2024-01-15 07:21

MUMBAI, Jan 15 (Reuters) - The Indian rupee climbed to a more than four-month high and forward premiums were at the highest since May on the back of bets that the U.S. Federal Reserve will cut rates rapidly this year. The rupee was at 82.8450 to the U.S. dollar at 12:24 p.m. IST, up from 82.9225 in the previous session. The last time the rupee had printed a daily decline was on Jan. 2 when it was at 83.35. Investors have piled on to bets that the rupee will rally, boosting the currency. "I am sure that this has been a surprise to many people. A number of supports (on USD/INR) have been taken out and more importantly, we are seeing decent-sized moves," an FX trader at a bank said. The USD/INR one-year implied forward rose to 1.93%, now up 18 basis points this month. The fall in U.S. Treasury yields has pushed forward premiums higher. The two-year U.S. yield dipped more on Friday after the U.S. wholesale inflation data propped up bets that the Fed will cut rates in March at each successive meeting this year. The odds of a Fed rate cut at the March meeting are now at near 80% and a total of 160 bps of rate cuts have been priced in for the year. "(US) rate cut probabilities could determine the next leg in the rupee move," Srinivas Puni, managing director at QuantArt Market Solutions, said. The focus this week will be on Fed Governor Christopher Waller's speech on Tuesday. "Widely considered one of the more hawkish Fed members, Waller's last speech in late November was an important part of the market's belief that the Fed will lower its policy rate this year. His 'pivot' was a preview for the more meaningful shift at the December Fed meeting," HSBC Bank said in a note. https://www.reuters.com/markets/currencies/rupee-forward-premiums-continue-their-march-higher-2024-01-15/

2024-01-15 06:53

81% chance of Fed rate cut rates in March- CME's Fed watch tool Palladium prices may rally modestly this year - HSBC Jan 15 (Reuters) - Gold prices advanced on Monday, as the metal's appeal was boosted by safe-haven demand owing to tensions in the Middle-East, while markets raised bets that the Federal reserve will cut rates sooner than expected. Spot gold was up 0.2% at $2,053.00 per ounce, as of 1026 GMT. U.S. gold futures rose 0.3% to $2,057.50, with trading expected to be low due to the Martin Luther King Day holiday. The war between Israel and Hamas has passed the 100-day mark as Israel continues its fierce offensive, while the Houthi militia's threat to respond to U.S. air strikes on Yemen kept risks elevated. Gold tends to perform well during economic turmoil, with reliability that can help offset the risk of more volatile assets in conditions such as geopolitical uncertainty. "Spot gold is also rising as markets cling on to hopes that the Fed will cut its benchmark rates as early as March," said Han Tan, chief market analyst at Exinity Group. "Gold's window for posting fresh record highs should remain open as long as the Fed can move in line with market expectations," Tan added. Bullion hit an all-time high of $2,135.40 on Dec. 4. Supporting gold, data on Friday showed U.S. producer prices unexpectedly fell in December, sending 10-year Treasury yields lower. Traders are now pricing in an 81% chance that the Fed could cut rates in March, according to CME's Fed watch tool. Higher interest rates raise the opportunity cost of investing in non-yielding bullion. In other metals, spot silver rose 0.2% to $23.21 per ounce, platinum climbed 0.7% to $911.58, palladium gained 0.4% to $979.57. "Despite gradual shift towards surplus, we believe (palladium) prices may rally modestly this year," HSBC said in a note. https://www.reuters.com/markets/commodities/safe-haven-gold-gains-renewed-fed-cut-bets-2024-01-15/

2024-01-15 06:51

MUMBAI, Jan 15 (Reuters) - Investors are betting that India's rupee will break out of its narrow range and rally this year, and are expressing that view via currency options. Volumes in the dollar-rupee options market have surged in the first few trading days of 2024, and the direction of these trades shows market participants expect the rupee to rise, escaping the central bank-induced narrow range of last year. The rupee, on Monday, climbed to 82.7800 to the U.S. dollar, its highest in more than four months. It has gained 0.4% so far in January, while other major Asian currencies have fallen 1% to 1.5%. The notional value of over-the-counter dollar-rupee (USD/INR) options traded in the United States so far in January is already 1.5 times that of December. Firms are required by U.S. law to report such trades to Swap Data Repositories. "Offshore, nearly all banks are calling on their clients to take long positions (on the rupee), whether via outright or put (USD/INR) options," a portfolio manager at a Singapore-based hedge fund said. A put option entitles the buyer to sell the currency pair at a particular rate, called the strike price, in the future. The buyer pays a small premium for this option. Options are popular alternatives to betting on a currency, providing a different payoff compared to outright bets. The loss for an option buyer is limited to the premium paid. The dollar/rupee volatility skew indicates the preference for bets that the Asian currency will rise. The three-month risk reversal turned negative in December, indicating investors are willing to pay more for betting that the rupee will rise. The Reserve Bank of India's (RBI) stranglehold on the rupee throughout last year thwarted expectations of a rally to match the country's healthy macros and robust inflows into the equity and debt markets. That drew criticism from the International Monetary Fund, which reclassified India's currency regime to a 'stabilized arrangement', from 'floating', in December. The rising interest in put options is primarily based on bets that the "frequency of RBI intervention will come off, following the IMF's criticism", the hedge fund portfolio manager said. That could mean the rupee could break out of last year's range, which was the narrowest since 2002. "I do think post the IMF classification, the RBI will allow the rupee a wider band, with a slightly appreciating bias," said Dhiraj Nim, a forex strategist at ANZ. "The soft dollar and the buildup in FX reserves that has happened will allow the RBI to intervene less." The rupee's volatility was among the lowest in Asia last year and even its implied or expected volatility currently is just a tad higher than on the pegged Hong Kong dollar. "The low implied volatility makes directional bets on the rupee via options relatively inexpensive, which I think is contributing to the volumes," an FX salesperson at a Singapore-based bank said. Low expected volatility reduces the premium that investors have to pay to buy USD/INR put or call options. https://www.reuters.com/markets/currencies/investors-bet-via-options-that-indias-rupee-will-rise-2024-01-15/

2024-01-15 06:39

BEIJING, Jan 15 (Reuters) - Some tourists stranded for several days after avalanches hit highways leading to a popular winter tourism area in China's northwest region of Xinjiang were lifted by helicopter to safety, according to local media reports on Sunday. Days of heavy snow at Altay Prefecture in northwest China's Xinjiang Uyghur Autonomous Region triggered dozens of avalanches on large sections of highways at the Altay mountains leading to the Kanas scenic area, Chinese state media outlets Xinhua and CCTV News reported on Saturday and Sunday. Six kilometres (3.7 miles) of highways were buried, according to CCTV. Altay, known for its ski resorts, is a popular destination for winter tourism. China has seen a huge boom in winter travel at north and northeastern cities over the past few weeks. The snow and avalanches blocked many roads leading to Kanas, Hemu, Baihaba and other scenic spots in Burqin County, burying traffic and stranding tourists, Xinhua reported. The Kanas scenic area management committee released a notice over the weekend saying stranded tourists would be provided accommodation free of charge, Xinhua said. The crew of an army aviation brigade in Xinjiang loaded fuel, generators, rice, flour, oil, and other materials onto a helicopter and went to Kanas, according to Tianshan Net-Xinjiang Daily. "After arriving at the point, staff quickly unloaded the supplies, and at the same time, some of the people who were trapped due to the heavy snowfall boarded the plane and were transferred from the Kanas Visitor Center to Kanas Airport," the media outlet reported on Sunday. But after completing the mission, the weather changed abruptly with more wind and snow, suspending additional rescue efforts, the report added. The Kanas scenic area management committee said on Monday it had closed the area until Jan. 20 due to the "recent extreme weather" to ensure the personal safety of tourists, according a statement from the committee's official WeChat account. https://www.reuters.com/world/china/tourists-stranded-by-avalanches-chinas-xinjiang-lifted-safety-by-helicopter-2024-01-15/

2024-01-15 06:15

LONDON, Jan 15 (Reuters) - The dollar was little changed on Monday in cautious during a U.S. public holiday, while risk-sensitive sterling slid ahead of a busy week for UK economic data. The dollar index , measuring the U.S. currency against six peers, was up 0.13% at 102.64, on the Martin Luther King (MLK) Day holiday. Bets on Federal Reserve cuts this year, beginning as early as March, have intensified after data on Friday showed U.S. producer prices unexpectedly fell in December. Market pricing now points to a 77% chance that the U.S. central bank will begin easing rates in March, up from 68% a week ago, according to the CME FedWatch tool. "Despite the upside surprise to the CPI on Thursday, investors grew increasing confident that the Fed is likely to cut rates soon," said Jim Reid, strategist at Deutsche Bank. In the broader market, traders also watch out for UK inflation, jobs data and retail sales due later in the week, as markets continue to focus on how soon major central banks globally could begin easing rates this year. Sterling slipped 0.27% to $1.2717, though it remained close to a two-week peak hit last week. "It’s a big UK data week," said Jeremy Stretch, head of G10 FX Strategy at CIBC Capital Markets, adding that the general risk-off mood across markets and speculation on the upcoming data is keeping the pound under pressure. CIBC expects earnings, inflation and retail spending data to come all below consensus forecasts. The euro hovered near the $1.10 mark and was last 0.08% lower on the day at $1.0941. In Asia, the yen remained under pressure, down 0.63% at 145.83 per dollar, moving closer to its lowest level since mid-December, on expectations that the Bank of Japan will keep its ultra-loose policy settings unchanged at its policy meeting next week. CHINA, TAIWAN The yuan fell on Monday to a one-month low after China's central bank surprised markets by keeping its medium-term policy rate unchanged, defying market expectations it would cut rates to shore up China's bumpy post-pandemic economic recovery. That sent the onshore yuan sliding to a one-month low of 7.1813 per dollar before it recouped some of those losses to trade down 0.08% at 7.1744. "Some economists have argued that the PBoC may have chosen to hold rates steady to avoid further downside in the yuan, and excess volatility in the FX market," said Kathleen Brooks, research director at XTB. Rate cuts could still be on the table, said Tommy Wo, senior economist at Commerzbank. "There will be more room for PBoC rate cuts when the timing of Fed’s rate reduction becomes clearer." Elsewhere, the Taiwan dollar fell to a more than three-week low of 31.284 per U.S. dollar, after the Democratic Progressive Party's (DPP) Lai Ching-te won the presidency over the weekend, though his party lost its majority in parliament Analysts now fear policy paralysis. "DPP lost the majority in the parliament. Hence Lai is ruling with a weaker mandate than Tsai Ing-wen," said Allan von Mehren, director at Danske Bank. He expects continued tensions in the Taiwan Strait but not a further escalation. "China will continue to deter Taiwanese independence with military drills around the island and Taiwan and the U.S. are likely to continue to have closer relations but without crossing China’s red line". https://www.reuters.com/markets/currencies/dollar-wobbles-yuan-guard-ahead-china-data-dump-2024-01-15/

2024-01-15 06:11

Europe's STOXX 600 down 0.5% China skips rate cut as GDP data looms Davos begins with focus on geopolitics Fed's Waller and U.S. retail sales ahead LONDON/SYDNEY, Jan 15 (Reuters) - European stocks fell on Monday as bond yields climbed, and Chinese equities dipped after the country's central bank unnerved investors by skipping an expected rate cut. U.S. markets were closed for Martin Luther King, Jr. Day. Europe's STOXX 600 index (.STOXX) was last down 0.5%, taking its fall for the year to around 1%, after a 13% increase in 2023. Britain's FTSE 100 (.FTSE) was 0.4% lower and Germany's DAX (.GDAXI) was off by 0.5%. The Chinese CSI 300 index (.CSI300) fell to its lowest since 2019 but finished 0.1% lower as investors digested the central bank's decision to leave its medium-term policy rate unchanged on Monday, defying expectations for a cut. Investors are set for a busy week with data on Chinese fourth-quarter growth, British inflation and U.S. retail sales all due on Wednesday. They will also be listening closely to central bank officials, especially the Federal Reserve's Christopher Waller, whose dovish turn in late November helped to send markets soaring and who speaks on Tuesday. Duncan Toms, multi-asset strategist at HSBC, said markets were vulnerable to a reconsideration of expectations for heavy rate cuts this year. "With so much in the price... there is little support to be expected for valuations," he said. "We expect a rather broad-based correction across all asset classes." Traders expect around 165 basis points of rate cuts from the Fed this year, and see an 80% chance of them starting in March, according to money market pricing. "The first half of January has shown a dislocation between rate expectations and data in the U.S.," said Francesco Pesole, currency strategist at ING. "The two most important data points for the Federal Reserve, labour and CPI inflation figures, both came in hotter than expected." ECB OFFICIALS PUSH BACK ON RATE CUTS U.S. Treasury trading was shut on Monday, but Germany's 10-year bond yield was up 5 basis points at 2.195%, around its highest level since mid-December. Prices, which move inversely to yields, fell as European Central Bank officials pushed back against market expectations for rapid interest rate cuts this year. Japanese stocks continued to shine, with the Nikkei 225 index (.N225) hitting a 34-year high above 36,000. The market has been buoyed by falls in the yen and U.S. bond yields in recent days. The focus of world leaders and executives gathering for the 54th World Economic Forum meeting this week in Davos, Switzerland, will be global politics. However, markets showed a limited reaction to the victory of the ruling Democratic Progressive Party in Taiwan over the weekend, a result which displeased Beijing. The U.S. Republican Iowa caucus will be run in frigid weather later on Monday. At the same time concern is running high of a broadening of the Middle East conflict. The euro was treading water at $1.095, while the dollar index rose 0.14% to around 102.65. Oil prices has drawn support from disruptions to shipping in the Red Sea, though doubts about demand this year have limited the rally . Brent crude oil was last down 0.8% at $77.66 a barrel, down from a two-week high of $80.75 on Friday. https://www.reuters.com/markets/global-markets-wrapup-1-2024-01-15/