialise, the International Monetary Fund (IMF) said on Thursday. "Given the two-sided risks to inflation, more flexibility in long-term yields would help to avoid abrupt changes later. This would help better manage inflation risks and also help address the side-effects of prolonged easing," the IMF said. EYING THE EXITThe IMF said the BOJ could also consider options such as targeting a shorter-term yield or the pace of its bond buying. The BOJ doubled its allowance band for the 10-year yield in December to 0.5% above or below zero.

This meant the U.S. dollar index , which measures the greenback against a basket of currencies, fell as low as 101.5, its lowest since the end of May. Markets expect policymakers at the Bank of England and European Central Bank (ECB), which also meet next week, to deliver 50 bps rate hikes. The Canadian dollar traded at 1.3387 per U.S. dollar, after the Bank of Canada on Wednesday raised its key interest rate to 4.5% but became the first major central bank fighting global inflation to say it would likely hold off on further increases for now. He said the pullback in Fed rate hike expectations following the BoC’s policy decision had triggered a US dollar sell-off alongside Canadian dollar weakness, which "highlights that the US dollar remains vulnerable to a further dovish repricing of Fed rate hike expectations." Reporting by Rae Wee and Alun John; Editing by Bradley Perrett and Kim CoghillOur Standards: The Thomson Reuters Trust Principles.

☆ Dollar wobbles near eight-month low ahead of c.bank meetings
▼ + stars: | 2023-01-26 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

SINGAPORE, Jan 26 (Reuters) - The dollar held close to an eight-month low against its peers on Thursday, as a gloomy U.S. corporate earnings season stoked recession fears and as traders stayed on guard ahead of a slew of central bank meetings next week. Trading was thin, with Australia out for a holiday and some parts of Asia still away for the Lunar New Year. "There are now signs the U.S. economy may be slowing in a more meaningful manner," said economists at Wells Fargo. Ahead of that, the Commerce Department is due to release advance estimates of U.S. fourth-quarter gross domestic product later on Thursday. Meanwhile, markets expect policymakers at the Bank of England and European Central Bank (ECB), which will also meet next week, to deliver 50 bps rate hikes.

☆ Japan's top FX diplomat warns sharp currency moves won't be tolerated
▼ + stars: | 2023-01-26 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +2 min

TOKYO, Jan 26 (Reuters) - Sharp one-sided currency moves cannot be tolerated, Japan's top finance diplomat Masato Kanda told Reuters, reaffirming Tokyo's determination to intervene in the foreign exchange market to curb any speculative or significant yen moves. Kanda oversaw Japan's currency intervention conducted last year to prop up the yen after it fell around 30% to 32-year lows near 152 to the dollar. Kanda emphasised that the government aims to keep currency moves stable, while the Bank of Japan (BOJ) has independence in guiding monetary policy and focuses on achieving price stability. But policy itself is independent," Kanda said of the central bank's monetary policy. The BOJ's ultra-loose monetary policy has drawn criticism from some analysts as having triggered an unwelcome yen plunge last year that inflated the cost of raw material imports.

☆ Dollar near eight-month low ahead of c.bank meetings
▼ + stars: | 2023-01-26 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

SINGAPORE, Jan 26 (Reuters) - The dollar lolled near an eight-month low against its peers on Thursday, as a gloomy U.S. corporate earnings season stoked recession fears and as traders stayed on guard ahead of a slew of central bank meetings next week. The U.S. dollar index , which measures the greenback against a basket of currencies, last stood at 101.53, languishing near last week's eight-month trough of 101.51. "There are now signs the U.S. economy may be slowing in a more meaningful manner," said economists at Wells Fargo. "With the Fed no longer leading the charge on interest rate hikes and U.S. economic trends set to worsen, we now believe the U.S. dollar has entered a period of cyclical depreciation against most foreign currencies." Markets expect policymakers at the Bank of England and European Central Bank (ECB), who will also meet next week, to deliver 50 bp rate hikes.

☆ IMF urges BOJ to let long-term yields rise, be ready to raise rates
▼ + stars: | 2023-01-26 | by ( Leika Kihara | ) www.reuters.com time to read: +5 min

It's more to balance some of the impact on the real economy against the impact on financial markets," IMF Japan Mission Chief Ranil Salgado said on Thursday. "Given the two-sided risks to inflation, more flexibility in long-term yields would help to avoid abrupt changes later. This would help better manage inflation risks and also help address the side-effects of prolonged easing," the IMF said in a statement issued after the policy consultation. EYING THE EXITThe IMF said the BOJ could also consider options such as targeting a shorter-term yield or the pace of its bond buying. The BOJ surprised markets in December by doubling its allowance band for the 10-year yield to 0.5% above or below zero.

☆ Russia sanctions, Ukraine support to be G7 priority, says Japan diplomat
▼ + stars: | 2023-01-26 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +4 min

"Sanctions against Russia and support for Ukraine will be a top priority at G7 financial leaders' meetings under Japan's chair," said Kanda, who will oversee G7 deputy-level talks on economic policy this year. While Kanda underscored the importance of G7 unity in standing up to Russia, some analysts say there may be differences on sanctions, particularly among Europeans who are being forced to wean themselves off Russian energy supplies. Kanda, who is vice finance minister for international affairs, listed the challenges the G7 will have to confront over the coming year. "If this is realised, it would pave the way to carry out debt restructuring for other middle-income countries." Reporting by Tetsushi Kajimoto; Additional reporting by Kentaro Sugiyama; Editing by Robert Birsel and Simon Cameron-MooreOur Standards: The Thomson Reuters Trust Principles.

☆ Bank of Japan showed no sign of making a hawkish shift in its January meeting
▼ + stars: | 2023-01-26 | by ( Jihye Lee | ) www.cnbc.com time to read: +3 min

Nationwide core inflation in Japan reached 4% in December, the highest annualized print since December 1981, according to data released last week. Yuichi Yamazaki | Afp | Getty ImagesThe Bank of Japan emphasized that it wants to maintain its current monetary policy, including leaving its yield curve control unchanged, according to the Summary of Opinions from its last meeting published Thursday. The "yield curve control" refers to a policy of the Japanese central bank that's designed to keep the 10-year yield on Japanese Government Bonds (JGBs) within 0.5 percentage points of zero. The central bank continued its operations to purchase Japanese government bonds in response to upward pressure on yields. I think a lot will depend on, for instance, the inflation data in the coming months," he told CNBC's "Street Signs Asia."

☆ Dollar near eight-month low ahead of central bank meetings
▼ + stars: | 2023-01-26 | by ( ) www.cnbc.com time to read: +3 min

The dollar kept trade-sensitive currencies pinned near multi-year lows on Monday and the euro was under pressure as investors sought safety due to worries about slowing global growth. The dollar lolled near an eight-month low against its peers on Thursday, as a gloomy U.S. corporate earnings season stoked recession fears and as traders stayed on guard ahead of a slew of central bank meetings next week. The U.S. dollar index , which measures the greenback against a basket of currencies, last stood at 101.53, languishing near last week's eight-month trough of 101.51. Markets expect policymakers at the Bank of England and European Central Bank (ECB), who will also meet next week, to deliver 50-bp rate hikes. Elsewhere, the Canadian dollar last traded at 1.3393 per dollar, after the Bank of Canada on Wednesday raised its key interest rate to 4.5% but became the first major central bank fighting global inflation to say it would likely hold off on further increases for now.

It followed a 3.9% rise in December and stayed above the central bank's 2% target for an eighth straight month, data showed on Friday. "These readings point squarely at a further, large increase in inflation at the national level this month," said Darren Tay, Japan economist at Capital Economics. Government measures to lower energy bills will kick in next month and bring inflation down by about 1% point," he said. The BOJ kept monetary policy ultra-loose this month but raised its inflation forecasts in fresh quarterly projections, as companies continued to pass on higher raw material costs to households. Kuroda, whose term will end in April, has stressed the need to keep monetary policy ultra-loose until wages rise more, changing the recent cost-push inflation into inflation driven by robust domestic demand.

☆ BOJ policymakers divided on wage, inflation outlook, Jan meeting summary shows
▼ + stars: | 2023-01-26 | by ( Leika Kihara | ) www.reuters.com time to read: +3 min

At the January meeting, many board members agreed on the need to retain ultra-loose monetary policy to support the economy and help companies raise pay, the summary showed. It will take time for wages to rise sustainably, so macro-economic support is necessary," another opinion showed. The summary lists the opinions of the BOJ's nine board members, but does not disclose who made them. Japan's core consumer prices in December rose 4.0% from a year earlier, hitting a fresh 41-year high and keeping alive market expectations the BOJ could phase out ultra-low rates. BOJ Governor Haruhiko Kuroda, whose term ends in April, has stressed the need to maintain the loose policy settings until wages rise sufficiently, and help keep inflation sustainably around the bank's 2% target.

☆ Dollar stuck near nine-month low vs euro as yen bounces
▼ + stars: | 2023-01-24 | by ( Amanda Cooper | ) www.reuters.com time to read: +3 min

LONDON, Jan 24 (Reuters) - The dollar hovered near a nine-month low against the euro and surrendered recent gains against the yen on Tuesday, as traders weighed the risks of a U.S. recession against the outlook for Federal Reserve monetary policy. Euro zone data on Tuesday reinforced the view that the economy is surviving a winter of intense price pressures reasonably well, analysts said. "That's integral to our bearish U.S. dollar view, that the U.S. is not going to be the global growth leader." Elsewhere, the dollar fell 0.4% to 130.18 yen , breaking a two-day rally. Last week, the dollar fell as low as 127.215 yen, its weakest since May, before a Bank of Japan policy review as investors bet the BOJ would begin to end its stimulus programme.

☆ Japan sees rising interest rates expanding its growing debt pile
▼ + stars: | 2023-01-24 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +3 min

The latest projections showed the budget target will be met in fiscal 2026. Rises in interest rates will test the government's ability to service the industrial world's heaviest debt burden at more than double the size of Japan's annual gross domestic product. "We see underlying interest rates to be somewhat higher, which will cause outstanding government debt to deviate upward due to the BOJ's move last month," a Cabinet Office official said. In comparison, the previous estimates issued in July showed long-term rates to stick to 0.1% in fiscal 2022-2025. The projections show that in case long-term interest rates rise by an additional 0.5 percentage-points, that would increase the government debt-to-GDP ratio by 3.3 percentage-points.

☆ Morning Bid: It's all about the weather
▼ + stars: | 2023-01-24 | by ( ) www.reuters.com time to read: +2 min

A look at the day ahead in European and global markets from Wayne Cole. Essentially banks could borrow at an average 0.145% fixed for five years to invest in JGBs - what could go wrong? The U.S. manufacturing PMI is forecast to dip to 46.0 from 46.2, with services at 45.0 from 44.7. Ironically, the weather in the States in recent weeks has been a lot worse than in Europe, which was not how this story was supposed to pan out. ($1 = 130.2100 yen)Reporting by Wayne Cole; Editing by Jacqueline WongOur Standards: The Thomson Reuters Trust Principles.

☆ Suntory CEO expects next BOJ governor to show clear policy roadmap
▼ + stars: | 2023-01-24 | by ( ) www.reuters.com time to read: +2 min

The BOJ stuck to its ultra-easy policy at a two-day policy meeting that ended on Jan. 16, defying investors who had bet on it ceasing to defend a cap on the 10-year government bond yield. The cap is part of a policy called yield curve control (YCC). But Niinami said expectations were growing that the BOJ would sooner or later end its expansionist experiment. "The ultra-easy policy can't be kept forever, given current (economic) conditions. Niinami also said economic growth led by the private sector would be needed to help prevent Japan's financial health worsening further.

NEW YORK, Jan 23 (Reuters) - The dollar edged lower against the euro on Monday, as the common currency found support from European Central Bank officials' comments signalling additional jumbo interest rate rises in Europe. The euro reached as high as $1.0927 , to trade at its highest level since April last year, before paring gains to trade up 0.1 % at $1.0865. A Reuters survey of analysts also favoured hikes of 50 basis points at the next two meetings and an eventual rate peak of 3.25%, from the current rate of 2%. "Really what's driving things is central bank policy divergence," said Joe Manimbo, senior market analyst at Convera in Washington. So when you weigh the outlook for central bank policy, it depicts the dollar at a disadvantage, given market bets on the Fed moving more slowly than its counterparts abroad," Manimbo said.

The euro reached as high as $1.0927 , breaking the recent peak of $1.08875, to trade at its highest level since April last year. The single currency was aided by European Central Bank (ECB) governing council members Klaas Knot and Peter Kazimir, who both advocated for two more 50 basis point hikes at meetings in February and March. A Reuters survey of analysts also favoured hikes of 50 basis points at the next two meetings and an eventual rate peak of 3.25%, from the current rate of 2%. Investors also have around 50 basis points of U.S. rate cuts priced in for the second half of the year, reflecting softer data on inflation, consumer spending and housing. The pound rose as high as $1.24475 , its highest in seven months, before turning 0.3% lower to $1.2355.

The euro reached as high as $1.0927 , breaking the recent peak of $1.08875, to trade at its highest level since April last year. It was aided by European Central Bank (ECB) governing council member Klaas Knot, who said interest rates would rise by 50 basis points in both February and March and continue climbing in the months after. A Reuters survey of analysts also favoured a hike of 50 basis points in March and an eventual top of 3.25% from the current rate of 2%. "Layered on top of that, it looks as if the ECB are going to carry on hiking interest rates fairly aggressively," Foley added. Investors also have around 50 basis points of U.S. rate cuts priced in for the second half of the year, reflecting softer data on inflation, consumer spending and housing.

☆ Japan warns of dire finances as BOJ struggles to contain yields
▼ + stars: | 2023-01-23 | by ( Tetsushi Kajimoto | ) www.reuters.com time to read: +3 min

It is not unusual for the finance minister to refer to Japan's strained finances. The Ministry of Finance estimates that every 1-percentage-point rise in interest rates would boost debt service by 3.7 trillion yen to 32.5 trillion yen for the 2025/2026 fiscal year. "Overall JGB issuance, including rolling over bonds, remain at an extremely high level worth about 206 trillion yen. We must secure fiscal space under normal circumstances to safeguard trust in Japan and people's livelihood at a time of emergency." LABOUR REFORMPrime Minister Fumio Kishida echoed Suzuki's resolve to revive the economy and tackle fiscal reform.

☆ Take Five: Staring at the ceiling
▼ + stars: | 2023-01-23 | by ( ) www.reuters.com time to read: +5 min

All told, companies worth more than half the S&P 500's market value are reporting results over the next two weeks. Stock markets can predict the global PMI levels, tending to bounce ahead of a sustainable rise of the index. On Wednesday, watch out for Australian and New Zealand inflation data as well, with the RBNZ pondering how much more to tighten, and the RBA wondering whether it's time to pause. Reuters Graphics5/LONDON CALLINGLondon's bluechip FTSE 100 index (.FTSE) is poised to launch a new attempt to scale an all-time high in days to come. British public sector borrowing numbers, producer price inflation and PMI data are all due as well ahead of a Bank of England meeting the following week.

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