3 Major Market Themes (and Potential Winners) for 2022

Last year, risk assets didn’t seem to have a care in the world.

Roaring inflation? No worries.

Central banks pulling back stimulus? So what?

Delta and Omicron variants? Life goes on.

Despite all of those seemingly worrying events, risk appetite demonstrated a remarkable resilience to overcome anything that was thrown in its path. Just look at how the S&P 500 posted 70 new record highs on the way to claiming a 27% advance for 2021.

Still, markets could yet face a year of reckoning in 2022.

Here are three main themes that investors and traders would have to contend with and also the potential winners to look out for:

  1. Stubborn Inflation

In recent months, the prices of goods and services in major economies have skyrocketed (as of Nov 2021):

  • US: fastest inflation since 1982
  • UK: fastest inflation since 2011
  • Europe: record high inflation!

Surging consumer prices are also a major consideration for investors who must choose which asset class could best protect their wealth and purchasing power against the erosive effects of inflation.

Potential winner: Gold

This precious metal is traditionally seen as a way to preserve one’s wealth (hedge) against inflation. However, gold also has an inverse relationship with the US dollar and US Treasury yields (i.e. when the dollar goes down, gold goes up, and vice versa).

In short, gold could have a stellar 2022 if inflation continues surging and the dollar/Treasury yields are kept in check.

Gold daily chart

2) Fed rate hikes

The US Federal Reserve is the most important central bank in the world. And one of their main jobs is making sure that consumer prices don’t rise too much too fast.

The main way they can keep inflation in check is by raising interest rates.

As things stand, the Fed has indicated that they could hike rates 3 times in 2022.

Potential winner: US dollar

Historically, higher US interest rates typically means a stronger greenback. This is because higher interest rates also usually mean higher yields for US Treasuries, prompting global investors to send more of their money towards US assets.

This relationship is set to play out once more in 2022, unless the Fed has to hold back on rate hikes for fear of triggering a recession.

US Dollar Index, daily chart

3) New Covid variant?

We’re entering the third year in this battle against Covid-19. So far, the global economy seems resilient enough to weather the Delta and Omicron variants.

But what if we see a new variant of concern that winds back the pandemic clock?

Pi is the next letter in the Greek Alphabet after omicron. Unless the WHO decides to skip a couple of letters again (like they did before deciding on Omicron), the world will be hoping that the ‘life of pi’ won’t bring us back to lockdowns that shutters the world economy once more.

However, if this tragic turn of events does become reality in 2022 …

Potential winner: Swiss Franc

The Swiss Franc (CHF) is considered a safe haven currency, meaning to say that investors flock to it during times of heightened fear. Recall how CHF was one of the best-performing G10 currencies against the US dollar in 2020, and the Swiss franc also had an annual gain versus all other emerging-market currencies that year.

In a major risk-off event, or a new variant of concern that upends the global economic recovery, expect safe haven currencies including the CHF to be well sought after.

USD/CHF Weekly Chart

Of course, the outlook for financial markets is too vast to be limited to just three themes. So here are five other events to keep an eye on that could rock various asset classes:

  • Brexit risks: GBP, FTSE 100
  • Contagion risks from China’s troubled property sector: CNH, Hang Seng index
  • US President Biden’s spending plans: US dollar, US stocks
  • 2022 US midterm elections (November): US dollar, US stocks
  • Geopolitical tensions between major economies: Safe havens – gold, CHF, USD

Whatever 2022 may spring on the world, it also promises plenty of opportunities for traders and investors.

Hence, it remains vital that market participants stay sharp and keep tabs on major themes that could sway asset prices over this calendar year.

By Han Tan Chief Market Analyst at Exinity Group

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

2022 Global Economic Outlook: Covid-19, Structural Inflation, Monetary Tightening Challenge Global Outlook

Explainer video: Scope Ratings introduces its 2022 Global Sovereign Outlook

Download Scope’s 2022 Sovereign Outlook (report).

Entering 2022, new variants of Covid-19, elevated inflation, and withdrawal of fiscal and monetary support present risk for the robustness of recovery. GDP is seen, nevertheless, continuing to grow above trend over 2022 of 3.5% in the US, 4.4% in the euro area, 3.6% in Japan and 4.6% for the UK, even if, in most cases, normalising to a degree from elevated early-recovery growth of 2021. China is seen growing nearer trend of 5%.

Amid an uneven recovery, we see momentary slowdown over Q4 2021 and Q1 2022 across many economies, if not in some cases temporary output contraction, as countries of Europe reintroduce generally lighter restrictions on basis of renewed rise in Covid-19 cases, including those associated with a new Omicron variant. But we see economic rebound regathering traction by the spring of 2022.

As expected, full economic normalisation has remained vulnerable to renewed introduction of restrictions as transmissible virus variants challenge public-health systems, though we see severity of virus risk for economic recovery continuing to moderate with time as governments adopt more targeted responses, virus becomes more transmissible but less lethal, and businesses and people adapt ways of doing business. Nevertheless, risk to the 2022 outlook appears skewed on the downside.

More persistent inflation, even as it begins to moderate, supports increasing monetary policy divergence

Inflationary pressure is likely to remain more persistent than central bank projections, running above pre-crisis averages even after price changes begin to moderate by next year. This is likely to compel a continued divergence of monetary policy within the globe’s core economies, with associated risk of crystallisation of latent debt and financial-bubble risk as central banks pull back.

This is especially true as regards the UK and the US, where inflation might continue testing 2% mandates, although much less the case for Japan of course, with the euro area somewhere in between with inflation potentially remaining under 2% over the long run.

By end-2022, policy rates of leading central banks are expected to similarly diverge: remaining on hold with respect to the ECB and the Bank of Japan but with rate hikes next year from the Bank of England and Federal Reserve. The ECB is seen halting the Pandemic Emergency Purchase Programme (PEPP) next year but adapting PEPP and/or other asset-purchases facilities to retain room for manoeuvre and smoothen transition in markets.

Higher inflation holds both positive and negative implications for sovereign credit ratings

Higher and more persistent inflation holds both positive and negative credit implications as far as sovereign ratings are concerned. Somewhat higher trend inflation supports higher nominal economic growth, helping reduce public debt ratios via seigniorage, and curtails historical deflation risk of the euro area and Japan. However, rising interest rates push up debt-servicing costs especially for governments carrying heavy debt loads and running budget deficits. Emerging economies, with weakening currencies and subject to capital outflows, are particularly at risk.

Substantive accommodation from central banks has cushioned sovereign credit ratings over this crisis, so any scenario of much more persistent inflation limiting room for monetary-policy manoeuvre is a risk affecting credit outlooks. Bounds in central bank capacity to impede market sell-off due to high inflation compromising monetary space may expose latent risk associated with debt accrued in past years.

Monetary innovation during this crisis has supported credit outlooks

As many central banks tighten monetary policy amid policy divergence, peer central banks that might otherwise prefer looser financial conditions may see themselves compelled to likewise remove some accommodation, otherwise risking currency depreciation. At the same time, with governments dealing with record levels of debt and central banks owning large segments of this debt, “fiscal dominance” may coerce moderation in speed of policy normalisation.

Monetary innovation over this crisis such as flexibility made available in ECB asset purchases supports resilience of sovereign borrowers longer run, assuming such innovations were available for re-deployment in future crises.

Emerging market vulnerabilities entering 2022, while ESG risks becoming increasingly substantive

Emerging market vulnerabilities are a theme entering 2022, amid G4 central bank tapering, geopolitical risk, and a slowdown of China’s economy. Debate heats up furthermore during 2022 around adaptation of fiscal frameworks for a post-crisis age, with potentially far-reaching implications as far as sovereign risk. Environmental, social and governance (ESG) risks are becoming increasingly significant – presenting opportunities and challenges for ratings.

Sovereign borrowers with a Stable Outlook make up presently over 90% of Scope Ratings’ publicly rated sovereign issuers, indicating comparatively lesser likelihood of ratings changes next year as compared with during 2021, although economic risks could present upside and downside ratings risk. Only one country is currently on Negative Outlook: Turkey (rated a sub-investment-grade B).

For a look at all of today’s economic events, check out our economic calendar.

Giacomo Barisone is Managing Director of Sovereign and Public Sector ratings at Scope Ratings GmbH.

 

Dollar Holds Losses to Euro After ECB Comments, Economic Data

The euro rose nearly 0.7% against the dollar and was headed for its biggest daily gain since May. It traded at $1.1681 in the late afternoon in New York.

Sterling gained nearly 0.4% to $1.3788.

The dollar index of major currencies lost nearly 0.6% to 93.3580.

Foreign exchange markets have become volatile around central bank activity. Bigger moves started on Wednesday with hawkish comments from the Bank of Canada and were followed on Thursday with an action by the Reserve Bank of Australia and comments by the ECB – all ahead of meetings next week of the U.S. Federal Reserve and the Bank of England.

“The market is very much triggered and sensitive to inflation worries and this notion that central banks are behind the curve,” said Mazen Issa, senior currency strategist at TD Securities.

A contributing factor to the increasing volatility, Issa said, is the approaching end of the month when more investment managers rebalance their portfolios across currencies.

As central banks each chart adjustments to monetary policies adopted during the pandemic, traders are trying to predict the direction of interest rates and inflation-adjusted yields across currencies.

Some of the currency volatility is likely a spill over from uneasy interest rate markets. Recently flattening yield curves have suggested to some that central banks will have to sacrifice support for the pandemic recovery by allowing interest rates to rise to try to hold back inflation. Euro zone yields rose sharply on Thursday.

Before Lagarde spoke in a press conference, the euro moved little on the ECB policy statement. The ECB had stood, as expected, by its plan to keep buying bonds and hold down interest rates.

Some saw Lagarde’s comments as not being as forceful in affirming the ECB’s dovish position as markets expected.

“President Lagarde failed to give enough pushback against market expectations of rate hikes next year,” Rabobank economists wrote in a note.

The dollar got no help from a U.S. government report that gross domestic product grew at only a 2% annualized rate in the quarter ended in September. Economists polled by Reuters had forecast a 2.7% rate.

More recent U.S. economic data has been stronger, so the report had not been expected to matter much to the dollar.

Though the British pound firmed against the dollar, it slipped against the euro as much as 0.3%.

The pound has been buffeted recently by speculation over whether the Bank of England would proceed with an interest rate hike at its meeting next week.

Early on Thursday, the Reserve Bank of Australia declined to buy a government bond at the heart of its stimulus program and the Aussie dollar fell in response to speculation the central bank will allow rates to rise earlier than expected.

The Aussie initially fell 0.5% after the RBA statement but soon erased those losses and was up 0.3% against the U.S. dollar at 19:24 GMT.

In cryptocurrencies, bitcoin rose 3% to $60,040.

========================================================

Currency bid prices at 3:24PM (19:24 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

93.3580 93.8980 -0.56% 3.753% +93.9680 +93.2770

Euro/Dollar

$1.1681 $1.1604 +0.67% -4.40% +$1.1692 +$1.1582

Dollar/Yen

113.5500 113.8050 -0.22% +9.90% +113.8600 +113.2600

Euro/Yen

132.63 132.03 +0.45% +4.50% +132.6500 +131.5800

Dollar/Swiss

0.9119 0.9182 -0.69% +3.07% +0.9194 +0.9116

Sterling/Dollar

$1.3788 $1.3740 +0.36% +0.93% +$1.3814 +$1.3723

Dollar/Canadian

1.2343 1.2364 -0.15% -3.06% +1.2382 +1.2331

Aussie/Dollar

$0.7540 $0.7520 +0.28% -1.98% +$0.7555 +$0.7479

Euro/Swiss

1.0652 1.0653 -0.01% -1.43% +1.0671 +1.0641

Euro/Sterling

0.8469 0.8440 +0.34% -5.24% +0.8475 +0.8423

NZ

Dollar/Dollar $0.7192 $0.7171 +0.31% +0.17% +$0.7216 +$0.7153

Dollar/Norway

8.3345 8.4215 -1.09% -3.00% +8.4410 +8.3180

Euro/Norway

9.7361 9.7693 -0.34% -6.98% +9.7977 +9.7108

Dollar/Sweden

8.5195 8.5845 -0.04% +3.94% +8.6046 +8.5176

Euro/Sweden

9.9517 9.9555 -0.04% -1.24% +9.9855 +9.9520

(Reporting by David Henry in New York and Tommy Wilkes in London. Editing by Christina Fincher, Will Dunham, Barbara Lewis and Marguerita Choy)

Currency Markets Steady After Hawkish Bank of Canada Comments

The moves left the U.S. dollar index down 0.1% to 93.8240 after the dollar weakened against the Canadian dollar, euro and Japanese yen.

The greenback initially lost 0.7% to the Canadian dollar after the Bank of Canada signaled that it could hike interest rates sooner than it had thought. But the move eased and left the U.S. dollar down 0.4% against the loonie.

Before the announcement, which was viewed by some as surprisingly hawkish, the Canadian dollar had weakened to its lowest level in nearly two weeks against its U.S. counterpart.

“You’re going to see more FX volatility and swings here,” said Ed Moya, senior market analyst at broker OANDA.

Traders will have different expectations for inflation in each region, Moya said, adding: “Interest rate differentials are going to be really hard to calculate for some currencies.”

The Bank of Canada comments could be the first trigger for new assessments of how interest rates will change and impact currencies as central bankers try to support the pandemic recovery without unleashing sustained inflation.

Currency markets had moved little in the first two days of this week as traders paused for monetary policy announcements from major central banks around the world, including the U.S. Federal Reserve, which meets next week.

For much of the day, the euro traded within 0.2% of its Tuesday close against the dollar. It was last up about 0.1% to $1.1607.

The European Central Bank meets on Thursday and is expected to take a dovish stance.

The German government cut its 2021 growth forecast for this year, as supply bottlenecks for semiconductors and rising energy costs delay recovery in Europe’s largest economy.

Germany’s 10-year bond yield fell to its lowest in more than a week and its yield curve flattened.

Similarly, the U.S. yield curve flattened with the spread between yields on two- and 10-year Treasuries narrowing to fewer than 104 basis points, the least since August. The 10-year yield dipped below 1.53%. It had reached 1.70% last week.

Flattening yield curves in developed markets this week may reflect concern, analysts say, that central banks will err if they tighten policy too early in the face of higher inflation that proves temporary.

The Australian dollar rose 0.3% to $0.752 after data showed that Australian core inflation sped to a six-year high in September, surprising the market. The data prompted a spike in short-term yields.

The Reserve Bank of Australia meets on Tuesday of next week and market pricing is at odds with RBA policymakers’ insistence that there will be no rate hikes before 2024.

Against Japan’s yen, the U.S. dollar was down 0.3% to 113.7950 – still within recent ranges and close to the four-year high of 114.695 the dollar touched against the yen one week ago.

The Bank of Japan meets on Thursday and is widely expected to downgrade its economic assessment. Markets have been betting on no rate hike in the foreseeable future.

The British pound was down 0.1% to $1.3740 after the U.K. finance minister unveiled Britain’s budget forecasts..

In cryptocurrencies, bitcoin fell to as low as $58,100 – its lowest in a week and a half – in a move attributed to profit-taking following the all-time high of $67,016 it reached last week. Since that high, the cryptocurrency has fallen more than 13% but was on track for its best month since February.

Bitcoin was down 3% for the day at %58,634.

For a look at all of today’s economic events, check out our economic calendar.

(Graphic: USDJPY: https://fingfx.thomsonreuters.com/gfx/mkt/jnpwewobkpw/USDJPY.png)

(Reporting by David Henry in New York and Elizabeth Howcroft in London; Editing by Christina Fincher, Barbara Lewis, William Maclean and Marguerita Choy)

Dollar Edges Up In Steady Markets Before Central Bank Meetings

After a report showed that U.S. consumers were more confident about the economy than expected, the dollar index rose modestly and was up 0.1% at 93.9280 at 3:30 p.m. EDT (19:03 GMT).

The greenback mostly hovered around a point midway between its one-year high reached earlier this month and the one-month low touched early on Monday.

Analysts said the dollar might continue to hold steady pending a slew of central bank meetings and economic data that could shift views on interest rates, inflation and growth rates.

Yields on 10-year U.S. and German government securities also stayed in narrow ranges before the yield on the benchmark U.S. 10-year note slipped to 1.6185% in the afternoon in New York.

“The markets are just pausing right now,” said Joseph Trevisani, senior analyst at FXStreet.com.

The Bank of Canada meets on Wednesday and the European Central Bank and Bank of Japan convene on Thursday. Next week brings meetings of the U.S. Federal Reserve, Bank of England, Reserve Bank of Australia and Norway’s Norges Bank.

The euro was down 0.1% at $1.1597. The euro has been weakened recently by expectations that the ECB will take a dovish stance when it meets. Doing so would come in the face of news on Tuesday that inflation expectations for the euro zone among bond investors had reached a seven-year high above 2.07%.

Bigger currency movements came from the British pound, the Australian dollar and the Japanese yen.

Sterling rose to more than $1.38 after British retailers reported stronger-than-expected sales in October, affirming the prospect of higher rates. The pound then slipped back and was flat for the day at $1.3764.

The Aussie, which tends to move with commodity prices, gained 0.2% to $0.7506. Last week, it traded above $0.75 for the first time since July.

The U.S. dollar rose 0.4% against the Japanese yen, with the pair at 114.1400, below the four-year high of 114.695 reached last week.

The Bank of Japan is expected to maintain its massive stimulus program and slash this year’s inflation forecast when it meets on Thursday, showing again that it has no intention of following other central banks in backing away from pandemic policies.

The Canadian dollar gained slightly on the greenback as oil prices rose but was held back by the approaching Bank of Canada meeting.

The Bank of Canada is expected to raise its inflation forecast and to largely end stimulus from its pandemic-era bond-buying program.

So far in 2021, energy-exporting currencies whose central banks are preparing to tighten – such as the Canadian dollar or Norwegian crown – have outperformed, ING strategists noted.

Bitcoin was down 1% at $62,343 at 19:03 GMT.

========================================================

Currency bid prices at 3:03PM (19:03 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index

93.9280 93.8420 +0.11% 4.386% +94.0240 +93.7030

Euro/Dollar

$1.1597 $1.1611 -0.11% -5.07% +$1.1626 +$1.1585

Dollar/Yen

114.1400 113.7200 +0.38% +10.48% +114.3050 +113.6800

Euro/Yen

132.36 132.01 +0.27% +4.29% +132.6600 +131.9800

Dollar/Swiss

0.9196 0.9200 -0.03% +3.96% +0.9226 +0.9188

Sterling/Dollar

$1.3764 $1.3768 -0.03% +0.75% +$1.3829 +$1.3758

Dollar/Canadian

1.2384 1.2382 +0.05% -2.72% +1.2396 +1.2350

Aussie/Dollar

$0.7506 $0.7491 +0.21% -2.41% +$0.7525 +$0.7485

Euro/Swiss

1.0666 1.0677 -0.10% -1.30% +1.0703 +1.0662

Euro/Sterling

0.8424 0.8431 -0.08% -5.74% +0.8437 +0.8403

NZ

Dollar/Dollar $0.7162 $0.7167 -0.06% -0.26% +$0.7193 +$0.7153

Dollar/Norway

8.3575 8.3610 +0.07% -2.56% +8.3755 +8.3215

Euro/Norway

9.6940 9.6985 -0.05% -7.39% +9.7145 +9.6689

Dollar/Sweden

8.6166 8.6049 +0.04% +5.13% +8.6286 +8.5901

Euro/Sweden

9.9933 9.9890 +0.04% -0.82% +10.0084 +9.9748

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by David Henry in New York and Elizabeth Howcroft in London; Additional reporting by Tom Westbrook in Singapore; Editing by John Stonestreet, Angus MacSwan and Jonathan Oatis)

Dollar Steadies After Bounce Off of One-Month Low

The upward move came at the expense of the euro, the Japanese yen and the Swiss franc. The change seemed to indicate that the market had taken the dollar down too much recently on expectations that inflation outside the U.S. will force up interest rates for other currencies faster than for the greenback.

The dollar index against major currencies steadied with a gain of nearly 0.2% for the day after turning up from a one-month low in early trading. Before the turn, the index had lost 1% over two weeks.

Threats to current positions could come on Thursday from the European Central Bank and from U.S. economic data and from U.S. and European inflation data on Friday, as well as a meeting of the Bank of Canada on Wednesday.

The U.S. Federal Reserve meets next week.

“There’s so much event risk on tap this week and the dollar has underperformed over the last two weeks that the market’s starting to buy back the dollar,” said Joseph Manimbo, senior market analyst at Western Union Business Solutions.

“What had dulled the dollar’s shine of late is this notion that other central banks appear poised to raise rates before the Fed,” he said.

At one point the dollar index was up 0.4% on the day as the yield on the 10-year U.S. Treasury rose. The dollar eased off and the 10-year yield fell back, and was last around 1.63% and little changed for the day. Crude oil, too, climbed and then eased for the day.

The euro lost 0.3% to $1.1613.

The European Central Bank meeting on Thursday is not expected to make big news but comments from the bank could shift views on how much inflationary pressures could impact interest rates.

“There is no way that they (ECB policymakers) can’t acknowledge that inflation has run higher, but also they do not want to get dragged into a game of expectations given the ECB’s dovish proclivities,” said Jeremy Thomson-Cook, chief economist at payments firm Equals Money.

“Alongside inflation and growth data due this week, we will be able to mark the European economy a lot better against its UK and U.S. counterparts, something we expect to continue to allow for additional euro weakness moving forward.”

The dollar chalked up gains versus the Japanese yen, rising 0.2% to 113.685 yen. The Bank of Japan meets later this week. But like the ECB, it is not expected to shift from its dovish policy stance.

Thursday’s U.S. gross domestic product figures — if they show an expected slowdown — could take some pressure off the Fed even while inflation runs relatively hot.

Cryptocurrency with bitcoin was up 3% at $62,997 after last week reaching $67,000.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by David Henry in New York and Tommy Wilkes in London. Editing by Peter Graff and Chizu Nomiyama)

Key Events This Week: Can Big Tech Earnings Push Nasdaq 100 to New Record High?

Monday, October 25

  • EUR: Germany October IFO business climate
  • Facebook Q3 earnings

Tuesday, October 26

  • CAD: PM Trudeau to announce new cabinet?
  • USD: US September new home sales, October consumer confidence
  • Twitter Q3 earnings
  • Alphabet Q3 earnings
  • Microsoft Q3 (fiscal Q1) earnings

Wednesday, October 27

  • CNH: China September industrial profits
  • EUR: Germany November consumer confidence
  • GBP: UK government’s autumn budget released
  • CAD: Bank of Canada rate decision
  • US crude: EIA crude oil inventory report

Thursday, October 28

  • JPY: Bank of Japan decision
  • EUR: Germany October CPI
  • EUR: European Central Bank decision, October economic confidence
  • USD: US Q3 GDP, weekly initial jobless claims
  • Amazon Q3 earnings
  • Apple Q3 (fiscal Q4) earnings

Friday, October 29

  • AUD: Australia September retail sales
  • EUR: Eurozone October CPI, Q3 GP
  • USD: US September personal income and spending, PCE price index, October consumer sentiment

The ongoing US earnings season has already helped the likes of the S&P 500 and the Dow Jones indexes to close at fresh record highs this past week. Over the coming days, with the likes of Facebook, Twitter, Alphabet (Google’s parent company), Microsoft, Amazon, and Apple all due to release their respective earnings, could Big Tech’s earnings help push the Nasdaq 100 index to a fresh record high as well?

Note that the tech behemoths listed above have a combined value of over US$ 9 trillion, which is about 52% of the Nasdaq 100’s total market cap. In other words, given the sheer size of these stocks (except for Twitter which is not a member of the Nasdaq 100 index), they should have a major say on how the broader index performs.

Given that the Nasdaq 100 is just some 2% from its highest-ever closing price, which was registered on 7th September, one would think that a fresh peak is within reach. However, those who have been following global markets would know of the major headwinds facing tech stocks.

From the looming prospects of Fed rate hikes (overall, tech stocks do not perform well as US interest rates rise), to global supply chain issues, to heightened regulatory scrutiny, there are enough reasons on the table currently to warrant caution surrounding tech stocks. Recall how the share prices of social media platforms such as Facebook and Twitter were dragged lower by Snap’s dismal outlook after reporting its own earnings last week.

In short, it might be a bigger ask for the Nasdaq 100 to climb to a new summit relative to the S&P 500 and the Dow, given the challenges for tech companies.

As for the economic calendar, the Bank of Canada, European Central Bank, and the Bank of Japan are all not expected to adjust their respective benchmark rates this week nor make any policy adjustments. However, it’s their commentary surrounding their next policy move which could move their respective currencies. Should any of these central bankers harp on concerns over potentially out-of-control inflation, that might suggest that they’d have to raise rates earlier than expected. Such an outlook could push their currency higher; so watch the CAD, EUR, and JPY pairs.

The GDP prints out of the US and the Eurozone, as well as China’s latest industrial profits, will all be closely monitored amidst fears that the global economy risks entering a period of stagflation (higher consumer prices amid sluggish economic growth). If the US, Europe, and China combined can show that these major economies have enough growth momentum, despite concerns over the Delta variant and supply chain bottlenecks during the third quarter, that could be conducive for risk appetite.

The UK government’s autumn budget release is also set to be a key event for the Pound. If markets take positively to a budget that solidifies the UK’s post-pandemic recovery, that might cheer Sterling bulls into helping cable launch another attempt to breach its 200-day simple moving average.

By Han Tan Chief Market Analyst at Exinity Group

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Dollar Pares Losses as Powell Signals Bond Taper

Powell said employment is still too low and high inflation will likely abate next year as pressures from the COVID-19 pandemic fade, even as many market participants are concerned that rising price pressures will last longer than policymakers believe.

Investors have taken profits since the dollar index hit a one-year high last week, when concerns that inflation will remain stubbornly high for longer led investors to bring forward expectations on when the Fed will first raise rates to mid-2022.

Now, “there’s a bit of a positioning unwind taking place, we’ve obviously seen a firmer dollar since the September Fed,” said Mazen Issa, senior foreign exchange strategist at TD Securities in New York. “That also dovetails with the seasonal tendency for the dollar to soften into the end of the month.”

The Fed said at its September meeting that it will likely begin reducing its monthly bond purchases as soon as November, and signaled interest rate increases may follow more quickly than expected.

The dollar index fell 0.10% to 93.64, and is down from a one-year high of 94.56 last week. The euro gained 0.09% to $1.1636.

Data on Friday showed that U.S. business activity increased solidly in October, suggesting economic growth picked up at the start of the fourth quarter as COVID-19 infections subsided, though labor and raw material shortages held back manufacturing.

The dollar rally has also faded as investors build in expectations for sooner rate increases in other currencies.

Issa expects the dollar to regain traction, however, as global central banks push back against the aggressive repricing of rate hikes, while the Fed is likely to remain relatively hawkish and move forward with a reduction in its bond purchase program.

“Once we get the pushback from other central banks and the Fed’s committed to taper, we should see dollar dips really being shallow,” Issa said. The Aussie dollar, which is a proxy for risk appetite, gave up earlier gains and was last down 0.05% at $0.7462.

The safe-haven yen gained, though it remains the weakest performer, having dropped by almost 10% this year. The dollar was last down 0.50% against the Japanese currency at 113.42 yen.

Bitcoin dropped 2.98 percent to $60,367. The cryptocurrency set a record high of $67,017 on Wednesday, after the launch of the first exchange-traded fund that buys U.S. bitcoin futures.

========================================================

Currency bid prices at 3:03PM (19:03 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.6380 93.7410 -0.10% 4.064% +93.7890 +93.5340

Euro/Dollar $1.1636 $1.1625 +0.09% -4.76% +$1.1656 +$1.1621

Dollar/Yen 113.4200 114.0200 -0.50% +9.84% +114.2000 +113.4400

Euro/Yen 131.97 132.50 -0.40% +3.98% +132.7900 +131.9300

Dollar/Swiss 0.9162 0.9184 -0.24% +3.56% +0.9185 +0.9152

Sterling/Dollar $1.3754 $1.3792 -0.27% +0.68% +$1.3815 +$1.3736

Dollar/Canadian 1.2370 1.2371 +0.00% -2.85% +1.2390 +1.2321

Aussie/Dollar $0.7462 $0.7466 -0.05% -2.99% +$0.7512 +$0.7454

Euro/Swiss 1.0660 1.0673 -0.12% -1.36% +1.0682 +1.0659

Euro/Sterling 0.8458 0.8423 +0.42% -5.36% +0.8468 +0.8422

NZ $0.7142 $0.7157 -0.17% -0.51% +$0.7188 +$0.7133

Dollar/Dollar

Dollar/Norway 8.3595 8.3690 -0.14% -2.68% +8.3790 +8.3235

Euro/Norway 9.7295 9.7145 +0.15% -7.05% +9.7452 +9.6890

Dollar/Sweden 8.5751 8.6029 -0.19% +4.62% +8.6145 +8.5615

Euro/Sweden 9.9781 9.9973 -0.19% -0.98% +10.0050 +9.9712

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Karen Brettell; Editing by Susan Fenton and Jonathan Oatis)

Dollar Dips as Risk Sentiment Improves, Bitcoin Hits Record High

The greenback hit a one-year high against a basket of other currencies last week as market participants ramped up bets that the Federal Reserve will raise rates sooner than expected to quell rising price pressures.

Those bets have faded, however, while investors are pricing for even more aggressive rate increases in other countries and as commodity-linked currencies including the Canadian and Australian dollars outperform.

“When it comes to central banks, there’s a lot of aggressive pricing out there,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto, noting that the market is likely overstating how quickly rate hikes will come.

The dollar index fell 0.24% to 93.57.

Rai expects the dollar may outperform if investors pare back rate hike expectations in other countries, though “that’s something that’s going to take some time to correct.”

“When push comes to shove, given the underlying fundamentals in the United States, which are still very constructive for growth, we think the Fed is probably going to be the central bank that raises rates over the course of the coming years at a bit of a more aggressive clip than the market is pricing in now,” Rai said.

Market participants are pricing for the Fed to raise rates twice by the end of 2022.

Fed Governor Randal Quarles on Wednesday said that while it is time for the Fed to begin dialing down its bond-buying program, it would be premature to start raising interest rates in the face of high inflation that is likely to recede next year.

The Fed also said in its latest Beige Book that the U.S. economy grew at a “modest to moderate” rate in September and early October, as the latest surge of COVID-19 cases crested and began to recede.

ING FX strategists said in a client note that the dollar’s recent decline could be due to a combination of markets closing long-dollar positions and “a benign risk environment, where a strong U.S. earnings season has continued to offset inflation/monetary tightening concerns.”

“At this stage, it looks like the dollar is lacking some catalysts to contain the ongoing correction, and any support to the greenback may need to come from a cool-off in the recent risk-on mood in markets,” ING said.

The Australian dollar, seen as a liquid proxy for risk appetite, gained 0.60% on the day to $0.7522, the highest since July 7.

The New Zealand dollar rose 0.73% to $0.7205, the highest since June 11.

Reduced demand for safe-haven assets saw the dollar hit a four-year high of 114.67 versus the yen overnight, before retracing to 114.27.

The Canadian dollar was higher on the day after the country’s annual inflation rate accelerated to an 18-year high in September, putting the focus on the Bank of Canada ahead of a rate decision next week.

The greenback dropped 0.35% against the loonie to CAD$1.2317.

The British pound gained 0.30% in the day to $1.3831 after data showed that British inflation slowed unexpectedly last month. The figures did little to change expectations that the Bank of England will become the world’s first major central bank to raise rates.

In cryptocurrencies, bitcoin hit a record high of $67,017, a day after the first U.S. bitcoin futures-based exchange-traded fund began trading.

========================================================

Currency bid prices at 3:08PM (19:08 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.5720 93.8060 -0.24% 3.991% +93.8800 +93.5370

Euro/Dollar $1.1653 $1.1632 +0.18% -4.63% +$1.1658 +$1.1617

Dollar/Yen 114.2700 114.4000 -0.19% +10.55% +114.6950 +114.0800

Euro/Yen 133.17 133.06 +0.08% +4.92% +133.4800 +132.7500

Dollar/Swiss 0.9190 0.9230 -0.44% +3.87% +0.9252 +0.9187

Sterling/Dollar $1.3831 $1.3790 +0.30% +1.24% +$1.3834 +$1.3743

Dollar/Canadian 1.2317 1.2363 -0.35% -3.25% +1.2367 +1.2308

Aussie/Dollar $0.7522 $0.7477 +0.60% -2.22% +$0.7522 +$0.7465

Euro/Swiss 1.0710 1.0733 -0.21% -0.90% +1.0765 +1.0706

Euro/Sterling 0.8424 0.8431 -0.08% -5.74% +0.8460 +0.8424

NZ $0.7205 $0.7154 +0.73% +0.36% +$0.7208 +$0.7147

Dollar/Dollar

Dollar/Norway 8.3095 8.3525 -0.51% -3.23% +8.4120 +8.3065

Euro/Norway 9.6855 9.7187 -0.34% -7.47% +9.7789 +9.6828

Dollar/Sweden 8.5844 8.6203 -0.26% +4.73% +8.6361 +8.5818

Euro/Sweden 10.0038 10.0295 -0.26% -0.72% +10.0456 +10.0030

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Karen Brettell; Additional reporting by Elizabeth Howcroft in London; Editing by Steve Orlofsky and Will Dunham)

Dollar Dips, While Sterling, NZ Dollar Gain

The greenback reached a one-year high against a basket of other currencies last week as Treasury yields surged and as investors bet the Federal Reserve may need to increase rates to address stubbornly high inflation.

Yields appeared to stabilize on Tuesday, before grinding higher again, with benchmark 10-year yields reaching more than three-month highs.

The dollar’s move lower on Tuesday was likely exaggerated by technical factors as investors unloaded long positions.

“The movement in rates hardly explains the extent of the USD drop,” analysts at Scotiabank said in a report. “Rather, it seems USD long liquidation has snowballed into a broader clear out of positioning, triggering a technical reversal in the USD generally,” they said.

The dollar also dipped after data showed that U.S. homebuilding unexpectedly fell in September and permits dropped to a one-year low amid acute shortages of raw materials and labor, supporting expectations that economic growth slowed sharply in the third quarter.

Richmond Fed President Thomas Barkin said on Tuesday that U.S. labor shortages may outlast the coronavirus pandemic and limit overall economic growth unless the country comes up with better education, health and childcare policies to boost the number of people willing and able to work.

The dollar index against a basket of other currencies was last down 0.22% on the day at 93.73, after earlier dropping to 93.50, the lowest since Sept. 28.

The euro gained 0.25% to $1.1640.

Currencies, including sterling and the New Zealand dollar, are benefiting from rising interest rate increase expectations.

The British pound rose 0.51% to $1.3798 as money markets priced in a cumulative 35 basis points in rate hikes by the end of the year.

New Zealand’s dollar jumped 1.14% to $0.7159 after data on Monday showed the fastest consumer-price inflation in more than a decade.

It earlier rose to $0.7172, the highest since June 11.

Britain and New Zealand have led a rise in short-term bond yields, with short-dated yields climbing comparatively more than in the United States.

The Aussie rose to $0.7485, the highest since July 15, shrugging off dovish minutes from the Reserve Bank of Australia’s last meeting.

The yuan hit a four-month high as fears about contagion from property giant China Evergrande’s debt troubles receded and some of its peers made bond coupon payments. Policymakers said late last week the situation was controllable.

The offshore yuan strengthened to as much as 6.3674 per dollar, the strongest since June 1.

Bitcoin rose to $63,789 as the first U.S. bitcoin futures-based exchange-traded fund began trading, the highest since April when it set a record high of $64,895.

========================================================

Currency bid prices at 3:00PM (19:00 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.7260 93.9360 -0.22% 4.162% +93.9360 +93.5010

Euro/Dollar $1.1640 $1.1611 +0.25% -4.73% +$1.1670 +$1.1609

Dollar/Yen 114.2900 114.3100 -0.03% +10.63% +114.3500 +113.9150

Euro/Yen 133.04 132.71 +0.25% +4.82% +133.1800 +132.6300

Dollar/Swiss 0.9225 0.9239 -0.14% +4.28% +0.9239 +0.9185

Sterling/Dollar $1.3798 $1.3728 +0.51% +1.00% +$1.3833 +$1.3725

Dollar/Canadian 1.2358 1.2377 -0.15% -2.94% +1.2382 +1.2312

Aussie/Dollar $0.7479 $0.7413 +0.90% -2.78% +$0.7485 +$0.7408

Euro/Swiss 1.0738 1.0723 +0.14% -0.64% +1.0740 +1.0711

Euro/Sterling 0.8433 0.8456 -0.27% -5.64% +0.8463 +0.8424

NZ $0.7159 $0.7085 +1.14% -0.22% +$0.7172 +$0.7085

Dollar/Dollar

Dollar/Norway 8.3500 8.4230 -0.87% -2.77% +8.4185 +8.3325

Euro/Norway 9.7206 9.7739 -0.55% -7.13% +9.7830 +9.7103

Dollar/Sweden 8.6178 8.6471 -0.26% +5.14% +8.6641 +8.5883

Euro/Sweden 10.0321 10.0581 -0.26% -0.44% +10.0619 +10.0158

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Karen Brettell; Additional reporting by Sujata Rao in London; Editing by Steve Orlofsky and Andrea Ricci)

Dollar’s Five-Week Winning Streak Ends as Risk Sentiment Rebounds

Global stock markets have rallied this week as fears about a stagflationary economy have been eased by forecast-beating corporate earnings in the United States.

Unexpectedly strong U.S. retail sales data for September also boosted sentiment. Retail sales rose 0.7% last month, versus expectations of a 0.2% decline, helped in part by higher prices.

“The risk appetite here remains really, really strong for the time being,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

“That’s helping the high beta currencies like the pound, the euro and the Aussie, simply because the market is feeling much more positive,” he said.

The dollar index initially firmed after the retail sales data, but then trended lower and was last down 0.106% at 93.941. The greenback was down 0.19% for the week, after having appreciated for the previous five weeks, and hitting a one-year high of 94.563 on Tuesday.

The big run-up in dollar strength, based on expectations that the U.S. Federal Reserve may begin hiking rates sooner than had been anticipated, may have been overblown, and the dollar is now consolidating, said Marc Chandler, chief market strategist at Bannockburn Global Forex.

“Next week will help clarify whether we are consolidating, and whether the consolidation is just like a breath that refreshes or is a prelude for a correction,” he said.

The greenback had rallied against its major peers since early September on expectations the U.S. central bank would tighten monetary policy more quickly than previously expected amid an improving economy and surging energy prices.

Minutes of the Fed’s September meeting confirmed this week that a tapering of stimulus is all but certain to start this year, although policymakers are sharply divided over inflation and what they should do about it.

Money markets are currently pricing in about 50/50 odds of a 25 basis point rate hike by July.

Sterling rose 0.57% to $1.3765, hitting its highest since Sept. 17, while the euro edged down 0.03% to $1.1595 after touching $1.1624 on Thursday for the first time since Sept. 4.

The risk-sensitive Aussie dollar added 0.02% to $0.7417, having climbed to $0.7439 earlier in the session. New Zealand’s dollar jumped 0.54% to $0.7068, extending Thursday’s 1% surge.

The Japanese yen was the biggest loser, dropping to as low as 114.46 yen per dollar, its weakest since October 2018. The yen is a safe-haven currency and has been knocked by the rebound in risk sentiment including in Asia. The dollar was last up 0.53% against the yen at 114.28 yen.

In cryptocurrency markets, the price of bitcoin topped $60,000 for the first time in six months and was not far from its record high on bets U.S. regulators will approve a bitcoin futures exchange traded fund.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by John McCrank in New York; Editing by Edmund Blair, Andrea Ricci and Diane Craft)

Dollar Dips in Choppy Trading as Risk Appetite Improves

The greenback had rallied since early September on expectations the U.S. central bank would tighten monetary policy more quickly than previously expected amid an improving economy and surging inflation.

But the dollar reversed course on Wednesday, even after the minutes of the Fed’s Sept. 21-22 policy meeting confirmed the tapering of stimulus is likely to start this year and data showed that pricing pressures were still hitting U.S. consumers.

“I think what we’ve seen over the last day or two is a little bit of profit-taking,” said Shaun Osborne, chief FX strategist at Scotia Capital.

“I don’t think this is, at the moment, anything close to a significant reversal in the dollar trend, and in fact, I think what we’ve seen today might be a sign that the corrective rebound that we’ve seen over the past day or two has perhaps run its course,” he said.

The market is expecting that the Fed will begin tapering its asset purchases as early as next month, and that the wind-down of the massive bond-buying program will happen fairly quickly, Osborne added.

“That seems to be advancing to some extent towards when and how quickly the Fed is going to raise interest rates, so that’s another potential positive for the dollar,” he said.

At 3:25 p.m. EDT, the dollar index was down 0.036% at 93.982, having climbed back from a 10-day low of 93.754 earlier in the session. On Tuesday, the greenback hit a one-year high of 94.563.

The euro was flat against the dollar, at $1.15955, falling from a nine-day high reached overnight, while the British pound was up 0.15% against the dollar, at $1.36815.

A return in risk appetite may also have dented demand for the safe-haven greenback, with U.S. equity markets notching solid gains on upbeat earnings, said Vassili Serebriakov, FX and macro strategist at UBS.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell sharply last week to the lowest level since mid-March 2020.

In another report, the Labor Department said its producer price index for final demand rose, but the increase was less than economists polled by Reuters expected, both on a monthly and a year-on-year basis.

The Australian dollar, which is seen as a liquid proxy for risk appetite, was up 0.47% versus the dollar at $0.7414, its highest level since Sept. 7.

The New Zealand dollar also rose, up 0.93% at $0.7030, its highest mark in 2-1/2 weeks.

Elsewhere, the cryptocurrency bitcoin was up 0.13% at $57,451. It hit a five-month high of $58,550 earlier in the session.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by John McCrank in New York; Editing by Emelia Sithole-Matarise, Kim Coghill and Paul Simao)

Dollar Pulls Back From One-Year High After Inflation Data

The consumer price index rose 0.4% last month versus a 0.3% rise anticipated by economists polled by Reuters. Year-over-year, the CPI increased 5.4%, up from 5.3% in August. Excluding the volatile food and energy components, the so-called core CPI climbed 0.2% last month versus 0.1% in August.

Yields on shorter-term Treasuries, which typically move in tandem with interest rate expectations, increased after the report, while longer-dated yields dipped, indicating the market is still not pricing in a sustained period of inflation. [US/]

The gap between the two- and 10-year Treasury notes closed to its narrowest in two weeks after having widened to a 3-1/2-month high on Friday.

“The market is now seeing a major pivot here as far as how inflation is showing more signs of being persistent than transitory, and that’s likely to force the Fed’s hand to deliver a rate hike well in advance of what people were anticipating,” said Edward Moya, senior market analyst at Oanda.

The market had been pricing in a rate hike for December 2022, but now it is eyeing September of that year, he said.

The greenback initially moved higher after the CPI data, touching a nearly three-year high versus the Japanese yen, before edging lower along with the longer-dated bond yields.

The dollar index, which measures the greenback against six rivals, was last down 0.515% at 94.036 from Tuesday, when it touched 94.563, its highest since late September 2020.

“The dollar has had a significant move higher and it’s been ripe for a pullback here, and I think this is going to likely trigger that,” Moya said.

The dollar slid 0.29% versus the yen to 113.275 yen.

The euro was up 0.56% at $1.15945, rebounding from its nearly 15-month low of $1.1522 hit in the previous session.

A surge in energy prices has added to inflation concerns and stoked bets the Fed may need to act faster to normalize policy than previously projected.

The commodity-linked Aussie dollar rose 0.35% to $0.7370, close to its one-month high of $0.7384 hit on Tuesday.

The minutes from the Fed’s September policy meeting signaled that the central bankers could start tapering their crisis-era support for the economy in mid-November, though they remain divided over how much of a threat high inflation poses and how soon they may need to raise interest rates in response.

“Tapering is baked in the cake,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.

“The bigger question is will the inflation dynamics lead them to be more aggressive and quicker in raising interest rates? So interest liftoff now becomes the big focus for the markets, and that’s where we’re really seeing price action along the yield curve,” she said.

Fed Governors Lael Brainard and Michelle Bowman were due to speak later on Wednesday.

In cryptocurrencies, bitcoin traded up 1.88% at $57,048.91, after reaching a five-month high of $57,855.79 at the start of the week.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by John McCrank; Editing by Carmel CrimminsF, Giles Elgood and Jonathan Oatis)

Dollar Hits One-Year High as U.S. Yields Rise, Inflation Data on Tap

Yields on the U.S. two-year Treasury note jumped to their highest in more than 18 months, as investors sold U.S. debt, reckoning that surging energy prices would fuel inflation and add to pressure on the Fed to take action sooner than anticipated. [US/]

“The focus right now is Treasury rates,” said Joseph Trevisani, senior analyst at FXStreet.com. “The credit markets are anticipating the taper starting, I think, in November.”

Investors will watch U.S. Consumer Price Index data on Wednesday and retail sales data on Friday for further clues as to when the Fed might begin winding down stimulus.

“The data is going to be huge,” said Joe Manimbo, senior market analyst at Western Union Business Solutions.

“These numbers will speak to both the inflation outlook, as well the extent to which third-quarter growth likely moderated. So if we get another hot print on inflation tomorrow, that would tend to cement tapering this year and maybe lead the market to fine-tune expectations on when we could see lift-off on interest rates,” he said.

The dollar index, which measures the greenback against a basket of major currencies, touched 94.563, its highest since late September 2020.

The spike in U.S. yields prompted investors to dump the Japanese yen versus the dollar, resulting in the second-biggest daily fall in the Japanese currency on Monday.

As Treasury yields rose further on Tuesday, the dollar hit a three-year high versus the yen, which has fallen 4% versus the greenback in three weeks.

“The primary driver of the move is the further rise that we’ve seen in U.S. Treasury yields – so it’s a fairly simple story of a widening rates differential … adding to the attraction of the carry trade,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank.

A Deutsche Bank monthly market sentiment survey this month noted that an overwhelming majority of respondents expect U.S. Treasury yields to rise from current levels.

The dollar also strengthened against the euro, with the common currency down 0.23% at $1.1525, its lowest since July 2020 as rising energy prices fed worries inflation may dent economic growth.

Oil passed $84 a barrel, within sight of a three-year high, before easing slightly, as a rebound in global demand after the worst of the pandemic caused price spikes and shortages in other energy sources. Coal has scaled record peaks and gas prices remain four times higher in Europe than at the start of 2021.

The ZEW indicator of economic sentiment in Germany slipped for the fifth month, the latest in a string of indicators showing supply bottlenecks holding back recovery in Europe’s largest economy.

The commodity-linked Australian dollar was up 0.16% at $0.7357.

In cryptocurrencies, bitcoin was down 3.02% at $55,750. Ether, the world’s second biggest cryptocurrency dropped 1.38% to $3,495.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by John McCrank; additional reporting by Saikat Chatterjee in London; Editing by Kirsten Donovan, Bernadette Baum and David Gregorio)

China Sept Forex Reserves Fall to $3.201 Trln – Central Bank

BEIJING (Reuters) – China’s foreign exchange reserves fell to $3.201 trillion at the end of September, down from $3.232 trillion at the end of August, official data showed on Thursday.

China held $109.18 billion of gold reserves at the end of last month, down from $113.69 billion at the end of August, data from the central bank’s State Administration of Foreign Exchange showed.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Jenny Su and Tom Daly, Editing by Timothy Heritage)

Dollar Edges Down as Traders Await U.S. Jobs Data

The U.S. Dollar Currency Index, which measures the greenback against a basket of six currencies, was 0.2% lower at 93.802. The index rose 0.8% last week to its highest since late September 2020.

With Chinese mainland markets closed until Thursday for the National Day holiday and South Korean markets also shut on Monday, investor attention was firmly on the upcoming U.S. data.

“Nonfarm payrolls will be the big focus for markets this week,” Brad Bechtel, global head of FX at Jefferies in New York.

Friday’s data is expected to show continued improvement in the job market, with a forecast for 488,000 jobs to have been added in September, according to a Reuters poll – enough to keep the Federal Reserve on course to begin tapering before year’s end.

The Fed has signalled it will likely begin reducing its monthly bond purchases as soon as November but a big stumble in labor data could delay its plans, traders worry.

“Will the Fed react negatively to a 300k print? Likely not. With the momentum on taper already really high, the Fed will have a hard time making an about face after a small miss on what has been a very volatile series,” Bechtel said.

“If we were to see something more extreme like a negative NFP print for example, then we could have a different story and the Fed may be forced to at least pause,” he said.

The dollar found little support from data on Monday that showed new orders for U.S.-made goods accelerated in August, even as economic growth appeared to have slowed in the third quarter because of shortages of raw materials and labor.

Still, speculators in the FX market have grown increasingly bullish on the U.S. currency in recent weeks, with net long bets on the U.S. dollar climbing to its highest since March 2020, data on Friday showed.

With oil prices rising to a near 7-year high, the greenback was particularly weak against the energy-sensitive Norwegian crown and the Canadian dollar.

The dollar fell 0.6% against the crown and slipped 0.5% against the loonie.

The British pound was 0.5% higher at $1.3611, extending its rebound from the 9-month low touched last week.

“We think the GBP is still on fragile footing since the country will likely still have energy and food shortages in the fourth quarter. This, combined with strong U.S. data this week, could see the GBP re-test the 1.34 zone and resume its September decline,” Shaun Osborne, chief currency strategist at Scotiabank, said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Saqib Iqbal Ahmed;Editing by Alison Williams and Sonya Hepinstall)

Dollar Advances to One-Year High; U.S. Debt Ceiling Impact Muted

The greenback also fared well despite an impasse in Washington over the U.S. debt ceiling that threatened to plunge the government into a shutdown.

The world’s largest reserve currency, seen as a safe-haven bet at times of market stress, has strengthened in recent days as investors instead focused on fears of a global slowdown, a rise in energy prices and higher U.S. Treasury yields.

Traders are also concerned that the Fed will start to withdraw policy support just as global growth slows.

“Fed has sounded the starting gun on monetary policy normalization,” Kit Juckes, macro strategist at Societe Generale, wrote in his latest research note.

“As the U.S. escapes the interest rate zero-bound, leaving the Eurozone and Japan behind, the global savings glut is set to be drawn towards the dollar, which can outperform the majority of other currencies in the coming year, and may start its move earlier than we expected,” Juckes added.

The dollar index – which measures the U.S. currency against a basket of six major currencies – rose for the fourth consecutive day, to 94.435, its highest since late September of last year. It was last up 0.7% at 94.404.

Erik Nelson, macro strategist at Wells Fargo in New York, sees a further 2% to 3% upside in the dollar index.

The greenback was also unfazed, even as U.S. Senate Republicans on Tuesday blocked a bid by President Joe Biden’s fellow Democrats to head off a potentially crippling U.S. credit default, with federal funding due to expire on Thursday and borrowing authority on around Oct. 18.

The Senate could vote on Wednesday or Thursday on a bipartisan resolution to fund federal operations through early December, Senate Majority Leader Chuck Schumer said.

The euro was among the currencies to lose ground, falling below the $1.16 level, the lowest since late July 2020. It last traded down 0.8% at $1.1592.

The yen showed little reaction to the election of Fumio Kishida as leader of Japan’s ruling Liberal Democratic Party, which put him on course to become the country’s next prime minister.

The yen, the currency most sensitive to U.S. yields as higher rates can attract flows from Japan, touched an 18-month low against a resurgent dollar. The dollar climbed as high as 112.04, its strongest level since late February last year, and was last up 0.4% at 111.99 yen.

The dollar also rose to a more than five-month high of 0.9355 francs. It was last up 0.7% at 0.9351.

Currency traders also took note of comments from major central bankers on Wednesday, who were panelists at a European Central Bank forum in Sintra, Portugal.

Fed Chairman Jerome Powell, European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey said they were keeping a close eye on inflation amid a surge in energy prices and the persistence of production bottlenecks.

========================================================

Currency bid prices at 4:06PM (20:06 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 94.3940 93.7060 +0.74% 4.904% +94.4350 +93.6710

Euro/Dollar $1.1593 $1.1684 -0.77% -5.12% +$1.1690 +$1.1590

Dollar/Yen 111.9850 111.5150 +0.42% +8.38% +112.0450 +111.2100

Euro/Yen 129.83 130.25 -0.32% +2.29% +130.4700 +129.6800

Dollar/Swiss 0.9350 0.9293 +0.65% +5.73% +0.9355 +0.9281

Sterling/Dollar $1.3419 $1.3536 -0.88% -1.80% +$1.3554 +$1.3412

Dollar/Canadian 1.2756 1.2686 +0.56% +0.18% +1.2774 +1.2670

Aussie/Dollar $0.7176 $0.7240 -0.86% -6.69% +$0.7264 +$0.7171

Euro/Swiss 1.0839 1.0855 -0.15% +0.30% +1.0862 +1.0822

Euro/Sterling 0.8639 0.8629 +0.12% -3.33% +0.8658 +0.8613

NZ $0.6862 $0.6960 -1.39% -4.43% +$0.6962 +$0.6861

Dollar/Dollar

Dollar/Norway 8.7750 8.6605 +1.45% +2.32% +8.7880 +8.6460

Euro/Norway 10.1720 10.1219 +0.49% -2.81% +10.1851 +10.0980

Dollar/Sweden 8.8068 8.7334 +0.05% +7.45% +8.8122 +8.7233

Euro/Sweden 10.2104 10.2055 +0.05% +1.33% +10.2175 +10.1816

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting Iain Withers in London; Editing by Angus MacSwan, Kirsten Donovan, Philippa Fletcher, Will Dunham and Jonathan Oatis)

Dollar Rises to 10-1/2-Month Peak, Lifted by Treasury Yield Surge

On Tuesday, benchmark 10-year Treasury yields hit a three-month peak, and were last up four basis points at 1.5253%.

The rise in yields accelerated after the U.S. central bank turned hawkish at last week’s monetary policy meeting, reinforcing the market view for a sooner-than-expected Fed taper.

“Yields are generally moving higher as rising inflation expectations weigh on the relative attractiveness of government bonds, but are climbing even faster in the United States as traders bet the Federal Reserve will move more quickly than its global counterparts,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

“Rate differentials are tilting toward the dollar, weakening low-yielders and putting pressure on economies with significant borrowing needs.”

In afternoon trading in New York, the U.S. dollar index reached its highest level since early November and was last up 0.3% at 93.719.

Risk aversion exacerbated the currency market moves, said Neil Jones, head of FX sales at Mizuho, with Wall Street shares down.

The Australian dollar, which is seen as a liquid proxy for risk appetite, dropped 0.6% at US$0.7240.

The euro was down 0.1% versus the dollar at $1.1681 . Earlier in the session, it hit a six-week low of $1.1668, after comments from U.S. Treasury Secretary Janet Yellen, saying that U.S. inflation at the end of the year would be closer to 4%, double the Fed target.

“One theme that seems to be gaining traction is that the market lies on the cusp of reassessing the path for the Fed tightening cycle,” ING strategists wrote in a note to clients.

“A big move higher in the short-end is the key reason why we are bullish on the dollar, particularly from 2Q next year, but we will closely monitor and reassess whether that move needs to come earlier – largely a function of timing the take-off in short-end rates.”

The Japanese yen weakened to its lowest level in nearly three months against the dollar. The greenback was last up 0.5% at 111.57 yen..

The yen is the G10 currency most correlated with U.S. two-year and 10-year Treasury yields, MUFG currency analyst Lee Hardman said in a note to clients.

Minutes from the Bank of Japan’s July meeting showed that some central bank policymakers warned of the risk of a delay in the country’s economic recovery.

The British pound, meanwhile, was down 1.2% at $1.3532. The currency jumped last week after a hawkish tone by the Bank of England, but analysts struck a cautious note on the currency as Britain struggled with supply chain chaos due to a shortage of truck drivers.

========================================================

Currency bid prices at 3:02 PM (19:02 GMT)

Description RIC Last U.S. Pct Change YTD Pct High Bid Low Bid

Close Change /  Previous  / Session

Dollar index 93.7590 93.4110 +0.39% 4.199% +93.8050 +93.3600

Euro/Dollar $1.1676 $1.1695 -0.15% -4.43% +$1.1704 +$1.1668

Dollar/Yen 111.5950 111.0100 +0.53% +8.00% +111.635 +110.935

Euro/Yen 130.28 129.79 +0.38% +2.65% +130.360 +129.680

Dollar/Swiss 0.9299 0.9257 +0.45% +5.11% +0.9302 +0.9259

Sterling/Dollar $1.3531 $1.3706 -1.25% -0.94% +$1.3717 +$1.3522

Dollar/Canadian 1.2676 1.2629 +0.36% -0.47% +1.2707 +1.2594

Aussie/Dollar $0.7238 $0.7287 -0.66% -5.90% +$0.7311 +$0.7226

Euro/Swiss 1.0857 1.0824 +0.30% +0.46% +1.0859 +1.0826

Euro/Sterling 0.8626 0.8538 +1.03% -3.48% +0.8640 +0.8526

NZ $0.6954 $0.7014 -0.86% -3.17% +$0.7026 +$0.6943

Dollar/Dollar

Dollar/Norway 8.6650 8.6010 +0.80% +0.97% +8.6815 +8.5990

Euro/Norway 10.1163 10.0530 +0.63% -3.35% +10.1426 +10.0475

Dollar/Sweden 8.7361 8.7079 +0.21% +6.58% +8.7499 +8.6971

Euro/Sweden 10.2003 10.1792 +0.21% +1.23% +10.2166 +10.1750

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Elizabeth Howcroft in London; Editing by Bernadette Baum, Susan Fenton and Mark Heinrich)

U.S. Dollar Gains, Tracks Rise in Treasury Yields

U.S. benchmark 10-year Treasury yields hit a three-month high of $1.516% on Monday. [US/]

Fed officials, including one influential board member, on Monday tied reduction in the Fed’s monthly bond purchases to continued job growth, with a September employment report now a potential trigger for the central bank’s bond “taper.”

Fed Chair Jerome Powell, who will join Treasury Secretary Janet Yellen, speaks before Congress on Tuesday.

The dollar index, which measures the U.S. currency against six major rivals, rose 0.1% to 93.37.

The greenback also extended gains after data showed new orders and shipments of key U.S.-made capital goods increased solidly in August, rising 0.5% in August amid strong demand for computers and electronic products.

But the market has been more focused on the U.S. Treasury market.

U.S. yields climbed to their highest since late June in anticipation of tighter monetary policy after the Fed announced last week it may start tapering stimulus as soon as November and flagged interest rate increases may follow sooner than expected.

“As much as taper in and of itself is not a surprise, an earlier end to its program will reinforce that downside risks to the U.S. dollar have diminished,” Mazen Issa, senior FX strategist at TD Securities, wrote in a research note.

TD expects the Fed to end its quantitative easing program by June 2022.

“If the last taper cycle was any indication, about half of the U.S. dollar’s cyclical upswing was observed three months after taper,” he added.

The euro slipped 0.1% against the dollar to $1.1698, largely ignoring developments in German elections over the weekend, with the Social Democrats projected to narrowly defeat the CDU/CSU conservative bloc.

The dollar rose 0.3% versus the yen to 110.99 yen, after earlier rising to a nearly three-month high. It gained 0.2% versus the Swiss franc to 0.9259 francs.

“The buck has no real reason to decline from where it is, so it will be about looking for what may actually change that as we hear from various sides this week: a new German leadership, a new Japanese head of state, and the U.S. Congress,” said Juan Perez, FX strategist and trader at Tempus Inc in Washington.

The risk-sensitive Australian dollar rose 0.4% to US$0.7289 as fears of widespread market contagion from indebted China Evergrande Group ebbed.

Concerns that Evergrande, China’s second-largest developer, could default on its $305 billion of debt have overshadowed trade in recent weeks, but some of those contagion fears are receding.

The People’s Bank of China injected a net 100 billion yuan ($15.5 billion) into the financial system on Monday, adding to the net 320 billion yuan last week, the most since January.

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Currency bid prices at 3:08 PM (19:08 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 93.3840 93.2680 +0.13% 3.782% +93.4940 +93.2060

Euro/Dollar $1.1698 $1.1722 -0.20% -4.25% +$1.1730 +$1.1685

Dollar/Yen 111.0000 110.7350 +0.25% +7.44% +111.0600 +110.5300

Euro/Yen 129.84 129.75 +0.07% +2.30% +129.9300 +129.4900

Dollar/Swiss 0.9260 0.9243 +0.19% +4.67% +0.9291 +0.9246

Sterling/Dollar $1.3707 $1.3670 +0.29% +0.34% +$1.3729 +$1.3661

Dollar/Canadian 1.2620 1.2657 -0.27% -0.88% +1.2672 +1.2610

Aussie/Dollar $0.7289 $0.7257 +0.42% -5.26% +$0.7291 +$0.7250

Euro/Swiss 1.0831 1.0831 +0.00% +0.22% +1.0864 +1.0825

Euro/Sterling 0.8534 0.8565 -0.36% -4.51% +0.8583 +0.8528

NZ $0.7019 $0.7015 +0.06% -2.26% +$0.7033 +$0.6990

Dollar/Dollar

Dollar/Norway 8.6030 8.5970 +0.10% +0.22% +8.6090 +8.5530

Euro/Norway 10.0653 10.0623 +0.03% -3.84% +10.0870 +10.0250

Dollar/Sweden 8.6972 8.6462 +0.36% +6.11% +8.7080 +8.6294

Euro/Sweden 10.1741 10.1380 +0.36% +0.97% +10.1898 +10.1165

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Ritvik Carvalho in London; Editing by Steve Orlofsky, Nick Macfie and Jonathan Oatis)

Dollar Climbs as Evergrande Uncertainty Percolates

China Evergrande Group owes $305 billion and has run short on cash, missing a Thursday deadline for paying $83.5 million and leaving investors questioning whether it will make the payment before a 30-day grace period expires. A collapse of the company could create systemic risks to China’s financial system.

The safe-haven dollar had its biggest one-day percentage drop in about a month on Thursday after Beijing injected new cash into the financial system and Evergrande announced it would make interest payments on an onshore bond, boosting risk sentiment.

The offshore Chinese yuan weakened versus the greenback at 6.4641 per dollar.

The decline came a day after the greenback was lifted by Wednesday’s announcement from the U.S. Federal Reserve that it will likely begin to trim its monthly bond purchases as soon as November and flagged interest rate increases may follow suit sooner than expected as the central bank moves away from its pandemic crisis policies.

“We are in one of the situations, and this doesn’t always happen, where the dollar is the beneficiary of multiple ideas,” said Joseph Trevisani, senior analyst at FXStreet.com.

“The U.S. economy does look better than most of its competitors, there is lingering fear out there over Evergrande and what else is out there in the rather untransparent Chinese economy and political system, plus the Fed appears finally ready.”

The dollar index rose 0.237%, with the euro down 0.2% to $1.1713.

Kansas City Fed President Esther George said the U.S. labor market has already met the central bank’s test to pare its monthly bond purchases, and the discussion should now turn to how its massive bondholding could complicate the decision on when to hike rates.

Cleveland Fed President Loretta Mester echoed the sentiment for a tapering this year, and said the central bank could start raising rates by the end of next year should the job market continue to improve as expected.

In prepared remarks in a listening session with a wide swath of economic players, Fed Chair Jerome Powell did not elaborate on his own economic or monetary policy outlook, which he had outlined at the close of the two-day Fed meeting on Wednesday.

Sterling weakened a day after hawkish comments from the Bank of England on Thursday pushed the pound to its biggest one-day percentage gain since Aug. 23.

The Japanese yen weakened 0.43% versus the greenback at 110.77 per dollar, while Sterling was last trading at $1.3666, down 0.36% on the day.

Cryptocurrencies slumped after China’s most powerful regulators increased the country’s crackdown on the digital assets, with a blanket ban on all crypto transactions and crypto mining.

Bitcoin, the world’s largest cryptocurrency, last fell 5.89% to $42,256.47.

Smaller coins, which generally move in tandem with bitcoin, also dropped. Ether last fell 8.08% to $2,899.10 while XRP last fell 7.2889413% to $0.93.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Dan Grebler and Sonya Hepinstall)