2023-12-20 09:26

FRANKFURT, Dec 20 (Reuters) - Two of the European Central Bank's most prominent hawks on Wednesday joined the chorus of policymakers trying to talk traders out of betting on upcoming rate cuts, so far with no success. Bundesbank President Joachim Nagel and his Dutch colleague Klaas Knot both said the ECB needed time before declaring victory over historically high inflation and reversing the sharpest streak of rate hike in the euro's history. "We must initially remain at the current interest rate plateau so that monetary policy can fully develop its inflation-dampening effect," Nagel said in an interview with German internet portal T-Online. "I would say to everyone who is speculating on an imminent interest rate cut: be careful, some people have already miscalculated that." He conceded, however, that rates had very likely reached their peak -- a comment that was echoed by Knot in his own interview with German financial daily Boersen-Zeitung. The Dutch central bank governor said the ECB first needed to see data about wage settlements, which would only become available around the middle of next year, making a rate cut before then "rather unlikely". "Based on the information available today, I think it is rather unlikely," the Dutch central bank governor said in response to a question. He added the ECB's simulations for the "optimal" path for rates were closer to where market expectations were on Nov. 23, the cutoff date for the central bank's economic forecasts, than where they are now -- that is much lower after softer inflation data. The two hawks -- market jargon for policymakers who favour higher rates -- were joining a number of their colleagues in taking aim at market expectations for the ECB to start lowering borrowing costs in March or April . Yet traders were undeterred, even slightly increasing their bets on lower ECB rates on Wednesday after a weaker-than-expected inflation print in neighbouring Britain. Money markets were fully pricing in 150 basis points worth of cuts next year, which would take the ECB's deposit rate to 2.5%, plus a slight risk that it could even end the year at 2.25% . https://www.reuters.com/markets/rates-bonds/ecbs-nagel-warns-traders-against-betting-imminent-rate-cuts-2023-12-20/

2023-12-20 08:37

LONDON, Dec 20 (Reuters) - Sterling fell against the dollar and euro after data showed British inflation fell in November and came in well below expectations, causing markets to bring forward bets on when the Bank of England will start cutting interest rates. The pound was last down 0.56% at $1.2659, having been down around 0.15% immediately before the data . It also softened versus the euro, which was up 0.43% at 86.62 pence. British annual consumer price inflation fell to 3.9% in November from 4.6% in October, the lowest pace since September 2021. The reading was below all forecasts in a Reuters poll of economists, which had pointed to a rate of 4.4%. Core inflation also cooled by an unexpectedly large amount, to 5.1% from 5.7%. That caused markets to bring forward their expectations of Bank of England rate cuts, and they are now fully pricing in a 25 basis point cut by May 2024, and show nearly a 50% chance of such a cut by March. Expectations of the BoE's relative hawkishness in comparison with other major central banks has supported sterling in recent weeks. "Markets are right to be pricing a number of rate cuts for 2024. Investors now expect 140bps of cuts in 2024 after this latest downside surprise on inflation, starting in May. That’s maybe pushing it, and we still think the Bank will prefer to tread a little more cautiously with 100bp of cuts starting in August," said James Smith, developed markets economist at ING in a note. "But interestingly, this data has also seen investors reassess where the BoE stands relative to the Fed and European Central Bank. Up until now, markets had been expecting both of the latter to be much more aggressive than the BoE, but that narrative seems to be fading." British shares and government bonds, known as gilts, rallied on the data. Britain's 10-year yield dropped 10 basis points to 3.55% and the rate-sensitive two-year yield fell 17 bps. Both Britain's blue chip FTSE100 stock index (.FTSE) and the domestically focused FTSE250 index (.FTMC) rose over 1% to their highest since May. https://www.reuters.com/markets/currencies/sterling-falls-british-inflation-slows-2023-12-20/

2023-12-20 07:55

MUMBAI, Dec 20 (Reuters) - The Indian rupee inched up on Wednesday, supported by strength in some of its Asian peers, but gains on the local unit are likely to be limited on dollar buying interest from local oil companies and importers. The rupee was at 83.15 against the U.S. dollar as of 10:15 a.m. IST, compared to its close at 83.18 in the previous session. The rupee is expected to "hover in its routine 5-10 paisa range," a foreign exchange trader at a state-run bank said. Oil companies have been lapping up dollars and they are likely to be active on Wednesday as well, the trader added. Weakness for the rupee "seems capped at 83.20-30 region," with room for potential appreciation amid supportive global cues, Amit Pabari, managing director at fx advisory firm CR Forex said. The dollar index fell nearly 0.4% on Tuesday and was last quoted steady at 102.16 in Asia hours as burgeoning rate cut expectations in the United States kept the greenback on the back foot. Asian currencies were mostly higher with the Korean won leading gains up by 0.6%. Market participants have raised bets on the U.S. Federal Reserve cutting policy rates in March to nearly 70%, according to the CME Group's FedWatch tool, despite some pushback from Fed officials. While equity markets surged after Fed Chair Powell hinted at rate cuts next year, Chicago Federal Reserve Bank President Austan Goolsbee struck a cautionary note on Tuesday. Markets "got a little ahead of themselves" with "euphoria" over the thought of Fed interest-rate cuts, Goolsbee said, adding that the U.S. central bank won't be "bullied" by markets. Investors now await personal consumption expenditure (PCE) inflation data due in the U.S. on Friday which is expected to show that month-on-month core PCE inflation was unchanged at 0.2% in November. https://www.reuters.com/markets/currencies/rupee-edges-up-importer-dollar-demand-likely-limit-upside-2023-12-20/

2023-12-20 06:59

MUMBAI, Dec 20 (Reuters) - Indian companies' fundraising via dollar bonds hit a 14-year low in 2023, as elevated global yields discouraged borrowers who moved to securing foreign currency loans instead. Corporates have raised $4.1 bln via six dollar bond issues so far in 2023, according to data shared by LSEG Workspace, marking the lowest since 2009, when annual fundraising totalled $1.6 bln. "Throughout 2023 global interest rate environment was not favourable and the cost of raising dollars hedged into rupees was comparatively higher than (accessing) domestic liquidity, so Indian issuers chose to borrow locally," said Sameer Gupta, head of India and South East Asia debt capital market at Deutsche Bank. Multiple rate hikes by the U.S. Federal Reserve and anticipation of prolonged higher rates drove an increase in bond yields worldwide. Instead, Indian companies leaned on foreign currency loans, which are benchmarked to floating interest rates. The total borrowings reached $22.13 billion, the highest since 2014, according to data. Apart from loans denominated in U.S. dollars, Indian firms have availed $2.15 billion in yen-denominated loans so far this year, up from $643 million last year, Refinitiv data shows. Corporates are happy to do a loan which is a floating rate instrument, said Shoaib Ahmed, director of debt capital markets at ANZ. Reliance Industries was among the largest borrowers in the foreign currency loan market this year, having raised over $8.5 billion as of October, data showed. Lenders, including REC, Canara Bank and Shriram Finance raised foreign currency debt, with others like the State Bank of India exploring plans to raise funds early next year, according to multiple bankers. Companies like Adani Ports and SEZ have sought to reduce their overseas debt by repurchasing their existing dollar notes. "We have also seen that companies have bought back bonds, using money raised in INR market, effectively substituting some of the debt with cheaper or retiring debt," ANZ's Ahmed said. Bankers expect an increase in dollar bond issuance in 2024 as global bond yields ease, with the volume of foreign currency loans likely declining. Though there have been enquiries from corporates for tapping the dollar bond market in the coming quarter, actual volumes would only rise in the second or third quarter of 2024, Ahmed added. Companies like REC and Exim Bank are expected to tap the market with dollar bond offerings, according to merchant bankers. The companies did not immediately respond to Reuters' email seeking comments. "Historically it has always been a cycle … We have always seen this trend between either the loan market being more active or the bond market," Ahmed said. https://www.reuters.com/world/india/indian-firms-dollar-debt-issuance-hit-14-yr-low-amid-global-yield-pressures-2023-12-20/

2023-12-20 06:42

NEW YORK, Dec 20 (Reuters) - The dollar rose against a basket of currencies on Wednesday as a late-session selloff on Wall Street boosted the U.S. currency's safe-haven appeal, and as data on sharply falling UK inflation prompted a steep drop in the British pound. U.S. stocks closed lower on Wednesday after an abrupt mid-afternoon sell-off snapped a rally which had been driven by falling interest rates and the Federal Reserve's dovish turn. The dollar was last up 0.28% at 102.42 , on pace to break a two-day losing streak. The index had dropped about 1.5% for the week ended Tuesday after last week's Federal Reserve meeting prompted traders to pencil in several rate cuts in 2024, starting as early as March. U.S. Federal Reserve officials have since been pushing back on the idea of rapid rate cuts next year. Helen Given, FX Trader at Monex USA, said Wednesday's rebound for the dollar was driven in part by a safety bid for the greenback as well as doubts about the Fed actually cutting rates as swiftly as the market is pricing. "We don't necessarily believe that the Fed is going to cut as early as market thinks ... so we think this reaction is pretty well merited," Given said. Data on Wednesday showed U.S. consumer confidence increased more than expected in December amid optimism about the labor market, which could help to underpin the economy early next year. The Federal Reserve's dovish December pivot has boosted the case for the weakening dollar to keep falling into 2024, though strength in the U.S. economy could limit the greenback's decline, according to investors. Investors now await U.S. inflation data on Friday for clues to future Fed policy actions. Meanwhile, the pound was down 0.76% at $1.2633, after slipping to a near 1-week low of $1.2625. British inflation fell in November to its lowest rate in over two years, prompting investors to fully price in a BoE rate cut by May 2024 and assign a nearly 50% chance of a cut by March. "A number of banks have seen pricing for (interest rate) cuts being front loaded. I think Bank of England was just a little bit behind because the inflation is higher, but it's now starting to move in the same direction," said Vassili Serebriakov, foreign exchange and macro strategist at UBS. "Also, the pound has had a good run in the past couple of weeks, I think it's just reversing some of those moves," Serebriakov said. Meanwhile, European Central Bank policymaker Joachim Nagel said in an interview published on Wednesday that euro zone interest rates must remain high and traders betting on upcoming cuts in borrowing costs should be careful. The euro was 0.36% lower at $1.0941. The dollar fell 0.14% against the yen to 143.64 , a day after the Bank of Japan maintained its ultra-loose monetary policy and opted to wait for more evidence to justify a shift. "The last thing (the BOJ) wants to do is to have to undo (a rate hike) again in a couple of months' time," Rob Carnell, Asia-Pacific head of research at ING, said. Japan's government is aiming to reduce its budget next fiscal year for the first time in 12 years, Reuters reported on Wednesday. In cryptocurrencies, bitcoin gained 3.26% to $43,634, its highest since Dec. 9 . A spate of filings for spot bitcoin and ether ETFs, including from traditional finance heavyweights, has helped revive the crypto market this year after a series of meltdowns in 2022. https://www.reuters.com/markets/currencies/dollar-struggles-rate-cut-expectations-yen-back-foot-2023-12-20/

2023-12-20 06:32

131 dead, 980 injured, 16 missing in earthquake-hit area Sub-zero conditions imperil trapped victims High-altitude, complex terrain challenges rescuers Gansu concluded search operations, focusing on treating survivors HAIDONG, Qinghai, Dec 20 (Reuters) - Braving below-freezing conditions, rescuers pulled to safety victims of an earthquake that rocked a remote area in China's northwestern Gansu province more than a day ago, while survivors faced months of uncertainty ahead without permanent shelter. The magnitude-6.2 earthquake jolted Jishishan county near the border straddling Gansu and Qinghai provinces a minute before midnight on Monday, sending frightened residents out of homes into the cold in the dead of the night, damaging roads, power and water lines as well as agricultural production facilities, and triggering land and mudslides. In Gansu, 113 people had been found dead as of 9 a.m. on Wednesday (0100 GMT), and 782 were injured, authorities said. The death toll in neighbouring Qinghai province rose to 18 with 198 injured as of 5:30 a.m. on Wednesday. Seventy-eight people have been found alive in Gansu, where rescue operations ended on Tuesday afternoon, Chinese media said, as focus shifted to treating the wounded and resettling residents as a months-long winter loomed. It was not immediately clear whether the search in Qinghai had ended or not. In Gansu, more than 207,000 homes were wrecked and nearly 15,000 houses collapsed, affecting more than 145,000 people. More than 128,000 emergency supply items including tents, quilts, tent lights and folding beds, were delivered while food such as steamed buns and instant noodles were provided to the victims. The quake-stricken area is geographically a transition zone between two plateaus, featuring terrains of altitudes ranging from 1,800 to 4,300 metres (5,906 to 14,108 feet) with "very complex" topography, CCTV said. Recovery from Monday night's earthquake has been further challenged by the powerful cold snap that has gripped most of China since last week. Temperatures around the quake epicentre in Gansu fell to about minus 15 degrees Celsius (5 degrees Fahrenheit) on Tuesday night. According to local media citing researchers, people trapped under rubble exposed to minus 10 C conditions without help run the risk of developing hypothermia and may only be able to live for five to 10 hours if uninjured. In Qinghai's quake-hit Haidong, Du Haiyi said his family home had been completely levelled. The 21-year-old told Reuters he had managed to save his mother and 16-year-old sister, who were trapped under debris the night of the quake. "My parents were pulled out from underneath this, but I don't know how," Du said. "We ran to wherever we could." Du, an occasional labourer, said his family of seven had slept exposed to the elements with neither sustenance nor adequate covers, taking shelter in a tent provided by the local government. HOMELESS IN WINTER Those who lost their homes in the earthquake on Monday had few options but to gather in fields, burning wheat straw for warmth. One family of seven took refuge in a car for the night as emergency tents were prioritised for the elderly and young, Beijing Youth Daily reported. Within 50 km of the epicentre on the side of Qinghai province, the earthquake affected 22 towns and villages, but of that, two villages suffered the worst damage. The county of Minhe county in Haidong earlier recorded 20 missing people from two villages, where a mudslide swept through half-burying many buildings in brown silt. Search and rescue operations and efforts to resettle residents were complicated as mud blocked main roads, state media said, showing footage of bulldozers clawing through mud and rubble. "We have prepared coats with extra cotton, like military coats, and then some things to keep warm like heating equipment," said 21-year-old Wu Saying, a rescue volunteer in Haidong. Earthquakes are common in provinces such as Gansu, lying on the northeastern boundary of the tectonically active Qinghai-Tibetan plateau. China's deadliest quake in recent decades was in 2008 when a magnitude 8.0 temblor struck Sichuan, killing nearly 70,000 people. AFTERSHOCKS The freezing cold was not the only concern weighing on rescuers and working groups assessing the situation. The Gansu Provincial Seismological Bureau said through comprehensive analysis, strong aftershocks of magnitude 5 were still possible around the area in the coming days, based on the characteristics of the Monday quake, historical seismic activity and other factors. The aftershocks will be closely tracked so as to issue early warnings, official news agency Xinhua cited the bureau's deputy director as saying. Wu, the volunteer, said villagers whose homes were seriously damaged were given tents. He said he was worried about aftershocks. By early Wednesday, there were two aftershocks of magnitude 4.0 and above, and eight of magnitude 3.0 and above, China Earthquake Networks Center said. The quake in Gansu's Jishishan county was logged at a depth of 10 km (6.2 miles), which experts consider shallow. Earthquakes with shallow focal points can easily cause considerable damage to the ground, Xinhua reported citing a senior engineer with the China Seismological Network Center. https://www.reuters.com/world/china/chinese-rescuers-brave-freezing-cold-find-earthquake-survivors-2023-12-20/