Dollar Posts Biggest Drop in Two Months on Fed and Yuan Rally – Bloomberg

  • Greenback falls below 116 yen for first time since Dec. 14
  • ‘Over-extended long dollar’ wagers add to selling: Macquarie
 
 What’s Driving the Dollar Lower?

The greenback fell by the most since Donald Trump won the U.S. presidential election as the Federal Reserve’s meeting minutes showed uncertainty over how his policies would impact the pace of interest-rate increases, while a yuan rally exacerbated the dollar selling.

Investors trimmed long-dollar positions amid signs the trade has gotten increasingly crowded, sending the greenback falling below 116 yen for the first time since Dec. 14. The offshore yuan’s record two-day jump versus the dollar as liquidity tightened in Hong Kong also spurred investors to sell the greenback against other Asian currencies, according to Masakatsu Fukaya, a Tokyo-based emerging-markets trader at Mizuho Bank Ltd.

Minutes from the Federal Reserve’s December meeting published Wednesday showed officials were grappling with uncertainties about Trump’s policies and the possible impact on growth, spurring selling by macro and leveraged funds in Asia, traders said. Hedge funds and other large speculators had boosted their bearish bets on the yen last week to the most since August 2015, according to the Commodity Futures Trading Commission in Washington.“Multiple references to dollar strength in the FOMC minutes, another plunge in the U.S. currency versus the offshore yuan and over-extended long dollar positioning more generally, have all contributed to today’s dollar selloff,” said Gareth Berry, a foreign-exchange and rates strategist at Macquarie Bank Ltd. in Singapore.

The DXY dollar gauge dropped as much as 1 percent, the most since Nov. 9, after the Fed minutes showed that officials “emphasized their considerable uncertainty about the timing, size, and composition of any future fiscal and other economic policy initiatives as well as about how those polices might affect aggregate demand and supply.” Attention is shifting to the U.S. jobs report Friday which will probably show employers boosted payrolls by 180,000 people in December, and the unemployment rate at 4.7 percent.

The dollar had climbed as much as 1.4 percent in the first two trading days of the new year to reach 118.60 yen. This followed a more than 15 percent surge versus the yen in the fourth quarter as investors bet that President-elect Trump’s promise of fiscal stimulus will boost growth and spur the Fed to speed up rate increases.

  • USD/JPY drops 1.1% to 115.94 after touching session low of 115.58
  • EUR/USD climbs 0.5% to 1.0546 vs session high of 1.0575
  • Dollar breaks 21-DMA for JPY, AUD and NZD
  • USD/CNH sinks as much 1.2% to 6.7853, following on a 1.3% decline Wednesday; China said to consider options to support the yuan, including ordering state-owned enterprises to sell dollars, according to Bloomberg report yesterday. CNH overnight deposit rate surges to a one-year high of 80% Thursday, squeezing yuan bears
  • Yield on 10-year Treasuries drops 3bps to 2.41%
  • While the FOMC debate on the potential impact from a Trump fiscal stimulus suggests the risk is a tighter Fed policy in 2017, the market appears to have focused on the “considerable uncertainty” headline, says Rodrigo Catril, a currency strategist at National Australia Bank in Sydney; Trump promised higher spending on infrastructure, tax cuts and regulatory reform during his campaign, though has offered few new details of his policy goals since winning the Nov. 8 election
Before it’s here, it’s on the Bloomberg Terminal.

Ex-Barclays Trader Admits Conspiracy to Rig Currency Prices – Bloomberg

  • Jason Katz pleads guilty to price-fixing charge in New York
  • Five banks slated to be sentenced Thursday in currency probe

Jason Katz, a former Barclays Plc currency trader, admitted conspiring to fix prices in the foreign-exchange market, the third individual to be charged and the first to plead guilty in a long-running U.S. criminal investigation into the rigging of currency rates.

Katz appeared in Manhattan federal court Wednesday, where he admitted to participating in a conspiracy with other bankers to manipulate emerging-market currency trades while working at three different financial institutions from 2007 to 2013. Separately, the Federal Reserve Board said it banned Katz from the banking industry.

Katz’s conviction comes one day before five banks are scheduled to be sentenced in connection with the Justice Department’s three-year investigation. The banks — Citigroup Inc., JPMorgan Chase & Co., Barclays and Royal Bank of Scotland Group Plc —pleaded guilty in May 2015 to charges that their traders conspired to manipulate trading in U.S. dollars and euros. UBS Group AG also pleaded guilty to a related charge.

Bloomberg previously reported that the currency-rigging investigation had expanded to additional chatrooms involving trading in emerging market currencies, including the Brazilian real, the Russian ruble and the South African rand.

Katz was released on a $150,000 bond to be secured by property in New York’s Delaware County. His travel is limited to New York, Connecticut and London until April 1 when he is to turn over his passport and remain in the U.S.

Trading History

Katz spent a year as director of emerging markets-foreign exchange trading at Barclays beginning in 2010, according to regulatory filings and his LinkedIn profile. He joined BNP Paribas in September 2011 as its director of emerging markets-foreign exchange trading, before leaving for Australia & New Zealand Banking Group Ltd. two years later, the documents show. Before joining Barclays, Katz spent more than nine years at Standard Bank, where he was head of foreign exchange, according to his LinkedIn profile.

Prosecutors say Katz was a dealer of central and eastern European, Middle Eastern and African currencies and conspired to manipulate prices through “non-bona fide trades,” coordinating the placement of bids and offers, and agreeing on currency prices quoted to specific customers.

Katz has agreed to cooperate with the government’s investigation. The conspiracy charge Katz admitted to has a maximum penalty of 10 years in prison and a $1 million fine, which may be increased based on the proceeds gained or the loss to investors. 

“These conspirators engaged in blatant collusion and succeeded in manipulating exchange rates for multiple currencies to their advantage,” said Brent Snyder, a deputy assistant attorney general with the department’s antitrust division. “Conspiracies such as this undermine the integrity of our financial markets, and the Antitrust Division is committed to ensuring that they are pursued and punished.”

Currency Chats

Katz’s time at Barclays coincides with that of Chris Ashton, the former global head of spot trading at the London-based bank. Prosecutors have been investigating allegations that Ashton and a group of other traders participated in an electronic chatroom calledThe Cartel where they conspired to rig currency prices. 

Ashton was permanently banned from U.S. banking by the U.S. Federal Reserve in August. It isn’t clear whether Katz had any interaction with Ashton or other members of The Cartel.

Those chatroom discussions formed the basis of guilty pleas by four of the banks, which are scheduled to be sentenced Thursday in Connecticut. Barclays, JPMorgan and Citigroup provided evidence of a potential new antitrust conspiracy in the currency spot market that prosecutors say involves different currencies than the ones at the center of their 2015 guilty pleas.

The case is U.S. v. Katz, 17-cr-00003, U.S. District Court, Southern District of New York (Manhattan).

Dollar Routed, Stocks Drop as Bonds Jump With Gold: Markets Wrap – Bloomberg

By Jeremy Herron
  • Greenback sinks most in six months, 10-year yields tumble
  • China intervention sparks retreat ahead of U.S. jobs report
 
0:000:30
 
 
All-Time High: Bitcoin Delivers Many Happy Returns
 
All-Time High: Bitcoin Delivers Many Happy Returns
 

What’s Driving the Dollar Lower?

The dollar tumbled the most in six months, U.S. stocks retreated and Treasuries rallied with gold amid Chinese efforts to stem capital outflows and a rethinking of Federal Reserve rate intentions. Emerging-market assets surged.

The greenback weakened a second day after reaching a 14-year high, as a record of Fed deliberations signaled central bankers remain committed to gradual rate hikes amid concern dollar strength could slow growth. The yield on 10-year Treasury notes slid below its level prior to the Fed meeting. U.S. stocks fell as banks sank the most since September and results from major retailers raised concern about the American consumer before Friday’s jobs report. The offshore yuan surged the most on record. 

The growing backlash against the dollar coincides with more sober outlooks on whether President-elect Donald Trump’s plans to boost government spending will boost growth. The Fed reiterated that a “gradual” pace of rate hikes over the coming years would likely remain appropriate, damping speculation officials will step in to counter inflation with higher rates. Stocks have rallied with the dollar, while Treasuries have plunged since Trump’s election.Stocks

  • The S&P 500 Index fell 0.4 percent to 2,261.64 at 11:48 a.m. in New York, after closing Wednesday within a point of an all-time high.
  • Financial shares sank 1.8 percent as the drop in rates posed a threat to lending profits.
  • Kohl’s Corp. plunged 18 percent, Macy’s Inc. lost 13 percent and L Brands Inc. fell 8 percent to pace declines after the retailers reported disappointing holiday results.
  • The Stoxx Europe 600 Index edged higher after falling 0.1 percent Wednesday to halt a three-day advance that took the measure into a bull market.

Currencies

  • The Bloomberg Dollar Spot Index fell 1.1 percent in its biggest slide since July on a closing basis. Companies added fewer jobs than forecast in December, according to a private research group.
  • The offshore yuan surged 0.5 percent after advancing 1.4 percent Wednesday.
  • The euro gained 0.2 percent to $1.0513.
  • Russia’s ruble advanced 1.5 percent, one of the top two performers among 31 major world currencies after breaching 60 per dollar for the first time since July 2015.
  • Mexico’s peso erased losses after the central bank sold dollars to bolster its currency.

Commodities

  • Crude fell 0.5 percent to $53 a barrel in New York, erasing gains after a government report showed U.S. fuel stockpiles surged last week.
  • Gold rose 1.5 percent to the the highest level in almost a month at $1,183 an ounce.

Bonds

  • U.S. Treasuries rallied, with the yield on the 10-year benchmark falling eight basis points to 2.36 percent.
  • Spanish bonds declined, and French bonds erased gains, after the nations sold bonds.

Nigeria sells 173 bln naira treasury bills with rates flat – Reuters

LAGOS Jan 5 (Reuters) – Nigeria sold 172.85 billion naira ($550 million) at its first treasury bill sale of the year on Wednesday with yields unchanged from the previous auction, held on Dec. 21, fixed income traders said on Thursday.

The central bank sold 115.85 billion naira of one-year debt at a rate of 18.68 percent, the same as the previous auction, traders said. 

They said the central bank also sold 35 billion naira of 91-day paper at 14 percent and 22 billion naira of six-month bills at 17.5 percent, unchanged from the previous auction.

Subscription at the auction came to 194.12 billion naira, well up from 42.68 billion naira at the previous auction.

Nigeria’s central bank issues treasury bills regularly to help lenders manage their liquidity, curb rising inflation and provide naira to help the government fund its budget. ($1 = 314.50 naira) (Reporting by Oludare Mayowa; Editing by Alexis Akwagyiram and Hugh Lawson)

 

OPEC oil output falls from record high ahead of planned cuts – Reuters survey

* OPEC supply falls by 200,000 bpd to 34.18 million bpd

* Nigeria posts biggest decline, followed by Saudi Arabia

 

* Iraq boosts output as southern exports likely hit record

* OPEC output 1.68 mln bpd above output target agreed from 2017

By Alex Lawler

LONDON, Jan 5 (Reuters) – OPEC’s oil output in December fell from a record high ahead of a deal to cut production, a Reuters survey found on Thursday, helped by attacks on Nigeria’s oil industry and top exporter Saudi Arabia trimming exports.

The decline, the first since May according to Reuters surveys, occurred despite higher exports from second-largest OPEC producer Iraq and a further upward trend in Libyan output.

Supply from OPEC in December fell to 34.18 million barrels per day (bpd) from a revised 34.38 million bpd in November, according to the survey based on shipping data and information from industry sources.

Oil hit an 18-month high of $58.37 a barrel on Tuesday, boosted by an OPEC agreement to lower supply from Jan. 1.

The supportive impact of the agreement on prices may not occur straight away, an analyst at SEB said.

“We are not necessarily set for an immediate price take-off. One problem is the very high OPEC production in fourth-quarter 2016,” said Bjarne Schieldrop, chief commodities analyst at SEB. “The still-rising crude oil production in Libya is also creating concerns that OPEC’s cuts might be less effective.”

Based on the December survey, OPEC is pumping 1.68 million bpd above the 32.50 million bpd production target that it agreed on Nov. 30 to adopt from Jan. 1 in its first supply cut decision in eight years.

OPEC output started to climb following its decision in late 2014 to retain market share rather than cut supply to prop up prices. Saudi Arabia, Iraq and Iran all pumped more and production also increased due to the return of Indonesia in 2015 and Gabon in July 2016 as OPEC members.

In December, the biggest reduction came from Nigeria, although not as a result of deliberate cuts to boost prices.

No Forcados crude was exported following an attack on a pipeline, and shipments of the Agbami stream fell most likely due to planned maintenance work, sources in the survey said.

Nigeria and Libya are both exempt from the OPEC supply cut agreement because of output losses caused by conflict.

Nigerian militant group Niger Delta Avengers said in November it had attacked the Forcados pipeline.

Saudi Arabia, which said it pumped a record amount in November, supplied less in December, sources in the survey estimated. Exports were lower because customers asked for less crude, not because of cutbacks implemented under the OPEC deal.

“Exports are down markedly from a massive November number,” said one source who tracks Saudi output. “The bottom line is December is down from November with regard to supply to market.”

Among countries with higher output, the largest increase of 70,000 bpd was in Libya, where a two-year blockade was lifted in December on pipelines leading from two western fields. The recovery remains at risk from political conflict.

Output also climbed in Iraq, the survey found, with exports from the country’s south most likely exceeding November’s record rate of 3.407 million bpd, according to shipping data and industry sources.

Iran, which was allowed to raise output under the OPEC deal as sanctions had crimped its supply, pumped 30,000 bpd more.

The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data, and information provided by sources at oil companies, OPEC and consulting firms.

(Editing by Jason Neely)

 

WEEKAHEAD-Kenya’s shilling under pressure, naira seen firming – Reuters

NAIROBI Jan 5 (Reuters) – Kenya’s shilling is expected to weaken further next week on dollar demand from oil importers, while the Nigerian naira is likely to gain on increased forex supply. 

KENYA

The Kenyan shilling is expected to remain under pressure with the central bank likely to sell dollars to smooth out any volatility, traders said.

At 0841 GMT, commercial banks quoted the shilling at 103.55/75 to the dollar, compared with 102.40/60 at last Thursday’s close.

NIGERIA

Nigeria’s naira is seen strengthening in the near term as bureau de change operators expect dollar supplies from international money transfer agents to boost liquidity.

The local currency held steady at 490 to the dollar on the parallel market on Thursday, the same level as last week, while the naira was quoted at 305 to the dollar at the official interbank window.

“We continue to see the naira hovering between 400-480 as the central bank fine tunes its policy to streamline rates and also as we see an increased dollar supply,” said Aminu Gwadabe president of association of bureau de change operators.

UGANDA

The Ugandan shilling is seen weaker, pressured by commercial banks picking up dollars in anticipation of a surge in demand from importers.

At 1027 GMT commercial banks quoted the shilling at 3,625/3,635, from last Thursday’s close of 3,605/3,615.

Benon Okwenje, trader at Stanbic Bank Uganda said the local currency would experience a “slow and gradual” depreciation spurred by healthy demand from banks and importers.

TANZANIA

The Tanzanian shilling is expected to come under pressure in the coming days, weighed down by strong demand for greenbacks from the energy and manufacturing sectors.

Commercial banks quoted the shilling at 2,189/2,194 to the dollar on Thursday, weaker than 2,173/2,183 a week ago.

“The liquidity tightness on the shilling has started to ease, while inflows of dollars is subdued,” said Mohamed Laseko, a dealer at CRDB Bank.

ZAMBIA

The kwacha is likely to make marginal gains against the dollar next week as companies start preparing to pay taxes due on Jan. 14.

At 0911 GMT on Thursday, commercial banks quoted the currency of Africa’s No.2 copper producer at 9.9400 per dollar, down from a close of 9.8400 a week ago.

“The kwacha should slightly appreciate towards the end of next week as companies start converting dollars,” independent financial analyst Maambo Hamaundu said.

GHANA

Ghana’s cedi is seen steady next week amid expectations that the central bank will resume its fortnightly dollar sales to commercial banks, an analyst said.

The local unit declined 11 percent at the end of December compared to an 18 percent depreciation in the previous year. It was trading at 4.2800 at 1245 GMT on Thursday, slightly down from 4.2400 at the end of December.

“We expect the pair (USD/GHS) to remain at around 4.2750 levels next week as Bank of Ghana resumes its programmed forex support to the interbank market,” Joseph Biggles Amponsah of the Accra-based Dortis Research said. (Reporting by John Ndiso, Oludare Mayowa, Elias Biryabarema, Fumbuka Ng’wanakilala, Chris Mfula, Kwasi Kpodo; Compiled by Tanisha Heiberg; Editing by Joe Brock)

 

Emerging-Market Currencies Rally as Dollar Slides – WSJ

Federal Reserve signals uncertainty over Donald Trump’s impact on the economy

The dollar extended its rout Thursday, while the Chinese yuan headed for its biggest two-day gain ever in offshore markets.

The WSJ Dollar Index, which measures the U.S. currency against 16 others, fell 0.7%, to 92.36, retreating further from the 14-year-highs hit earlier in the week.

Asian currencies broadly rose against the U.S. dollar Thursday after Federal Reserve minutes signaled uncertainty about Donald Trump’s impact on the economy.ENLARGE
Asian currencies broadly rose against the U.S. dollar Thursday after Federal Reserve minutes signaled uncertainty about Donald Trump’s impact on the economy. PHOTO: KAREN BLEIER/AGENCE FRANCE-PRESSE/GETTY IMAGES

ENLARGE
 

Analysts said minutes from the Federal Reserve’s December meeting are weighing on the dollar. The Fed raised interest-rates at the meeting and signaled a more aggressive path of tightening this year.

Minutes released Wednesday showed some Fed officials remain cautious about the path of the U.S. economy, citing pressures from higher long-term rates, a stronger dollar and uncertainty over Donald Trump’s policy proposals.

“The general tone of the minutes read hawkish with the Fed emphasizing the strength in the labor market and playing up the scope for fiscal policy,” said Mark McCormick, North American Head of FX Strategy at TD Securities. “Still, participants emphasized considerable uncertainty about the impact of future stimulus.”

The Fed is projecting rates will rise three times this year. Investors currently see only a 36% chance of that happening, according to fed-funds futures, a popular derivative used to bet on central-bank policy tracked by CME Group.

A more dovish Fed would alleviate pressure on emerging-market economies, especially China. Higher U.S. rates typically boost the dollar but make emerging-market nations’ dollar-denominated debts more expensive to pay back.

Concerns over higher U.S. rates have battered the Chinese yuan in recent months and ramped up pressure on Chinese authorities to stem capital outflows.

On Thursday, the Chinese yuan rose 0.9% against the dollar in offshore markets, on track for its biggest two-day gain since the currency began trading freely outside of mainland China in 2010.

Other emerging-market currencies also rallied, with the dollar falling 1.3% against the Korean won and 0.5% against the Malaysian ringgit. The dollar was down 0.7% against the Mexican peso after Mexico’s central banks supported its currency by selling dollars.

Friday’s U.S. jobs report will be an important test for the dollar. A report showing the labor market remains strong would bolster the Fed’s case for raising rates, analysts said. Data this week has been mixed, with strong U.S. manufacturing and service-sector reports but weak private-sector hiring data.

Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com

Nigeria resumes payments to former Niger Delta militants -official – Reuters

YENAGOA, Nigeria Jan 5 (Reuters) – Nigeria has resumed payments of cash stipends to former militants agreed under a 2009 amnesty in the country’s Niger Delta oil hub, an official said on Thursday.

“Two months of the ex-militants stipends were paid yesterday…The rest of their stipends will be paid later in batches by (central bank) CBN,” said Piriye Kiyaramo, an officer in the Amnesty Office.

He said the paid stipends covered August and September. (Reporting by Tife Owolabi; writing by Ulf Laessing; editing by Jason Neely)

 

UPDATE 1-Nigerian union orders Total fuel depot strike over sackings – Reuters

(Adds details, background)

LAGOS Jan 5 (Reuters) – A Nigerian oil labour union ordered an indefinite strike at Total fuel truck depots across the OPEC member nation on Thursday in protest against sackings.

 

The Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) said it had ordered its members to take part in the industrial action, with immediate effect, and was holding talks with Total.

Tokunbo Korodo, NUPENG chairman in the southwest, said a walkout by the union’s members began in that part of the country four days ago but the nationwide strike was called on Thursday.

“We have stopped the operation of Total. We are at the table with Total discussing the situation of the workers,” he said. Total did not immediately respond to a request for comment.

A senior figure in another labour union – Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) – said his members were not taking part in the industrial action.

“The strike will not affect crude production, except petrol, even when it goes nationwide because PENGASSAN is not involved,” said Chika Onuegbu, who represents PENGASSAN in Rivers state, in the oil-rich southern Niger Delta region.

Nigerian labour unions have in recent months criticised oil companies for laying off workers.

The industry has been hit by low crude prices and a wave of militant attacks in Nigeria’s oil hub, the Niger Delta, hampering production capability. (Reporting by Alexis Akwagyiram and Tife Owolabi; Additional reporting by Libby George, in London; Editing by Ulf Laessing and Adrian Croft)

 

BTCC’s Bobby Lee: Bitcoin Can Reach $7,000 if it Breaks ATH $1,300 – Cointelegraph

Although the recent rise in the price of Bitcoin did not come as a surprise to the CEO of BTCC, he believes the price of the digital currency can reach up to $7,000 if it scales over its previous all-time high.

In an interview with CNBC, Bobby Lee says that people have been waiting for a time like this for quite a while. Bitcoin’s price has been increasing steadily over the past eight years, including the few short six years in which the currency increased in value by more than a thousand times.  

It looks promising

Lee added in the video that although he doesn’t know how high it would go in 2017, as he wouldn’t like to make predictions in the short-term, the long-term outlook seems promising.

He says:

“I think long-term, we all understand that Bitcoin is very unique. It’s the world’s first digital asset and in that sense, today’s value is only around $16 bln. Compared to other assets, especially things like gold, stocks and real assets, $16 bln is just a drop in the bucket. So if it goes to $32 bln, that would be doubling the price. In the past few years, what we’ve seen is: whenever we hit an all-time high, Bitcoin itself would actually exceed its all-time high and go up by 3 to 5x or even more. So if it crosses the $1,300 sort of all-time high, it might even go up to $7,000 per Bitcoin.”

Major drivers of Bitcoin price

Lee’s BTCC is one of the leading Chinese exchanges – the largest Bitcoin trading platform on the market – to record a new all-time high price of CNY$7,666 or $1,103. He maintains that the drivers of Bitcoin price have not changed but have been the same for the past eight years of its existence.

He says:

“The reason that people are more paying attention to Bitcoin in the past year is because of the geopolitical stuff happening around the world. We have the demonetization effort in India and Venezuela; we have the foreign capital control in China; we have the excessive money printing in other countries, especially in the US, Japan and so on and the high debts. So when the existing money system has problems, people maybe turn to Bitcoin.”