Dollar absorbs suspected yen interference, China figures mixed
by Brian Neeley October 24, 2022 in Market
Dollar absorbs suspected yen interference, China figures mixed
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Dollar buffet versus yen by suspected BOJ interference
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SYDNEY, Oct 24 (Reuters) – The US dollar faced another suspected outburst of Japanese intervention to push higher on the yen on Monday, while a slump in Chinese markets for equities weighed on hopes of a slowdown in US interest rate hikes. Water turned.
The dollar started in a bullish mood with an opening round of 149.70 yen, which suddenly expanded to 145.28 within a few minutes. Nevertheless, speculators seemed fearless and took the dollar back to 148.90 in choppy trading.
The Bank of Japan may have sold at least $30 billion on Friday in an effort to rein in the yen’s weakness, the Financial Times reported, which has sharply raised the cost of imports, especially for resources.
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Japanese officials again declined to confirm whether they had intervened, but price action strongly suggested they had. read more
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Any action to support the yen is contrary to the Bank of Japan’s super-easing policies and will intensify pressure to step back on yield curve controls at its policy meeting this week. read more
Also shaking was Sterling, who saw news that Boris Johnson had dropped out of running for British prime minister.
This raised the possibility that Rishi Sunak, the former finance minister, and the market’s favorite candidate, would win power and ease the political uncertainty hanging over the pound, at least for a while. read more
News Sterling initially jumped nearly a percentage point to $1.1402, but it didn’t hold up and last trading at $1.1307 as investors waited for more clarity on the competition.
Equities extended most of the rally that began late in New York on Friday, with the Federal Reserve debating when to slow the pace of hikes and the November meeting signaling a step back.
The market is still on course for an increase of 75 basis points next month, but has withdrawn bets on a similar move in December. The peak for rates has also fallen to around 4.87%, up from 5.0% at the start of last week.
ECB, BOC ready for hike
The prospect of a less aggressive Fed helped S&P 500 futures in Asia add 0.1%, while Nasdaq futures rose 0.2%. EUROSTOXX 50 futures gained 0.7%, while FTSE futures gained 0.1%.
Japan’s Nikkei (.N225) rose 0.6% and South Korea (.KS11) 0.9%, but MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) fell 1.1% as Chinese stocks tumbled.
Chinese blue chips (.CSI300) slipped 1.7% as the yuan continued its decline and Xi Jinping secured a precedent-breaking third leadership term by electing a top governing body lined with loyalists. read more
Delayed data on gross domestic product (GDP) showed the Chinese economy grew 3.9% in the third quarter, beating a forecast of 3.5%, but retail sales were disappointed by a modest 2.5% growth. read more
Markets are now awaiting US GDP data due on Thursday and key inflation measures the next day. The economy is projected to grow 2.1% annually in the third quarter, while the Atlanta Fed’s GDP Now estimate is 2.9%.
Sentiment will also be tested by some key earnings, with Apple (AAPL.O), Microsoft (MSFT.O), Google-parent Alphabet (GOOGL.O) and Amazon (AMZN.O) all reporting.
The European Central Bank meets this week and is widely expected to raise its rates by 75 basis points, although it is less clear whether it will signal another such move in December.
“While we do not expect any ‘faulty’ policy signals, we currently maintain a bias toward a lower rate path than market prices,” analysts at NatWest Markets said in a note.
“We anticipate reaching a peak of +50bp in December and 2.25% of +25bp in early 2023,” he said. “There is more uncertainty around QT (quantitative tightening), where the start of sales could be announced in Q1 2023.”
The euro was down a fraction at $0.9835, having briefly hit a high of $0.9899 at the start of the session.
Bank of Canada is also expected to tighten by 75 basis points at this week’s meeting. read more
The prospect of a slowdown in US rate hikes helped bonds offset some of their recent heavy losses, with the US 10-year Treasury yield falling to 4.16% compared to a 15-year peak of 4.337% on Friday.
In the commodity markets, gold was reduced to $ 1,654 an ounce.
Oil prices took early gains after soft data on Chinese demand. Brent fell 42 cents to $93.08 a barrel, while US crude fell 41 cents to $84.64.
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Reporting by Wayne Cole; Editing by Jacqueline Wong and Christopher Cushing
Our Standards: Thomson Reuters Trust Principles.
Source: news.google.com
