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Tuesday, 30 January 2018

Dollar up for second day as firmer yields support


LONDON (Reuters) - The dollar climbed for a second consecutive day on Tuesday as investors took profits into a recent drop in the greenback in the backdrop of firmer bond yields and a central bank policy decision due this week.

Despite the dollar’s bounce, the currency is set for its biggest monthly decline since July 2017 as the combination of strong global growth and slow inflation encouraged investors to add bearish bets.

But a spike in global bond yields, with ten-year U.S. bond yields pushing well above 2.70 percent, its highest since April 2014, prompted some investors to cut some short positions.

“We are seeing a consolidation of the dollar’s losses and there is a whiff of nervousness among dollar bears out there,” said Viraj Patel, an FX strategist at ING in London.

The dollar rose 0.3 percent against a basket of six major currencies to 89.60, having pulled up from a low of around 88.43 set last week, its weakest level since December 2014.

Analysts said a renewed rise in U.S. bond yields this week lent some support to the dollar. The U.S. 10-year Treasury yield reached a peak of 2.733 percent in Asian trading on Tuesday, the highest since April 2014, and last stood at 2.712 percent.

The euro eased 0.3 percent to $1.2373, edging away from a three-year high of $1.2538 touched last week.

“There is a pause in the dollar’s weakness, at least for now,” said Teppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore.

Market participants are probably waiting for Trump’s State of the Union speech, due later on Tuesday, for anything further he might have to say about the dollar, Ino said.

Treasury Secretary Steven Mnuchin gave U.S. currency bears a major boost last week with a tacit endorsement of a weak dollar. Trump later tried to row back from those comments, saying he ultimately wants the dollar to be strong.

Trump said on Monday he will address his proposed immigration overhaul in his State of the Union speech as well as his efforts to lower trade barriers around the world for American exports.

The dollar’s gain also comes at a time when risk sentiment is at the back foot with Asian stocks falling and European stocks stumbling in opening trades.

Sterling, a currency highly correlated to risk-on sentiment, fell below the $1.40 line for the first time in a week. It is now down more than 2.5 percent from a peak above $1.43 hit last week.


Reporting by Saikat Chatterjee

Asia stocks off record highs as Wall St. flags, dollar firms on higher yields


TOKYO (Reuters) - Asian stocks retreated from record highs on Tuesday after a selloff in Apple shares and spike in bond yields knocked Wall Street lower, while the dollar found support as U.S. bond yields climbed to near four-year highs.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.1 percent after rising to an all-time high the previous day. It was still on track for a 6.5 percent monthly gain.

Australian stocks shed 0.9 percent, South Korea’s KOSPI lost 1 percent and Japan’s Nikkei dropped 1.4 percent.

Hong Kong’s Hang Seng slipped 0.9 percent and Shanghai was down 0.8 percent.

Spreadbetters expect the negative pressure to spill over to Europe, forecasting Britain’s FTSE to drop 0.7 percent at the open, Germany’s DAX to open 0.8 percent lower and France’s CAC to lose 0.6 percent at the open.

The bearish sentiment in Asia followed a softer lead from Wall Street, which has led a global equities rally over the past year thanks to strong world growth fuelling higher corporate earnings and stock valuations.

On Monday, U.S. stocks pulled back from record highs, with the Dow and the S&P 500 indexes marking their biggest one-day percentage declines in about five months, weighed down by a slide in Apple shares.

The dollar, however, enjoyed a reprieve from some persistent selling in the past few weeks.

Buoyed by higher U.S. bond yields, the dollar index against a basket of six major currencies was 0.15 percent higher at 89.457, having bounced overnight from a three-year low of 88.438 plumbed on Friday when peers like the euro outshone the greenback.

The 10-year Treasury note yield stretched its overnight surge above 2.70 percent and reached its highest since April 2014 after comments from a European Central Bank official added to expectations that central banks globally will reduce stimulus as the economic outlook improves.

“This is a rise in real interest rates, also reflecting a rise in inflation expectations,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

“The yield rise may have bumped off U.S. stocks from highs, but a correction was due after their recent gains,” Ichikawa said.

The U.S. Treasury Department said on Monday that it expects to borrow $441 billion through the credit markets in the January-March quarter, less than announced previously.

Treasury yields remained elevated, however, as U.S. borrowing is expected to continue increasing steadily in the coming years as the federal government looks for ways to fund budget deficits.

Moreover, the bond market braced for potentially hawkish language from the Federal Reserve, which will begin its two-day policy meeting on Tuesday.

The focus was also on U.S. President Donald Trump’s State of the Union address scheduled later in the global day, with attention on his views on an infrastructure overhaul and trade.

The euro was down 0.2 percent at $1.2361 after slipping overnight from a three-year peak of $1.2538.

The dollar was 0.3 percent lower at 108.645 yen, unable to hold to a high of 109.205 scaled earlier.

“The dollar lost a bit of traction against the yen as losses deepened for stocks in Tokyo and the rest of Asia. U.S. yields are going up, but players are hesitant to push dollar/yen higher ahead of President Trump’s address,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.

The Australian dollar shed 0.3 percent to $0.8072 after reaching $0.8136 on Friday, its highest since May 2015.

Oil prices extended losses after being pressured by the dollar’s bounce and rising U.S. crude output.

U.S. crude futures were down 1.2 percent at $64.79 per barrel. Underpinned by the dollar’s recent slide, prices had risen to $66.66 per barrel on Thursday, the highest since December 2014.

Brent crude fell 0.85 percent to $68.88 per barrel.

Spot gold slipped to $1,334.10 an ounce, the lowest since Jan. 23, weighed by the stronger U.S. currency. The precious metal had climbed to $1,366.06 last week, its highest since August 2016.

Reporting by Shinichi Saoshiro

Monday, 29 January 2018

Japan raps Coincheck, orders broader checks after $530 million cryptocurrency theft


TOKYO (Reuters) - Japan’s financial regulator said on Monday it would inspect all cryptocurrency exchanges and ordered Coincheck to get its act together after hackers stole $530 million worth of digital money from its exchange in one of the biggest cyber heists on record.

The theft highlights the vulnerabilities in trading an asset that global policymakers are struggling to regulate and the broader risks for Japan as it aims to leverage the fintech industry to stimulate economic growth.

The Financial Services Agency (FSA) on Monday ordered improvements to operations at Tokyo-based Coincheck, which on Friday suspended trading in all cryptocurrencies except bitcoin after hackers stole 58 billion yen ($534 million) of NEM coins, among the most popular digital currencies in the world.

Coincheck said on Sunday it would return about 90 percent with internal funds, though it has yet to figure out how or when.

The NEM coins were stored in a “hot wallet” instead of the more secure “cold wallet”, outside the internet, Coincheck said. It also does not use an extra layer of security known as a multi-signature system.

The FSA said it ordered Coincheck to submit an incident report and measures for preventing a recurrence by Feb. 13. If necessary, it will conduct on-site inspections of other exchanges, an official told a briefing.

The regulator said it has yet to confirm whether Coincheck had sufficient funds for the reimbursement.

Japan started to require cryptocurrency exchange operators to register with the government only in April 2017, allowing pre-existing operators such as Coincheck to continue offering services ahead of formal registration.

The FSA has registered 16 cryptocurrency exchanges so far, and another 16 or so are still awaiting clearance. Coincheck’s application was made in September.

“It’s been long said that cryptocurrencies are a solid system but cryptocurrency exchanges are not,” said Makoto Sakuma, research fellow at NLI Research Institute.

“This incident showed that the problem has not been solved at all. If Coincheck screws up its crisis management, that could deal a blow to the current cryptocurrency fever.”

NEM fell to $0.78 from $1.01 on Friday but recovered to $0.97 on Monday, according to CoinMarketCap. Crypto-currency related shares mostly rose in Tokyo, with GMO Internet (9449.T), which offers cryptocurrency exchange service, gaining 5.7 pct.

CRYPTOCURRENCY RISKS
Singapore-based NEM Foundation said it had a tracing system on the NEM blockchain and that it had “a full account” of all of Coincheck’s lost NEM coins. It added that the hacker had not moved any of the funds to any exchange or personal accounts but that it had no way to return the stolen funds to its owners.

In 2014, Tokyo-based Mt. Gox, which once handled 80 percent of the world’s bitcoin trades, filed for bankruptcy after losing around half a billion dollars worth of bitcoins. More recently, South Korean cryptocurrency exchange Youbit last month shut down and filed for bankruptcy after being hacked twice last year.

World leaders meeting in Davos last week issued fresh warnings about the dangers of cryptocurrencies, with U.S. Treasury Secretary Steven Mnuchin relating Washington’s concern about the money being used for illicit activity.

Many countries have clamped down on exchanges.

South Korea will ban cryptocurrency traders from using anonymous bank accounts to crack down on the criminal use of virtual coins. China has ordered some exchanges to close, with the aim of containing financial risks.

But Japan has taken a different tack, becoming last year the first country to introduce national-level regulation of cryptocurrency exchanges.

The move, intended to protect consumers and stymie money laundering, was praised by many traders and operators as progressive.

($1 = 108.6600 yen)

Reference: Reuters

Asia shares extend bull run, dollar huddles near lows


SYDNEY (Reuters) - Asian shares extended their bull run on Monday amid upbeat corporate earnings and strong global economic growth, while the dollar struggled to bounce as the White House continued to complain of “unfair” trade practices by competitors.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.26 percent, aiming for a 12th straight session of gains. It is up 8 percent for the year so far.

Japan’s Nikkei rose 0.1 percent as the yen eased a little, while South Korea notched a record.

Hong Kong’s Hang Seng has been the best performer for the year so far with a rise of almost 11 percent, while Shanghai blue chips ran into profit-taking on Monday.

Spread betters tipped opening gains for the major European bourses, while E-Minis for the S&P 500 were steady.

Wall Street has likewise been on a tear. Just last week, the Dow rose 2.08 percent, the S&P 500 2.22 percent and the Nasdaq 2.31 percent.

Quarterly earnings growth for the S&P 500 is estimated at 13.2 percent, according to Thomson Reuters data, up from 12 percent at the start of the year. Almost 80 percent of the 133 companies in the index that have reported beat forecasts.

Another 36 percent of the S&P 500 is due to report this week including heavy hitters Apple, Alphabet, Facebook, Microsoft and Amazon.

The rush to equities combined with the risk of faster global inflation, has been a major negative for sovereign bonds with yields rising across much of the developed world.

Yields on U.S. two-year Treasuries have risen steadily to their highest since 2008 and are fully priced for a rate hike by the Federal Reserve in March.

Ten-year yields broke above the range of the last week or so to reach 2.69 percent on Monday, levels last visited in mid-2014.

The Fed holds its next meeting on Wednesday, the last for Chair Janet Yellen, and analysts suspect the statement will only cement expectations for a March move.

WORDS MATTER
The inexorable increase in Treasury yields has not, however, been enough to rescue the U.S. dollar which sank to three-year lows last week as U.S. officials welcomed a weaker currency.

President Donald Trump did try and walk some of that back late in the week but by then the damage had been done.

Indeed, in an interview shown on Sunday, Trump threatened to confront the European Union over what he calls “very unfair” trade policy toward the U.S..

“‘Words’ in the world of FX do matter,” said Deutsche Bank Strategist George Saravelos. “The U.S. is reengaging with a weak dollar policy similarly to the 1994-95 period.”

This was happening while the sum of trade and investment flows into the United States was shrinking. The opposite was happening in the euro zone, where the German export engine was powering an ever-expanding current account surplus.

“We continue to target $1.30 in EUR/USD for this year,” Saravelos concluded.

The euro did run into a little profit-taking in Asia on Monday which nudged it to back to $1.2412 and away from a three-year peak of $1.2538 last week.

The dollar was a fraction firmer on the yen at 108.73, but not far from a four-month trough of 108.28.

Against a basket of major currencies, it edged up 0.1 percent to 89.145 having been at the lowest since late 2014.

The dollar faces a bevy of U.S. economic reports this week including indicators of inflation, manufacturing and payrolls.

The currency’s decline has been a boon for many commodities, with gold making a 17-month top last week and last trading at $1,348.10 an ounce.

Oil prices had reached their highest in three years and Brent crude futures were holding atop $70 at $70.46 a barrel. U.S. crude futures were up 23 cents at $66.37.

Reporting by Wayne Cole

Dollar crawls up but not out of woods as U.S. policy doubts persist


TOKYO (Reuters) - The dollar crawled up from lows on Monday but struggled to pull ahead from six straight weeks of losses on its evaporating yield advantage and doubts about Washington’s commitment to a strong currency.

The dollar index against a basket of six major currencies rose 0.2 percent to 89.215, extending its rebound from 88.429, a three-year nadir set on Thursday.

The currency was marginally helped by U.S. GDP data on Friday, which showed strong domestic consumption and capital spending even though the headline figure was weaker than expected due to a rise in imports.

Yet traders expect more headwinds for the dollar, which has been pummelled by renewed worries that President Donald Trump may use currency policy as a tool to press other countries to get better “deals” on trade.

“I don’t see any changes in the dollar’s larger downtrend. But given that U.S. GDP figures showed strong consumption and U.S. bond yields are rising, it’s hard to expect a rapid fall in the dollar against the yen,” said Kazushige Kaida, head of foreign exchange at State Street Bank in Tokyo.

Treasury Secretary Steven Mnuchin gave U.S. currency bears a major boost last week with a tacit endorsement of a weak dollar. While Trump tried to row back from those comments, the damage had already been done and the dollar’s downturn since November showed little sign of abating.

The greenback is also losing its relative yield attraction for investors. Short-term interest rates are expected to rise in other countries as the European Central Bank and many others start to scale back their easy monetary policy.

U.S. equities have one of the most expensive valuations in the world, prompting investors to look for better bargains elsewhere.

Against the yen, the dollar eked out 0.1 percent gain to trade at 108.72 yen, after hitting a low of 108.28 yen on Friday, its lowest level since mid-September.

Comments from Bank of Japan Governor Haruhiko Kuroda in Davos on Friday that the central bank is finally close to the inflation target sparked expectation of an exit from its massive stimulus.

The yen later pared gains after a BOJ spokesman said Kuroda was merely repeating the central bank’s official view.

Yet, it showed how sensitive the market is to any slightest hint that the BOJ is on the cusp of unwinding its stimulus.

“Many foreign players are now betting on a BOJ policy change. The dollar/yen has no major support if it falls below its September low of 107.32. A break of that level probably means a shift to new trading range,” said Yukio Ishizuki, senior strategist at Daiwa Securities.

The euro traded at $1.2400, down 0.2 percent and off its three- year peak of $1.2538 touched on Thursday.

Its failure over the past couple of days to stay above $1.25 is seen by some traders as a sign of fatigue in its six-week old rally.

Data from U.S. financial watchdog Commodity Futures Trading Commission showed speculators’ net long position in the euro/dollar futures traded in Chicago rose to a record high, suggesting that profit-taking could be on the cards.

The Australian dollar held firm at $0.8109 after hitting a 20-month peak of $0.8136 on Friday.

The Chinese yuan gained 0.2 percent to 6.3157 per dollar, near Thursday’s 6.2968, which was its strongest since August 2015, when Beijing effectively devalued the yuan suddenly.

The yuan is on course for its biggest monthly gain in January, seen by traders as Beijing’s counter-move to deflect any criticisms that China is gaining unfair trade advantage with a cheaper currency.

Reference: Hideyuki Sano

Friday, 26 January 2018

Sterling builds on rally after GDP stronger-than-expected


LONDON (Reuters) - The pound rose on Friday after Britain’s economy unexpectedly picked up speed in the last three months of 2017, adding to the view that the hit from the Brexit vote was not as bad as expected.

Gross domestic product grew by 0.5 percent in the three months to end of December, faster than analyst expectations of 0.4 percent, official data showed.

That was the fastest pace of quarterly growth last year, although the Office for National Statistics said the big picture remained one of slower and more uneven expansion in Britain.

Sterling, already up about 0.7 percent before the data, rose further for a one percent rise on the day at $1.4289 before giving up some of those gains. Against the euro, the pound also strengthened and was up 0.4 percent at 87.325 pence per euro at 0950 GMT.

“This is further confirmation that the economy has outperformed expectations since the vote,” London-based MUFG strategist Lee Hardman said.

The pound has enjoyed a strong rally this year and is up 5.5 percent against the U.S. currency, helped by a broad-based dollar sell-off that intensified this week until U.S. President Donald Trump on Thursday said he ultimately wanted a strong greenback.

Some of the world’s biggest investors have bought into the notion that sterling can move higher on the back of hopes Britain will secure itself more favourable terms when leaving the European Union and a better-than-expected domestic economic performance.

MUFG has had a bullish view on the pound for some time, with a year-end target of $1.47 and about 85 pence per euro.

With the recent run-up, Hardman said there was some risk of a pull-back, particularly as negotiations with the EU for a trade deal restart. “But the bigger picture is still supportive for sterling,” he said.

Credit Agricole analysts said that the rise of sterling should take the sting out of Britain’s above-target inflation, limiting the ability of increased rate hike expectations to boost the pound further.

“With GBP long positioning close to multi-year extremes, we advise against chasing the currency higher,” they wrote.

The internationally-focused FTSE 100 initially fell slightly after the GDP data release before recovering. British government bond futures briefly pared gains and approached a session low, before returning to their previous level, up 12 ticks on the day at 122.96 at 0933 GMT.

Reporting by Tommy Wilkes

Dollar gains reprieve after Trump backs 'strong dollar'


SINGAPORE (Reuters) - The dollar traded above its recent lows against major rivals on Friday, having bounced after U.S. President Donald Trump said he wanted a “strong dollar”, contradicting earlier comments made by Treasury Secretary Steven Mnuchin.

Trump told CNBC in an interview in Davos, Switzerland, on Thursday that he ultimately wants the dollar to be strong, adding that Mnuchin’s comments had been misinterpreted.

The dollar’s bounce pulled the euro away from three-year highs and knocked sterling off its strongest levels since June 2016. The dollar stayed steady against the yen, holding above a four-month low struck on Thursday.

Against a basket of six major currencies, the dollar last traded at 89.176, staying above a three-year low of roughly around 88.43 set this week. The dollar index has slid more than 3 percent so far in January.

Some market participants doubted whether Trump’s comments would be enough to change the recent trend of dollar weakness.

“The market forces, fundamentals all suggest that the dollar should weaken over the course of 2018,” said Roy Teo, investment strategist for LGT Bank in Singapore.

Trump is due to address the World Economic Forum in Davos later on Friday.

Market participants say the dollar has faced headwinds because its relative yield attraction is seen at risk as the world’s major central banks are seen winding up their stimulus. That would change the interest rate dynamics of the past few years, when the U.S. Federal Reserve was the only central bank raising rates.

The dollar has also been hampered by concerns over U.S. protectionism.

“My view is that the Trump trade policies, which I think are still going to be maintained, favour a weaker dollar,” said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.

Trump decided to impose steep import tariffs earlier in the week on washing machines and solar panels, flaming worries about trade protectionism that sent the greenback on the defensive.

The euro last traded at $1.2424, up 0.2 percent on the day but down from Thursday’s high of $1.2538.

The euro had reached that peak after European Central Bank President Mario Draghi said economic data pointed to “solid and broad” growth with inflation likely to rise in the medium term.

Draghi also warned that the surge in the euro was a source of uncertainty and said the ECB might have to review strategy if U.S. comments on the benefits of a weak dollar lead to a change in monetary conditions.

Sterling rose 0.4 percent to $1.4191, but remained well below its peak on Thursday of $1.4346, which was the pound’s highest level since the Brexit vote in June 2016.

Against the yen, the dollar held steady at 109.42 yen, staying above a four-month low of 108.50 yen struck on Thursday.

Asked about the comments on the dollar by Trump and Mnuchin, Japanese Finance Minister Taro Aso said on Friday that major economies have agreed to avoid targeting currencies for the purpose of trade competitiveness.

Reporting by Masayuki Kitano;

Thursday, 25 January 2018

ECB meets as euro hits three-year high


LONDON (Reuters) - The euro steadied at a three-year high on Thursday and shares inched back as traders waited to see if the European Central Bank would try to cool the currency’s hottest run in nearly four years.

Concerns about U.S. protectionism kept the dollar weak after its worst day in six months, but it was the ECB’s first meeting of 2018, and when it will end its 2.6 trillion euro stimulus programme, that was attracting attention.

Another challenge facing policymakers is how to address the euro’s surge - it hit a three-year high of over $1.24 on Thursday - as this could dampen inflation and endanger the work done by years of unprecedented stimulus.

Euro zone bonds were again reducing the premium offered by former debt crisis countries like Greece, Portugal and Spain compared with ultra-safe German debt, but it will be a delicate balancing act for ECB chief Mario Draghi.

Oil prices, which are a major driver of inflation, hit $71 per barrel in Asian trading for the first time since 2014.

“The rate of change (in the euro) might make the ECB a little uncomfortable,” said State Street’s head of EMEA macro strategy, Tim Graf.

“They can’t push back too much on the fruits of their success, but you may well get comments around excessive currency volatility.”

The uncertainty about the ECB made for a quiet start for European shares. The pan-European STOXX 600 barely budged as Germany's exporter-heavy DAX index fell 0.2 percent to offset small gains on London's FTSE and France's CAC.


Trading updates saw drinks giant Diageo warn its sales were being crimped by the resurgent pound. Sterling hit its highest in six months against the euro on Thursday, having also bounded back to its pre-Brexit vote levels against the dollar this week.

In the tech sector, Software AG fell 3.7 percent as it reported a drop in core profits, while Nordic bank Nordea’s results also proved a drag.

TRADE WAR GAMES?
Asian trading had been a mixed bag, with many of the moves driven by the weakening of the dollar.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS touched an all-time peak for the ninth session in a row, but Japan's Nikkei fell 1.1 percent, hit by the yen's latest jump against the greenback.

MSCI the index provider’s broadest gauge of the world’s stock markets, consolidated its more than 6.5 percent gains for the month

A new Reuters poll of over 500 economists showed the global economy is expected to grow at the fastest pace since 2010.

The upbeat mood, however, has come up against renewed fears of protectionism by the United States after President Donald Trump’s decision to impose steep import tariffs on washing machines and solar panels earlier in the week.

U.S. Commerce Secretary Wilbur Ross, hinted at other measures against China too on Wednesday, saying at the annual Davos meeting that Washington was investigating whether there was a case for taking action over China’s infringements of intellectual property.

Trump is scheduled to speak in Davos on Thursday.

Also in the Swiss Alpine town, U.S. Treasury Secretary Steven Mnuchin made a major departure from traditional U.S. currency policy on Wednesday, saying “obviously a weaker dollar is good for us as it relates to trade and opportunities.”

Analysts say they cannot remember any U.S. Treasury Secretary openly embracing a cheaper dollar, at least in the last two decades or so.

“I was speculating the Trump administration may role out something with fanfare given its big delegation to Davos,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.

“I’d think the real aim of Mnuchin’s comments on the dollar is not so much engineering a weaker dollar per se as putting pressure on trading partners to do some trade deals with the administration,” he added.

The dollar’s index against a basket of six major currencies tumbled to a three-year low of 88.816 before steadying in European trading. It has fallen 1.9 percent so far this week.

The dollar had also slipped to as far as 108.74 yen JPY=, its lowest since mid-September, and to its weakest against the Chinese yuan since November 2015.  It is on course for its biggest ever monthly fall against the yuan.

“They (the U.S. administration) can either have tariffs with the rest of the world or do it organically through a nice depreciation of the dollar,” said JP Morgan Asset Management’s chief European markets strategist Karen Ward.

Reporting by Marc Jones

Asia shares hit record peak but trade protectionist fears cast shadow


TOKYO (Reuters) - Asian stocks hit a record high on Thursday though concerns about the Trump administration’s protectionist stance tempered enthusiasm in financial markets, while the dollar struggled after U.S. Treasury Secretary Steven Mnuchin welcomed a weaker currency.

European shares are expected to tick up slightly, with spread-betters seeing a small rise of 0.1 percent in Britain’s FTSE, Germany’s DAX and France’s Cac.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.3 percent to an all-time peak for the ninth session in a row.

Japan’s Nikkei fell 1.1 percent, hit by the dollar’s decline against the yen.

MSCI ACWI, the index provider’s broadest gauge of the world’s stock markets, boosted its gains for the month to 6.6 percent. It had registered declines only on two days this year amid optimism over an extended growth spurt in the global economy and solid earnings.

A Reuters poll of over 500 economists showed the global economy is expected to grow at the fastest pace since 2010.

The upbeat mood, however, has come up against renewed fears of protectionism after U.S. President Donald Trump’s decision to impose steep import tariffs on washing machines and solar panels earlier in the week.

U.S. Commerce Secretary Wilbur Ross, who attended the World Economic Forum in Davos, hinted at action against China, saying U.S. trade authorities were investigating whether there is a case for taking action over China’s infringements of intellectual property.

Trump is scheduled to speak in Davos on Thursday.

Also in the Swiss Alpine town, Mnuchin made a major departure from traditional U.S. currency policy on Wednesday, saying “obviously a weaker dollar is good for us as it relates to trade and opportunities.”

Analysts say they cannot remember any U.S. Treasury Secretary openly embracing a cheaper dollar at least in the last two decades or so.

“I was speculating the Trump administration may role out something with fanfare given its big delegation to Davos,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management.

“I’d think the real aim of Mnuchin’s comments on the dollar is not so much engineering a weaker dollar per se as putting pressure on trading partners to do some trade deals with the administration,” he added.

The dollar’s index against a basket of six major currencies tumbled to a three-year low of 88.816, falling 1.9 percent so far this week.

The euro rose to as high as $1.2459, a peak not scaled since December 2014, ahead of the European Central Bank’s policy meeting later in the day.

The meeting comes against a backdrop of heightened speculation over when it will end its vast stimulus and signal a rise in interest rates from record lows.

The dollar slipped to 108.74 yen, its lowest levels since mid-September.

The Chinese yuan also strengthened, gaining 0.5 percent to 6.3280 yuan per dollar in onshore trade, hitting its highest level since November 2015.

It rose 2.7 percent so far this month. The gains, if sustained, would mark the biggest monthly rise ever.

Gold jumped past its September peak to 1-1/2-year high of $1,365.8 per ounce. A break above its July 2016 high around $1,375 would take it to a four-year high.

Brazilian markets might be in for another strong day following rally in the real and shares on Wednesday after an appeals court upheld the corruption conviction of former President Luiz Inacio Lula da Silva, a major blow to the popular politician’s plans to run again for the presidency this year.

He was perceived to be not friendly to markets, even though his eight-year reign from 2003 saw strong gains in Brazilian shares and currency.

Oil prices rallied to three-year high, boosted by a record 10th straight weekly decline in U.S. crude inventories, though reduced refining activity and rising production signaled U.S. stocks could rise in coming weeks.

International benchmark Brent futures were nudging $71 per barrel - $71.03 a barrel at 0232 GMT - a level not seen since early December 2014 and up 45 cents, or 0.6 percent, from their last close.

Bitcoin extended its rebound from Tuesday’s low of $9,927 to $11,541, up 1 percent so far in Asia.

Reference: Hideyuki Sano

Surging euro forces ECB's Draghi to tread carefully on policy


FRANKFURT (Reuters) - The dilemma facing the European Central Bank at its meeting on Thursday will be how to address the euro’s surge against the dollar, a move that threatens to dampen inflation and endanger the work done by years of unprecedented stimulus.

The euro zone’s economy is roaring ahead but the strengthening currency -- at a three-year high against the dollar -- is expected to prompt ECB President Mario Draghi to pour cold water on any view the bank is speeding towards an interest rate hike.

Draghi is expected to keep the ECB’s 2 trillion euro asset buying program in place for now while acknowledging Europe’s unexpectedly strong run of growth.

But it will be a delicate balancing act: the euro’s five percent rise since December holds back inflation which the ECB wants to see climb, even if the rapid economic growth and expected end of the bond buys later this year justify some currency strength.

Wanting to keep all options on the table, Draghi will probably verbally seek to stop the euro from firming further, keeping markets in a holding pattern until policymakers are ready to unveil their blueprint for winding down stimulus, economists said.

“Draghi could signal concerns ... by stressing that the euro appreciation has been in excess of what is warranted by fundamentals, or to push back against rate hike expectations,” Peter Chatwell, an analyst at brokerage Mizuho, said.

Having bought more than 2 trillion euros worth of bonds over the past three years, the ECB has almost single-handedly depressed borrowing costs in the euro zone to kick start growth and lift prices. Markets now expect these often controversial asset buys to finally end in the last quarter of this year.

But predictions for tighter ECB policy are putting pressure on the currency and raising market bets for a rate hike as early as December, a move seen as premature even by the most hawkish of policymakers.

Inflation is also years away from rising back to the ECB’s target of 2 percent, so Draghi can hardly afford any big currency swings.

“We think ECB President Draghi’s priority will be to talk down growing expectations of early interest rate hikes and a strengthening euro,” ABN Amro said in a note to client.

The ECB announces its rate decision at 1245 GMT, followed by Draghi’s news conference at 1330 GMT.

WEAK DOLLAR?
Fears about currency swings appear justified after U.S. Treasury Secretary Steven Mnuchin argued for a weak dollar on Wednesday.

While the euro’s gain so far has only a modest impact on inflation, the worry is that weaker economies on the bloc’s periphery would be affected by it more, a risk to an economic convergence process that restarted only recently.

Part of his holding pattern approach, Draghi is also likely to keep the bank’s guidance unchanged, maintaining a promise to continue asset buys until a sustained rebound in inflation, even though work to revise the text could begin on Thursday.

Policymakers argued in the December policy meeting that the guidance should be revised in “early” 2018, removing from the text a singular focus on asset buys and raising the role of interest rates in policy accommodation.

“We expect changes in the forward guidance in March and June, to prepare the markets for the end of quantitative easing from October,” Daniele Antonucci at Morgan Stanley said.

But even a normally cautious Draghi will be unlikely to shoot down market expectations for the ECB to end bond purchases after the scheme, already extended several times, runs out in September.

Growth projections, revised up repeatedly, already look too pessimistic as manufacturing, trade and jobs data all point to superb run for the euro zone economy.

The bloc is about to run out of spare capacity and more hawkish policymakers are already arguing that the ECB was at risk of falling behind the curve in clawing back stimulus for an economy enjoying a five-year growth run.

“While it is by now widely recognised that euro area growth is strong, the extent of this is still being hugely underappreciated,” JPMorgan economist Greg Fuzesi said.

Reporting by Balazs Koranyi and Francesco Canepa

Wednesday, 24 January 2018

2018 global growth to roll to highs not seen in eight years - Reuters poll


BENGALURU (Reuters) - The global economy is expected to grow at a robust pace this year and reach an altitude not seen since 2010, as momentum builds in developed economies and inflation revives, Reuters polls of over 500 economists showed.

Major central banks are expected to move away from ultra-easy monetary policy this year, but borrowing costs are still accommodative and should underpin growth.

The latest Reuters polls taken this month, covering more than 45 countries, not only underscored optimism on growth but also showed inflation forecasts were either upgraded or left unchanged in nearly 70 percent of those economies.

“For the first time in a long while, global growth is speeding up away from its average rather than recovering back towards it,” said James Sweeney, chief economist at Credit Suisse.

The global economy is predicted to grow 3.7 percent this year, the fastest since the 4.3 percent in 2010.

That was an upgrade from the 3.6 percent predicted in October’s poll but lower than the International Monetary Fund’s outlook of 3.9 percent growth this year.

Nearly 70 percent of over 140 respondents who answered an extra question said the global economic boom was more likely to gain momentum this year and push inflation higher than currently predicted.

Those expectations were largely driven by growth in developed economies, particularly the euro zone and the United States - which may not be firing on all cylinders yet but enough to keep things rolling.

Surging business and consumer confidence and steady job creation have left economists repeatedly raising growth estimates for the euro zone and its major economies.

The rising euro poses a threat in Europe and could challenge the European Central Bank as it moves to end its money printing by the end of the year.

“All the conditions for the classic macroeconomic sequencing of a growth phase have now come together. All the countries in the EU have not only seen a return to positive growth but are showing a marked acceleration in activity,” wrote Michael Carey, chief U.S. economist at Credit Agricole CIB, in a note.

“The ECB has again signalled that, despite the improved growth prospects, the process of monetary normalisation will be slow, and it has managed to lock market expectations into its timetable.”

But for Britain, above-target inflation and a buoyant job market won’t push the Bank of England to tighten policy until at least November as it waits to see how divorce talks with the EU develop.

The U.S. economy was predicted to grow at its fastest pace in three years in 2018, fuelled by the biggest tax overhaul since the 1980s, but economists said the expected boost will be short-lived and will keep the Federal Reserve on track with its current guidance of three interest rate increases this year .

One conclusion from the latest surveys was inflation expectations, which showed the risk is now skewed more to the upside with last year’s pessimism somewhat tempered.

TRADE PROTECTIONISM THREAT LIMITED
While economists previously had repeatedly warned about “deep uncertainty” to the global economy from protectionist policies, particularly on U.S. President Donald Trump’s “America First” trade policies, the latest polls showed that was slowly fading.

Indeed, over 80 percent of nearly 140 economists who answered a separate question said any significant barriers to global trade in 2018 were unlikely.

“Global trade barriers are definitely a downside risk to our forecasts this year, but is not our baseline case. No country will benefit from erecting trade barriers, so we see such an outcome as still unlikely,” said Scott Anderson, chief economist at Bank of the West.

But the remaining 24 respondents said some barriers were likely to emerge. A few hurdles mentioned were the North American Free Trade Agreement (NAFTA) talks, Brexit negotiations and rising risks of a U.S. trade war with China.

A majority of economists in a separate Reuters poll last week said NAFTA will probably be renegotiated successfully with no significant changes, despite the Trump administration’s saber-rattling.

“I still suspect that adults will prevail and NAFTA will not be allowed to collapse,” said William Dickens, head of the economics department at Northeastern University in Boston.

But concerns over U.S. protectionism and a nationalist presidential candidate have weighed on the peso, stoking fears of faster inflation in Mexico.

Barring that country, the latest poll showed economists’ confidence in Latin America’s growth prospects strengthening ahead of major elections in the region.

Expectations of solid economic growth though was not widespread to other emerging market economies, with Turkey, India and China forecast to slow this year.

Reference: Shrutee Sarkar, Rahul Karunakar

Asia shares take a breather, dollar sold anew


SYDNEY (Reuters) - Asian share markets took a time out on Wednesday as investors were left breathless at the breakneck pace of recent gains, while a fresh burst of speculative selling took the U.S. dollar to three-year lows.

Most Asian stock indices are up anywhere from 5 to 10 percent since the start of the year with many at all-time highs.

“These markets are absolutely flying and have had seemingly one-way moves since late December,” noted Chris Weston, chief market strategist at broker IG.

“There has clearly been a wall of capital hitting these markets, as is the case with many Asian currencies,” he added. “One simply can’t rule out further upside here, even if there are growing risks of buyers’ fatigue kicking in.”

Early Wednesday, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.2 percent, having jumped 1.2 percent on Tuesday to an all-time peak.

Japan's Nikkei .N225 edged down 0.6 percent as the yen strengthened, though that was from a 26-year top.

Figures out of Japan showed exports growing for a 13th straight month, led by record demand from China and Asia as a whole, while manufacturing activity expanded at the fastest pace in almost four years.

Investors seemed to have largely shaken off worries about a trade war, sparked when U.S. President Donald Trump’s slapped steep import tariffs on washing machines and solar panels in a move condemned by China and South Korea.

Korea's main index was flat, while China's blue-chip CSI300 index dipped 0.3 percent. The latter is still up more than 8 percent on the year so far and near its highest since mid-2015.

On Wall Street, a 10 percent surge in Netflix led gains across the tech sector as it became just the latest to top forecasts. So far, 82 percent of reporting companies having beaten estimates.

The Nasdaq ended Tuesday with gains of 0.71 percent and the S&P 500 0.22 percent, while the Dow  edged down a tiny 0.01 percent.

EUROPE ON A ROLL
In currency markets, the dollar remained under fire as investors wagered the Federal Reserve would be far from the only central bank to tighten this year as growth spread more widely.

The sea change has been greatest in Europe where a survey of consumers overnight showed confidence jumped to a 17-year high in January.

“Both investors and consumers in Europe have started 2018 in a cheery mood, as the rotation away from the U.S. as the epicentre of global growth continues,” said ANZ analyst Richard Yetsenga in a note to clients.

The upbeat data only reinforced speculation the European Central Bank might take a step toward an eventual tightening at its policy meeting on Thursday.

That helped lift to euro to $1.2315 EUR= and back toward the three-year top of $1.2322 touched last week. The dollar was already at a fresh three-year trough against a basket of major currencies at 90.003.

It also ran into selling against the yen even though the Bank of Japan tried hard on Tuesday to quash talk it might curb its massive asset buying campaign anytime soon.

The dollar was last down 0.35 percent at 109.90 JPY=, having breached support at 110.00 for the first time since September.

The British pound GBP= also powered to $1.4040, its highest since the vote to leave the European Union in June 2016, aided by optimism around Britain's chances of securing a favourable Brexit deal.

The dollar’s decline has been a boon to commodities priced in the currency, with gold edging up to $1,341.26 an ounce XAU=.

Oil prices were consolidating after jumping more than 1 percent on Tuesday, with benchmark Brent crude hitting $70 a barrel for the first time in a week.

Brent futures were off 19 cents at $69.77, still not far off the three-year high of $70.37 reached on Jan. 15, while U.S. crude eased 6 cents to $64.41 a barrel.

Reference: Wayne Cole

Tuesday, 23 January 2018

Yen turns lower as BOJ hoses down stimulus end speculation


TOKYO (Reuters) - The yen slipped on Tuesday after comments from the Bank of Japan chief quelled speculation the central bank follow other central banks in scaling back monetary stimulus, while the dollar recovered losses after the U.S. government’s shutdown ended.

The yen weakened to 111.15 yen to the dollar, down 0.2 percent from late U.S. levels, after BOJ Governor Haruhiko Kuroda reiterated his commitment to strong monetary easing, saying there is still some distance to meeting inflation target.

That helped the Japanese currency reverse its earlier gains to 110.55 per dollar, which put it within sight of last week’s four-month low of 110.19, after the BOJ maintained its policy and its economic and price projections.

The comments came after U.S. senators struck a deal to lift a three-day government shutdown, which helped the dollar recover earlier losses. However, the greenback remained mired near a three-year low against a basket of currencies on lingering concerns about its yield advantage being chipped away.

The BOJ said risks to prices are still tilted to the downside, though its slight change to its assessment on inflation expectations to “flat” from “weak” was enough to trigger a bout of yen buying.

“I don’t see anything in today’s announcement that suggests a change in the BOJ’s stance. Rather today’s price action talks more about how the market is preoccupied with the idea that the BOJ will adjust its monetary policy at some stage in the future,” said Minori Uchida, chief FX analyst at the Bank of Tokyo-Mitsubishi UFJ.

The yen has gained after the BOJ trimmed its buying of long-dated government bonds earlier this month, sparking speculation of an eventual exit from its large stimulus.

The dollar’s index against a basket of major currencies stood at 90.49, not far off its three-year low of 90.104 touched on Jan. 17.

The U.S. House of Representatives passed a short-term measure on Monday to fund the federal government through Feb. 8 after it won enough support in the Senate.

Still, a boost from the deal did not last long partly because the measure secured funding for only a little more than two weeks, with the Republicans and Democrats still at loggerheads on many issues.

One reason often cited by traders for the dollar’s climbdown is that its relative yield attraction is at risk as the world’s major central banks are seen winding up their stimulus.

That would change the interest rate dynamics of the past few years, when the U.S. Federal Reserve was the only central bank raising rates.

The euro stood at $1.2277, consolidating its rally after having hit a three-year high of $1.2323 on Jan. 17.

Expectations that the European Central Bank may withdraw its stimulus gained momentum earlier this month after the accounts of its last policy meeting showed it could shift its policy communication early this year.

But sources have told Reuters the ECB is unlikely to ditch a pledge to keep buying bonds at its upcoming meeting on Thursday.

The British pound hit its post-Brexit referendum high of $1.4005, helped by optimism that Britain will reach a favourable divorce deal with the European Union.

French President Emmanuel Macron said on Saturday Britain would be able to have a bespoke deal with the European Union after Brexit, one of Prime Minister Theresa May’s objectives.

Reference: Hideyuki Sano

Stocks scale record highs as U.S. govt shutdown ends, yen turns down


TOKYO (Reuters) - Asian stocks advanced on Tuesday after U.S. senators struck a deal to end a government shutdown in a boost to Wall Street, while the dollar turned higher against the yen after Bank Of Japan’s chief reiterated his support for quantitative easing.

Spreadbetters expected Britain's FTSE .FTSE to open 0.3 percent higher, Germany's DAX 0.5 percent and France's CAC .FCHI 0.3 percent.

U.S. lawmakers passed a short-term measure on Monday to fund the federal government through Feb. 8.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.9 percent to a record peak.

Australian stocks climbed 0.75 percent and South Korea's KOSPI .KS11 added 1.4 percent.

Japan's Nikkei .N225 rose to a 26-year peak, Hong Kong's Hang Sang .HSI scaled a record high and Singapore .STI reached a 10-year top.

World equity markets have been on a tear over the past year, buoyed by a synchronised uptick in global economic growth in a boon to corporate profits and stock valuations.

The brief U.S. government shutdown put only a minor dent to equities, with Wall Street rallying to all-time highs overnight following the deal to end the impasse in Washington.

In currencies, the dollar briefly dipped 0.33 percent to 110.550 yen JPY= after the BOJ maintained its short-term interest rate target at minus 0.1 percent and a pledge to guide 10-year government bond yields around zero percent.

The BOJ also said “inflation expectations have moved sideways recently,” offering a slightly more upbeat view than three months ago when it said they were on a weak note.

The central bank was still far from its peers who were looking for ways out of unconventional monetary policies.

“The BOJ kept is policies unchanged and made no real changes to its overall stance. It still remains a step behind other central banks looking to normalise their policies,” said Shusuke Yamada, chief Japan FX strategist at Bank of America Merrill Lynch.

The BOJ caused ripples in the markets earlier in January by slightly reducing the amount of longer-dated Japanese government bonds (JGBs) it buys from the market at its regular debt-purchasing operations.

The yen had appreciated significantly against the dollar as some traders speculated the central bank was preparing to scale back its massive stimulus.

In Tuesday’s press conference following the policy decision, BOJ Governor Haruhiko Kuroda put such notions to rest: “There is still some distance to 2 percent inflation, so we’re in no condition yet to debate the timing of an exit from ultra-easy monetary policy.”

In response, the dollar pulled back from earlier losses and was last 0.2 percent higher at 111.100 yen.

The euro was down 0.2 percent at $1.2240 EUR= after gaining 0.3 percent overnight. The common currency was still within reach of a three-year peak of $1.2323 set on Wednesday.

The euro was supported ahead of the outcome of the European Central Bank’s meeting on Thursday, which could provide clues to future shifts in the central bank’s monetary policy.

The pound was a shade lower at $1.3961 GBP=D3 after touching $1.3992, its highest level since June 2016's vote for Brexit, on optimism that Britain will reach a favourable divorce deal with the European Union.

The dollar index against a basket of six major currencies stood rose 0.15 percent to 90.524.

In the virtual currency world, bitcoin was down 4.5 percent on the Bitstamp exchange at $10,320.13 following news that South Korea will ban the use of anonymous bank accounts in cryptocurrency trading from Jan. 30. While it was a widely telegraphed move designed to stop virtual coins from being used for money laundering and other crimes, the step also underscored authorities' intent to close down avenues for spurious speculation.

Oil prices rose on Tuesday, lifted by healthy economic growth as well as the ongoing supply restraint by a group of exporters around OPEC and Russia.

U.S. crude oil futures rose 0.6 percent to $63.94 per barrel and Brent gained 0.56 percent to $69.42 per barrel.

Spot gold XAU= tacked on 0.2 percent to $1,336.70 per ounce.

Reference: Shinichi Saoshiro

Euro nears recent three-year high on dollar weakness


LONDON (Reuters) - The euro rose a third of a percent on Monday on expectations the European Central Bank will maintain its current monetary policy at a meeting this week and not signal a dovish tilt.

Dollar weakness, exacerbated by a U.S. government shutdown and strengthening economic growth in Europe, also encouraged large investors to boost their expectations on the euro with UBS Wealth Management upgrading its short-term forecast for the single currency.

“If it was not for the interest rate differentials, the euro would be much higher against the dollar as the underlying fundamentals such as current account balances have improved significantly in recent months,” said Thomas Flury, head of currency strategy at UBS Wealth Management’s Chief Investment Office.

In a report published on Monday, the unit upgraded the euro forecast against the dollar to $1.25 over the next three months from a previous forecast of $1.18.

The single currency was up 0.3 percent to $1.2259 in early trades, nearing a three-year high of $1.2323 that it reached last Wednesday.

It is up more than 2 percent this year after gaining more than 10 percent against the dollar last year.

ECB SURPRISE
Investors were also focused on policy decisions in Japan and Europe. Japan is unlikely to signal any policy shift when its meeting ends on Tuesday; the ECB which may stick to its dovish policy stance and is unlikely to offer any hint of a change in forward guidance.

Some analysts advise caution in betting on any quick withdrawal of ECB policy stimulus on Thursday as broad measures of inflation remain well below its targets.

“Unless the U.S. government shutdown ends very quickly, which may boost the dollar, markets are focusing on the two other cross currents this week, namely the BOJ and the ECB, with the latter likely to surprise euro bulls,” said Alvin Tan, a currency strategist at Societe Generale in London.

Recent data and political developments, especially in Germany, have bolstered the euro, with business sentiment optimistic and capital spending picking up.


Meanwhile, latest positioning data showed dollar bears extended bets against the greenback last week as the political wrangling dented investor confidence.

The U.S. government shutdown took effect at midnight on Friday after Democrats and Republicans failed to agree on a last-minute deal to fund government operations. A vote on Sunday to provide funding through Feb. 8 was cancelled and will be held at 12 p.m. (1700 GMT) on Monday.

The dollar’s index against a basket of six other major currencies initially dipped to 90.155 but was last up 0.1 percent at 90.665, managing to hold above the three-year low of 90.113 set on Thursday.

Sterling steadied around $1.39 on Monday, with traders cautious about pushing the pound higher after five consecutive weeks of gains against the dollar, its longest winning streak since 2014.

Reference: Saikat Chatterjee

Monday, 22 January 2018

Top Swiss cryptocurrency lawyer questions 'stupid' ICO structure


ZURICH (Reuters) - One of the top lawyers in the booming cryptocurrency industry says the legal structure he helped set up to raise funds for new virtual currencies is “old, inflexible and stupid” and may no longer be fit for purpose.

The Swiss lawyer’s comments come as regulators around the world increase their scrutiny of initial coin offerings (ICOs), the digital fundraisers that precede a currency’s launch.

There is also growing scrutiny from investors. The Zug-based Tezos Foundation is facing U.S. class-action lawsuits from those who say they were misled and defrauded in its ICO.

Luka Mueller’s MME law firm helped set up foundations in Switzerland for Tezos and some of the world’s biggest ICOs, including those of Bancor and Ethereum. Many foundations applied for non-profit tax status. The money raised in the ICO is treated as a donation that may not be returned.

Regulators in the United States, the UK, and elsewhere are looking at whether an ICO should have similar investor protection to an initial public offering (IPO) for a company.

Mueller told Reuters cryptocurrency groups involving U.S. participants or gaining backing from investors should set up companies instead of the Swiss foundations he helped popularize.

“If you structure your token sale in a way that it would look like an initial public offering, then even if you launch a (blockchain) protocol, the foundation is maybe not suitable,” he said.

“If...the background is more an investor environment rather than a technical environment, yes, do all the registrations. If you want to sell it, if you want to be active and actively promoting it in the US, apply U.S. law.”

He said a foundation could still work for ICOs if a project is of interest mainly to technical experts rather than investors.

“CRYPTO VALLEY”

Bitcoin, the best-known cryptocurrency, exploded in value since it was launched in 2009. Its price increased from less than a cent in early 2010 to a record shy of $20,000 in December 2017.

The coins use encryption and a blockchain transaction database enabling fast and anonymous transfer of funds without centralized payment systems.

ICOs skyrocketed in 2017, reaching nearly $3 billion through September. Switzerland attracted around a quarter of the world’s ICOs with nearly $650 million raised there in the first nine months of 2017, according to data compiled by cryptocurrency research firm Smith + Crown.

Blockchain groups have set up foundations in the Swiss “Crypto Valley,” but the model has also loosely been exported elsewhere including to the Seychelles, Mauritius and Singapore.

Tezos aims to be a blockchain that’s more reliable than the ones behind bitcoin and ether. Its foundation raised $232 million last July.

It is now facing at least half a dozen class-action lawsuits in the United States. The plaintiffs are seeking a refund as well as damages.

They made non-refundable donations and expected to receive tokens called Tezzies when the network launched. But a former board member said the project is in a state of paralysis because of the lawsuits and a dispute between the developers and the foundation’s president. The network has not yet launched.

Tezos Foundation officials have declined to comment on the lawsuits. An attorney for the founders, Kathleen and Arthur Breitman, said of the first lawsuit that is was without merit and that the couple would aggressively defend themselves.

Under MME’s guidelines, tokens become property with an enforceable right once the blockchain launches and the token receives a spot on the first block. Before the launch contributors have no such rights.

Mueller said the foundation structure his team helped bring to cryptocurrency groups was initially conceived as a means to ensure funds were used for a set purpose and to protect developers from any liability over the project’s success.

“It’s a concept of a donation, from which it is clear you donate,” Mueller said. “You donate into a structure and you donate to a team and to their idea.”

By MME’s definition, the developers behind the tokens are not liable for the projects and there is no counterparty to sue.

 
BURNT FINGERS
Other experts on Swiss foundation law say it would be nearly impossible for contributors to see money refunded from the foundation.

Alexandre Swoboda, an economist who sat on the Swiss National Bank’s council from 1997 to 2009 said: “ICOs are basically about financing yourself by giving these people these new coins, and holding those new coins doesn’t give you a claim on anything except to be part of the club that holds those coins.”

But regulators are looking into this.

Investors in the United States may have been encouraged to file lawsuits after the U.S. regulator, the Securities and Exchange Commission (SEC), in July stated that some of the coins, also called tokens, may be considered securities subject to federal rules and regulation.

This has opened the door for courts to follow suit in enforcing the interpretation of ICOs as security sales.

Mueller conceded that while a foundation was a useful model for launching a new blockchain project that expected to see interest exclusively from a small technically-geared community, other projects would “need to have an operational company, like a GmbH or an AG, and not a foundation.”

“The Swiss foundation actually is a very old, inflexible, stupid model,” he said. “The foundation is not designed for operations.”

Nevertheless, he said the vast majority of cryptocurrency fundraiser participants understood the terms and were therefore accountable for the risky decision to contribute.

“You as a user must be absolutely clear — and if you don’t understand it keep your fingers away — that if you have an ether or a bitcoin, and it does not work, you have nobody to claim against,” he said.

Reference: Brenna Hughes Neghaiwi

Sterling steadies around $1.39 after best run since 2014


LONDON (Reuters) - Sterling steadied around $1.39 on Monday, with traders cautious about pushing the pound higher after five consecutive weeks of gains against the dollar - the currency’s longest winning streak since 2014.

Data published on Friday showed speculators increased their net-long positions on sterling - or bets that it would rise - to the highest level in 3-1/2 years in the latest week, on the view that Brexit talks had so far gone relatively well and that the economy was ticking along better than some had expected.

Former Goldman Sachs economist and Treasury minister Jim O‘Neill said on Monday morning that Britain’s economy is likely to do better in 2018 than many forecasts suggest and the benefits of global growth in the coming years will “easily dwarf” any Brexit hit.

But some analysts say there have been few fundamental drivers behind the pound’s 3 percent climb against the dollar since the start of the year, that there remains a great deal of political uncertainty, and that sterling is due a correction lower.

“With speculative long positioning close to multi-year extremes, we advise against chasing the currency higher. If anything, we remain of the view that the currency is trading in overbought territory,” said Credit Agricole currency strategists Manuel Oliveri.

Sterling traded flat at $1.3907 on Monday, close to Friday’s peak of $1.3945, its highest since the results of Britain’s vote to leave the European Union in June 2016.

Although it is still down more than 7 percent since the day of the ballot, thee pound is now trading higher against the dollar than during a dip four months before the EU referendum, when the currency briefly touched as low as $1.3836.

Versus the euro, however, which has strengthened across the board in recent months, sterling is still trading far lower than its pre-referendum levels and is down almost 14 percent since the day of the vote.

The pound was trading up 0.1 percent on the day at 88.08 pence per euro on Monday.

“Euro strength has pulled the pound higher lately, pushing sterling/dollar to post-referendum highs,” wrote UBS Wealth Management strategists in a note to clients.

“We expect this trend to continue, as the UK economy remains relatively solid. A strong U.S. dollar rebound remains unlikely, given the U.S.’s large trade and budget deficits, but rising U.S. interest rates should deliver some support to the dollar,” they added.

French President Emmanuel Macron said on Saturday Britain would be able to have a bespoke deal with the European Union after Brexit, one of Prime Minister Theresa May’s objectives, though London’s financial centre could not enjoy the same level of access to the EU under May’s current Brexit plan.

Reporting by Jemima Kelly

Wall Street futures, dollar dip after U.S. government shutdown, Asia resilient


TOKYO (Reuters) - Wall Street stock futures and the dollar pulled back slightly on Monday after the U.S. government was forced to shut down amid a dispute between President Donald Trump and Democrats over immigration.

ut Asian shares remained resilient overall while U.S. bond yields continue to rise as investors saw limited economic fallout from the standoff in the U.S. capital.

European stock futures are mostly opening slightly higher, with Dax futures up 0.2 percent, and France’s Cac futures up 0.05 percent. Britain’s FTSE futures are down 0.1 percent.

“After all, people know this is just a political show. Neither Republicans nor Democrats can afford to keep dragging their feet for long ahead of mid-term elections this year,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

MSCI’s broadest index of Asia-Pacific shares outside Japan managed to erase slim losses earlier to eke out gains of 0.1 percent, hitting a record high for six days in a row. Japan’s Nikkei also ended up 0.03 point.

U.S. S&P500 mini futures dipped just 0.1 percent, still clinging near a record high hit on Friday.

A U.S. government shutdown will enter its third day on Monday as Senate negotiators failed to reach an agreement late on Sunday to restore federal spending authority and deal with demands from Democrats that young “Dreamers” be protected from deportation.

The Senate set a vote for 12 p.m. (1700 GMT) on Monday on advancing a measure to provide temporary government funding through Feb. 8, end the shutdown and allow hundreds of thousands of federal employees to return to work.

But it was unclear whether there would be enough Democratic votes on Monday to advance a temporary spending bill.

While many see minimal impact on the economy from a short-term government shutdown, analysts say a prolonged stalemate in Washington could dampen investors’ confidence in U.S. assets.

“The markets had not expected this shutdown. Given that U.S. share prices have rallied strongly since the beginning of the year, we have to see if this event is a trigger to change the market trend,” said Takafumi Yamawaki, head of Japan fixed income research at JPMorgan Securities.

Yamawaki noted that during previous government shutdowns - two in 1995 and one in 2013 - U.S. bond yields have tended to slip in the first few weeks after the closure.

But so far U.S. Treasuries yields have risen despite the government shutdown, extending their uptrend since September.

The benchmark 10-year yield rose to as high as 2.672 percent, its highest level in 3-1/2 years. A clear break above its double top marked in December last year and March could signal a further rise in the yield, analysts say.

In the foreign exchange market, the dollar’s index against a basket of major currencies dropped about 0.2 percent from late last week to 90.465, not far from three-year low of 90.104 touched on Wednesday, before edging back to 90.63.

The euro opened the day 0.4 percent higher at $1.2275, but it stopped short of testing Wednesday’s three-year peak of $1.2323 and pared back much of the gains to trade at $1.2225.

The common currency was also helped after Germany’s Social Democrats (SPD) voted on Sunday to begin formal coalition talks with Chancellor Angela Merkel’s conservatives, moving Europe’s economic powerhouse closer to a stable government after months of political deadlock.

The safe-haven Swiss franc gained 0.3 percent to 0.9619 franc per dollar. It hit a four-month high of 0.9536 to the dollar on Friday.

The Japanese yen was little changed at 110.83 yen to the dollar, not far from Wednesday’s four-month high of 110.19.

The South African rand was the biggest mover in Asian trade, rising almost 1 percent at one point to 2-1/2-year highs of 12.0825 per dollar.

Leaders of South Africa’s ruling African National Congress (ANC) met on Saturday to outline the party’s program for the coming year amid reports that its executive planned to force Jacob Zuma to quit as the country’s president.

Moving in the opposite direction, the Turkish lira eased 0.6 percent to 3.8280 after Turkey’s army and rebel allies battled U.S.-backed Kurdish militia in northern Syria, in a campaign that has opened a new front in Syria’s civil war.

Oil prices ticked up, pushed higher by comments from Saudi Arabia that cooperation between oil producers who are currently withholding supplies in an effort to prop up the market would continue beyond 2018.

Brent crude futures were at $68.75, up 0.2 percent, from their last close. Brent on Jan. 15 hit its highest since December, 2014, at $70.37 a barrel.

U.S. West Texas Intermediate (WTI) crude futures were at $63.53 a barrel, up 0.3 percent from their last settlement. WTI marked a December-2014 peak of $64.89 a barrel on Jan. 16.

Reference: Hideyuki Sano

Friday, 19 January 2018

Dollar hurt by U.S. shutdown fears, Treasury yields at highest since 2014


LONDON (Reuters) - The dollar wallowed near three-year lows on Friday as heightened fears of a U.S. government shutdown unnerved investors, while U.S. Treasury yields continued an upward march to hit their highest levels since September 2014.

Legislation to stave off an imminent federal government shutdown encountered obstacles in the Senate late on Thursday, despite the passage of a month-long funding bill by the House of Representatives hours earlier.

Without the injection of new money, no matter how temporary, scores of federal agencies will be forced to shut starting at midnight on Friday, when existing funds expire.

The dollar index, which measures the greenback’s value against other major currencies, was down 0.3 percent at 90.230 and close to three-year lows hit this week.

It has already lost 2 percent in the early days of 2018.

“The fear of the U.S. government shutdown has made investors nervous,” said Naeem Aslam, chief market analyst at Think Markets UK. “There is a strong possibility that the U.S. government shutdown may become a reality.”

Market players said worries of a shutdown may have also weighed on sentiment in bond markets, which remain under pressure from expectations that strong economic data globally will encourage the U.S. Federal Reserve to press ahead with monetary tightening.

U.S. 10-year Treasury yields hit their highest level in more than three years at 2.642 percent on Friday, and were set for their biggest weekly rise in a month.

“It’s a continuation of the trend and expectations for a normalization of monetary policy,” said Chris Scicluna, head of economic research at Daiwa Capital Markets, referring to rising U.S. bond yields.

FIRM GROUND
In Europe, equity markets opened firmer with the exception of London's blue-chip FTSE stock index .FTSE. Germany's Dax index was 0.5 percent higher on the day .DAX and France's benchmark index was up 0.1 percent .FCHI.

The MSCI world equity index .MIWD00000PUS, which tracks shares in 47 countries, touched fresh record highs bouyed by gains in Asia.

Optimism over the global economic growth outlook and improved corporate earnings have helped share markets rally at the start of 2018. Supporting economic confidence was data on Thursday that showed China’s growth in 2017 accelerated for the first time in seven years.

China stocks ended at fresh two-year highs on Friday, with the Shanghai index .SSEC posting its fifth straight week of gains. Japan's Nikkei .N225 closed up 0.2 percent.

The euro rose 0.4 percent to $1.2280 EUR= after hitting a three-year peak above $1.2300 earlier this week on expectations that the European Central Bank would take steps towards winding back on stimulus measures to normalize monetary policy.

The euro’s rally was tempered later as some ECB officials voiced worries about the currency’s strength.

China's yuan meanwhile breached the psychologically important 6.4 dollar level for the first time in more than two years the day after Beijing said annual growth was 6.8 percent in October-December, slightly above forecasts.

Oil prices meanwhile fell more than 1 percent as a bounce-back in U.S. production outweighed ongoing declines in crude inventories.

Brent crude futures were at $68.63 a barrel, down 1.03 percent on the day. On Monday, they hit their highest since December 2014 at $70.37.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were also 1 percent lower, trading at $63.28 a barrel.

Gold prices XAU= rose, supported by a weaker dollar amid worries about a possible U.S. government shutdown, but the metal was still on track for its first weekly drop in six weeks.

Reference: Dhara Ranasinghe

Thursday, 18 January 2018

Strong China data cranks up pressure on bond markets


LONDON (Reuters) - The first acceleration by China’s giant economy in seven years kept stocks near record highs on Thursday, but added to growing pressure on bond markets as U.S. Treasury yields - the benchmark for global borrowing costs - cranked to a 10-month high.

Underlining the momentum of the world economic expansion into the back end of last year, both Chinese fourth quarter growth of 6.8 percent and December industrial output growth of 6.2 percent were ahead of expectations.

Most Asian bourses were closing when the data landed but had briefly set a new all-time record after the U.S. bluechip Dow Jones Industrial had closed above 26,000 points for the first time.

China's yuan finished strongly to hit its highest since December 2015. Europe's main FTSE, Dax and CAC40 markets then ticked higher too[.EU], though moves were choppy in the cross currents of both a rising euro and bond yields.

After a week of trying, the 10-year U.S. Treasury yield passed 2.6 percent to hit its highest since March 2017 It drove European counterparts up too with Germany’s 10-year bond yield, the region’s benchmark, near a 5-1/2 month top at 0.52 percent.

With such encouraging data coming though, “the likelihood we have higher inflation in the big economies is well over 50 percent, so that is the next turning point for the markets,” said SEB investment management’s global head of asset allocation Hans Peterson.

He added it raised two big questions. How will central banks respond? And will the rise in bond yields happen at such a pace that it impacts optimism around assets like equities?

“We are going to change the regime probably within the next 2-3 months,” he said. “Will it be accompanied by rising producer prices? If so then we can live with higher bond yields, otherwise it is a problem for us.”

The break higher in U.S. yields also lifted the dollar off a three-year low hit earlier in the day in Asia.

Ahead of U.S. trading though, the euro was regaining traction and last stood at $1.2245 EUR=, up 0.5 percent on the day but well below a peak of $1.2323 set on Wednesday, the euro's strongest level since December 2014.

Top ECB policymakers were speaking in Frankfurt. Some may have been caught off guard by the speed of the euro’s appreciation, said Lee Jin Yang, macro research analyst for Aberdeen Standard Investments in Singapore.

“Maybe they are trying to manage volatility or slow down the rise,” Lee said referring to Austria’s Ewald Nowotny who told reporters on Wednesday that the euro’s recent strength against the dollar was “not helpful.”

TRAINED LIKE DOGS
Wall Street was expected to tick fractionally higher when it resumes in New York with traders there bracing for another deluge of company fourth quarter results as well as some closely followed housing market data.

Elsewhere, the Canadian dollar eased about 0.1 percent to C$1.2450 CAD=D3, having see-sawed after the Bank of Canada raised interest rates but sounded a cautious tone on the future of the North American Free Trade Agreement (NAFTA).

Emerging markets were digesting a number of key interest rate meetings including Turkey which kept its rates on hold having seen last year’s 18 percent slump in the lira versus the euro drive inflation back into double digits.

South Africa's central bank was due next at 1300 GMT. After being sickly for much of 2017, a sounder political backdrop has seen the rand surge. ZAR= It is one of the best performing currencies in the world so far this year, fuelling talk of a possible rate cut.

“The South Africa meeting is the big show today. People are in it, they want to like it they want to own it,” said UBP’s EM macro and FX strategist Koon Chow. “So any dovishness or a cut would be another trigger for another leg higher.”

The rising U.S. bond could cause turbulence for EM debt markets, however. As well as the gains for benchmark Treasuries, The two-year yield hovered at a nine-year high of just over 2 percent.

“In emerging markets we are trained like dogs,” Chow said about the rising yields. “When we hear that bell ring we want to just run,”

In commodities, crude oil prices rose earlier on data showing a decline in U.S. crude inventories and as rebels in Nigeria threatened to attack the country’s petroleum infrastructure, before trimming their gains.

U.S. crude futures were 10 cents higher at $64.07 a barrel have hit a three-year high of $64.89 on Tuesday.

Spot gold XAU= was steady at $1,333 an ounce, with the dollar’s bounce pulling it back from a four-month high of $1,344.43 set on Monday.

Reporting by Marc Jones

Asia stocks touch record highs after Wall St surge, dollar edges back


TOKYO (Reuters) - Asian stocks struck record highs on Thursday, with a rally by Wall Street supporting bullish investor sentiment, while the dollar pulled back from three-year lows as comments by European Central Bank officials tempered the euro’s recent rally.

Spreadbetters expect Britain's FTSE to open 0.1 percent lower, Germany's DAX to start 0.3 percent higher and France's CAC opening up 0.2 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.2 percent higher after rising as much as 0.4 percent to a fresh record peak.

South Korea's KOSPI  was effectively flat. Japan's Nikkei .N225 reached its highest level since late 1991 earlier before ending down 0.4 percent.

Shanghai shares .SSEC rose 0.9 percent, buoyed by data showing China's economy grew 6.8 percent in the October-December quarter from a year earlier, the same rate as the previous quarter and slightly better than most economists had expected.

U.S. stocks jumped on Wednesday and the Dow closed above 26,000 for the first time as investors' expectations for higher earnings lifted stocks across sectors.

Optimism over prospects for sustained strong global growth and improved corporate earnings have helped share markets rally at the start of 2018.

“Events related to North Korea pose potential risks, but there are very few factors holding equities back at the moment,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

“And bullish U.S. stocks, higher Treasury yields and signs of the euro’s recent surge running its course are all dollar-supportive factors,” Ishikawa said.

The dollar index against a basket of six major currencies was 0.3 percent higher at 90.793 after pulling back overnight from a three-year low of 90.279 set earlier in the week.

The euro was traded at $1.2203 EUR=, slipping from a three-year peak above $1.2300 after some ECB officials voiced worries about the currency's strength. The common currency had advanced this month on expectations that the central bank would take steps towards winding back on stimulus measures to normalise monetary policy.

The dollar was flat at 111.270 yen JPY= after surging 0.75 percent overnight, when it bounced from a four-month low of 110.190.

The two-year Treasury yield hovered near a nine-year high of 2.051 percent reached on Wednesday on expectations the Federal Reserve will continue to tighten monetary policy this year.

In commodities, crude oil prices rose earlier on data showing a decline in U.S. crude inventories and as rebels in Nigeria threatened to attack the country’s petroleum infrastructure, before trimming their gains.

U.S. crude futures were 2 cents higher at $63.99 a barrel. On Tuesday, they hit a three-year high of $64.89.

Many analysts warned that the recent oil price rally could lose momentum.

“We reckon that the upside is now limited for oil prices. U.S. shale oil output will increase by a good 111,000 barrels per day (bpd) next month to 10 million bpd, and will rise to about 11 million bpd by the end of next year,” said Fawad Razaqzada, market analyst at Forex.com.

“This would put the U.S. on par with Saudi Arabia and Russia’s output,” Razaqzada said.

Spot gold XAU= was down 0.1 percent at $1,327.56 an ounce, with the dollar’s bounce pulling it back from a four-month high of $1,344.43 set on Monday.

Reporting by Shinichi Saoshiro

Wednesday, 17 January 2018

Sterling pauses after rally as traders watch Brexit developments


LONDON (Reuters) - Sterling edged lower against the dollar on Wednesday after a rally as traders took profits and awaited the latest developments in negotiations over Britain’s departure from the European Union.

The pound has in recent days reached its highest levels since the vote to leave the European Union in June 2016, with the better-than-expected economic performance of the British economy and hopes that Britain will soon agree a transition deal with Brussels supporting sterling.

“I expect the political noise to move the pound on a short-term basis. But will it change the overall [positive] direction of the last 12 months? I don’t think so,” said Michael Hewson, chief analyst at CMC Markets, who remains bullish on the pound.

Hewson said the only event that could send sterling sharply lower was if talks with the EU broke down completely, which he said did not look likely as Brussels looked more amenable to negotiating with Britain.

The president of the EU Commission, Jean-Claude Juncker, said on Thursday Britain was welcome to rejoin the trading bloc after it has left next year.

In London, the European Union (Withdrawal) Bill is set to complete its first journey through parliament’s lower house some time after 1900 GMT, a milestone on the long road towards cementing the legal foundations of Brexit.

The pound was down marginally against the dollar at $1.3778 after hitting a high overnight of $1.3836. Data on Tuesday showing a slight fall in December inflation in Britain checked the pound’s rally.

Against the euro, which has gained broadly in recent days on expectations the European Central Bank would soon move to rein in monetary policy, the pound was up 0.2 percent at 88.7 pence.

“The talks about the transition period are due to start in late January, the negotiations on future trade relations following an EU summit at the end of March. Until a reversal of the plans is in sight EUR-GBP will continue to trade in a narrow range,” Commerzbank analysts wrote in a note.

Later, the euro fell on Wednesday after rocketing to a fresh three-year high in early trades above the $1.23 line as some investors ramped up bullish bets about the currency though some concerns from policymakers this week damped broader optimism.

Overall dollar weakness and growing optimism about the outlook of the European economy in 2018 has lent fresh legs to the euro’s rally after it gained more than 10 percent last year.

But the speed of the rise in the opening days of 2018 -- up more than 3 percent in the last two weeks -- has invited some comments from ECB officials this week, highlighting some growing concerns, according to analysts.

In an interview to an Italian daily la Repubblica, Vitor Constancio, the vice president of the European Central Bank, said he did not rule out that monetary policy would still continue to be “very accommodating for a long time”.

On Tuesday, Jens Weidmann, Germany’s representative on the ECB’s policymaking body said it would be “appropriate” for the European Central Bank to stop its bond purchases, due to run at least until September.

“The ECB is playing the good cop and the bad cop in terms of their comments over the euro but there is no doubt the currency’s rally has sowed the seeds of uncertainty in the ids of ECB policymakers,” said Viraj Patel, an FX strategist at ING in London.

The single currency rose to a session high of $1.2323 against the dollar in Asian trading before falling 0.2 percent to stand at $1.2238.

For euro bulls, these are key levels for a couple of reasons. Unlike 2017’ summer, when positioning wasn’t as stretched and valuations still reasonably attractive, current levels are not as supportive for the single currency.

Latest positioning data showed that net long euro positions are at a record high while both ECB and IMF valuation metrics show the euro is only about 6-7 percent currently compared to more than 12 percent before the French elections last year.

Morgan Stanley strategists said in a daily note that as long as inflation expectations are met and growth remains strong, the euro’s strength will be tolerated by the ECB.

Elsewhere, Canada’s central bank is widely expected to raise interest rates by 25 basis points and take the benchmark borrowing cost to 1.25 percent. Analyst expect the BoC to raise rates as many as three times in 2018.

The Australian dollar rose 0.1 percent to $0.7970 and the New Zealand dollar dipped 0.1 percent to $0.7260.

Reference: Reuters