The yen weakened after U.S. Senate leaders said they’ll resume talks on raising the debt limit, spurring optimism a U.S. default will be avoided and damping demand for the currency as a haven.
Japan’s currency fell versus all of its 16 major counterparts as U.S. stock futures rose with Senate discussions representing the clearest path to a deal. The pound climbed to a one-week high after U.K. jobless claims fell last month. New Zealand’s dollar rose to the strongest in four weeks as quickening inflation boosted speculation the central bank will raise interest rates. South Korea’s won advanced amid demand for higher-yielding assets.
Oct. 15 (Bloomberg) -- House Minority Leader Nancy Pelosi, a Democrat from California, talks about the outlook for an agreement avoiding a U.S. debt default and ending the partial government shutdown, following a meeting between House Democrats and President Barack Obama. House Minority Whip Steny Hoyer also speaks. (Source: Bloomberg)
Oct. 15 (Bloomberg) -- Thierry Wizman, global interest rates and currency strategist at Macquarie Group Ltd., and William Hoagland, a senior vice president at the Bipartisan Policy Center, talk about the negative rating watch placed on U.S. debt by Fitch Ratings. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
Oct. 15 (Bloomberg) -- White House Press Secretary Jay Carney speaks about the U.S. government shutdown and debt ceiling. Carney, speaking at a White House news briefing, also comments on the Obama administration's health-care overhaul. (Source: Bloomberg)
“The broad view is that whatever is going on in terms of the political spat, there will be a deal,” said Gavin Friend, a currency strategist at National Australia Bank Ltd. in London. “If people think there’s going to be a deal, equity markets will go up and the yen will tend to fall.”
The yen declined 0.2 percent to 98.34 per dollar at 7:21 a.m.New York time after strengthening 0.4 percent yesterday. Japan’s currency dropped 0.4 percent to 133.29 per euro after depreciating to 133.83 yesterday, the weakest since Sept. 26. The dollar slipped 0.2 percent to $1.3554 per euro.
U.S. Senate leaders are trying to complete an agreement to end the fiscal impasse that has caused a partial government shutdown, stepping in after House Republicans’ last-minute plan to avert a default collapsed. A Senate accord may be announced as early as today, though passage in the Republican-led House is far from assured. U.S. borrowing authority lapses tomorrow.
Failure to reach a deal would probably see the dollar weaken “pretty quickly” toward the 96 yen level, said Jim Vrondas, chief currency and payment strategist at OzForex Ltd. in Sydney. The dollar was last lower than 96 yen on Aug. 12.
The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 major peers, fell 0.2 percent to 1,010.71. The gauge has stayed in range of 0.9 percent this month as traders waited to see if lawmakers would reach a deal on the budget deficitand debt ceiling. The range was 3.2 percent in September.
JPMorgan Chase & Co.’s G-7 Volatility Index, a measure of price swings among Group of Seven nations’ currencies, dropped to 8.17 percent yesterday, the lowest level since Jan. 23. It rose today to 8.26 percent.
The jobless rate as measured by International Labour Organisation standards was unchanged at 7.7 percent in the three months through August.
“We suspect a lot of good news is now priced into the pound,” Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note to clients. The recent strength has been “primarily driven by optimism over the economic outlook,” he said.
Sterling climbed 0.2 percent to $1.6033 after appreciating to $1.6059, the highest since Oct. 9.
New Zealand’s dollar gained for a fourth session as the statistics bureau said consumer prices increased 0.9 percent in the third quarter, the fastest pace since the period ended June 2011. An industry report released this week showed home prices climbed to a record in September.
“New Zealand is almost the only developed country with a rate increase coming into sight, so the kiwi is likely to remain strong,” said Kengo Suzuki, chief currency strategist at Mizuho Securities Co. in Tokyo. Markets are expecting the central bank to raise interest rates “because of the resilient economy and inflation concerns.”
The kiwi rose 0.4 percent to 84.16 U.S. cents after increasing to 84.31 cents, the highest level since Sept. 19.
The won advanced 0.1 percent to close at 1,065.69 per dollar in Seoul after reaching 1,065.44, the strongest since Jan. 23.
South Korea’s adjusted jobless rate declined to 3 percent in September, the lowest level since December 2012, a government report showed today.
U.S. stock-index futures gained, signaling the Standard & Poor’s 500 Index (SPX) will climb for the fifth time in six days, as lawmakers rushed to lock up an agreement on raising the debt limit before tomorrow’s deadline.
Yahoo! Inc. and Mattel (MAT) Inc. advanced at least 2.6 percent after reporting earnings that topped analyst estimates. Intel (INTC) Corp. slipped 0.8 percent after saying manufacturing snags will delay a new line of processors.
S&P 500 futures expiring in December rose 0.7 percent to 1,703.50 at 9:19 a.m. in New York. The benchmark gauge slid 0.7 percent yesterday after rallying 3.3 percent over the previous four days. Contracts on the Dow Jones Industrial Average gained 106 points, or 0.7 percent, to 15,201.
“If the market truly believed the U.S. will default on its obligations, we would see a more dramatic reaction from equity and bond markets,” Henk Potts, who helps oversee about $310 billion as a strategist at Barclays Wealth & Investment Management in London, said by phone today. “The great expectation is the deal will be done. If the deal is not done, however minuscule that chance that may be, it would have a devastating impact on sentiment.”
The S&P 500 has advanced 1 percent this month even as Congress failed to agree on a federal budget, forcing the first partial government shutdown in 17 years.
A framework being negotiated by Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell would fund the government through Jan. 15, 2014, and suspend the debt limit until Feb. 7. The proposal will probably be presented for a House vote by Speaker John Boehner and may win passage with a majority of Democrats and minority of Republicans, Representative Charles Dent, a Pennsylvania Republican, said in an interview on CNN.
With no deal, the U.S. would exhaust its borrowing authority tomorrow and the government may start missing payments at some point between Oct. 22 and Oct. 31, according to the Congressional Budget Office. Fitch Ratings put the world’s biggest economy on watch for a possible credit downgrade yesterday, citing lawmakers’ inability to agree.
“Reaching a broad agreement aside, there are still a few hoops to go through before it can be considered a done deal,” Jim Reid, a strategist at Deutsche Bank AG, wrote in e-mailed comments. “All eyes clearly will be on this today as we await for further developments from Capitol Hill.”
The Federal Reserve is scheduled to release its Beige Book of current economic conditions today.
Some 22 companies in the S&P 500 are due to post results today. Profits for companies in the index probably increased 1.4 percent during the third quarter while sales rose 2 percent, according to analysts’ estimates compiled by Bloomberg.
Yahoo, the biggest U.S. Web portal, advanced 2.6 percent to $34.25 as an influx of advertising dollars helped boost turnaround efforts by Chief Executive Officer Marissa Mayer.
Mayer, who took the helm of the largest U.S. Web portal in July 2012, is investing in product improvements to woo more users and marketers amid competition from Google Inc. and Facebook Inc.
Mattel climbed 5.5 percent to $43.84. The world’s largest toymaker topped estimates as sales of Barbie and American Girl gained. The company has been trying to boost sales amid lackluster growth of the toy industry in the U.S., the company’s largest market, as kids spend more time using electronic devices.
Intel declined 0.8 percent to $23.20. The chipmaker said manufacturing snags will delay the new Broadwell line of processors, denting confidence in its ability to roll out advanced technology that can win orders in the fast-growing market for tablets and smartphones.
The company also reported third-quarter earnings that exceeded analysts’ estimates.
Stanley Black & Decker Inc., the maker of power tools and electronic security systems, tumbled 11 percent to $79.40. The company cut its full-year earnings outlook on slower-than-anticipated improvement in margins in its security business and weakness in emerging markets, as well as uncertainty created by the U.S. government shutdown.
The dollar strengthened against the yen for a third day, the longest run of gains in a month, amid signs U.S. lawmakers may reach a compromise to avert an unprecedented default.
The Bloomberg U.S. Dollar Index touched a two-week high as congressional leaders were said to be open to a short-term increase in the nation’s debt limit. The greenback briefly pared its gain versus the yen after U.S. jobless claims last week rose more than forecast. The Swedish krona and Norwegian krone slid as reports showed inflation pressures eased in the Nordic economies, cooling bets that interest rates will have to rise.
The Bloomberg U.S. Dollar Index, which tracks the performance of the greenback against 10 major peers, rose 0.2 percent to 1,014.75, set for the highest close since Sept. 26. Photographer: Tomohiro Ohsumi/Bloomberg
Oct. 9 (Bloomberg) -- Valentin Marinov, head of Group-of-10 foreign-exchange strategy at Citigroup Inc. talks about the effect on the dollar of Janet Yellen's nomination for chairman of the Federal Reserve. He speaks with Anna Edwards and Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)
Oct. 3 (Bloomberg) -- Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore, talks about the U.S. debt ceiling, Federal Reserve monetary policy, and the implications for the dollar and the euro. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
“Both parties are aware that it’s not in anybody’s best interest for the U.S. to default on its debt,” Sireen Harajli, a foreign-exchange strategist at Mizuho Bank in New York, said in a phone interview. “It looks like we are going to avoid the situation where we’ll see an actual default, which is giving the dollar relief.”
The greenback advanced 0.5 percent to 97.81 yen at 8:47 a.m. New York time, set for a three-day gain that would be the longest run since Sept. 5. The dollar was little changed at $1.3531 per euro. The Japanese currency weakened 0.5 percent to 132.36 per euro.
The Bloomberg U.S. Dollar Index, which tracks the performance of the greenback against 10 major peers, was at 1,012.86, after touching 1,015.74, the highest since Sept. 27.
Treasury Secretary Jacob J. Lew warned Congress uncertainty over whether it will raise the debt ceiling is “beginning to stress the financial markets” and failing to do so by Oct. 17 could put Social Security and Medicare payments at risk. Lew testified to the Senate Finance Committee
House Republican and Senate Democratic leaders are open to a short-term increase in the debt limit, said congressional aides of both parties, who spoke on condition of anonymity. The movement comes after House Democrats met with PresidentBarack Obama at the White House. A small group of House Republicans is scheduled to meet with the president today.
“There’s an indication that there’s some movement going on that we could get some kind of deal that could raise the debt ceiling,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “Sentiment has turned a little bit more dollar-friendly.”
The U.S. borrowing authority lapses on Oct. 17 as congressional Republicans seek spending cuts and changes to the nation’s 2010 health-care law.
Minutes of the Federal Reserve’s Sept. 17-18 meeting showed yesterday that most policy makers said the central bank was likely to reduce the pace of its $85 billion in monthly bond purchases this year. The gathering took place before the political deadlock over the budget and debt limit.
Obama yesterday nominated Fed Vice Chairman Janet Yellen to run the central bank to succeed Chairman Ben S. Bernanke, whose term ends Jan. 31.
The Swedish krona slid 0.8 percent to 8.8141 per euro after depreciating to 8.8190, the weakest level since June 25. The krone fell 1 percent to 8.1835 per euro, after reaching the lowest level since November 2010.
A report in Sweden showed headline inflation unexpectedly held at 0.1 percent, when economists surveyed by Bloomberg had predicted faster price growth. Underlying inflation inNorway slowed more than analysts estimated in September to 1.7 percent. Policy makers at both nations’ central banks last month kept rates unchanged and signaled higher rates next year.
The krone has declined 4.6 percent in the past six months, the worst performer after the Australian dollar among 10 major currencies tracked in Bloomberg Correlation-Weighted Currency Indexes. The Swedish currency slipped 0.9 percent in that period, leaving it with a 2.9 percent gain in 2013.
Bank of Japan Governor Haruhiko Kuroda is scheduled to speak today at the Council on Foreign Relations in New York. In April, he announced a plan to buy more than 7 trillion yen of Japanese government bonds per month to achieve 2 percent inflation in two years.
Japanese investors sold a net 2.2 trillion yen of overseas bonds in the week ended Oct. 4, the most on record, figures from the Ministry of Finance showed today in Tokyo.
The European Central Bank and the People’s Bank of China agreed to establish a bilateral currency swap line, bolstering access to trade finance in the euro area and strengthening the international use of the yuan.
The swap line will be valid for three years and have a maximum size of 350 billion yuan ($57 billion) when Chinese currency is provided to the ECB and 45 billion euros ($61 billion) when money is given to the PBOC, the Frankfurt-based central bank said in an e-mailed statement today. The arrangement is available to all Eurosystem counterparties via national central banks, it said.
The swap line will be valid for three years and have a maximum size of 350 billion yuan ($57 billion) when Chinese currency is provided to the ECB and 45 billion euros when money is given to the PBOC, the Frankfurt-based central bank said in an e-mailed statement today. Photographer: Nelson Ching/Bloomberg
PBOC Governor Zhou Xiaochuan pledged on June 28 to expand cross-border use of the yuan and encourage multinational companies to include the currency in their asset portfolios. Photographer: Tomohiro Ohsumi/Bloomberg
“The swap arrangement has been established in the context of rapidly growing bilateral trade and investment between the euro area and China, as well as the need to ensure the stability of financial markets,” the ECB said. “From the perspective of the Eurosystem, the swap arrangement is intended to serve as a backstop liquidity facility and to reassure euro area banks of the continuous provision of Chinese yuan.”
PBOC Governor Zhou Xiaochuan pledged on June 28 to expand cross-border use of the yuan, also known as the renminbi, and encourage multinational companies to include the currency in their asset portfolios. China will allow direct trading between the yuan and foreign currencies and push for more convertibility without giving up control of capital flows, Zhou said.
“It’s a reflection of the increasing bilateral trade and a measure to accompany China’s push for wider flexibility in the exchange rate,” said Stefan Schneider, chief international economist at Deutsche Bank AG in Frankfurt. “China is integrating itself more and more into global financial markets and such agreements are part of that.”
China is the European Union’s second-largest trading partner after the U.S. The 28-nation bloc exported 71.4 billion euros ($96.5 billion) of goods to China in the first six months of this year, with imports totaling 133.6 billion euros, according to the latest Eurostat data.
The Bank of England was the first in a race among European central banks to establish swap facilities with China, when it agreed on a line of 200 billion yuan and 20 billion pounds ($32 billion) in June. China, the world’s second-largest economy, has similar agreements with countries including Australia, Turkey, Brazil, South Korea and Malaysia.
Hong Kong has the largest swap agreement at 400 billion yuan, followed by South Korea with 360 billion yuan, with the ECB’s 350 billion yuan the third-biggest, according to PBOC data. The ECB swap line is smaller than initially anticipated. Frankfurt Main Finance, a lobby group based in Germany’s financial capital, said in July the facility may be as much as 800 billion yuan.
“London as the global center for currency trading still has the best chances for becoming the European center for trading in the renminbi,” Mark Williams, chief Asia economist at Capital Economics Ltd., said by phone from London. A swap line is “mainly of symbolic importance. It provides a backstop to the use of renminbi abroad,” he said.
Frankfurt is basing its push to become an offshore trading center for yuan on Germany’s close ties with China, the nation’s third-biggest trading partner. The two countries imported and exported goods and services valued at 144 billion euros between them last year, according to the Federal Statistics Office in Wiesbaden, Germany.
The swap agreement with the ECB “is for a very significant amount,” Christian Noyer, France’s representative on the ECB’s Governing Council, said in a statement. “This reflects the strong position of the euro in terms of international exchange. Euro-zone banks and French banks now have at their disposal the security they need to develop their business in renminbi over the long term.”
The Governing Council will discuss “technical modalities” and their communication in due course, the ECB said.
The yuan was the world’s eighth most-traded currency in August, up from 11th in January 2012, the Society for Worldwide Interbank Financial Telecommunications, or Swift, said in an Oct. 8 statement.
“Yuan is certainly becoming more internationalized,” Williams said. “Users of renminbi in Europe can have more reassurance that in any financial squeeze they would still be able to access renminbi liquidity.”