Rebound In Equities, Dollar Strengthens,

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Rebound In Equities, Dollar Strengthens,

Asian equity markets fell yesterday after a broad global rally, but the dollar strengthened against most other currencies as traders become increasingly confident the Federal Reserve will hike interest rates this month.
Investors took their cash off the table on profit-taking Thursday after the previous day’s surge fuelled by Donald Trump’s address to Congress, in which he promised massive infrastructure spending and tax cuts.
But with Fed boss Janet Yellen due to speak Friday the greenback has bounced back as experts say the bank is odds-on to tighten monetary policy in the face of an improving US economy.
Comments from three top Fed officials, including a noted dove, have cemented those expectations.
“The Fed rate hike balloon has successfully been floated, and the market has continued to reprice the March rate hike probability fuelled by the dove of doves, Lael Brainard, who came out ‘hawks-a-blazing’ at exactly the appropriate time,” said senior OANDS trader Stephen Innes in a note.
“With Brainard flying the dove’s coup, she has tipped the scales in overwhelming favour of a rate hike as the market now views March as fait accompli.”
The dollar, which has swung wildly as investors try to gauge Trump’s plans and veiled Fed messages, broke above 114 yen for the first time in two weeks in Asia on Thursday and pressed on through the day.
In Tokyo it was down against the yen but well up from the levels below ¥112 touched earlier in the week, while it maintained recent gains against the euro and pound.
However, it surged against higher-yielding and emerging market currencies.
It jumped more than 1% against South Korea’s won, 0.2% on the Indonesian rupiah and 0.8% versus Australia’s dollar.
The New Zealand and Singapore dollars were also sharply lower.
Share traders headed for the door ahead of the weekend, after the week’s surge. Tokyo ended 0.5% lower, with dealers brushing off news that Japanese consumer prices rose last month for the first time in almost a year.
However, Nintendo jumped 3.7% as its new console went on sale yesterday, with gamers queueing outside stores around Japan.
Hong Kong sank 0.7%, while Shanghai ended 0.4% off, Singapore shed 0.7% and Sydney dived 0.8%.
Seoul slipped 1.1% following a report by Yonhap that China had told travel agents to stop selling packages to South Korea as the two countries face off over the deployment of a controversial US missile defence system.
There were also big losses in Taipei, Wellington and Manila.
The losses follow selling in Europe and New York, where all three main indexes again hit record highs this week.
“The markets are in the short-term overextended,” Mark Matthews, Singapore-based head of Asia research at Bank of Julius Baer, told Bloomberg News.”Longer term, the reason why rates are going up is because the economy is getting better, and that’s good for stocks.”
Oil prices edged up marginally after tumbling more than 2% Thursday in reaction to the stronger dollar — which makes the commodity more expensive for holders of other currencies — and news that Russia was well short of its promised output cuts.
Despite agreeing to slash production as part of a deal with global producers to address a global glut, Moscow’s reductions were only a third of what it pledged in January and February.
In Tokyo, the Nikkei 225 down 0.5% to 19,469.17 points; Hong Kong — Hang Seng down 0.7% to 23,552.72 points and Shanghai — Composite down 0.4% to 3,218.31 points at the close yesterday.

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Rupee gains 7 paise against dollar on rebound in equities

The rupee on Wednesday appreciated by 7 paise to settle at 71.24 against the US dollar following gains in the domestic equity market.

The rupee on Wednesday appreciated by 7 paise to settle at 71.24 against the US dollar following gains in the domestic equity market.

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Forex traders said rupee consolidated in a narrow range as market participants are assessing the economic implications of the coronavirus outbreak and awaiting cues from the Union Budget.

At the interbank foreign exchange market, the local currency opened at 71.23. During the day, the local unit saw a high of 71.17 and a low of 71.29. The domestic unit finally settled at 71.24, up 7 paise from its previous close.

The rupee had settled at 71.31 against the American currency on Tuesday.

“Indian rupee gained as risk sentiment recovered amid a rebound in the global and domestic equities. Market players assessing the economic implications of the coronavirus outbreak,” said V K Sharma, Head PCG and Capital Markets Strategy, HDFC Securities.

Meanwhile, Australian scientists said on Wednesday they have successfully recreated the novel coronavirus in a lab, for the first time outside China, a “significant breakthrough” which they say may help combat the deadly virus that has claimed over 130 lives and infected thousands.

Sharma further said that strong foreign fund flows also supported strength in rupee as they have bought USD 2.21 billion equities so far this month.

“Rupee consolidated in a narrow range ahead of the important Union Budget that will be released later this week,” said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.

Somaiyaa further said that on the domestic front, market participants will be keeping an eye on fiscal as well as GDP number.

“Expectation is that the number could disappoint and that could keep the rupee weighed down against the US dollar. We expect the USDINR(Spot) to quote in the range of 71.05 and 71.50,” he said.

Meanwhile, the global crude benchmark Brent Futures rose 0.82 per cent to trade at USD 60 per barrel.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose by 0.08 per cent to 98.09.

The 10-year Indian government bond yield was at 6.57 per cent.

Crude prices have seen some moderation in the past few sessions over demand slump amid rising coronavirus cases in China and other regions.

On the domestic equity market front, the 30-share BSE Sensex rallied 231.80 points, or 0.57 per cent, to finish at 41,198.66. Likewise, the broader NSE Nifty closed 73.70 points, or 0.61 per cent, higher at 12,129.50.

Foreign institutional investors sold equities worth Rs 1,014.27 crore on a net basis on Wednesday, according to provisional exchange data.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 71.3263 and for rupee/euro at 78.6211. The reference rate for rupee/British pound was fixed at 93.0918 and for rupee/100 Japanese yen at 65.41.

Energy drags on US equities, dollar strengthens

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There was a distinct lack of, well, energy in Tuesday’s trading session.

Major indices closed down on the day, with the energy sector leading the decline following comments from Saudi Arabia’s energy minister signalling that emboldened US shale developers may undermine efforts to shore up oil prices.

The Dow Jones Industrial Average shed 0.15 per cent from the open to close at 20,923, and the S&P 500 and Nasdaq each followed with declines of approximately 0.3 per cent apiece, to 2,368 and 5,833 respectively. Some of the biggest laggards of the day were energy companies, with that sector falling about 0.9 per cent on both the Dow and S&P 500.

The falls come amid a flurry of news out of the CERAWeek by IHS Markit conference, a gathering of the global energy who’s-who in Houston, Texas. Saudi Arabia’s energy minister Khalid al-Falih told executives that his country’s participation in an international agreement to cut crude output was reinvigorating rivals in the US shale patch, the FT reported, a development that could undermine efforts to stabilise a weak oil market.

Healthcare shares also failed to regain much of the ground they lost earlier in the day following a tweet from President Donald Trump declaring yet again his intention to bring down drug prices.

The global Brent benchmark price declined 0.2 per cent on the day to $55.88 a barrel, while the US benchmark West Texas Intermediate down about the same amount, to $53.10.

The dollar was also gaining ground for the second straight day, climbing 0.14 per cent to 101.78. The 10-year Treasury note saw yields tick up 1.1 basis points to hit a yield — which moves in the opposite direction of its price — of 2.51 per cent.

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Pound strengthens against the dollar and euro on Brexit day

THE pound has strengthened in value against the dollar and the euro as the UK prepares to leave the European Union.

The historical event of Brexit is taking place at 11pm tonight and we will then enter the so-called transition period until December 2020.

Read our Brexit day live blog for all the latest news and updates

By 5pm on Friday the pound was up about 0.41 per cent against the euro and 0.74 per cent against the dollar.

At the time of writing, £1 would buy you about €1.19 and $1.31.

But even though it’s a big political event, financial experts said they don’t expect Brexit to have any impact on the exchange rate tonight.

That’s because Brexit has been “fully priced in” and the markets have been building up to this moment for three years.

Michael Brown, currency expert at international payments and foreign exchange firm Caxton FX told The Sun: “The pound gained quite a lot of ground yesterday after the Bank of England left rates unchanged.

“It indicated that it is prepared to wait and see if the bounce in the economy we saw lately will continue.

“The UK leaving the EU is the biggest event on the calendar today but I can’t see it having any effect on the currency exchange.

“The departure has been fully priced in since the December election.”

Nigel Green, CEO of financial advisory organisation deVere Group, agreed: “The markets have fully priced-in Brexit day and the pound will, therefore not be immediately impacted at the moment the UK officially leaves the EU.

“That said, we can expect some volatility throughout the next 11-month transition period as we move into unchartered territory.”

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Ian Strafford-Taylor, of international money specialist Equals, added that the pound will remain “vulnerable” in months to come.

He said: “In less than a week we’ll be entering unchartered territory for the pound which leaves it vulnerable to further turbulence against the euro and other currencies and makes it difficult to predict exactly what will happen next.”

“There is a lot of work for the pound to do to reach pre-referendum heights but whether or not it’s able to regain those rates depends largely on the trade deals the UK strikes with other countries after leaving the EU on Friday.”

In comparison to pre-referendum levels in June 2020, Brits could then get $1.588 or €1.4271 for £1.

Overall, the pound ended last year roughly 2 per cent higher against the dollar.

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