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Sunday, 10 December 2017

After bitcoin’s wild week, traders brace for futures launch


NEW YORK (Reuters) - The newest way to bet on bitcoin will arrive on Sunday, when futures of the cryptocurrency that has taken Wall Street by a storm begin trading.

The first bitcoin future trades are set to kick off at 6 p.m. EST (2300 GMT) on CBOE Global Markets Inc’s CBOE Futures Exchange.

This has given an extra kick to the cryptocurrency’s scorching run this year. Bitcoin’s price soared so far this month, but it has made sharp moves in both directions in recent days, falling by almost a fifth on Friday after surging more than 40 percent in the previous 48 hours.

On Sunday, bitcoin was up about 3 percent at $15,000 on the Luxembourg-based Bitstamp exchange. On the Gemini Exchange, it was at $15,650.

Bitcoin fans appear excited about the prospect of an exchange-listed and regulated product and the ability to bet on its price swings without having to sign up for a digital wallet. Others, however, caution that risks remain for investors and possibly even the clearing organizations underpinning the trades.

The futures are cash-settled contracts based on the auction price of bitcoin in U.S. dollars on the Gemini Exchange, which is owned and operated by virtual currency entrepreneurs Cameron and Tyler Winklevoss.

“The pretty sharp rise we have seen in bitcoin in just the last couple of weeks has probably been driven by optimism ahead of the futures launch,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

“You are going to open up the market to a whole lot of people who aren’t currently in bitcoin,” Frederick said.

The futures are an alternative to a largely unregulated spot market underpinned by cryptocurrency exchanges that have been plagued by cybersecurity and fraud issues.

The launch has so far received a mixed reception from big U.S. banks and brokerages, though.

Interactive Brokers Group Inc plans to offer its customers access to the first bitcoin futures when trading goes live but will bar clients from assuming short positions and has margin requirements of at least 50 percent.

Several online brokerages, including Charles Schwab Corp and TD Ameritrade Holding Corp, will not allow trading of the new futures immediately.

JPMorgan Chase & Co, Citigroup Inc and other large U.S. banks will not immediately clear bitcoin trades for clients, the Financial Times reported on Friday.

Goldman Sachs Group Inc said on Thursday it was planning to clear such trades for certain clients.

VOLATILITY DAMPENER

Bitcoin’s manic run-up this year has boosted volatility far in excess of other asset classes. The futures trading may help dampen some of the sharp moves, analysts said.

“Hypothetically, volatility over the long run should drop after institutions get involved,” said Ophir Gottlieb, chief executive officer of Los Angeles-based Capital Market Laboratories. “But there may not be an immediate impact, say in the first month.”

Placing futures on an underlying spot market can lend more order to spot trading in the long run by helping to determine the proper price of a security and by allowing investors to express both bullish and bearish biases, said J.J. Kinahan, chief market strategist at TD Ameritrade in Chicago.

Analysts warn, however, against trying to predict how the futures will perform, given that bitcoin is unlike any other asset.

“This is completely unknown territory,” said Charles Schwab’s Frederick.

Bitcoin’s meteoric price rise has raised worries that it could collapse soon, although analysts have little concern that this could hurt broader financial markets because the cryptocurrency lacks correlation with other risky assets and is held and traded largely outside the banking sector.

However, there are still fears of inaccurate pricing and systemic risk to clearing houses, should prices move sharply and clients fail to meet margin calls. Brokers have called for more safeguards to protect against bitcoin’s high volatility.

For a factbox on the launch of bitcoin futures contracts, see:

The risk that investors might manipulate the underlying spot market to benefit in the futures market is another big concern.

“Large equity indexes show some volatility around cash settlements, and those are in highly liquid, highly regulated venues,” said Steve Sosnick, chief options strategist at Interactive Brokers in Greenwich, Connecticut.

“Compare that to cash settlement in bitcoin, and there is a lot more uncertainty on how that would play out.”

Reporting by Saqib Iqbal Ahmed

Friday, 8 December 2017

Sterling rises, euro edges down as Brexit deal may be near


TOKYO (Reuters) - Sterling rose while the euro edged down on Friday, as traders waited to see if British Prime Minister Theresa May has finally clinched an elusive deal with Irish and EU officials on how they would run their post-Brexit Irish land border.

The U.S. dollar was higher against a basket of currencies, on track for a weekly gain, as the passage of a bill to temporarily extend U.S. government funding raised investors’ optimism that a tax reform bill would also pass.

The leader of the Northern Irish party which props up May’s government negotiated through the early hours about the post-Brexit Irish land border, a source in the party told Reuters on Friday.

An agreement would remove the last obstacle for opening free-trade talks with the European Union. May is likely to meet European Union chief executive Jean-Claude Juncker before dawn (0600 GMT) in Brussels.

The euro inched down 0.1 percent to $1.1761 EUR=, around its lowest levels since Nov. 22. It was on track to shed 1.1 percent for the week, but is still up nearly 12 percent so far in 2017.

Sterling was up 0.3 percent at $1.3512 GBP=, pulling away from its overnight low of $1.3320.

Forex traders were also awaiting the closely watched U.S. non-farm payrolls report later in the day, which is expected to show 200,000 new jobs were created in November, according to a Reuters poll.

The dollar index, which gauges the greenback against a basket of six major rivals, was slightly higher on the day at 93.830, up 1 percent for the week. But it was still down 8.2 percent for the year, a period plagued by U.S. policy uncertainty.

Removing one major stumbling block for the dollar, the U.S. Congress on Thursday passed legislation to temporarily fund the government through Dec. 22, beating a Friday midnight deadline. The bill will be sent to President Donald Trump to sign.

U.S. Senate Republicans agreed to talks with the House of Representatives on sweeping tax legislation on Wednesday, amid early signs that lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline.

“The market action this week has mostly been drawing cues from Washington,” said Bill Northey, chief investment officer at the private client group of U.S. Bank in Helena, Montana.

“But from an economic perspective, as we start to look at the real economy, we will get one of the first ‘clean reads’ on employment,” he said, referring to a jobs report in which the impact of the year’s hurricanes is no longer a factor.

The number of Americans filing for unemployment benefits unexpectedly fell last week to 236,000, data showed on Thursday.

Fed funds futures prices show that investors expect the U.S. central bank to hike rates at its Dec. 12-13 meeting, with investors now focused on how many more hikes to expect in 2018.

“Speculators may think today is a good day to have dollar long positions, and buy the dollar on dips, ahead of the U.S. employment data, and with the Fed expected to hike next week,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman.

Against its Japanese counterpart, the dollar was 0.3 percent higher at 113.38 yen, trading at its highest levels since mid-November and up 1 percent for the week. It was still down 3.2 percent for the year.

Investors had a muted reaction to upbeat Japanese economic readings on Friday, including revised data that showed the economy grew an annualized 2.5 percent, twice as fast as originally estimated in the third quarter, thanks to big gains in capital expenditure.

But regional sentiment got a lift from stronger-than-expected Chinese trade data showing exports surged 12.3 percent in November from a year earlier, more than double the forecast, while imports climbed almost 18 percent.

Bitcoin was down 9.8 percent on the Bitstamp exchange at $14,965.00, after notching a record high of $16,666.66. It was up more than 30 percent for the week, as investors debated about whether the cryptocurrency was in a bubble that was about to burst.

Reporting by Lisa Twaronite

Thursday, 7 December 2017

Dollar hits two-week high on U.S. tax reform optimism, world shares climb


LONDON (Reuters) - The dollar rose to its highest level in two weeks on Thursday over optimism the United States would successfully push through tax reforms, while world shares rebounded after two straight days of losses.

The U.S. currency slipped against the safe-haven Japanese yen on Wednesday after U.S. President Donald Trump said he would recognise Jerusalem as the capital of Israel - a move that imperiled Middle East peace efforts and provoked widespread condemnation.

But amidst a broader climb in global stocks on Thursday, the greenback rose 0.3 percent against the yen to trade at 112.60 yen, and hit a two-week high against a basket of peers.

The MSCI World Index, which tracks shares in 47 countries, was up 0.1 percent.

Underpinning some of the dollar’s gains analysts said was some cautious optimism on progress over U.S. tax reforms.

U.S. Senate Republicans agreed to talks with the House of Representatives on sweeping tax legislation on Wednesday, amid early signs that lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline.

“The dollar is fighting back a little bit but there’s still some caution, as it could still be a few weeks until we know the outcome of the tax reform bill,” said Rabobank currency strategist Jane Foley, in London.

“The yen will be sensitive if geopolitical tensions rise again, and I think there’s an inevitability to that, so I don’t think there’s going to be too much upside for dollar/yen in this environment,” she added.

Upbeat U.S. private-sector employment data released on Wednesday also provided some support to the dollar. But strategists said the currency would trade in narrow ranges until the release of the closely watched non-farm payrolls report on Friday.

Bitcoin soared to a record high of more than $14,500, up almost 7 percent on the day and continuing a staggering surge from less than $1,000 at the beginning of the year.

European stock markets appeared to take their cues from a general recovery in tech stocks overnight in Asia and Wall Street.

The pan-European STOXX 600 was up 0.2 percent with tech stocks initially up 0.5 percent. Financials, industrials and healthcare shares also added points to the index.

“We have seen some aggressive moves in Asia, whereas Europe seems to be a bit more subdued,” said David Madden, analyst at CMC Markets in London.

“It’s almost like European markets look for an excuse to selloff but it takes them a lot to be convinced to actually push higher.”

Shares in the energy sector, which weighed on shares earlier in Wall Street and Asia, rose in Europe, as oil prices recovered from a big fall on Wednesday.

U.S. West Texas Intermediate crude futures traded at $56.13 per barrel in European trade, up 0.3 percent on the day.

Brent futures gained 0.4 percent to $61.45 per barrel.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent as some technology bellwethers rebounded, with Tencent rising over 3 percent and Alibaba more than 2 percent.

In Japan, the Nikkei jumped 1.5 percent, recouping much of its 2.0 percent loss the previous day, which was its biggest fall since late March.

The price of copper, seen as a barometer of global economic health because of its extensive industrial use, also fell sharply earlier this week, raising worries about the world growth outlook.

Copper traded at $6,576 a tonne, up 0.5 percent on the day and above a two-month low of $6,507.5 touched on Tuesday.

Reporting by Ritvik Carvalho

Dollar inches up, shakes off weakness vs yen, Bitcoin briefly tops $14,000


TOKYO (Reuters) - The dollar edged up against peers on Thursday, shaking off earlier losses versus the yen, supported by signs that investors’ risk appetites were improving again and by optimism on U.S. tax reforms.

The greenback was 0.1 percent higher at 112.380 yen after dropping by 0.25 percent overnight.

The dollar had slipped against the yen after President Donald Trump on Wednesday recognised Jerusalem as the capital of Israel, imperilling Middle East peace efforts and upsetting Washington’s friends and foes alike.

“The impact of the ‘risk off’ moves that weakened the dollar against the yen stemming from the Middle East developments appears to have been limited. It likely served as a pretext for speculators to cover some yen shorts,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

“We could still see participants try to sell the dollar on upcoming ‘risk off’ events. But the dollar is positioned to absorb much of the selling pressure, with many players poised to buy on dips,” he said.

Dollar/yen on Thursday rose in line with a surge in Tokyo shares, which had slumped the previous day on Middle East concerns.

But considering the Nikkei’s gains - the index was up more than 1 percent- the dollar’s rise versus the yen appeared limited, some observers noted.

"The decoupling that has begun taking place between equities and currencies is one of the key market themes of 2017," said Daisuke Karakama, chief market economist at Mizuho Bank.

The U.S. currency rose to a two-week high against a basket of six major currencies as optimism towards U.S. lawmakers’ making progress on tax legislation grew. Upbeat U.S. private-sector employment data released on Wednesday also provided support.

U.S. Senate Republicans agreed to talks with the House of Representatives on sweeping tax legislation on Wednesday, amid early signs that lawmakers could bridge their differences and agree on a final bill ahead of a self-imposed Dec. 22 deadline.

The dollar index was little changed at 93.543 after rising to 93.650 overnight, its highest since Nov. 22.

The euro was steady at $1.1803 after slipping 0.25 percent overnight, when it hit a two-week low of $1.1780.

Bitcoin briefly soared to a record high of $14,095.00, continuing its surge from below $1,000 at the beginning of the year, despite questions about the cryptocurrency’s real value and worries about a dangerous bubble.

Later, Bitcoin was down 0.25 percent at $13,590.01 at the Luxembourg-based Bitstamp exchange.

The Canadian dollar nursed deep losses suffered overnight after the Bank of Canada held interest rates steady and showed enough caution to dampen expectations for a hike early next year.

The loonie was effectively flat at C$0.9895 per dollar after retreating 0.8 percent the previous day.

The Australian dollar, hit the previous day by weaker than expected local gross domestic product numbers, extended losses against the buoyant dollar.

The Aussie was 0.2 percent lower at $0.7548.

The New Zealand dollar held up for a while after showed that housing prices in the country jumped 6.4 percent in November.

But the kiwi last traded at $0.6859, down 0.3 percent on the day.

Sterling was down 0.1 percent at $1.3383 after touching a one-week low of $1.3358 overnight amid growing concerns that a Brexit deal may be unlikely before next week’s key EU summit. The immediate focus for the pound was on British Prime Minister Theresa May, who is expected to propose suggestions to Brexit negotiators to try to break an impasse on the issue of the Irish border.

Reporting by Shinichi Saoshiro

Wednesday, 6 December 2017

Brexit deadlock fears push sterling to 1-week lows


LONDON (Reuters) - Sterling fell to a one-week low in volatile trading on Wednesday after the Sun newspaper’s political editor said on Twitter that a Brexit deal is unlikely this week.

The Sun’s political editor Tom Newton Dunn, citing a source in the Democratic Unionist Party, said there would be no Brexit deal done this week and hopes are fading fast in London that Prime Minister Theresa May will go back to Brussels on Thursday.

The Northern Irish party that props up May’s minority Conservative government rejected this week a proposal on the post-Brexit border with Ireland that could have helped move forward negations on Britain’s exit from the European Union.

Market bets on sterling had shifted considerably in recent weeks towards betting on a breakthrough in Brexit negotiations with sterling rising to more than a two-month high last Friday.

Though the tentative deal was rejected on Monday, some market strategists such as Nomura believe there is a 70 percent probability of a breakthrough in talks, though some traders say the latest headlines reduce those expectations even further.

“This political ping-pong battle is really hurting investor sentiment towards sterling,” said Neil Jones, Mizuho’s head of currency sales for hedge funds in London.

Failure could mean a delay until February, adding to the risk of businesses scaling back investment plans in Britain as uncertainty clouds the outlook beyond Brexit in March 2019.

The British pound which was already down on the day, extended its drop to stand 0.6 percent weaker at $1.3358 on the day. Against the euro, sterling was down half a percent on the day at 88.33 pence.

High-frequency indicators of market positioning and options market hedging have also shifted markedly in recent weeks to show some optimism emerging on sterling, with the British currency hitting a two-month high last week.

But reflecting the growing pessimism about a conclusive breakthrough in talks before a crucial EU summit next week, some traders reported a pickup in activity in selling short-dated calls on sterling around the 2017 highs of $1.3653, hit in mid-September.

Reference: Saikat Chatterjee

Bitcoin dips below $11,000 after setting another record high


LONDON (Reuters) - Bitcoin dipped back under $11,000 (8,169.93 pounds)on Monday, coming off a record high just shy of $11,800 it hit on Sunday after a surge from less than $1,000 at the start of the year.

The cryptocurrency, which trades 24 hours a day and seven days a week, climbed as high as $11,799.99 on the Luxembourg-based Bitstamp exchange at around 2100 GMT on Sunday.

It was not clear what caused the move higher over the weekend other than new investors joining the upstart market, with so-called wallet-providers reporting record numbers of sign-ups over the past week.

Analysts said Friday’s announcement by the main U.S. derivatives regulator that it would allow CME Group Inc and CBOE Global Markets to list bitcoin futures contracts had turned sentiment positive after a choppy week.

“The price rises are triggered by continued media interest driven by the expectation of futures trading on CME,” Charles Hayter, founder of data analysis website Cryptocompare, said.

By 1310 GMT on Monday, bitcoin had slipped back to around $10,919, down 2 percent on the day but still up more than 100 percent over the past three weeks. Sunday’s high marked a 1,121 percent increase since the start of the year.

Think Markets analyst Naeem Aslam said reports Britain wants to increase regulation of bitcoin and other digital currencies by expanding the reach of European Union anti-money-laundering rules that force traders to disclose their identities and report suspicious activity, had knocked bitcoin off its highs.

But others said greater regulatory scrutiny would help.

“If anything, regulation will only increase bitcoin’s rate of growth as regulation lends credibility and engenders trust,” Nicholas Gregory, CEO of London-based cryptocurrency firm CommerceBlock, said.

Sunday’s record high for bitcoin came as Venezuelan President Nicolas Maduro announced the launch of the “petro”, which he said would be a cryptocurrency backed by oil reserves, to shore up a collapsed economy.

Opposition leaders said the digital currency would need congressional approval and some cast doubt on whether it would ever see the light of day in the midst of turmoil.

Reporting by Jemima Kelly

Tuesday, 5 December 2017

Dollar steadies after Monday's bounce; sterling crumbles


LONDON (Reuters) - The dollar steadied on Tuesday after posting its biggest daily rise in a week in the previous session as caution set in before the U.S. tax bill becomes reality, with sterling leading early losers.

“With regards to the dollar, everything is already there in the price and we need to see further movement on the tax bill or strong data to push it higher,” said Manuel Oliveri, an FX strategist at Credit Agricole in London.

The Senate must now reconcile its version of the bill with legislation passed by the House of Representatives.

Against a basket of six major currencies, the dollar edged 0.1 percent higher at 93.278 after gaining about 0.3 percent the previous day, its biggest daily rise since Nov.

Sterling dipped more than half a percent GBP=D3 in early trades as disappointment over a Brexit deal prompted investors to cut their long bets. The British currency fell 0.8 percent to $1.3375, extending its decline from Asia.

Prime Minister Theresa May failed to clinch a deal on Monday to open talks on post-Brexit free trade with the European Union after a tentative deal with Dublin to keep EU rules in Northern Ireland angered her allies in Belfast.

Commerzbank strategists said Monday’s volatility in sterling showed how difficult the Brexit negotiations remain.

“As soon as the second round of the negotiations starts, which will be dealing with the trade agreement, things are going to heat up further as every single one of the 27 EU countries had the right to veto the agreement and can therefore block any progress,” they said.

The Australian dollar led early gainers after the The Australian dollar was 0.6 percent higher at $0.7639 AUD=D4 after data showed strong retail sales in October after months of lukewarm demand.

Reporting by Saikat Chatterjee