Sterling stumbles to first three-day fall of year – Reuters
By Jemima Kelly and Marc Jones | LONDON
Britain’s pound weakened on Monday, marking its first three-day fall against the dollar this year and putting it on the back foot ahead of Thursday’s first Bank of England meeting of 2017.
“Super Thursday” will see the central bank, which cut interest rates to a record low of 0.25 percent after the June referendum on EU membership, present its quarterly inflation report along with its decision on monetary policy.
Inflation has accelerated as sterling has shed 12 percent since the Brexit vote on a trade-weighted basis. This has led to market talk that the BoE may take a more hawkish tilt and even signal that it is moving closer to raising rates from their current record low of 0.25 percent.
A Reuters poll last week, however, found most economists expect the BoE to leave its rates and other stimulus measures unchanged at least until 2019. Even though it is likely to raise its growth forecasts, uncertainty over soon-to-start Brexit negotiations mean it will likely remain cautious.]
“(Bank of England Governor Mark) Carney will probably reiterate his line that there are limits to tolerance of above-target inflation,” said BNP Paribas currency strategist Sam Lynton-Brown.
“If that rhetoric occurs at the same time of potential upward revisions to growth forecasts and maybe even inflation forecasts, that will prompt the market to increase its pricing for the probability of a Bank of England rate hike by the end of this year.”
Sterling slipped off a five-week high of $1.2674 at the end of last week, and by 1545 GMT on Monday had fallen another 0.2 percent on the day to $1.2525, as worries over a travel plan implemented by U.S. President Donald Trump drove a risk-off mode across markets.
Against a broadly weaker euro, the pound inched up 0.1 percent to 85.13 pence, close to a four-week high.
Crédit Agricole FX Strategist Manuel Oliveri forecast sterling would struggle following a recent mini-rally, with Brexit uncertainty to remain the main driver and data also likely to weaken.
“We don’t think the (BoE) inflation report will be a big shock,” he said. “It may sound a bit more hawkish but it still remains cautious.”
“A lot more is needed to push the needle” for the bank to start considering a move in interest rates, he added.
The pound has fallen roughly 19 percent against the dollar since June’s Brexit vote, but for the last few months it has been in a relatively restrained range of between $1.20 and $1.28 and 84 pence and 88 pence per euro.
(Editing by Richard Lough)
FOREX-U.S. travel ban row halts dollar recovery – Reuters
* Yen moves higher after row over U.S. immigration order
* Moves put focus back on risks of Trump’s protectionism
* Weaker-than-expected U.S. GDP halted dollar gains on Friday
* Monetary policy in focus as BOJ, Fed and BoE meet this week (Adds German inflation data, updates prices)
By Patrick Graham
LONDON, Jan 30 The dollar dipped on Monday as investors sought the traditional security of the Japanese yen after new U.S. immigration curbs put the spotlight back on President Donald Trump’s protectionist bent and the risks it poses for the economy.
The dollar had begun to climb at the end of last week after its worst month in five, as expectations of higher inflation and tax cuts to spur growth under the new president pushed U.S. government bond yields higher.
That was halted by a combination of weaker-than-expected U.S. economic growth data on Friday and the uproar that followed Trump’s order restricting entry to the United States for travelers from seven Muslim-majority nations.
“Concerns on protectionism appear to be rising after President Trump’s executive order to restrict immigration,” said Adam Cole, head of G10 FX strategy with RBC in London.
After an Asian session becalmed by Chinese New Year holidays, the yen rose 0.4 percent to 114.58 yen per dollar in morning trade in Europe. The greenback was flat at $1.0695 per euro and marginally higher at $1.2537 against sterling.
The euro drew some support from a rise in European government bond yields to their highest in a year after regional data showed solid rises in annual German inflation. That came at the start of a week dominated by central bank meetings in the United States, Japan and Britain.
The bond market, however, also suggested euro investors were pricing in more risk from France’s presidential election in April after the selection of a more radical leftist candidate by the French Socialists at the weekend.
A stronger dollar was one of 2017’s big calls for many investment banks and asset managers at the end of last year but that faith has been undermined by worries about how U.S. trade and diplomacy will pan out under Trump’s presidency.
At the top of the list are concerns that the new administration may actively pursue a weaker dollar as part of efforts to change its trading relationship with China and others.
“The weak U.S. GDP is doing the dollar no favours. But it also takes courage to keep buying the dollar, considering what Trump has said about the kind of a currency policy he could pursue,” said Daisuke Karakama, market economist at Mizuho Bank in Tokyo.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Gareth Jones)
Forex: Naira appreciation in forwards market indicates rising confidence – Vanguard
By Babajide Komolafe
THE naira appreciated in the forwards segment of the foreign exchange market indicating rising confidence buoyed by recent increases in the nation’s foreign reserves. ADVERTISING Meanwhile, prices of Nigeria’s Eurobond maintained downward trend for the third consecutive week due to persistent selling pressure. Naira appreciates in forwards market Data from the Financial Dealers Market Quote (FMDQ) show that the naira exchange rate for one month forward contracts dropped to N315.34 on Friday from N320.18 per dollar the previous week, indicating N4.84 or 1.5 percent appreciation for the naira. Highest appreciation Similarly, exchange rate for two months forward contracts dropped to N323.27 from N330.54 per dollar, indicating N7.27 or 2.20 per cent appreciation for the naira.
The naira also appreciated by N14.57 or 4.20 percent for three months forward contracts, as the exchange rate dropped to N331.53 from N346.1 per dollar. Naira The naira recorded its highest appreciation for six months forward contracts, appreciating by N29 or 7.67 per cent, as the exchange rate dropped to N323.27 from N378 per dollar. The naira also recorded marginal appreciation of 0.08 percent for spot transactions where the exchange rate edged down to N305.25 per dollar from N305.5 per dollar in the previous week.
According to analysts at Cowry Assets Management Limited, the naira appreciation in the forwards market suggests future stability in the foreign exchange market amidst rising foreign reserves. The nation’s foreign reserves have been an upward trajectory since October 18th 2016 courtesy of increase in crude oil prices inspired by the production cut deal agreed by OPEC members. According to data by the Central Bank of Nigeria (CBN), the foreign reserves rose by $5 billion from $23.96 billion on October 18th 2016 to $28.9 billion on Tuesday January 24th 2017.
CBN defends forex policy CBN Governor, Mr. Godwin Emefiele however insisted that the apex bank would maintain its policy of selling 60 percent of available foreign exchange to manufacturers, and continued to intervene in the interbank foreign exchange market to moderate the exchange rate of the naira. Addressing the press on the outcome of the Monetary Policy Committee (MPC) meeting on Tuesday, Emefiele said: “I am happy to say that het reserve today is $28.9 billion. It is exciting to see this happen. But is there a need to float the Naira? It is important to note that we have to manage the reserve.
That means from time to time we will intervene in the market to make sure the exchange rate does not go beyond our expectations and those interventions will be to moderate the rates as necessary. “The fact that we have begun to see some accretions to the reserves does not mean we have to be reckless. We will continue the policy of ensuring that foreign exchange is made available to those who are importing raw materials, plants and equipment, those supporting the agricultural sector and not those who want to engage in what I can regard as less important sectors.” Eurobond maintains downward trajectory On the other hand, prices of Nigeria’s Eurobond dropped for the third consecutive week, indicating investors may be dumping the bonds.
According to the closing prices and yields of Nigeria’s Eurobond posted by the Debt Management Office (DMO): The 10-year, 6.75 percent Jan 28, 2021 bond lost $.68 while the yield rose to 5.932 percent; the 5-year, 5.13 percent July 12, 2018 bonds lost $.32 while the yield rose to 3.67 per cent; the 10-year, 6.38 per cent July 12, 2023 also lost $0.77 while the yield rose to 6.59 per cent. CBN to sell N242bn treasury bills Meanwhile the CBN will this week sell treasury bills worth N242.4 billion in continuation of liquidity mop up operations.
The treasury bills comprise N45.18 billion worth of 91 day bills, N80 billion worth of 182 days bills, and N117.2 billion worth of 364 days bills. This of course is to moderate the liquidity effect of the inflow of N218.36 billion through payment for matured treasury bills this week. The matured treasury bills comprise N21.15 billion worth of 91 days bills, N80 billion worth of 182 days bills, N117.2 billion worth of 364 bills and N72.9 billion worth of 185 days bills. The combined effect of these developments is expected to moderate down cost of funds in the interbank money market. Last week cost of funds rose marginally despite inflow of N400 billion from statutory allocation funds.
The impact of the inflow was subdued by outflows through treasury bills and FGN bonds auction during the week. Although interest rate on Overnight borrowing dropped to 5.5 per cent last week from 11.63 percent the previous week, the interest rate for I month, 3 month and 6 month borrowing rose respectively to 17.86 per cent (from 17.73), 19.50 percent (from 19.12) and 23.14 percent (from 22.21). Seventh OTC FX Futures Contract matures, settles on FMDQ The 7th Naira-settled OTC FX Futures contract, NG/US JAN 25 2017, with amount $274.39 million, matured and settled on Wednesday, January 25, 2017 on FMDQ OTC Securities Exchange, bringing the total value of contracts so far matured on the OTC Exchange to circa $1.80 billion, and about $5.46 billion worth of OTC FX Futures contracts traded so far.
Designated clearing agent The contract, which stopped trading on Tuesday, January 17, 2017, was valued against the Nigerian Inter-Bank Foreign Exchange Fixing (NIFEX) Spot rate as published by FMDQ on January 25, 2017, with the associated clearing/settlement effected by the FMDQ-designated clearing agent, the Nigeria Inter-Bank Settlement System PLC (NIBSS), in line with the FMDQ OTC FX Futures Market Operational Standards. Whilst businesses, corporates, and other market participants desirous of hedging their FX exposures continue to key into this product, it is expected that the potential of the OTC FX Futures market will be further maximised during the course of the year. The Central Bank of Nigeria (CBN) on the other hand, introduced a new contract, NGUS JAN 31 2018, for $1.00bn at $/N281.50 to replace the matured contract and also repriced its quotes on the existing one to 11-month contracts.