Dollar firm, sterling gives up gains after touching two-week high
The dollar held steady against most of its major peers on Monday, supported by expectations of tighter U.S. monetary policy, while sterling gave up nearly all its recent gains as investors sought clarity around Brexit. A Sunday Times report that an all-UK customs deal will be written into the agreement governing Britain's withdrawal from the EU had cheered investors who sent the pound to $1.3062 on Monday, the highest since Oct. 22.
The dollar's index versus six major peers was steady at 96.50 on Monday.
Analysts are bullish on the greenback, supported by strong economic growth and see the Federal Reserve on track to raise interest rates in December, followed by another two hikes by mid-2019.
Data out on Friday showed that U.S. jobs growth rebounded sharply in October and wages recorded their largest annual gain in 9-1/2 years.
"The jobs data has reaffirmed the dollar's strength due to the rates differential factor going forward. The risk is that the markets may be caught surprised by a more hawkish Fed," said Rodrigo Catril, senior currency strategist at NAB.
Ten-year U.S. Treasury yields were at 3.2 percent on Monday, having risen on Friday on the back of the jobs report.
"With the tight labour market starting to deliver meaningful wage growth, the Fed is on track to another quarterly rate increase at next month’s FOMC meeting. Our view remains for the ceiling of the Fed Funds Rate to increase to 2.50 percent and 3.50 percent by the end of 2018 and 2019 respectively," said Eugene Leow, currency strategist at DBS.
Such a rise is expected to help the dollar firm against the safe haven Japanese yen, which traded flat at 113.22 on Monday.
The dollar weakened by 0.66 percent versus the yen in the month of October as news flow around trade tensions, geopolitical risks and a global economic slowdown gave the Japanese currency a flight-to-safety boost.
"The dollar/yen will follow the U.S. 10-year yields higher. We don't see much downside as of now," added Catril.
Currency traders will also be focussing on U.S. midterm elections on Tuesday U.S. time.
Opinion polls show a strong chance that the Democratic Party could win control of the House of Representatives after two years of wielding no practical political power in Washington, with President Donald Trump's Republican Party likely to hold the Senate.
Despite Brexit relief supporting risk appetite in currency markets, the UK's Telegraph newspaper reported that significant hurdles still remain to be overcome.
The pound retraced its intra-day high in thin Asian early trade, but was up 0.13 percent for the day. It has lost 3.7 percent versus the greenback year to date.
The positive sentiment around a smooth Brexit also gave the euro a small bid in early Asian trade. However, the single currency gave up all its gains and traded flat at $1.1385.
The offshore yuan traded lower versus the dollar at 6.9123.
Offshore-traded yuan gained versus the greenback in the last two sessions, supported by rising hopes that trade tension between China and the United States will ease.
The Australian dollar was trading 0.14 percent lower at $0.7186.
The U.S. will reimpose on Monday more sanctions lifted under a 2015 nuclear pact world powers struck with Iran.The new wave of sanctions, the second since August, will target Iran's energy, shipbuilding, shipping, and financial sectors.The U.S. has been trickling out a list of 12 demands Iran must meet if it wants to see sanctions lifted ahead of their reimposition on Monday.In all, eight countries will receive temporary waivers to allow them to continue importing Iranian oil after the penalties take effect.The European Union is not one of the recipients, according to Pompeo who said those who receive waivers "have made important moves towards getting to zero crude oil importation."Two of the countries have agreed to reduce imports to zero while six others "will import at greatly reduced levels," according to the U.S. announcement on Friday.“These negotiations are still ongoing,” said US Secretary of State Mike Pompeo.The U.S. expects to have reduced Iranian oil exports by more than 1 million barrels even before Monday's tranche of economic penalties. In all, 700 Iranian entities will be added to sanctions lists on Monday, according to Treasury Secretary Steven Mnuchin.EU, Germany, UK, France deeply regret Iran sanctionsIran has no concerns over reimposition of new US sanctions: ministry officialTurkey, US lift tit-for-tat sanctionsMore than half, or about 400, will have had their designations lifted as part of the 2015 Joint Comprehensive Plan of Action while roughly 300 will be new designations.U.S. President Donald Trump unilaterally withdrew Washington from the pact in May despite objections from close allies in Europe.All of the other signatories -- China, the European Union, France, Germany, Iran, Russia, and the United Kingdom -- have remained in the deal despite the U.S. action.The accord provided Iran with billions of dollars in relief from international sanctions in exchange for sweeping curbs on and inspections of its nuclear program.On Friday, the EU, Germany, Britain and France said in a joint statement that they “deeply regret the further reimposition of sanctions by the United States".On late Friday, Turkey's Energy and Natural Resources Minister Fatih Donmez said they have information that the U.S. will grant Turkey a waiver to continue importing oil from Iran after sanctions, but they don’t have all the details yet.UAE blames Iran's 'aggressive policies' for US sanctionsIran seeks European assurances as US oil sanctions loomIran's Khamenei says the world opposes Trump's decisions
Second wave of US sanctions on Iran starts Monday
Workers are putting the finishing touches on a Beijing-funded boulevard designed to showcase Papua New Guinea’s (PNG) capital to visiting world leaders at this month’s Asia-Pacific Economic Cooperation forum.Critics say the six-lane road - complete with wide, illuminated footpaths - is emblematic of a regional power play whereby donor countries vie for influence with show-stopper gifts, even as deeper problems plague the Pacific nation.Australia, PNG’s traditional partner and a close Washington ally, is lifting aid and has plowed more than A$120 million ($86.5 million) into APEC, seeking to keep its sway over its neighbor.Allan Bird, a parliamentarian and governor of PNG’s second largest province, said the boulevard outside parliament house had little practical benefit.“Whatever the Chinese government spent on it, it could have been better spent somewhere else, buying medicine or building a school,” Bird told Reuters.Amid trade war, China premier says Sino-US ties can improvePakistani premier to pay official visit to ChinaAustralia to help PNG build a navy base to fend-off ChinaBird said such gifts put pressure on traditional partners such as Australia to place less restrictions around donated funds and refrain from criticizing PNG’s own spending, which controversially includes buying 40 Maseratis and three Bentleys for APEC.“There is no transparency around the use of public finances,” Bird said.“The government can turn to other donors and tell them to ‘toe the line or else we’ll be quite happy to take Chinese money’. They use it as leverage.”The PNG government did not respond to questions on funding for the boulevard project or other aspects of APEC. PNG has previously thanked China for its infrastructure funding and aid, and denied Beijing had asserted any diplomatic pressure.Chinese Foreign Ministry spokesman Lu Kang said people should be supportive of the PNG government’s efforts to promote regional economic integration by hosting the summit.“At the request of the Papua New Guinea side, China has proactively provided support and help for the hosting, which I can tell you has been warmly welcomed by the Papua New Guinea government and people,” Lu told reporters in response to Reuters questions, without providing a figure.Speaking in Port Moresby on Wednesday, the Chinese government’s top diplomat, State Councillor Wang Yi, said in recent years his country had helped build more than 100 projects in PNG and other Pacific island nations, including schools and hospitals, which these countries had greatly appreciated.“Whether China’s aid is good or not, the governments and people of those countries being aided have the most right to speak,” Wang said, according to China’s Foreign Ministry.China says Xi-Trump call was quite positiveTrump asks officials to draft possible trade deal with ChinaTrump says had good talk with China's Xi on trade, North KoreaAiding And IndebtingIf the region - pivotal in the Pacific battles of World War II - is a strategic treasure, PNG is one of its jewels.It controls large swaths of ocean, is rich in mineral resources and is close to both U.S. military bases on the island of Guam and to Australia.Formerly administered by Canberra, PNG has in recent years turned increasingly to China for financing as Beijing becomes a bigger player in the region.PNG has the largest debt to China in the South Pacific, at almost $590 million, representing about one-quarter of its total external debt.When world leaders arrive in the capital of Port Moresby for APEC, the contributions of donors will be obvious.Australia will provide security personnel, naval patrol boats and a helicopter-docking ship; and the city will have an upgraded sewerage system care of the Japanese government.Beijing has refurbished the show-piece convention center and gifted coaches, mini-buses and fire-engines.China also rebuilt city’s main highway, which according to Moresby-based think tank the Institute of National Affairs, didn’t really need an upgrade.The institute’s executive director, Paul Barker, said the resurfaced streets and new boulevard had little public benefit.“It’s hard to imagine the boulevard will have any use other than marches or grand displays from time to time,” he said.“It’s not really a road that goes from anywhere to anywhere.”While the exact cost of each project is unclear, a Reuters analysis of PNG government announcements shows China’s total bill would be several tens of millions of dollars.Australia’s A$120 million contribution to the event represents nearly a third of what Canberra spent when hosting world leaders for G20 in 2014.Australian foreign aid to PNG is budgeted to hit a record A$572 million this year as Canberra diverts more capital to the Pacific at the expense of other regions.On Thursday, Australia announced it would help fund a PNG navy base that China had expressed an interest in funding.“Over the last year, we have seen Australia and New Zealand aggressively expand their focus on the Pacific, which is something we are very pleased about,” said a senior U.S. official, who spoke on condition of anonymity.Australia’s Minister for Foreign Affairs Marise Payne declined to comment on Canberra’s funding for APEC. Australia has previously said it was “partnering” with PNG to showcase trade, tourism and investment opportunities.US official denies report of possible China trade dealTesla seeks to reduce tariff impact for Model 3 by making cars in ChinaChina promises Pakistan support as Khan tells of 'very difficult' economyThe Fast And The Furious“(PNG Prime Minister) Peter O’Neill sees APEC as putting PNG on the world stage,” a British official told Reuters. “If a donor wants to win favor with O’Neill, assisting with APEC is the way to do it.”Yet, while gifts pour in, parts of PNG are still struggling to recover after a massive earthquake in February killed more than 100 people, destroying crops and infrastructure.Polio, a potentially deadly and highly infectious viral disease almost eradicated globally, also re-emerged in PNG in recent weeks.Faced with such challenges, the purchase by the PNG government of a fleet of luxury vehicles has sparked public protests.Retailing in Australia at more than A$200,000 ($141,560), a Maserati is well beyond the reach of a typical PNG local, who earns on average $2,400 each year, according to U.N. data.PNG’s government has said it has agreements in place to sell the cars immediately after APEC and taxpayers will bare no financial loss.Diplomatic sources told Reuters nearly all leaders attending the event would travel in special armored vehicles, making it unclear what the sports cars will be used for.Donors have so far largely refrained from public comment.“Some are worried about rocking the boat and don’t want to threaten bilateral relations by publicly criticizing O’Neill for buying luxury cars,” said the senior British diplomatic source.Chinese chip firm Fujian Jinhua denies stealing IP from MicronTrump says 'I think we'll make a deal with China' on tradeChina says more talks needed on economic aid for Pakistan
China's boulevard to nowhere: The battle for influence in APEC's Pacific host
A senior Trump administration official on Friday dismissed as untrue a media report that U.S. President Donald Trump was readying a possible trade deal with China, a CNBC reporter said in a post on Twitter."There is a long way to go," on negotiations, the unnamed official told CNBC's Eamon Javers, according to his tweet.NEW: A senior administration official tells me that the report president Trump is ready to cut a trade deal with China is not true. “There is a long way to go” on negotiations, the official said.— Eamon Javers (@EamonJavers) 2 Kasım 2018 Earlier on Friday, Bloomberg, citing people familiar with the matter, reported that Trump wanted to reach an agreement with Chinese President Xi Jinping and had asked key U.S. officials to begin drafting potential terms for a deal.Reuters could not immediately confirm either report, and White House officials did not immediately reply to a request for comment on the Bloomberg report.Still, world share markets soared on Friday amid growing hopes that the world's two largest economies are starting to repair their badly damaged trade relations following a conversation held by Trump and Xi on Thursday.The two spoke by telephone in what both sides described as an positive call, their first known direct discussion in several months. Trump, in a tweet after their talk, said he planned for the two leaders to meet at the G20 summit in Argentina later this month.Neither leader gave any details about possible progress.The Bloomberg News report said it was unclear if Trump was easing up on demands that China has resisted, and it cited one person as saying intellectual property theft was a sticking point on a possible deal.Hours after the call, the U.S. Justice Department accused another Chinese company of unfair practices, part of an across-the-board pressure campaign by the Trump administration targeting China.Trump administration officials have said U.S.-China trade talks cannot resume until Beijing outlines specific actions it would take to meet U.S. demands for sweeping changes to policies on technology transfers, industrial subsidies and market access.The two countries have imposed tariffs on hundreds of billions of dollars of each other's goods and Trump has threatened to extend the tariffs to the remainder of China's $500 billion-plus exports to the United States if the disputes cannot be resolved. Tesla seeks to reduce tariff impact for Model 3 by making cars in ChinaChina promises Pakistan support as Khan tells of 'very difficult' economyChina says Xi-Trump call was quite positive
US official denies report of possible China trade deal
Euro zone government bond yields rose on Friday ahead of U.S. jobs data, and after reports that U.S. President Donald Trump is taking steps to resolve a trade war with China fuelled a bid for riskier assets.Asian equities jumped to three-week highs after Bloomberg reported that Trump is seeking a trade agreement with Chinese President Xi Jinping, setting the tone for a strong European open which saw stocks there gain 1.1 percent."We've seen a correction of the very pessimistic mood by investors, driven by decent earnings and some good news regarding the trade spat," said Rene Albrecht, analyst at DZ Bank."But this looks like election tactics by Trump with the mid-terms next week. With stock markets diving he probably felt the need to counteract."US grants eight countries Iran sanctions waiversBoth 10-year U.S. Treasury bond yields and 10-year German yields - key safe-haven assets - rose to their highest in over a week, up three basis points each early on Friday.,Most other higher-grade euro zone government bond yields were 2-4 basis points higher.,.The improved risk appetite helped fuel demand for Italy, with its bond yields falling up to five basis points. Albrecht said the upcoming U.S. mid-term elections meant the selloff in risk assets would be limited.China says Xi-Trump call was quite positiveFurther direction might come from the U.S. jobs report due at 1230 GMT, with investors looking for more indications on the health of the U.S. economy and the pace of further Federal Reserve interest rate rises.U.S. job growth is expected to have rebound in October with wages expected to have recorded their largest annual gain in 9-1/2 years, pointing to further labour market tightening that could encourage the Fed to hike again in December.Data on Thursday showed worker productivity slowed in the third quarter, which tempered the rise in yields in late trade, according to an analysis by ING."There is perhaps a bit more evidence the U.S. is starting to feel the negative effects of trade uncertainty, higher interest rates and the stronger dollar," analysts at the bank wrote in a note published on Friday.After the market close, the European Banking Authority will release the results of its latest stress tests. Analysts will be looking to see how a lengthy selloff in Italian government bonds has affected the balance sheets of the four Italian banks surveyed.Trump announces plans to limit asylum seekers
Trade war hopes boost euro zone bond yields