2024-04-04 07:07

MUMBAI, April 4 (Reuters) - The Indian rupee's exchange rate will not be affected by the recent volatility in the currency's exchange-traded derivatives, which was sparked by traders furiously unwinding positions to comply with a central bank rule, four bankers said on Thursday. The considerable volatility in the rupee's exchange-traded derivatives, particularly options, on Wednesday persisted on Thursday as brokers asked clients to unwind positions or provide proof of underlying forex exposure, market participants said. Brokers took this step as they thought that a central bank rule stating exchange-traded rupee derivative transactions can only be used for hedging, meant clients without an underlying forex exposure could not hold such positions once the rule kicks in on Friday. While this forced some traders to square off their existing exchanges positions and disrupted futures and options trading, bankers said this will not have any consequences on the over-the-counter spot dollar/rupee exchange rate. "Futures and options prices have diverged from OTC because no new positions are allowed (on exchange rupee derivatives)," said Anshul Chandak, head of treasury at RBL Bank. "However, that by itself will not have an impact on spot." To impact spot prices, the size of the option position being unwound has to be significant, a treasury official at a private sector bank said. "The risk that the option positions (on exchanges) carry is too low relative to the depth of the OTC market," the official said, declining to be named as he is not allowed to speak to the media. He highlighted that when option prices on exchanges "took off" on Wednesday, the dollar/rupee spot was confined to a narrow range. The spot rose by less than 0.1% on Wednesday and by a similar margin on Thursday to 83.4475, after dropping to a record low of 83.4550. The larger implication of the central bank's hedging rule will be that speculation will cease on exchanges and liquidity will drop, said VRC Reddy, treasury head at Karur Vysya Bank. "It will not affect spot." Keep up with the latest medical breakthroughs and healthcare trends with the Reuters Health Rounds newsletter. Sign up here. https://www.reuters.com/markets/currencies/volatility-indian-rupee-exchange-traded-derivatives-wont-impact-spot-bankers-say-2024-04-04/

2024-04-04 07:05

ZURICH, April 4 (Reuters) - Swiss inflation eased to its lowest level in two-and-a-half years in March, supporting the Swiss National Bank's decision last month to make its first interest rate cut since 2015, official data showed on Thursday. Consumer prices rose by 1% from March 2023, the lowest rate since September 2021 and down from 1.2% in February. It was the 10th month running that inflation has come within the SNB's 0-2% target range. A Reuters poll had forecast a 1.3% reading. Switzerland has been shielded from inflation by the strong franc, with imports declining in price by 1.3% during March. The cost of food, and restaurants and hotels came down. The SNB in March cut its key rate to 1.5% and said it expects inflation to remain low over the next few years. SNB Vice Chairman Martin Schlegel last week said low inflation pressure had enabled the rate cut, and analysts polled by Reuters expect more to follow this year. Month-on-month prices did not change, according to data from the Federal Statistics Office. Another month of low inflation will reassure the SNB it was right to cut rates, but it was too early to sway the next policy decision in June, said UBS economist Maxime Botteron. "The SNB will look more at the inflation situation in May before deciding what to do with rates in June, because then there will be the impact of increased rents in Switzerland," he said. "The SNB will also consider what the ECB and the Fed do. If they cut rates there's more likelihood of the SNB also cutting rates again because it will not want to risk the franc rising in value again," said Botteron, who expects the SNB to cut rates to 1.25% in June and 1% in September. The Reuters Daily Briefing newsletter provides all the news you need to start your day. Sign up here. https://www.reuters.com/world/europe/swiss-inflation-hits-lowest-level-two-half-years-2024-04-04/

2024-04-04 07:01

Short positions on Indonesian rupiah jump sharply Bearish bets on Thai baht at highest since Oct 2022 Investors give up long bets on Indian rupee to turn neutral April 4 (Reuters) - Investors raised short positions on emerging Asian currencies, with bearish bets on the Indonesian rupiah jumping sharply, as the U.S. dollar remained resilient amid uncertainty over the timeline of the Federal Reserve's interest rate cuts, a Reuters poll showed on Thursday. Short positions on the Indonesian rupiah strengthened to their highest since Nov. 2, while those on the Thai baht jumped to their highest since October 2022, according to a fortnightly poll of 11 analysts. Recent solid U.S. manufacturing activity and labour market data have cast a shadow over the quantum of Fed rate cuts this year, supporting the greenback. "Ahead of the non-farm payrolls data on Friday, we believe there continues to be USD buying bias in the FX market," said Ryota Abe, an economist with Sumitomo Mitsui Banking Corp. "Under the circumstances, there are few incentives for traders to buy Asian currencies," he added. Bearish bets on the rupiah firmed on the back of accelerating inflation in Southeast Asia's largest economy. The fall in the currency on Monday had prompted the central bank to intervene in the foreign exchange market. With an imminent move towards the psychological 16,000-level, analysts believe that a rate hike from Bank Indonesia may not be out of the cards. "Speculation is that a one-sided depreciating bias in the currency might revive rate hike bets, akin to the one-off move in October 2023," Radhika Rao, senior economist at DBS said in a note. Elsewhere, Chinese central bank authorities also intervened to prevent further sinking in the yuan , with markets expecting more depreciation in store. Moreover, the baht has come under pressure due to a softer growth in Thailand's tourism-reliant economy, a dividend payout season for foreign investors, and dissenting opinions over rate cuts between the government and central bank, multiple analysts said. Bearish positions on the Taiwan dollar and the South Korean won were a notch higher, reaching their highest since early November. Poon Panichpibool, a markets strategist with Krung Thai Bank, said he expects the Taiwan dollar and the South Korean won to be "quite volatile should tech stocks come under correction, which could happen as these stocks have been rising significantly lately". Meanwhile, investors who had been slightly bullish on the Indian rupee so far this year, have now pared back their bets to turn neutral owing to concerns over the Fed's stance on interest rates. The Asian currency positioning poll is focused on what analysts and fund managers believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar, Indian rupee, Philippine peso, Malaysian ringgit and the Thai baht. The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. A score of plus 3 indicates the market is significantly long on U.S. dollars. The figures include positions held through non-deliverable forwards (NDFs). The survey findings are provided below (positions in U.S. dollar versus each currency): Keep up with the latest medical breakthroughs and healthcare trends with the Reuters Health Rounds newsletter. Sign up here. https://www.reuters.com/markets/currencies/asian-fx-bears-firm-investors-mull-timeline-us-rate-cuts-2024-04-04/

2024-04-04 06:40

NEW DELHI, April 4 (Reuters) - India has paid $1.02 billion as incentives to boost local manufacturing, following over $13 billion in investments from private firms under a scheme introduced in 2020, a top government official said on Wednesday. The 1.97-trillion-rupee ($24 billion) production-linked incentive scheme (PLI) is India's key industrial policy and covers 14 sectors ranging from electronic products to drones. Critical to Prime Minister Narendra Modi's plans to promote India as a global manufacturing hub, the scheme has drawn participation from large global and Indian firms including Apple (AAPL.O) , opens new tab, Foxconn (2354.TW) , opens new tab, Samsung Electronics (005930.KS) , opens new tab, Hindustan Unilever Ltd (HLL.NS) , opens new tab and Reliance Industries (RELI.NS) , opens new tab. It has also helped push mobile phone exports to a record $15 billion in the fiscal year that ended March 31, according to industry estimates. "The scheme has had a good impact and incentive disbursements have also picked up," Rajesh Kumar Singh, top bureaucrat at India's Department for Promotion of Industry and Internal Trade, told Reuters. India has exported goods worth 3 trillion rupees - 3.5 trillion rupees under the PLI scheme, the official said. Production in sectors such as mobile phones, electronics and food processing has "moved faster", while that in white goods and drones has also picked up, he said. Still, textile and specialty steel sectors are seeing some lag and the incentives for those may require tweaks, Singh, whose department oversees the scheme's implementation, said. India regularly reviews the scheme's uptake. There are no "immediate plans" to expand the incentives to other sectors, the official said. ($1 = 83.4350 Indian rupees) The Reuters Daily Briefing newsletter provides all the news you need to start your day. Sign up here. https://www.reuters.com/world/india/india-gives-over-1-bln-incentives-private-firms-under-its-manufacturing-scheme-2024-04-04/

2024-04-04 06:27

TOKYO, April 4 (Reuters) - Japanese lens maker Hoya Corp (7741.T) , opens new tab on Thursday said the production of several of its products have stopped after a system failure, which was "most likely caused by unauthorised access" to its servers. Hoya said the company discovered a system discrepancy in one of its overseas offices on Saturday and confirmed the disruption despite its efforts to isolate affected servers. The company is investigating whether any of its confidential or personal data had been compromised and is cooperating with authorities to resume production as soon as possible, it said in a statement. Hoya's consumer eyeglass lens unit, Hoya Vision Care Co, on Tuesday apologised on its website that it had stopped taking orders for lenses due to a group-wide system failure. Hoya is the world's second-largest eyeglass lens maker, with about 90% of its eyewear lens sales earned from outside of Japan, according to its latest annual report. A Hoya spokesperson declined to say whether any of the company's other optical products, including components for chipmaking equipment and hard disc drives, have been affected by the disruption. The Reuters Daily Briefing newsletter provides all the news you need to start your day. Sign up here. https://www.reuters.com/technology/cybersecurity/japanese-lens-maker-hoya-halts-production-after-cyberattack-2024-04-04/

2024-04-04 06:14

LONDON, April 4 (Reuters) - Traders and investors are looking to global interest rate cuts and a closely-fought U.S. election to drag the world's currency markets from their deepest lull in almost four years. Measures of historical and expected volatility - how much prices move over a set time period - have sunk in recent months with the world's biggest central banks stuck in a holding pattern, depriving FX traders of the divergent moves between regional bond yields on which they thrive. Deutsche Bank's closely-followed implied currency volatility gauge is around its lowest in two years, and not far off pre-pandemic levels. "The music isn't playing in FX so far this year," said Andreas Koenig, head of global FX at Amundi, Europe's biggest asset manager. "U.S. (bond market) rates go up and down, but the others all follow, and therefore we have no change in differentials." "Who's cutting first and how far...and then the U.S. elections, will be the FX events, the big macro events," Koenig said. Central banks are slowly stirring. The Swiss National Bank in March was the first major central bank to lower borrowing costs this cycle. The Federal Reserve, European Central Bank, and Bank of England are expected to follow later this year. Although U.S. yields have risen in recent days as investors reined in bets on Fed rate cuts after stronger-than-expected data, euro zone bond yields have largely followed suit. "What would lead to any real volatility is increased differentiation among central banks," said Samuel Zief, head of global FX strategy at JPMorgan Private Bank, although he said that's unlikely in the first half of the year, with European and U.S. inflation following a broadly similar path. TRUMP CARD Donald Trump also looms large, last year floating the idea of a 10% universal import tariff should the former U.S. President regain the White House and in February adding that he could slap levies of 60% or more on Chinese goods. "Tariffs, extra tax, means the dollar could get stronger," said Themos Fiotakis, global head of FX strategy at Barclays, adding that the euro and the Chinese yuan would likely suffer. Barclays thinks the dollar could rally 3% on the back of tariffs in the event Trump secures a second term and has even said the euro could drop to parity with the U.S. currency. Trump and Joe Biden currently appear neck and neck, suggesting heightened volatility in the $7.5-trillion-a-day global currency market as opinion polls swing in the run up to November's election. Oliver Brennan, FX volatility strategist at BNP Paribas, said options, which let investors bet on currency prices, suggest traders are bracing for moves in the Mexican peso , Polish zloty and the yuan , all of which tumbled after Trump's 2016 victory. "Volatility in the 9-month to one-year range (for those three currencies) is really high, and because nothing is happening now, volatility is really low," he said. "If you look at any currency there is a kink around the November election, but the kink is huge in those three." NOT WORTH TRADING For now, the volatility slump is limiting opportunities. "Looking at our risk today, substantially less than the long-term average is allocated to currency," said Jamie Niven, senior portfolio manager at Candriam. That's particularly true in certain currency pairs. "It's not worth trading euro-sterling at the moment," said Yusuke Miyairi, strategist at Nomura. Volatility in the pair is at its lowest since 2006 . There are, however, signs rate moves are beginning to drive pockets of volatility. The Bank of Japan raised rates for the first time in 17 years in March, but that didn't stop the yen tumbling to near its lowest since 1990 as traders realised Japanese borrowing costs would stay near zero. Strategists said that led to swings in Asian currencies including China's yuan, showing how fluctuations in one area can ripple across the market. Direct intervention by Japanese authorities to prop up their currency could provide another jolt. In Europe, Switzerland's rate cut helped the euro post its biggest quarterly gain on the franc since the common currency's creation. Meanwhile, investors are doing what they can. "If volatility is low, we find carry trade strategies particularly attractive," said Guillaume Rigeade, co-head of fixed income at Carmignac, referring to trades where investors borrow in a currency with low rates to buy higher-yielding ones. He said low volatility also makes it cheaper to hedge an equity or bond portfolio. For JPMorgan's Zief, there have been worse times. "At least we have an environment where yes, it's low volatility, but there are carry trades," he said. "Low volatility with very low rates...is even worse." Keep up with the latest medical breakthroughs and healthcare trends with the Reuters Health Rounds newsletter. Sign up here. https://www.reuters.com/markets/currencies/currency-markets-are-deep-freeze-rate-cuts-trump-could-thaw-them-2024-04-04/