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Dollar Absorbs Suspected Yen Intervention; mixed data from China

Dollar Absorbs Suspected Yen Intervention;  mixed data from China
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  • https://tmsnrt.rs/2zpUAr4
  • The dollar hit against the yen by the alleged intervention of the BOJ
  • Stocks trim early gains as China markets ease
  • China’s GDP beats forecasts, but retail sales disappoint
  • Stg flat as Boris Johnson drops out of the PM race

SYDNEY, Oct 24 (Reuters) – The U.S. dollar on Monday weathered another purported flurry of Japanese intervention to push the yen higher, while for equities, a slump in Chinese markets dampened hopes of an eventual slowdown in U.S. markets. US interest rate hikes.

The dollar started in a bullish mood with an early rise to 149.70 yen, before suddenly falling as low as 145.28 within minutes. However, speculators did not seem discouraged and took the dollar back to 148.90 in irregular trading.

The Financial Times reported that the Bank of Japan may have sold at least $30 billion on Friday in an effort to contain the yen’s weakness, which has sharply raised the cost of imports, particularly resources.

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Japanese authorities again declined to confirm whether they had intervened, but price action strongly suggested that they had. read more

Any action to support the yen is at odds with the Bank of Japan’s super-loose policies and will intensify pressure for it to retreat from yield curve control at its policy meeting this week. read more

The pound sterling also moved, which was affected by the news that Boris Johnson had withdrawn from the British prime ministerial candidacy.

That raised the possibility that former finance minister and market-preferred candidate Rishi Sunak would win power and reduce the political uncertainty weighing on the pound, at least for a while. read more

The news initially sent sterling up nearly a penny to $1.1402, but it failed to hold and last traded at $1.1307 as investors awaited more clarity on the competition.

Stocks mostly extended a rally that started late in New York on Friday as the Federal Reserve was debating when to slow the rate of hikes and may signal a step back at its November meeting.

Markets are still priced in for a 75 basis point hike next month, but have cut bets on an equivalent move in December. Peak rates have also dropped to around 4.87%, from 5.0% at the beginning of last week.

ECB, BoC SET TO UPWARD

Only the possibility of a less aggressive Federal Reserve helped S&P 500 futures rise 0.1% in Asia, while Nasdaq futures rose 0.2%. EUROSTOXX 50 futures firmed 0.7%, while FTSE futures rose 0.1%.

japan nikkei (.N225) gained 0.6% and South Korea (.KS11) 0.9%, but MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) lost 1.1% due to the fall in Chinese shares.

chinese blue chips (.CSI300) It fell 1.7% as the yuan continued its decline and Xi Jinping secured an unprecedented third leadership term, electing a top governing body packed with loyalists. read more

Late data on gross domestic product (GDP) showed the Chinese economy grew 3.9% in the third quarter, beating forecasts of 3.5%, but retail sales disappointed with a meager 2% increase, 5 %. read more

Markets now await US GDP figures to be released on Thursday and core inflation measures the following day. The economy is forecast to have grown 2.1% annualized in the third quarter, while the Atlanta Fed now estimate of GDP is up 2.9%.

Sentiment will also be tested by some big gains with Apple. (AAPL.O)Microsoft (MSFT.O)google main alphabet (GOOGL.O) and Amazon (AMZN.O) all reports.

The European Central Bank is meeting this week and is expected to raise rates by 75 basis points, although it is unclear whether it will signal another similar move in December.

“While we don’t expect any ‘dovish’ policy signals, we maintain a bias towards a path of lower rates than what markets are currently pricing in,” analysts at NatWest Markets said in a note.

“We forecast +50 bps in December and +25 bps in early 2023 to a peak of 2.25%,” they added. “There is more uncertainty around the QT (quantitative adjustment), where the start of sales could well be announced in the first quarter of 2023.”

The euro fell a fraction to $0.9835, having briefly risen to $0.9899 earlier in the session.

The Bank of Canada is also expected to tighten by 75 basis points at its meeting this week. read more

The possibility of a slowdown in US rate hikes helped bonds trim some of their recent heavy losses, with 10-year US Treasury yields falling to 4.16% compared with a 15-year high of 4.337% on Friday.

In commodity markets, gold fell to $1,654 an ounce.

Oil prices gave up early gains after weak data on Chinese demand. Brent fell 42 cents to $93.08 a barrel, while US crude fell 41 cents to $84.64.

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Information from Wayne Cole; Edited by Jacqueline Wong and Christopher Cushing

Our standards: The Thomson Reuters Trust Principles.

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