Posts Tagged ‘Swiss Franc’

Trump’s Currency Complaints Hit Unexpected Targets

February 17, 2017

Top-five trading partners China, Japan and Germany brush them off; Taiwan and Switzerland seem to be paying heed

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Feb. 17, 2017 3:47 a.m. ET

HONG KONG—U.S. President Donald Trump’s accusations of currency manipulation appear to be reaching an audience he may not have primarily intended.

Mr. Trump vowed on the campaign trail to revive American manufacturing, in part by taking a hard line on Chinese trade practices and labeling the country a currency manipulator. Since taking office, the president has accused both China and Japan of consistently devaluing their currencies,…

Mr. Trump vowed on the campaign trail to revive American manufacturing, in part by taking a hard line on Chinese trade practices and labeling the country a currency manipulator. Since taking office, the president has accused both China and Japan of consistently devaluing their currencies , while his top trade adviser Peter Navarro has accused Germany of benefiting from what he termed the “grossly undervalued” euro .

All three countries, which rank among the U.S.’s top five trading partners, have brushed off the Trump administration’s claims.

“No one has the right to tell us that the yen is weak,” Japan’s finance minister Taro Aso told parliament on Wednesday, following last weekend’s meeting between Mr. Trump and Prime Minister Shinzo Abe . Japan hasn’t directly intervened in currency markets since 2011 following a major tsunami and resulting Fukushima nuclear disaster.

“The charge that Germany exploits the U.S. and other countries with an undervalued currency is more than absurd,” Jens Weidmann , the president of the German central bank, said earlier this month.

China hasn’t directly commented on Mr. Trump’s criticisms, but most analysts say Beijing recently has been propping up the yuan by selling foreign-currency reserves rather than looking to weaken it.

Still, some smaller economies look like they are taking notice, notably Taiwan and Switzerland. The U.S. Treasury found in October that both had engaged in persistent, one-way currency intervention, essentially by buying foreign currencies like the U.S. dollar and selling their own to maintain weak exchange rates.

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Analysts say the central banks of Switzerland and Taiwan are now stepping back from those activities, perhaps to avoid closer scrutiny from the Trump administration. The upshot: The Swiss franc has advanced nearly 2% against the U.S. dollar this year, while the new Taiwan dollar has surged 5.3%. Both have outperformed the euro and yen since the U.S. election in early November.

Taiwan’s central bank bought $500 million in foreign currencies in the fourth quarter, well below its quarterly average of more than $3 billion since 2012, according to Khoon Goh , head of Asia research at ANZ in Singapore, who said he suspects it is stepping back from “currency-smoothing operations.” The central bank said it doesn’t comment on currency policy.

For the first nine months of last year, the Swiss National Bank /quotes/zigman/1379668/delayed CH:SNBN +0.12% intervened heavily in currency markets to slow the franc’s rise, spending an amount roughly equivalent to its current-account surplus for the period, J.P. Morgan/quotes/zigman/272085/composite JPM -0.76% analysts note. Over the following four months, the scale dropped to around two-thirds of the surplus.

“It’s not an entirely fanciful suggestion that the SNB might be tapering intervention in order to the guard against the risk of being cited by the U.S. Treasury as a currency manipulator,” the analysts wrote in a note.

The Swiss National Bank declined to comment.

For the U.S. to label an economy a currency manipulator under the current law, it must have a large trade surplus with the U.S. and a hefty current-account surplus and persistently intervene in the currency in one direction. As of October, no economies met all three criteria.

Recent comments from officials in South Korea, which the Treasury has flagged for its hefty trade surplus with the U.S. and its current-account surplus, suggest they’re similarly eager to avoid U.S. ire, says Govinda Finn , senior analyst at Standard Life Investments in Edinburgh. The Korean won has surged 5.2% against the dollar this year.

But any gains in the Korean and Taiwanese currencies due to U.S. political pressure may not last, he said: “On a longer-term horizon, there’s a pretty strong case to say both of those currencies can and will weaken as the authorities look to support their economies.”

Jenny W. Hsu contributed to this article.

Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com

US election jitters hit UK investors and financial people

November 4, 2016

  • FTSE 100 on track for worst week since early January
  • Pound breaks $1.25 after yesterday’s Brexit ruling
  • S&P 500 records longest losing streak since 2008 financial crisis
  • US presidential elections continue to spook markets
  • Investors flee stocks, corporate bonds ahead of US election
  • FTSE 100 poised for longest losing streak since December 2015
  • US non-farm payrolls miss expectations in October

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2:48pm

Pound on track for best week in over seven years

The pound has extended its gains this afternoon and is up 0.6pc on the day at $1.2519. That puts it on track for its best week against the dollar in over seven years after gaining 2.7pc.

It last enjoyed gains of these levels on the week ended October 16 2009, when it rallied 3.23pc.

GBp
CREDIT: BLOOMBERG
2:18pm

The global implications of the US elections

Citigroup’s   chief US equity strategist Tobias Levkovich looks at the global implications of the US presidential election:

  1. The bank does not expect a Clinton victory to be especially market-sensitive;
  2. It thinks a Trump victory could trigger a 3-5pc S&P sell off;
  3. A Clinton victory could be unhelpful for healthcare stocks;
  4. A Trump win could offer some respite for Energy and/or utility stocks which have been under environmental scrutiny;
  5. Emerging markets economies are especially sensitive to global trade;
  6. Emerging markets equities are vulnerable to a Trump victor- the bank fears an increase in protectionism following a Trump victory;
  7. Any post-election rally in the US dollar would also be unhelpful;
  8. Latin American would be the most vulnerable.
2:01pm

Wall Street opens flat as investors await election

US stocks were little changed at the opening bell on Wall Street this afternoon after data showed US non-farm payrolls fell short of expectations and ahead of  the US presidential election next week.

The latest Reuters/Ipsos polling showed Clinton, seen as the status quo candidate by markets, maintaining a narrow lead over Trump.

Minutes into trading:

  • Dow Jones: -0.05pc
  • S&P 500: +0.08pc
  • Nasdaq: +0.07pc
traders
1:40pm

FTSE 100 on track for worst day since June 27

If the FTSE 100 maintains its current losses today, it will suffer its biggest daily fall since June 27 (the Monday after the Brexit vote).

It is currently off by 1.5pc. On June 27, it fell 2.55pc.

1:20pm

Markets update: European bourses extend losses

Its a torrid end to the week for European bourses, they have extended their losses as the looming US presidential elections continue to spook markets.

Here’s the current state of play in Europe:

  • FTSE 100: -1.44pc
  • DAX: -0.64pc
  • CAC 40: -0.88pc
  • IBEX: -1.04pc

 Connor Campbell, of SpreadExsaid: “Well what started as a few jitters morphed into a full on panic attack this Friday, the European indices plunging at the prospect of Trump moving into the White House.

“The FTSE was the worst effected, dropping 1.5pc to dip under 6700 for the first time since mid-September. The Eurozone indices, which had to deal with a series of disappointing services PMIs, were just as bad, the DAX and CAC sliding around 1pc apiece. The pound, on the other hand, took advantage of this dollar and euro weakness, knocking on the door of $1.25 while climbing above €1.125.”

12:53pm

Probability of a December rate hike now 80pc

US jobs report more bullish on a 2nd look. Although US NFP underwhelmed by 12k, UR steady, AHE stronger. Probability for a Dec hike now 80%

12:48pm

Pound slides from $1.25 after US non-farm payrolls data

The pound has lost some momentum after US non-farm payrolls missed expectations last month, recording an increase of 161,000 – that’s below forecasts of a rise of 175,000.

The pound is now trading at $1.2477 against the dollar, up 0.24pc on the day.

GBP
CREDIT: BLOOMBERG
12:40pm

Non-farm payrolls will not stop the Fed from raising rates

Commenting on the non-farm payrolls, Naeem Aslam, of Think Markets, says even though it missed expectations the number isn’t going to stop the Fed increasing rates.

“Things are hot, when it comes to the US economy and today’s number has cement that idea. You can criticise the Fed that they are thinking of increasing the interest rate when the GDP growth could be slowing for the final quarter of this year. But the fact is that the Fed is very close  in achieving their GDP, inflation and unemployment target. Throughout this year, they have been aching to increase the rate.

“The wage growth was the shining area in this report without any doubt and this will give them more than enough ammunition to increase the interest rate.

“Going forward, all eyes are going to be on the outcome of the US election, and as long as the outcome is not messy, we think that the Fed will increase the interest rate this year. Although, if the equity market is to behave normally to that reaction, is still under question.”

US economy adds 161k jobs in Oct (Sept revised to 191k from 156k).
Unemployment rate falls to 4.9%.
Average monthly earnings up to +0.4%.

12:37pm

US employment growth solid, wages jump in October

US employers maintained a strong pace of hiring in October and boosted wages for workers, which could effectively seal the case for a December interest rate increase from the Federal Reserve.

Nonfarm payrolls increased by 161,000 jobs last month, the Labor Department said on Friday. August and September data was revised to show 44,000 more jobs created than previously reported.

The unemployment rate fell one-tenth of a percentage point to 4.9 percent, in part as people dropped out the labor force.

Quick Take: STRONG report, just what the Fed wanted to see – rate hike in Dec. likely, pending election and Nov. NFP

The closely watched employment report was published four days before the Nov. 8 presidential election. It came on the heels of data last week showing an acceleration in economic growth in the third quarter. But economists see little impact from the report on an increasingly bitter and divisive campaign.

“There is so much noise out there right now, everyone is screaming from the rooftops. I just don’t know that any particular data point is going to have a great bearing on the election, in and of itself,” said Sam Bullard, senior economist at Wells Fargo Securities in Charlotte, North Carolina.

Though the U.S. central bank is expected to increase borrowing costs next month, that decision will likely depend on the outcome of Tuesday’s election. The tight race between Democratic candidate Hillary Clinton and her Republican rival Donald Trump has rattled financial markets.

Economists polled by Reuters had forecast payrolls increasing by 175,000 jobs last month and the unemployment rate falling one-tenth of a percentage point to 4.9 percent.

The Fed on Wednesday left interest rates unchanged but said its monetary policy-setting committee “judges that the case for an increase in the federal funds rate has continued to strengthen.” It lifted its benchmark overnight interest rate last December for the first time in nearly a decade.

“The election could still derail the Fed’s plans, particularly if a very close result led to one or both candidates contesting it via the courts,” said Paul Ashworth, chief economist at Capital Economics in Toronto.

Report from Reuters

12:32pm

Breaking: US non-farm payrolls miss expectations in October

US non-farm payrolls fell short of expectations in October, rising 161,000 compared with forecasts of 175,000.

Meanwhile, September’s reading was revised upwards from 156,000 to 191,000.

12:26pm

Political tremors send global stocks to lowest since July

Global share prices retreated to their lowest levels since early July on Friday after two weeks of relentless losses dominated by uncertainty about the outcome of the U.S. presidential election and, as of Thursday, Britain’s path out of the European Union.

A London High Court ruling on Thursday dealt a big blow to Prime Minister Theresa May’s plans to launch formal Brexit talks next March, prompting speculation of an early national election and sending sterling spinning higher.

The pound was up another 0.1 percent in early trade on Friday. London’s FTSE indices were down across the board, with the blue chip FTSE100 .Europe’s worst performer with a 1.4 percent loss.

The dollar at the same time has been hammered by a surge for U.S. Republican presidential candidate Donald Trump in opinion polls in the past week. Investors believe this may prevent the U.S. Federal Reserve from raising interest rates next month.

Broader jitter about the shape of global trade and growth under a Trump presidency have also helped send shares down across the globe, and the major markets in Europe and Asia were all again in retreat on Friday.

MSCI’s global share index . slipped just under half a percent to its lowest since July 11 and is down almost 5 percent over the past two weeks.

“With only a few days left until Americans go to the polls many traders are continuing to reduce their risk exposure further,” said Markus Huber, a trader with brokers City of London Markets.

Stock markets in Germany,  Spain , France  and Italy  all fell around 1 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.4 percent after brushing its lowest levels since early August. It looked set for a loss of 1.7 percent for the week.

Report from Reuters

11:43am

US futures little changed ahead of monthly jobs data

US stock index futures are little changed ahead of monthly employment data.

Investors have been rattled by signs the US presidential race between Democrat Hillary Clinton and Republican Donald Trump is tightening, after Clinton had until recently been thought to have a clear lead.

This afternoon’s non-farm payrolls data is expected to show an increase of 175,000 last month, up from 156,000 in September.

Ahead of the opening bell, S&P 500 futures are trading down 0.01pc, the Nasdaq is down 0.06pc and the Dow Jones has dipped 0.1pc.

wall street
11:00am

Volatility index hits highest level since June 27

The Volatility Index, which is considered the best gauge of fear in the market, was up over 14pc yesterday, closing above 22. That’s its highest level since June 27 (in the immediate aftermath of the Brexit vote).

Jim Reid of Deutsche Bank flags: “The post-Brexit high for the VIX is 25.76. Meanwhile sovereign bond markets continue to be a bit directionless. Yields in Europe were generally 2-3bps higher while 10y Treasuries were 1bp higher at 1.812%. It’s a lot more obvious where the momentum is in currency markets though. The USD index (-0.25pc) was down for the third day in succession with the Yen (+0.31%) once again benefiting. The Mexican Peso (+1.00pc) did rally back after the latest ABC News/Washington Post tracking poll had Clinton now swinging back to a 2pc lead at 47pc to 45pc, albeit still within the sample margin of error.”

Trump

We’ve already highlighted that if the S&P 500 falls again today it will be its longest losing streak since 1980.

However, Mr Reid said: “Of the 20 losing streaks equal or worse, this is the 2nd mildest so far with the index only down -2.91pc. So it’s more notable by its consistency than its depth at the moment.”

10:47am

Paddy Power cashes in on summer of sport and sterling plunge

On an otherwise torrid day for the FTSE 100, Paddy Power has bucked the trend rising 3.6pc after it hiked its full-year earnings guidance following its third quarter results. Harry Yorke reports: 

Ahectic summer of international football and the fall in the value of sterling lifted Paddy Power Betfair’s profits in the three months to September 30.

The Dublin-based bookmaker, formed in a £7bn merger earlier this year, reported a 68pc surge in underlying operating profits to £95m.

Paddy Power Betfair was buoyed by a 26pc increase in sportstakes on the back of Euro 2016, which generated revenues of £16m during the period, and £38m in total. This helped push total revenues up 25pc to £404m.

The sharp decline in the value of sterling following the EU Referendum in June also benefited the company’s non-UK earnings to the tune of £28m. On a constant currency basis, stripping out fluctuations in the exchange rate, revenue rose by 15pc over the quarter.

Paddy Power Betfair has now increased its full-year ebitda guidance to between £390m and £405m.

Read more here

10:45am

Housebuilders tumble as gloomy predictions weigh on sector

Housebuilding stocks are among the biggest fallers on the FTSE 100 this morning. Rhiannon Bury reports: 

Shares in the some of the UK’s biggest housebuilders have slipped this morning as gloomy predictions about the state of the market weigh on investor confidence.

Taylor Wimpey was down 3.4pc to 142.1p, while Persimmon was down 3.58pc to £16.95 and Barratt Developments sunk 2.77pc to 456p, making the firm’s some of the FTSE 100’s biggest fallers.

Savills warned this morning that house price growth will be flat across the UK next year due to economic uncertainty, adding to wider concerns that the housing market in the UK has peaked.

Earlier this week, figures from Nationwide Building Society showed house price growth ground to a halt in October after 15 successive month-on-month increases. Prices rose by 4.6pc in the year to the end of October, down from 5.3pc growth in September.

10:29am

US election trading has Brexit echo

Neil Wilson, of ETX Capital, says markets are on “a knife-edge” after Donald Trump closed the gap on Hillary Clinton in the polls.

“There is a definite sense we’re heading for a Brexit-like event – if Trump wins there could be a sharper selloff in risky assets like stocks and the US dollar. If Clinton wins, a rally is on the cards,” he continues.

“Ignoring the longer-term implications, there is a strong chance of immediate and significant movements in prices – particularly as we get results in from key swing states such as Ohio and Florida. And because so many hang in the balance there is a strong chance that markets will overreact when an individual state is called.

Dollar heads for first weekly decline since September, ahead of U.S. election http://bloom.bg/2ekKKsy 

“Back in June the pound plunged 5pc in a matter of seconds when Sunderland voted heavily for Leave. We could see similar gyrations in a broader range of markets, particularly if volumes are down overnight. There is a worry that thin liquidity could result in whippy trading conditions and we’re upping staffing levels overnight to cope with the expected turbulence. As we saw with Brexit, when trading volumes soared to record levels, clients want to trade around events like this and we will be ready to offer them access to the markets.

“Market volatility has already risen sharply, with various gauges of implied volatility in stocks and currencies hitting their highest levels since the UK’s June referendum.”

After 8 days lower in the S&P – markets could look for a positive in

beat = economy can take a rate hike
miss = rate hike less likely

10:11am

FTSE 100 on track for longest losing streak since December 2015

The FTSE 100 is on track to record its longest losing streak since December last year. It has fallen for five consecutive trading sessions, that’s its longest spell in the red since December 2015 when it fell for eight consecutive days (from December 3-14 2015).

UKX
CREDIT: REUTERS
9:45am

A Trump victory could see ‘an immediate flight to safety’

As Republican candidate Donald Trump inches ahead in the polls, Caxton FX analyst Alexandra Russell-Oliver examines what this will mean for the currency markets:

  1. A Trump victory would likely see “an immediate flight to safety” – including government bonds and the Swiss Franc;
  2. There would also be volatility in the dollar;
  3. It could also call into question the future of the Fed. In an extreme scenario Yellen could resign, Caxton says, which would have implications for future interest rates and the dollar’s strength.

Read the rest:

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China to Allow Direct Conversion Between Yuan and Swiss Franc — Can bypass a conversion into the U.S. dollar

November 9, 2015

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By 
Bloomberg

China took another step to boost the yuan’s global usage, saying it will start direct trading with the Swiss franc, as the nation pushes its case for reserve-currency status at the International Monetary Fund.

The link will start on Tuesday, the China Foreign Exchange Trade System said in a statement, making the franc the seventh major currency that can bypass a conversion into the U.S. dollar and be directly exchanged for yuan. The rate will be allowed to fluctuate a maximum 5 percent on either side of a daily fixing, according to CFETS.

“This is an important step in strengthening bilateral economic and trade connections between China and Switzerland,” the People’s Bank of China said in a statement on its website on Monday. The link will help lower conversion costs and facilitate the use of both currencies in bilateral trade, it added.

The announcement, which confirmed an earlier report, comes as the IMF prepares to meet this month to review its Special Drawing Rights. The executive board of the Washington-based institution will gauge whether the Chinese currency has fulfilled the criterion of being “freely usable,” after rejecting its bid in 2010. The other major currencies that can be directly converted into yuan are the U.S., Australian and New Zealand dollars, the British pound, the Japanese yen and the euro.

The PBOC this year extended Switzerland a 50 billion yuan ($7.9 billion) quota under the Renminbi Qualified Foreign Institutional Investor program, which allows yuan raised offshore to be used to buy securities in China’s domestic markets. In 2014, the Swiss and Chinese central banks signed a three-year currency-swap agreement that can be used to borrow as much as 150 billion yuan.

http://www.bloomberg.com/news/articles/2015-11-09/china-to-allow-direct-conversion-between-yuan-and-swiss-franc