2025-01-10 10:46

LONDON, Jan 10 (Reuters) - Deutsche Bank said investors should sell the pound on a broad trade-weighted basis, in a Friday note, as Britain's current account deficit is no longer improving, and the currency is vulnerable to the recent increase in volatility. The pound has lost nearly 2% this week against a strong dollar to a 14-month low of $1.2239 It has also has also lost ground on the euro and other majors, a reversal after sterling was the second best performing major currency last year behind the dollar. "With the trade-weighted sterling index still sitting just over 2% off its post-Brexit highs, we think there's further to go in the recent pound weakness," Deutsche said. "We like selling GBP against a basket of other major currencies," they said, mentioning the euro, dollar, Swiss franc and Japanese yen. Deutsche had been bullish on the pound until mid December. Sign up here. https://www.reuters.com/markets/currencies/deutsche-recommends-selling-sterling-broad-trade-weighted-basis-2025-01-10/

2025-01-10 10:42

PBOC suspends treasury bond purchases amid global bond selloff PBOC seeking to defend falling yuan, analysts say Analysts expect continued downtrend in bond yields SHANGHAI, Jan 10 (Reuters) - China's central bank suspended treasury bond purchases on Friday, briefly lifting yields and spurring speculation it is stepping up defence of the yuan currency which has been sliding since the election of Donald Trump as U.S. president. The move breaks with five months of buying and coincides with a brutal selloff in global bond markets, suggesting the People's Bank of China is also trying to ensure yields at home rise in tandem, or at least stop falling, analysts say. Yields, which move inversely to bond prices, jumped following the announcement, though benchmark 10-year rates were slightly lower by evening. The policy shift and the market's wary response points to the juggling act PBOC is attempting as it seeks to revive economic growth by keeping cash conditions easy, while also trying to douse a runaway bond rally and simultaneously stabilise the currency amid political and economic uncertainty. "It has indicated a willingness to loosen policy further ... however, (yuan) weakness due to the strong dollar and widening differential with U.S. rates will complicate the PBOC's position," analysts at Commerzbank said in a note. The PBOC cited a shortage of bonds in the market as the reason it was halting the purchases, which were part of its operations to ease monetary settings and boost economic activity. China's 10-year treasury yield initially rose four basis points but was last down by just over half a basis point to 1.619%. The yuan rose slightly though it was last trading flat at 7.3326 per dollar, around a 16-month low. "One of the key reasons for the depreciation of the yuan is the widened yield gap between China and the U.S., so the central bank is sending a signal to the market that the yield rate is unlikely to fall further," Ken Cheung, chief Asian FX strategist at Mizuho Bank. The central bank said in a statement it would resume bond buying via open market operations "at a proper time depending on supply and demand in the government bond market". BUBBLE RISKS Bond prices in China have been on a decade-long rally - one that kicked into a higher gear roughly two years ago as property sector woes and weakness in the stock market triggered a flood of funds flowing into bank deposits and the debt market. This week the market has defied a global selloff, rallying on irresistible demand for safe assets and investors' bets on further rate cuts in the world's second-biggest economy. The PBOC has warned for months about bubble risks as long-dated yields hit successive record lows, though at the same time authorities have foreshadowed further easing. The currency has fallen nearly 5% since September, largely due to worries that Trump's threats of fresh trade tariffs will heap more pressure on the struggling Chinese economy. Huang Xuefeng, research director at Shanghai Anfang Private Fund Co in Shanghai, said he expects the downtrend in bond yields to persist as "the market continues to grapple with an asset famine situation" where there's a shortage of good investment opportunities. On Friday, Financial News, a PBOC publication, quoted an economist as saying that the market should avoid excessive expectations on monetary policy easing. Sign up here. https://www.reuters.com/world/china/chinas-central-bank-halts-treasury-bond-buying-citing-short-supply-2025-01-10/

2025-01-10 10:31

U.S. likely to lag Europe further under Donald Trump U.S. ESG fund flows slide, more anti-climate lawsuits Demand for green innovation to underpin market demand LONDON, Jan 10 (Reuters) - A turbulent year for sustainable finance is set to continue in 2025 as the return of Donald Trump as U.S. president heralds more regional divergence on everything from fund flows to legal cases and market regulations. Despite record high temperatures and more extreme weather events across the planet last year, the policy response by governments still remains too slow to meet the world's near 10-year-old goal of limiting global warming. While regulators everywhere are gradually toughening up the rules that govern finance and companies in the real economy in an effort to cut climate-damaging carbon emissions faster, the pace of change is uneven with the U.S. already lagging Europe. A turbo-charged U.S. political backlash over environmental, social and governance-related (ESG) policies under Trump means that gap could widen even if, in many cases, the economics, companies' near-term emissions reduction pledges and the rising costs of climate events keep the broad direction unchanged. "We anticipate that in 2025, we'll see a resilience for sustainable investment globally, although it's likely that there will remain core differences between the U.S. and Europe's approach," said Tom Willman, Regulatory Lead at sustainability tech firm Clarity AI. "In the U.S., we can expect a more conservative approach, with investors prioritising long-term risk-adjusted returns to avoid potential political or reputational risks." While just over half of U.S. executives expect new or expanded sustainability regulations this year, in Britain that figure is 60% and Singapore 80%, a December survey of 1,600 executives by Workiva showed. The U.S. political reality has already spurred some U.S. firms to curtail their climate and diversity efforts to avoid censure. In the latest sign of corporates changing tack, the biggest U.S. banks recently left a sector coalition aimed at cutting emissions. Legal pressure is also building on the world's climate efforts. One in five climate litigation cases , opens new tab were not aligned with policies to reduce emissions, analysis last year by the Grantham Research Institute on Climate Change and the Environment showed. The majority of these were in the United States. The regional split was evident among sustainable investment in the year to the end of September, with U.S. funds seeing clients withdraw a combined $15.9 billion as European funds took in $37.3 billion, data from industry tracker Morningstar showed. The number of new ESG-focused funds launched in the United States, meanwhile, fell to just 7 against 189 in Europe. Across the world, more sustainable funds were closed than launched for the first time, hit by the U.S. backlash, increasingly tough European Union rules aimed at forcing funds to evidence their sustainability credentials and market consolidation. Demand for sustainable funds lagged the broader market in part because of mixed performance, concerns around whether some funds were as green as they purported to be, regulatory uncertainty and the ESG backlash, said Hortense Bioy, Head of Sustainable Investing Research, Morningstar Sustainalytics. Despite an uncertain outlook given the potential for Trump to water down some ESG initiatives, for example government support for electric vehicles, many of the underlying market drivers of demand for sustainable finance, such as the need for green energy, remained, she added. Charles French, co-chief investment officer at Impax Asset Management, said despite Trump's negative view on climate change - he has called it a hoax - companies in sectors from healthcare and industrials were eyeing climate tech solutions to cut costs. "The era of tech-inspired transformation is not coming to an end. In many areas, it's just getting started," he said. The amount of money raised through sustainable bonds also continued to rise in the Americas, up 16.9%, and Europe, up 10.7%, in 2024, data from LSEG showed. Given the competing pressures, Leon Kamhi, head of responsibility at asset manager Federated Hermes, said he expected investors to "mature" and focus on the impacts being achieved in the real economy. "For the transition to be successful, it is essential that such investments yield economic returns for both companies and investors alike." Sign up here. https://www.reuters.com/sustainability/politics-not-climate-drive-sustainable-finance-trends-2025-2025-01-10/

2025-01-10 10:26

Renewed weak yen may prod BOJ to upgrade price forecast Price forecast upgrade alone won't trigger rate hike in Jan BOJ's focus will be on wage momentum, Trump risk BOJ highlights strong wage momentum in quarterly report BOJ holds policy meeting Jan. 23-24, to release new f'casts TOKYO, Jan 10 (Reuters) - Prospects of sustained wage gains in Japan and the boost to import costs from a weak yen have heightened attention within the central bank to rising inflationary pressures that may lead to an upgrade in its price forecast this month, sources said. Even if the Bank of Japan were to raise its inflation forecast, the upgrade alone won't lead to an interest rate hike if it is driven by temporary factors such as the rising price of rice and higher import costs, said three sources familiar with the bank's thinking. The BOJ could hike rates this month if the board is convinced that sustained, broad-based wage hikes will take hold, and keep inflation durably at its 2% target, they said. "Risks to inflation are skewed to the upside due partly to renewed yen falls," said one of the sources, a view echoed by another source. "Wage momentum also appears to be strong," a third source said, adding the board may discuss revising up its inflation forecast for the fiscal year beginning in April. The BOJ will likely debate whether to raise interest rates from the current 0.25% at its policy meeting on Jan. 23-24. It will also issue fresh quarterly growth and price forecasts that serve as the basis for setting monetary policy. Under current forecasts, the board expects core consumer inflation to hit 1.9% for both fiscal 2025 and 2026. While the board has yet to discuss details of its forecasts, recent data and surveys have pointed to rising inflationary pressures. The yen is currently hovering at 158 to the dollar, down from around 140 hit in September and near levels hit when the BOJ hiked rates in July last year. Core inflation accelerated in November to 2.7% as the weak yen pushed up import costs, adding to stubbornly high prices of rice. Rising wages are adding to inflationary pressure, backing up the BOJ's argument that Japan is on track to sustainably achieve its 2% inflation target - a prerequisite for further rate hikes. Wage hikes are spreading to companies of all sizes and sectors, the BOJ said in a quarterly report on Thursday, signaling that conditions for a near-term rate hike were continuing to fall into place. "The need to raise pay is more widely shared among small firms," Kazushige Kamiyama, the BOJ's Osaka branch manager, told a news briefing on Thursday. "We can expect solid wage gains this year." While such optimism heightens the chance of a rate hike at the BOJ's January meeting, Governor Kazuo Ueda has flagged uncertainty over U.S. President-elect Donald Trump's policy as a reason to tread cautiously in pushing up borrowing costs. If comments and policies announced after Trump's inauguration on Jan. 20 trigger volatile market moves, the BOJ could put off hiking rates again, some analysts say. Markets are focusing on BOJ Deputy Governor Ryozo Himino's speech and news conference on Tuesday, for fresh hints on whether the bank could hike rates this month. Sign up here. https://www.reuters.com/world/japan/rosy-wage-outlook-weak-yen-drawing-boj-attention-inflation-risks-2025-01-10/

2025-01-10 10:24

MUMBAI, Jan 10 (Reuters) - The Indian rupee slipped to its all-time low on Friday as the dollar stood firm ahead of closely watched U.S. labour market data, keeping regional currencies on the defensive. The rupee weakened to 85.97 against the U.S. dollar, inching past its previous record low of 85.9325 hit on Thursday. The currency ended at 85.9650, down 0.2% on the week and logged its tenth consecutive weekly loss. The local unit has faced persistent headwinds over recent weeks on the back of a surging dollar and weak capital flows. However, routine interventions by the Reserve Bank of India have helped limit losses. State-run banks were spotted offering dollars on Friday as well, most likely on behalf of the RBI, three traders told Reuters. The rupee's fall below the psychologically important 86 level is likely "sooner rather than later," a trader at a foreign bank said. The dollar index held north of the 109-handle, hovering close to a two-year peak ahead of U.S. non-farm payrolls data. The data will influence expectations of the pace and depth of rate cuts by the Federal Reserve this year. "We think the balance of risks is tilted to the upside for the dollar today, as robust jobs figures could prompt markets to price out a March cut and potentially push the first fully-priced move beyond June," ING Bank said in a note. Expectations surrounding the incoming U.S. President's policies and slower rate cuts by the Fed have boosted the dollar and U.S. bond yields over recent weeks. Meanwhile, foreign investors have pulled out over $3 billion from Indian stocks and bonds so far in January. Both factors have kept the rupee under pressure with gauges that measure the currency's volatility also ticking higher in the one month since the change of guard at the Reserve Bank of India. Sign up here. https://www.reuters.com/markets/currencies/india-rupee-hits-lifetime-low-falls-10th-straight-week-2025-01-10/

2025-01-10 09:09

BERLIN, Jan 10 (Reuters) - The German trade surplus with the United States is heading towards a record level just before U.S. President-elect Donald Trump arrives at the White House, an analysis of statistics office data showed. While the German statistics office published trade data for November on Thursday, Reuters calculations of 11 month figures showed that between January and November German trade surplus with the U.S. exceeded 65 billion euros ($66.95 billion), well above the previous 63.3 billion euro record reported for the full year 2023. "German exports to the U.S. have developed very well in recent months and are now at a record level," said Jens Suedekum from the Duesseldorf Institute for Competition Economics (DICE). The trend could reverse, however, after Trump's inauguration on Jan. 20, as the Republican has promised to impose tariffs of 10% on global imports, in measures he says would boost U.S. manufacturing. Last month, he also said European Union countries would face more tariffs unless the bloc stepped up imports of U.S. oil and gas. "No European country will be as badly affected as Germany," Suedekum said. "He will erect trade barriers and ask German industrial conglomerates, such as car manufacturers, to relocate their production to the USA." Reuters calculations showed that in the first 11 months of this year, German exports to the United States increased by 2.3% to 149.9 billion euros compared with the same period of 2023, consolidating the U.S. position as the top buyer of goods "Made in Germany". "This is also a result of the economic boom in the U.S. and the targeted offensive of the Biden administration to re-establish modern industrial production in the U.S.," said Suedekum. ($1 = 0.9709 euros) Sign up here. https://www.reuters.com/markets/europe/germanys-trade-surplus-with-us-reaches-record-high-trump-tariffs-loom-2025-01-10/