2025-07-03 04:36

Investors cut long yen position by 25% since April-end BOJ's cautious stance on hike-path leaves yen in limbo for now Yen likely to strengthen but near term headwinds to persist SINGAPORE, July 03 (Reuters) - Global investors are unwinding their wagers on Japan's yen rising quickly as a cautious central bank, a trade war and the prohibitive cost of holding the currency sour one of the year's most popular trades. Most analysts and real money investors remain convinced the yen will eventually appreciate as Japan shifts away from ultra-low rates. But pitted against this conviction are short term headwinds, including the lack of progress on a trade deal with the United States and uncertainty surrounding Japanese national elections. Sign up here. Monetary policy has become the yen's biggest sticking point after the Bank of Japan (BOJ) has hinted it is loath to raise rates again this year, having done so in January, before it can gauge the full impact of U.S. President Donald Trump's sweeping tariffs. James Athey, London-based fixed income manager at Marlborough, has reduced his long yen positions versus the dollar because he sees short-term positioning in the currency and the BOJ's "intransigence" as headwinds. "Ultimately we do still see numerous long-term tailwinds for the yen, it's just about managing the journey amongst this uncertainty and volatility," he said. Investors still hold net long positions in the yen worth $11.41 billion, although that's drastically lower than the record $15.7 billion at the end of April, weekly data from the U.S. markets regulator showed. By virtue of low Japanese yields and huge offshore investments, the yen has historically been sensitive to overseas interest rates. The yawning gap between the U.S. and Japanese interest rates in the past few years had driven the yen to record lows, prompting costly interventions from Tokyo. That gap also makes owning the yen, whose bonds pay 0.5% on average, using U.S. dollars that cost upwards of 4%, an expensive proposition for investors. If the yen depreciates, it's a double-whammy. Bo Zhuang, global macro strategist for Loomis Sayles, an affiliate of Natixis Investment Managers, said investors expected at the beginning of the year the long yen trade would work well over three to six months. "But now it's about 'oh well, maybe it will last more than that' and the cost of holding such a position might be too high for them to recover." SHIFTING EXPECTATIONS At the start of 2025, market expectations were for Japan to raise rates quickly and for the U.S. Federal Reserve to start cutting rates later in the year. Yen buyers were rewarded when Trump's sweeping trade tariffs in April jolted markets, shook investors' faith in the U.S. dollar and caused a swift 9% rise in the yen from levels near 160 per dollar, its strongest first-half performance since 2016. But the yen has been meandering since then as the BOJ turned cautious. "The trade faces a negative carry because of the interest rate differential and needs to be actively managed," said Matthias Scheiber, senior portfolio manager at Allspring Global Investments, who reduced his long yen position. But Scheiber reckons any sell-off in yen is an opportunity to buy it. "We still like the trade, despite the fact that over the last couple of weeks, it was basically trading flat," said Scheiber, who is also the head of the multi-asset solutions team at Allspring. In the derivatives market too, options betting on a higher yen cost more, in a sign of bullishness on the currency. Interest in low-cost yen options that deliver outsized payoffs if the currency strengthens sharply has jumped. The yen's trajectory will heavily depend on where U.S. duties end up after Trump this week cast doubt over a possible deal with Japan. He also suggested a tariff of 30% or 35% on imports from Japan - well above the previous 24% tariff rate. A high tariff rate will stifle Japan's major auto exports and make the BOJ's path towards shifting away from decades of ultra-low rates even more perilous. "I think the yen is waiting for catalyst in terms of how the US-Japan trade negotiations go because I think that's a road block for policymakers," said Moh Siong Sim, currency strategist at Bank of Singapore. "Yen has always been alternating between super excitement and super disappointment." https://www.reuters.com/business/japans-yen-is-compelling-trade-comes-cost-2025-07-03/

2025-07-03 04:13

Risk events piling up for markets in weeks ahead EU-tariff deal a coin-toss but dollar exposed either way - investors U.S. payrolls data may spark biggest market flare-up Euro zone and UK debt anxiety rising before French budget vote LONDON, July 3 (Reuters) - Big investors are mobilising to trade through weeks packed with wild-card events that may shatter the calm in stock markets and drive big swings for assets they see as exposed to both positive or negative surprises, from gold to corporate credit. U.S. Treasuries, the dollar, yen and euro zone debt may also turn volatile, investors said, Thursday's U.S. jobs data is followed by next week's crunch U.S.-European Union tariff deadline and then an unpredictable French budget vote. After that, markets face an August 12 deadline for U.S.-China talks to achieve a trade deal. Sign up here. "I can't think of a time in my history in markets, which is pretty long, where you've had so much risk and so little risk premium," said Insight Investment head of investment specialists April La Russe, referring to the compensation for holding risky assets over cash. Here's a look at how investors are gaming out potential market flare-ups in the days and weeks ahead. TARIFF TREMORS Russell Investments global head of solutions strategy Van Luu said market participants were pricing a mildly positive outcome on July 9, with the U.S. and EU either settling for 10% universal tariffs or postponing a resolution, as the U.S. had with China. He had turned negative on corporate credit because yields were underpricing the economic risks of ongoing tariff uncertainty, he said. With Brussels now pushing for exemptions for key EU export sectors, the worst case scenario was a deadlock and markets starting to fear reciprocal tariffs, he said. Amundi global head of macro Mahmood Pradhan, a former IMF deputy director for Europe, said the July 9 outcome was a coin-toss but a benign result was already priced into risky assets. World stocks(.MIWD00000PUS) , opens new tab have rebounded and are up 24% since a low of April 8, soon after U.S. President Donald Trump delivered his "Liberation Day" April 2 bombshell of tariffs on imports from around the world. "Given the rally we've had, there might not be more upside," Pradhan said. DOLLAR, TREASURIES, GOLD Any outcome on July 9 could hit the dollar and spark cross-currency volatility, investors said. The greenback is already down some 10% against other major currencies so far this year . Treasuries would suffer if talks broke down in a threat to world trade, Artemis head of fixed income strategy Liam O'Donnell said. A long and steady accumulation of Treasuries by overseas investors and central banks has been partly driven by the dollar's dominant position in global trade flows. Gold, (.XAU) , opens new tab which has soared by more than 25% year-to-date to $3,344 as investors piled into the precious metal to hedge portfolios against inflation and recession risks sparked by high tariffs, is also vulnerable to a positive EU tariff outcome. "We could see profit taking (on gold) by real money investors and also hedge funds," Edmond de Rothschild multi-asset head Michael Nizard said. DATA JOLTS While latest U.S. payrolls data is released on Thursday, the next official payrolls report on Aug. 1 could be a bigger jolt to world markets than tariffs, coming at a time of holiday-thinned trade, investors added. "In terms of what would produce the biggest market surprise, I think it's actually U.S. data because that has been flying under the radar," Russell's Luu said. Artemis' O'Donnell said the upcoming U.S. job reports were the biggest event risk for markets. Luu said gauges of expected volatility in some world currencies seemed too low, particularly those expressing how Japan's yen, which can rip higher when U.S. rate cut bets build, might swing against the dollar and the euro in the months ahead. EUROPE DEBT STRESS There are also crunch dates for Europe that could revive anxiety about debt stress, overshadowed so far by investors tapping assets such as triple-A rated German Bunds as Treasuries' haven appeal has diminished. French Prime Minister Francois Bayrou survived his eighth no confidence motion on Tuesday but investors are wary about his chances of getting a plan to trim the euro zone's biggest budget deficit on July 14 through a parliament rocked by right-wing rebellions. Germany's stimulus bonanza is also now rolling, with an upper house vote on business tax breaks on July 11. Benchmark Bund yields are about 25 basis points (bps) higher so far this year to around 2.62% given expectations for increased bond sales to fund extra borrowing. The extra yield bond investors demand for lending to France over Germany, at 70 bps now , might be too low given the immediate French budget risk ahead. "We prefer an underweight position in French sovereign bonds in the near term," RBC Wealth Management investment strategy head Frédérique Carrier said. And Britain is also back on the watch-list as government U-turns on welfare reforms threaten a budget blowout, sparking fresh bond selling. https://www.reuters.com/legal/transactional/global-markets-risk-events-graphic-2025-07-03/

2025-07-03 03:01

MUMBAI, July 3 (Reuters) - The Indian rupee is likely to open marginally higher on Thursday, supported by an uptick in most Asian currencies on optimism over signing trade deals with the United States before the tariff deadline. The 1-month non-deliverable forward indicated an open between 85.60 and 85.64 versus 85.7025 in the previous session. Sign up here. U.S. President Donald Trump announced an agreement with Vietnam that cuts U.S. tariffs on many Vietnamese goods to 20% from his previously announced 46%. The deal has sparked hopes that other countries, including India, will be able to negotiate trade deals with Washington before July 9 when Trump's 90-day pause on so-called reciprocal tariffs is set to expire. Most Asian currencies traded higher, while equities were mixed. The U.S. and India are pushing for a trade pact after Trump's deal with Vietnam. Trump threatened a 26% duty on Indian goods under his reciprocal tariff plan, with the rate temporarily lowered to 10% to allow time for negotiations. "If the India-U.S. deal is done, it will be more of a relief for the rupee and nothing beyond that," a currency trader at a bank said. "I don’t expect a major move if the deal materialises. The bigger reaction will come if it doesn’t." Meanwhile, in a boost for Asian currencies and risk assets, weaker-than-expected U.S. private payrolls data strengthened the case for a Federal Reserve rate cut in the coming months —possibly as early as this month. U.S. private payrolls unexpectedly fell in June, the ADP National Employment Report showed on Wednesday. "There is an increased near-term focus on the labour market.. the question is whether this weakness will be corroborated by tomorrow’s labour market report, or if the data will indicate resilience," ANZ Bank said in a note. The U.S. non-farm payrolls data for June is due Friday. KEY INDICATORS: ** One-month non-deliverable rupee forward at 85.72; onshore one-month forward premium at 10 paise ** Dollar index marginally up at 96.77 ** Brent crude futures down 0.9% at $68.5 per barrel ** Ten-year U.S. note yield at 4.26% ** As per NSDL data, foreign investors bought a net $129.1 million worth of Indian shares on July 1 ** NSDL data shows foreign investors sold a net $37.4 million worth of Indian bonds on July 1 https://www.reuters.com/world/india/rupee-supported-by-hopes-india-us-trade-deal-weak-us-jobs-data-2025-07-03/

2025-07-03 00:46

BUENOS AIRES, July 2 (Reuters) - Argentina will limit the supply of natural gas for industrial use as residents braving a recent cold snap are using more energy to heat their homes, the South American nation's energy secretariat said on Wednesday. The coldest weather in 30 years has created record demand, with the National Gas Regulatory Entity (Enargas) expecting Wednesday's usage to be 25% higher than the same day last year. Sign up here. "Distributors... were forced to interrupt supplies to CNG (compressed natural gas) contracts and industries," the secretariat said. The government of President Javier Milei, which slashed energy subsidies as part of its public spending cuts, blamed the situation on the lack of infrastructure investment in previous years. In Argentina, as well as in its neighbors Chile and Uruguay, the cold weather caused unexpected snowfall in some areas. https://www.reuters.com/business/energy/argentina-cuts-industrial-gas-supply-amid-record-cold-snap-2025-07-03/

2025-07-02 23:01

WELLINGTON, July 3 (Reuters) - The north of New Zealand's South Island was bracing for more heavy rains on Thursday, with a few homes evacuated and local authorities warning of landslides and surface flooding. New Zealand's Nelson and Tasman regions were hit by heavy rains at the weekend, which caused significant flooding in rural areas and resulted in a local state of emergency being declared to deal with the disaster. Sign up here. Further heavy rains are now forecast for the regions, as a wild weather system that pummelled Sydney on Tuesday and Wednesday and led to dozens of flight cancellations moved toward New Zealand. New Zealand weather forecaster Metservice has issued a heavy rain warning for the Nelson and Tasman regions from the early morning to early evening on Thursday with further lighter rain forecast for the following day. Nelson Tasman Controller Alec Louverdis told Radio New Zealand it was not clear how severe the weather might be Thursday "so precaution is the priority." He warned that as the land was already wet, it would not take much for things to get bad. Nelson Tasman Emergency Management Group said in a statement that river levels remain steady but they were continuing to monitor them. Metservice also has heavy rain warnings in place for the central and east coast of New Zealand's North Island. https://www.reuters.com/business/environment/new-zealands-south-island-braces-further-heavy-rains-some-homes-evacuated-2025-07-02/

2025-07-02 22:44

Nasdaq closed up 0.94%; S&P 500 rose 0.47%; Dow falls 0.02% Centene tumbles after pulling 2025 forecast Tesla climbs, bouncing from decline early in week NEW YORK, July 2 (Reuters) - The S&P 500 and Nasdaq closed at record highs on Wednesday, boosted by gains in technology stocks and a trade agreement between the U.S. and Vietnam that eased concerns over prolonged trade tensions. The Dow Jones Industrial Average closed slightly lower but remained within 1.18% of its December 4 record close. Sign up here. Wall Street has logged a string of record highs in recent weeks, reflecting a backdrop of choppy trading sessions and strong investor appetite for risk amid uncertainties around inflation, deficit and policy. Nasdaq renewed its June 30 record, boosted by Nvidia (NVDA.O) , opens new tab, Apple (AAPL.O) , opens new tab and Tesla (TSLA.O) , opens new tab. TSLL, a high-risk leveraged exchange-traded fund that delivers twice the daily return of Tesla stock and is designed for short-term trading, was among the most negotiated stocks. Investors will now look ahead to the non-farm payrolls report on Thursday for clues on how soon the Federal Reserve could lower borrowing costs. A weakening economy "is a very mixed bag", said Jim Awad, senior managing director at Clearstead Advisors LLC in New York. "Employment softening and inducing the Fed to lower rates would be a positive," he said. "But if it softens too much, that would be a negative for growth and profits." Trump's massive tax-and-spending bill headed to the U.S. House of Representatives for possible final approval after the Senate passed the legislation. Nonpartisan analysts say it will add $3.4 trillion to the national debt over the next decade. Markets opened lower after a non-key indicator showed U.S. private payrolls fell unexpectedly in June and job gains in the prior month were smaller than initially thought. But they reversed course before lunch time as the U.S. and Vietnam struck a trade agreement that sets 20% tariffs on many of the Southeast Asian country's exports. The Trump administration has teased that a deal with India is also coming soon, but has said others may not be ready by July 9. Investors have been closely watching trade developments, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston. "There is some relief in regards to progress on trade. The deal with Vietnam was welcomed news," Arone said. The S&P 500 (.SPX) , opens new tab gained 29.41 points, or 0.47%, to 6,227.42 and the Nasdaq Composite (.IXIC) , opens new tab gained 190.24 points, or 0.94%, to 20,393.13. The Dow (.DJI) , opens new tab fell 10.52 points, or 0.02%, to 44,484.42. There were 358 new highs and 41 new lows on the New York Stock Exchange. Tesla rose 5%, bouncing after a drop early this week, even as the electric vehicle maker posted a big drop in second-quarter deliveries. Some traders said the numbers were less severe than analysts' bleak forecasts. The stock has shed more than 20% this year. Centene (CNC.N) , opens new tab tumbled 40% to the lowest level in eight years after the health insurer said it had withdrawn its 2025 earnings forecast after data showed a significant drop in expected revenue from its marketplace health insurance plans. The focus is on the more comprehensive non-farm payrolls report on Thursday, a day earlier than usual, with markets closed on July 4 for Independence Day. The reading is expected to show U.S. job growth cooled in June and the unemployment rate ticked up to 4.3%, according to a Reuters poll of economists. "Investors are likely expecting this will push the Fed towards cutting rates sooner rather than later," Arone said. Volume on U.S. exchanges was 16.95 billion shares, compared with the 17.82 billion average for the full session over the last 20 trading days. https://www.reuters.com/business/futures-inch-higher-investors-eye-trade-deals-payrolls-data-2025-07-02/