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Monday, 14 October 2019

FOREX-Dollar holds near 2-1/2-mth high vs yen on trade progress; sterling firm


SYDNEY, Oct 14 (Reuters) - The dollar held near a 2-1/2-month high against the yen on Monday on signs of progress in U.S.-China trade talks, while sterling’s rally ran out of steam after touching a 3-month peak on hopes for an orderly British exit from the European Union.

On Friday, the dollar strengthened against the safe-haven yen to as high as 108.63 yen, its highest since August 1, before U.S. President Donald Trump said the United States and China had reached a ‘Phase 1’ trade deal.

It pared those gains after Trump announced the agreement, covering agriculture, currency and some aspects of intellectual property protections.

In Asian trade on Monday, the dollar inched down to 108.34 yen, while the euro stood at $1.1034 versus the greenback, off Friday’s three-week high of $1.10625.

With Tokyo’s market closed for a public holiday and the United States also seeing partial market closures for Columbus Day, trading volumes would likely remain lighter than usual.

Analysts said the further gains in the dollar/yen may be limited because the partial deal between the world’s two largest economies appeared to lack substance with limited progress on structural issues such as technology transfers.

The trade deal “looks more symbolic than substantial, and might be better described as simply an ‘interim trade war truce,’” said Ray Attrill, head of FX strategy at National Australia Bank.

“This Phase 1 agreement, if inked, does little to immediately brighten the outlook for global trade and growth. While it shouldn’t prevent the Fed from agreeing to cut rates by another quarter point on Oct. 30, it doesn’t provide a firm pretext for significant or sustained U.S. dollar depreciation.”

The deal represents the biggest step between the United States and China in a 15-month trade dispute. Friday’s announcement did not include many details and Trump said it could take up to five weeks to get a pact written. He acknowledged the agreement could fall apart during that period, though he expressed confidence that it would not.

STERLING
The British pound surged on Friday to as high as $1.2708 , its strongest since July 1, and a five-month peak of 86.955 pence per euro, on optimism about orderly Brexit.

On Monday, cable’s rally ran out of steam and was last traded at $1.2610 in Asia, 0.28% lower on the day.

The EU agreed on Friday to hold another round of intense negotiations with London in a bid to break the deadlock and secure a deal before the Oct. 31 deadline.

EU negotiator Michel Barnier and his British counterpart Stephen Barclay earlier held what both sides called a “constructive” meeting in Brussels. The British and Irish prime ministers said on Thursday they had found “a pathway” to a possible deal, and by Friday some officials were expressing guarded optimism.

On Sunday, British Prime Minister Boris Johnson told his cabinet a last-minute deal was still possible as the two sides pressed on with intensive talks to try to avoid a disorderly Brexit on Oct. 31.

Britain said there would be more talks on Monday, with Johnson hoping a deal will be agreed in time for EU leaders to approve it at a summit in Brussels on Thursday and Friday this week.

But he will still have to convince a deeply divided British parliament to ratify the agreement, while the European Commission said “a lot of work remains to be done” in a statement issued late on Sunday.

“Brexit talks between the UK and the EU will continue today. With the EU Council meeting to take place on Oct. 17-18, Brexit headlines will be the main focus for this week,” said Daria Parkhomenko, FX strategist at RBC Capital Markets.

Reference: Tomo Uetake


GENEVA (Reuters) - The World Trade Organization (WTO) formally authorized the United States on Monday to impose tariffs on up to $7.5 billion of imports of EU goods after a decision earlier this month by a WTO arbitrator over subsidies to planemaker Airbus (AIR.PA).

The WTO’s dispute settlement body, made up of representatives from its 164 members, cleared Washington to take countermeasures against the European Union and Airbus-producing countries Britain, France, Germany and Spain.

The authorization was a formality. It would only have been denied if all WTO members present voted against.

Reporting by Stephanie Nebehay


(Reuters) - European shares opened lower on Monday, as optimism on the progress made in the Sino-U.S. trade talks was offset by growth fears following weak data from Beijing and fresh Brexit uncertainty.

The pan-European STOXX 600 was down 0.7% at 7:12 GMT after recording its best session since January on hopes of a trade deal and a Brexit agreement.



Late on Friday, United States and China outlined the first phase of a trade deal and suspended this week’s scheduled U.S. tariff hikes. But existing tariffs remain in place and officials on both sides said much more work is needed before an accord could be agreed.

In the latest sign of weakness in the Chinese economy, data showed a further contraction in exports and imports in September.

Germany's DAX .GDAXI, dominated by firms with exposure to China, slipped 0.5%. All country indexes were in the red.

Britain's domestically-focused FTSE mid-caps .FTMC, typically sensitive to Brexit news, gave up 1.3% after Friday's more than 4% surge.

Swiss pharmaceutical companies Roche Holding AG and Novartis AG dropped more than 1% each, and were the biggest drags on the main index, after a report that the United States was considering tariffs on Swiss pharmaceutical products.


Reporting by Medha Singh

Asian shares get trade lift, let down by China data


SYDNEY (Reuters) - Asian share markets firmed on Monday as signs of progress in the Sino-U.S. trade standoff whetted risk appetites, though investors remained wary of the damage already done to the global ceremony at the Tokyo Stock Exchange (TSE), held to wish for the success of Japan's stock market, in Tokyo, Japan.

Figures from China underlined the pain felt as dollar-denominated exports and imports both fell by more than expected in September.

Liquidity was also lacking with Japan off and a partial market holiday in the United States for Columbus Day. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.1% in light trade.

Australia's main index tacked on 0.6% and South Korea .KS11 rose 1.4%. Shanghai blue chips .CSI300 added 1.4%.

Nikkei futures were trading at 22,080 NKc1 compared with a Friday close of 21,798 in the Nikkei cash index. E-Mini futures for the S&P 500 ESc1 nudged up 0.2% after jumping on Friday, while EUROSTOXX futures were little changed.

Sentiment had been boosted when U.S. President Donald Trump outlined the first phase of a deal to end a trade war with China and suspended a threatened tariff hike, though officials on both sides said much more work needed to be done.

The emerging deal, covering agriculture, currency and some aspects of intellectual property protections, would represent the biggest step by the two countries in 15 months.

Analysts, however, advised caution.

“We have seen a truce established, and then broken, before,” said Tai Hui, chief market strategist for Asia at JPMorgan Asset Management.

“The threat to global growth is weak corporate capex, and potentially spilling over into the consumer sector,” Hui added. “CEOs are not going to restart investing again merely because of the latest round of agreement between the two sides.”

The drag from the trade war was a major reason Singapore’s central bank eased monetary policy on Monday for the first time in three years as data showed the city-state’s economy had only narrowly dodged recession.


BIG WEEK FOR BREXIT
The progress on trade was still enough to slug safe-haven bonds with yields on U.S. 10-year Treasury notes climbing 23 basis points last week to stand at 1.74%.

The yield curve also steepened as short-term rates were held down by news the Fed would start buying about $60 billion per month in Treasury bills to ensure “ample reserves” in the banking system.

The rally in risk assets had seen the yen ease across the board, leaving the dollar holding at 108.32 JPY= on Monday after hitting a 10-week top around 108.61 on Friday.

The dollar fared less well elsewhere, partly due to a jump in sterling, and was last at 98.435 against a basket of currencies .DXY after losing 0.5% last week.

The dollar also slipped 0.5% on the Chinese yuan to stand at 7.0500 CNY=.

The pound was trading cautiously at $1.2614 GBP= having surged to a 15-week high around $1.2705 on Friday on optimism Britain could reach a deal on Brexit with the European Union.

However, officials from Downing Street and the EU said on Sunday a lot more work would be needed to secure an agreement on Britain’s departure from the bloc.

The two sides will hold more talks on Monday ahead of a summit of EU leaders in Brussels on Thursday and Friday.

The general improvement in risk sentiment saw spot gold ease another 0.2% to $1,486.99 per ounce XAU=.

Oil prices pared gains made on Friday when reports surfaced that an Iranian state-owned oil tanker had been attacked in the Red Sea.

Investors were also anxiously watching Turkey’s incursion into Syria as the White House threatened to impose heavy sanctions on Ankara.

Brent crude futures eased 26 cents at $60.25, while U.S. crude lost 25 cents to $54.45 a barrel.


Reference: Wayne Cole

Friday, 11 October 2019

Aussie dollar up on hopes of U.S.-China trade deal, sterling holds gains


LONDON (Reuters) - The Australian dollar and China’s yuan, often seen as barometers of investor risk appetite, rose on Friday on hopes of progress in U.S.-China trade talks, while optimistic comments from Ireland on Brexit boosted the British pound.


Top U.S. and Chinese negotiators wrapped up their first day of trade talks on Thursday, with U.S. President Donald Trump welcoming what he called a “very, very good negotiation with China”.

Business groups expressed optimism the two sides might be able to de-escalate their trade war, which has sapped economic growth around the globe.

“Investors are ready to celebrate any form of a U.S.-China trade deal, even a limited one,” said FXTM analyst Han Tan.

The Australian dollar was up 0.2% at 0.6776 per U.S. dollar AUD=D3 after rising to a two-week high of 0.6782 overnight.

China's yuan was stable after hitting a three-week high in the Asian trading session of 7.0890 per dollar CNH=EBS.

The safe-haven yen JPY=EBS on the other hand slipped to 108.13 per dollar, its weakest since Oct. 1, as investors' risk appetite improved.


The euro was up slightly at $1.1018 EUR=EBS, not far from the three-week high it reached on Thursday against the dollar, which usually appreciates as a safe-haven currency when trade relationships worsen.

Sterling was up marginally at $1.2455 GBP=D3, just under a two-week high it hit after rising 2% overnight - its largest daily percentage gain in seven months, driven by hopes for a Brexit resolution. Euro/sterling was little changed at 88.445 pence EURGBP=D3.

Irish Prime Minister Leo Varadkar said on Thursday a Brexit deal could be clinched by the end of October to allow the United Kingdom to leave the European Union, after what he called a very positive meeting with Britain’s Boris Johnson.

Marshall Gittler, chief strategist at ACLS Global, said he found it hard to change his pessimistic view on the pound, “especially since we don’t know what the two sides actually discussed.”

“I’m also worried that anything that’s acceptable to Ireland might prove unacceptable to the rest of the UK Parliament, and enough MPs might be willing to choose national suicide rather than accept the unacceptable. I will therefore retain my negative bias for now, but recommend watching the situation closely,” Glitter said.

Elsewhere, the Swedish crown, which has been beaten up by the prospects of dismal global economic growth as result of trade tensions, got pushed up to a four-day high of 10.8180 against the euro, though its long-term weak trend remains unbroken for now.

The Norwegian crown was up 0.2% at 10.0280 against the common currency.

Reporting by Olga Cotaga

For a few dollars more: global funds take on FX risk


LONDON/TOKYO/NEW YORK (Reuters) - Some European and Japanese bond investors are taking on more currency risk by buying dollar debt without protecting themselves against potentially devastating exchange rate swings as they seek ways to compensate for sub-zero yields at home.


A fund manager in Germany can buy 10-year U.S. Treasuries that offer minimal credit risk at yields of up to 1.6%, more than 2 percentage points more than for German Bunds.

But that juicier yield is available only if she eschews expensive currency hedging that could wipe out that whole premium — a vulnerable position that funds have traditionally avoided for fear of adverse exchange rate swings.

Hedging dollar exposure is expensive — at current prices, the German investor’s 2.2% yield pick up on 10-year Treasuries would become a 0.3% loss after hedging.

With some 40% of non-U.S. debt — about $15 trillion — now yielding less than zero, however, it’s a risk that funds —especially those with obligations to insurance policyholders and pensioners — seem prepared to take.

“For fixed income investors, the normal habit is to hedge currency risk, but this year we’ve seen a tendency to hedge less,” said Claire Dissaux, head of global strategy at fund Millennium Global, which helps clients manage FX exposures.

“If you are a euro zone investor, it’s expensive to hedge (dollar exposure) so there has been a temptation to not hedge. And if you didn’t hedge you will have done well.”



Hedges are usually implemented via currency forwards that specify the rate at which a currency may be exchanged over the contract period — usually three or six months. That effectively shields the fund if the foreign currency depreciates against its base currency.

Funds rarely disclose their hedging strategies but interviews with money managers and advisors, data on hedged and unhedged bond returns, and exchange rate moves imply the ratio of unhedged debt holdings in portfolios has been rising.

A survey of corporate clients by U.S. bank Wells Fargo showed 35% of FX exposure was hedged in 2018, versus 47% in 2016, indicating a broader decline in hedging appetite.

Japan’s $1.5 trillion Government Pension Investment Fund (GPIF) recently decided to reclassify FX-hedged foreign debt as domestic, giving itself leeway to buy more foreign debt — including “scope to increase buying of FX-unhedged foreign bonds”, Barclays analysts wrote.

A yen-based investor currently earns a 196 bp yield pickup on 10-year Treasuries — but a 0.5% loss after hedging costs.


Japanese funds bought 2.57 trillion yen ($23.76 billion) of U.S. bonds in July, official data shows, the most in a month since July 2016.

With little reliable data, investors often use exchange rate moves to draw conclusions on hedge ratios. Because hedging effectively offsets the purchase of an FX asset by selling the same currency in forward markets, a currency may strengthen more if it is not being sold for hedging purposes.

Dissaux said the U.S. dollar’s resilience in the face of interest rate cuts and slowing growth is partly due to investors not hedging their dollar exposure.

Tohru Sasaki, head of Japan rates and FX research at JPMorgan, says the dollar-yen exchange rate has a fairly stable correlation to the yield gap between 10-year Treasuries and Japanese government bonds.

“But in September the dollar has shifted about one yen above the usual correlation and it rose further in the last couple of weeks, which suggests unusual factors are driving up dollar/yen,” he added.

“Unhedged foreign bond buying by Japanese investors is the most likely culprit.”



TRIMMING HEDGES?
The shift is important because bond investors are a risk-averse bunch. Pension and insurance funds desire slim but steady returns — and holding bonds unhedged can jeopardize that.


When U.S. bonds yielded around 5% and the Treasury yield curve was steep, hedging costs ate less into returns.

But a flattening of the curve since 2016, so that long-maturity debt yields barely more than short-dated bonds, has crushed post-hedging yields, said Ugo Lancioni, managing director for global fixed income at Neuberger Berman.


“(Curve flattening) has forced Japanese and other investors to buy bonds on an increasingly unhedged basis ... if you were to hedge your FX risk completely, what you earn on the long end you can lose by hedging on the short end,” Lancioni said.

Although it is unusual for hedging costs to eliminate the yield advantage of a foreign security, the gap between U.S. interest rates and those in Europe and Japan — on which the cost of forwards is based — mean no change is likely soon.

Collapsing currency volatility is another factor. With big FX swings now relatively rare, it’s become less risky for bond investors to run unhedged portfolios.

“The Fed has not pushed the button (on U.S. interest rates) and said we’re going to zero, like in Europe and Japan. So if you’re looking to take on dollar exposure, it’s probably still to your advantage to enjoy the full interest rate differential,” said Tim Horan, chief investment officer for fixed income at Chilton Trust in New York.

Some would call the strategy reckless. Dollar positioning, valuations and the low-volatility backdrop have reached extremes, meaning any reversal could be bloody. The dollar meanwhile faces headwinds from Fed rate cuts and President Donald Trump, who blames currency strength for U.S. trade woes.

“By leaving all of your global bonds unhedged, currency risk will dominate in your portfolio ... You may lose the integrity of a fixed income portfolio,” said Ben Popatlal, multi-asset strategist at Schroders.

Do clients usually know what currency risks they face? Popatlal said active managers tend to have discretion over portfolios, with clients kept informed of strategy shifts.

“Our neutral starting point is to be 100% hedged and then take active decisions away from that, such that every currency earns its place in the portfolio,” he added.

Reference: Saikat Chatterjee, Hideyuki Sano, Gertrude Chavez-Dreyfuss

Asian shares jump on 'very good' trade talks, pound edges up



SHANGHAI (Reuters) - Asian shares jumped on Friday after U.S. President Donald Trump said he would meet with China’s top trade negotiator, stirring hopes for an agreement, while sterling resumed its climb amid optimism over a possible Brexit deal.


European shares were mostly expected to continue the rally. Pan-region Euro Stoxx 50 futures rose 0.26% to 3,494 and German DAX futures gained 0.29% to 12,209. FTSE futures were down 0.43% at 7,142.5 early in the day.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 1.3% on Friday afternoon in Asia. S&P e-mini futures added 0.45%.

Australian shares climbed 0.9%, while Japan's Nikkei stock index .N225 gained 1.1%. Chinese blue-chips .CSI300 were up nearly 1% after a slow start.


The bullish market mood came after a first day of trade talks between top U.S. and Chinese negotiators, characterized by Trump as “very, very good.”

A White House official said the talks had gone “probably better than expected” and a U.S. Chamber of Commerce official briefed by both sides raised the possibility of a currency agreement this week.

Even before Trump's comments, hopes for an agreement helped to lift U.S. markets. The Dow Jones Industrial Average .DJI added 0.57%, the S&P 500 .SPX gained 0.64% and the Nasdaq Composite  rose 0.6%.

But while optimism around trade talks helped to drive a “classic risk-on session” overnight, the lack of runaway enthusiasm reflected broader investor caution, said Matt Simpson, senior market analyst at GAIN Capital in Singapore. “We know that it’s just a few words from Trump.”

Further positive developments in trade talks could boost markets on Monday, but low expectations for a deal mean that the lack of an agreement would not “necessarily (be) the end of the world for risk,” he added.

Analysts at National Australia Bank said freezing tariffs at current levels would be unlikely to reverse the trade-driven slowdown in economic growth.

“The uncertainty around unresolved structural issues such as IP (intellectual property) theft and subsidies to state owned enterprises are likely to remain deterrents for a pick-up in much needed capital expenditure. On this score details on a potential currency pact will be important,” they said in a morning note.

On Friday, the dollar was little changed against the yen at 107.98 JPY=, while the euro gained 0.1% to buy $1.1017. The pound, which had earlier given up some of the previous day's gains, turned higher, adding 0.1% to $1.2455.

The dollar index .DXY, which tracks the greenback against a basket of six major rivals, was down at 98.636 after posting its biggest daily drop in five weeks on waning safe-haven demand for the currency.

The British pound had jumped nearly 2% on Thursday, its biggest daily gain since March, after Irish Prime Minister Leo Varadkar said a Brexit deal could be clinched by the end of October after what he called a very positive meeting with his British counterpart, Boris Johnson.

The move away from safe havens also lifted the yield on benchmark 10-year Treasury notes to 1.6699% compared with a U.S. close of 1.656% on Thursday. Yields rose across the curve, with two-year notes US2YT=RR yielding 1.5486% compared with a U.S. close of 1.53%.

In commodity markets, oil prices extended gains on news of an explosion on an Iranian tanker in the Red Sea. Prices had climbed earlier after the head of OPEC said the organization could take action to balance oil markets, including a deeper cut in oil supplies, and amid hopes that progress toward ending the U.S.-China trade war could help to revive economic growth and lift fuel consumption.

Global benchmark Brent crude was up around 2% at $60.29 per barrel.

Gold, which had found its appeal tarnished by rising risk appetite, recovered some ground, with spot gold XAU= trading up 0.1% at $1,495.63 per ounce.

Reference: Andrew Galbraith

Thursday, 10 October 2019

Dollar dips, yuan rebounds as trade talk views twist and turn


SINGAPORE (Reuters) - The dollar eased against major currencies on Thursday and the yuan firmed as global markets remained fixated on Sino-U.S. trade talks in Washington, amid mixed signals over whether the two sides are making any progress in resolving the dispute.


Investors turned from downcast to bullish after Bloomberg reported the United States is weighing a currency pact with China as part of a partial deal that could see a planned tariff hike next week being suspended.

The dollar dropped more than 0.2% on the euro and the pound, and was 0.1% weaker against a basket of major currencies .DXY at 98.995. The euro rose to $1.0987.

Highlighting rapidly shifts in trade sentiment, China's yuan, CNH= the most sensitive currency to the trade war, bounced to a two-week high from a month-low in offshore trade. By midday, it had firmed 0.3% and pulled the trade-exposed Australian and New Zealand dollars up with it.

The safe-haven Japanese yen jumped after a report in the South China Morning Post suggesting U.S.-China talks in Washington were headed for stalemate. But it later gave up its gains to trade flat at 107.46 JPY= per dollar.

“There are many headlines flying about, some negative, and some positive,” said Stuart Oakley, global head of flow FX at Nomura in Singapore.

“The USD/CNY fix (by China’s central bank) will be key to watch over the next 4-5 sessions. It’s been pegged around 7.0730 for several weeks. A move away from that level will give us a clear signal as to how the trade negotiations have gone.”

The United States is set to hike the tariff rate on $250 billion worth of Chinese goods to 30% from 25% next Tuesday.


Markets have gyrated for weeks as hopes for a de-escalation or breakthrough in the trade talks have waxed and waned, even as data pointed to further weakening in global growth.

Safe-haven currencies rallied after the SCMP, citing unnamed sources familiar with the discussions, said no progress was made on key issues and China’s lead negotiator, Vice Premier Liu He, planned leaving Washington a day early.

But a White House spokesman told CNBC he was unaware of any plans for Liu to leave early.

Then sentiment turned positive, and the yen began falling, after the Bloomberg report and a New York Times story suggesting a possible reprieve on U.S. restrictions on Chinese technology giant Huawei.

Liu is scheduled to meet U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin later on Thursday.

“The burden of expectations and back-forth news on trade is likely to keep market participants anxious and the price action noisy as the trade talks get underway,” Citi analysts said in a note.

“The risk seems skewed towards a higher USD/CNH on the other side of talks, in our view.”


The Australian dollar lifted from a week low to $0.6747 AUD= and the New Zealand dollar rose to $0.6313.

The pound climbed to $1.2228, though it remained close to a one-month low amid uncertainty over Britain’s exit from the European Union. Hopes for progress on a key sticking point were dashed overnight.

A slew of British data, including GDP estimates and monthly services and production figures are due at 0830 GMT.

Reference: Tom Westbrook

Global stocks recover but disquiet over trade talks lingers


TOKYO (Reuters) - Global stocks recouped early losses as news reports raised hopes that the United States and China would settle some economic disputes, but investors were kept on edge by an earlier report that trade talks due to begin on Thursday could be cut short.


U.S. S&P500 mini futures traded down 0.1%, with a big part of early losses cut after the New York Times reported Washington will soon issue licenses allowing some U.S. firms to supply non-sensitive goods to China’s Huawei Technologies.

Another report, from Bloomberg, that the White House is looking at rolling out a previously agreed currency pact with China, also raised hopes of a partial deal and helped to lift risk assets.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.24% while Japan's Nikkei .N225 rose 0.34%. Shanghai shares .SSEC also rose 0.49%.

European stocks are on course to open higher, with pan-European Euro Stoxx 50 futures rising 0.17% in Asian trade.


Earlier U.S. stock futures slumped as much as 1.3%, as the South China Morning Post (SCMP) reported the Chinese delegation, headed by Vice Premier Liu He, was planning to leave Washington after just a day of minister-level meetings, instead of as originally planned on Friday.

Top negotiators from the two countries were scheduled to meet in Washington on Thursday and Friday to try to end a bruising 15-month-old trade war.

Though there were some conflicting reports on whether Liu’s plans have been changed, many market players remained cautious.

Without significant progress, U.S. President Donald Trump is set to hike the tariff rate on $250 billion worth of Chinese goods to 30% from 25% next Tuesday.

“Barring any surprise today, it looks like their talk is breaking down. The tariff will be hiked. The situation looks dire,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

China is unlikely to be willing to make an easy compromise with a U.S. president who seems increasingly vulnerable to domestic political pressure as opposition Democrats seek to impeach him, analysts also said.

U.S. Democratic presidential contender Joe Biden called for the impeachment of Trump for the first time in a deepening partisan fight over a congressional investigation of the Republican president.

“Mr. Trump’s recent impeachment risk has turned the timetable against him, Chi Lo, senior economist at BNP Paribas Asset in Hong Kong, wrote in a report to clients.

“While China is not eager to reach a trade deal, Mr. Trump is, however, under pressure to get at least a temporary deal done to help his re-election bid before his impeachment risk rises and the U.S. economy weakens further,” Chi said.

In the currency market, the offshore yuan reversed early losses to gain 0.3% to trade at 7.1148 per dollar CNH= following the Bloomberg report about a U.S.-China currency pact.

“The yuan rose on expectations of a currency pact. If there will be such an agreement, the yuan could rise to 6.9 to the dollar. But the trouble is, no one knows what’s in that pact that they had reportedly agreed in February,” said Ei Kaku, currency strategist at Nomura Securities.

In the onshore trade, the renminbi gained 0.25% to 7.1130.


The safe haven yen and Swiss franc gave up most of their early gains.

The yen last stood almost flat at 107.56 JPY= while the Swiss franc traded at 0.9946 franc per dollar CHF=, about 0.1% higher than late U.S. levels. The euro firmed slightly to $1.0986 EUR=.

Sterling wobbled near one-month lows against the dollar and the euro as hopes of a break-through on a key sticking point for a Brexit deal were dashed.

Northern Ireland’s Democratic Unionist Party, a coalition partner in the British government, said it would emphatically oppose a reported European Union concession on the Irish backstop under any Brexit deal.

The pound last stood at $1.2227 GBP=D4, up 0.2% for the day but still not far from Tuesday's five-week low of $1.2196.

The Turkish lira retreated to six-week lows as Turkish troops, together with their Syrian rebel allies, attacked Kurdish militia in northeast Syria, opening a fresh chapter in Syria’s eight-year-old civil war.

The lira fell to 5.8777 per dollar, the lowest since its flash crash on Aug. 26.

U.S. Treasuries yield slipped back after having risen to 1.594% on Wednesday, pressured partly by this week’s heavy bond supply.

The 10-year Treasuries yield dipped to one basis point to 1.577%

The price of front-end Fed funds rate futures gained on increasing bets on more rate cuts by the U.S. Federal Reserve.

The November contract FFX9 is almost fully pricing in a 0.25 percentage point cut on Oct. 30.

Oil prices also slid on wariness over U.S.-China talks. Brent crude futures fell 0.15% to $58.23 a barrel while U.S. West Texas Intermediate (WTI) crude lost 0.11% to $52.53 per barrel.


Reference: Hideyuki Sano