Dollar idles after tumble from 19-month peak; Aussie firm before RBA

TOKYO - The US dollar nursed its wounds on Tuesday following its biggest drop in nearly three weeks against major peers, as Federal Reserve policymakers allayed investor fears of a very rapid tightening of monetary policy.

The Australian dollar remained firm after its biggest jump in eight months overnight ahead of a Reserve Bank of Australia policy decision later on Tuesday, with expectation building that Governor Philip Lowe will capitulate on his prior conviction that an interest rate rise this year was unlikely.

The dollar index, which measures the greenback against six rivals, ticked 0.05 percent higher to 96.715, barely making a dent in Monday's 0.59 percent tumble. It was at an almost 19-month high of 97.441 at the end of last week, as investors pondered chances the Fed could raise rates by 50 basis points in March.

Trading in Asian hours may be subdued with several markets on holiday for the Lunar New Year.

A chorus of Fed officials on Monday backed a lift-off in rates in March, but spoke cautiously about what might follow.

Money markets price in a quarter-point rise for March, and four more by year-end.

"Recent Fed remarks appeared to push back on the odds of a 50bp rate hike in March," putting the focus on economic data this week for clues on the pace of policy tightening, including the closely watched monthly payrolls report on Friday, TD Securities strategists wrote in a note.

US payrolls are forecast to show a gain of 153,000 jobs for January, down from 199,000 in December, with the unemployment rate holding steady at 3.9 percent, according to a Reuters poll.

Meanwhile, the Aussie was little changed at $0.7067 after soaring 1.06 percent on Monday, its biggest gain since early June.

Australian inflation is surging at the fastest annual pace since 2014, suggesting price pressures are not as benign and transitory as policymakers thought they would be.

"It is impractical and unlikely the RBA can continue to hold a dovish stance," the TD Securities strategists wrote, predicting a hike in August or earlier.

A Reuters poll of economists puts the odds of a first hike in November.

The Bank of England holds its policy meeting on Thursday, with a Reuters poll predicting a second rate hike in less than two months after UK inflation jumped to its highest in nearly 30 years.

The European Central Bank also meets on Thursday. While no policy change is expected, analysts said the Fed's looming rate hikes will narrow the ECB's window for action.

The euro slipped 0.11 percent to $1.12235, following a 0.80 percent jump on Monday.

Sterling was flat at $1.34385 after gaining 0.33 percent in the previous session.

The greenback was little changed at 115.125 yen.

(Editing by Jacqueline Wong)

-reuters

Asian markets rally, yuan edges up after US gains

Asian markets rose on Monday after a healthy lead from Wall Street as positive US jobs data trumped fresh trade war threats, while the yuan extended a recovery after the Chinese central bank moved to support the unit.

Hong Kong led gains as the week got off to an upbeat start, with dealers tracking their New York and European counterparts following recent painful losses.

Data on Friday showed that while the US economy saw a slowdown in jobs creation in July, the pace of hiring remained strong over the past three months.


The report also showed wage growth remained tepid, helping temper worries about an overheating economy.

The result provided some much-needed cheer to markets, which managed to brush off a warning from Beijing that it would impose new tariffs on $60 billion worth of US goods if Washington pushes ahead with levies on $200 billion of Chinese imports.


Despite reports that unofficial talks have been held between the two sides, trade tensions continue to rise with a top White House advisor calling China a bad bet and saying its economy — the world’s second biggest — was struggling.

Still, equity traders were in a buying mood Monday. Hong Kong piled on more than one percent while Shanghai added 0.2 percent and Tokyo went into the break 0.5 percent higher.

Sydney rose 0.7 percent, Singapore jumped more than one percent and Taipei was 0.3 percent stronger. Jakarta climbed 0.7 percent despite an earthquake that rattled the island of Lombok, killing dozens of people.

– Pound struggles –
Support also came from the People’s Bank of China decision late Friday to unveil measures making it harder to bet against the yuan, which has suffered steep losses the past two months.

The currency, which is around lows not seen for more than a year, bounced back soon after the announcement and it extended the gains Monday.

The bank’s measure was similar to a move when the currency went into freefall following a devaluation three years ago that rattled global markets.

However, analysts were lukewarm on the move with some saying it indicated Chinese leaders were growing increasingly worried about the unit’s depreciation.

“The yuan kept falling when China did this last time in 2015, so I don’t think the PBoC’s move will significantly change the market tone,” Hao Hong, chief strategist at Bocom International Holdings, told Bloomberg News.

“No matter what happened over the weekend, the weakness in Chinese stocks may continue. The trade war is nowhere near its end and China’s economy is slowing down, so why would the trend reverse?”

In another forex trading, the pound was fighting to recover from Friday’s sell-off that came after Bank of England boss Mark Carney warned the chances of leaving the EU without a proper deal was “uncomfortably high” and “highly undesirable”.

While he said such a situation was still “unlikely” compared with other outcomes, the comments come as leaders on both sides are struggling to reach a compromise with just months to go before Britain is due to formally exit.

The remarks sent sterling tumbling, with an interest rate hike last week unable to provide any support.

Key figures at 0300 GMT

Tokyo – Nikkei 225: UP 0.5 percent at 22,626.56 (break)

Hong Kong – Hang Seng: UP 1.2 percent at 28,008.62

Shanghai – Composite: UP 0.2 percent at 2,745.04

Euro/dollar: DOWN at $1.1563 from $1.1567 at 2100 GMT on Friday

Pound/dollar: DOWN at $1.2996 from $1.3005

Dollar/yen: DOWN at 111.20 yen from 111.25 yen

Oil – West Texas Intermediate: UP 18 cents at $68.67

Oil – Brent Crude: UP 15 cents at $73.36 per barrel

New York – Dow Jones: UP 0.6 percent to 25,462.58 (close)

London – FTSE 100: UP 1.1 percent at 7,659.10 (close)

source: business.inquirer.net