2023-12-07 16:42

Dec 7 (Reuters) - Monetary policy in the United States continues to be appropriate, and interest rates will need to remain at current levels in order to "durably" reduce inflation, the International Monetary Fund said on Thursday. The US economy has proven to be "quite resilient," said IMF spokesperson Julie Kozack in a scheduled press briefing. "Interest rates will likely need to stay at current levels well into 2024," Kozack added. U.S. benchmark bond yields edged up from three month lows on Thursday ahead of key payrolls data expected on Friday. Futures markets are pricing in a 25 basis point rate cut by the U.S. Federal Reserve in March. https://www.reuters.com/markets/us/us-monetary-policy-appropriate-should-remain-current-levels-reduce-inflation-imf-2023-12-07/

2023-12-07 15:47

Yen set for biggest one day jump since Jan Move exacerbated by sharp position unwind - analysts Focus turns to Dec BOJ meeting LONDON, Dec 7 (Reuters) - Investors in Japan's yen have jumped at what they see as the clearest sign yet from the country's monetary authorities that the end of ultra-low interest rates is fast approaching, opening the floodgates to a rush of buyers. The yen surged over 2% to a multi-month high against the dollar on Thursday after Bank of Japan Governor Kazuo Ueda said policy management would "become even more challenging from the year-end and heading into next year" and flagged several options for what could come next. On Wednesday, Deputy Governor Ryozo Himino had discussed the potential impact an exit from ultra-loose monetary policy could have on the economy. Their combined comments lit a fire under the battered yen, which was set for its biggest one-day gain versus the dollar since January. Five-year Japanese bond yields witnessed their most aggressive sell-off in a decade. "On the yen side there has been a bit of a frenzy," Olivier Marciot, Unigestion head of investments multi asset, said. Just four weeks ago, the yen languished around the 150 mark, near its weakest in 30 years, and markets were on edge over potential central bank intervention to prop up the currency. The BOJ has been the lone holdout as other big central banks have hiked rates from zero to fight a surge in inflation. Much action in currency markets this year have been a function of the dollar and U.S. rate expectations. Yet Thursday's stellar yen rally now adds to a growing conviction that Japan's currency, down almost 10% this year, is poised for a stronger 2024. Commonwealth Bank of Australia sees dollar/yen falling below 140 next year, while ING expects the currency pair to move to 130 by end-2024. It was last trading at around 145. BROAD RALLY The yen also rose 2% against sterling , the most in a day in almost a year, while against the euro , it headed for a ninth straight gain - the longest such streak since 2017. Expectations are growing that the BOJ will soon signal a winding down of its ultra-low rates policy, in place since 2016, and its Dec. 18-19 meeting could provide an opportunity. "There are various options. But we have not made a decision yet on which interest rate to target once we end our negative interest rate policy," Ueda told parliament on Thursday. City Index analyst David Scutt said the choice of wording – "once", not "if", suggested the BOJ was committed to normalising policy, most likely around April. Ed Hutchings, head of rates at Aviva Investors in London, said the BOJ comments suggested the December meeting would be watched closely as an indication of what happens in January. "It's likely they would give a one-month lead up into any formal action on policy," he said. With focus now on the December meeting, trader demand for options to hedge risk for that date surged, even if an outright rate hike is viewed as unlikely. One-week options volatility - a measure of demand for a particular derivative that expires in a week - spiked by the most in five months to its highest since July. "The BOJ would prefer to hike when they release new projections and that won't happen in December," ING strategist Francesco Pesole said. "Now, there's just growing interest in not missing the hike, so markets are quite jittery when it comes to dollar/yen." COILED SPRING Part of the force behind the yen's snap higher was an unwinding of large, long-held bearish positions, analysts said. Ever since other major central banks, such as the Federal Reserve embarked on hiking rates, speculators have amassed large holdings of short yen positions - ones that become increasingly valuable as the currency depreciated against the dollar. Latest weekly data from the U.S. markets regulator shows speculators hold a net short yen position worth $10 billion, compared with a net long worth $3.4 billion in early 2021. With the prospect of the longed-for policy shift from the BOJ possibly moving into view, yen bulls rushed out in force, upping the rally's momentum. "The market is very, very heavily short the yen and we've got a heavy consensus in for 2024 that this is going to be the year that they bring negative rates to an end," said TraderX strategist Michael Brown. "It shows the market is ready to latch on absolutely anything that it can in light of that." https://www.reuters.com/markets/currencies/yen-bulls-spy-ray-hope-boj-policy-hint-2023-12-07/

2023-12-07 15:33

WASHINGTON, Dec 7 (Reuters) - U.S. wholesale inventories fell more than initially estimated in October, suggesting that inventory investment could be a drag on economic growth this quarter. The Commerce Department's Census Bureau said on Thursday that wholesale inventories dropped 0.4%, instead of 0.2% as previously reported last month. Stocks at wholesalers were unchanged in September. Economists polled by Reuters had expected that inventories would be unrevised. Inventories are a key part of gross domestic product. They decreased 2.3% on a year-on-year basis in October. Economists expect business inventories to subtract from gross domestic product in the fourth quarter. Private inventory investment contributed 1.40 percentage points to the economy's 5.2% annualized growth pace in the third quarter. Growth estimates for the October-December quarter are below a 2% rate. A survey from the Institute for Supply Management last week found that customer inventories had increased "toward the upper end of 'about right' territory" in November, suggesting limited scope for businesses to restock at the third-quarter's clip. Higher interest rates are tamping down demand. Wholesale motor vehicle inventories were unchanged in October after increasing 0.6% in September. Recently ended strikes by the United Auto Workers union members at General Motors (GM.N), Ford Motor (F.N) and Chrysler parent Stellantis (STLAM.MI) likely restrained motor vehicle supply. There were decreases in wholesale stocks of furniture, computer equipment, metals, apparel and hardware. But stocks of machinery, electrical and farm products increased Excluding autos, wholesale inventories fell 0.4% in October. This component goes into the calculation of GDP. Sales at wholesalers dropped 1.3% in October after rising 2.0% in September. At October's sales pace it would take wholesalers 1.34 months to clear shelves. That was up from 1.33 months in September. https://www.reuters.com/markets/us/us-wholesale-inventories-revised-lower-october-2023-12-07/

2023-12-07 15:18

JOHANNESBURG, Dec 7 (Reuters) - The South African rand gained on Thursday on increasing bets that the U.S. Federal Reserve might implement interest rate cuts early next year. At 1506 GMT, the rand traded at 18.8250 against the dollar , up over 0.7%, while the dollar was last trading 0.25% weaker against a basket of global currencies. A slew of economic data has illustrated a softness in the U.S. labour market and has strengthened the market's view of a pivot in the Fed's policy through next year, said Bheki Mahlobo, a market analyst at ETM Analytics. "The pricing in of rate cuts from potentially as early as March has seen UST (U.S. Treasury) yields trading lower, improving the outlook on riskier assets such as the ZAR, with the currency further supported by lower oil prices," Mahlobo said. Global investor focus will now turn towards payrolls data on Friday, which could give hints on the future interest rate path of the world's biggest economy. The rand often takes cues from global factors such as U.S. monetary policy in addition to local drivers. Locally, South African Reserve Bank data earlier showed the country's current account deficit narrowed sharply in the third quarter to 0.3% of gross domestic product from a revised 2.7% in the second quarter. Separately, South Africa's net foreign reserves rose to $56.319 billion at the end of November from $55.510 billion in October. On the Johannesburg Stock Exchange, the blue-chip Top-40 index (.JTOPI) closed over 0.8% lower. South Africa's benchmark 2030 government bond was marginally stronger, with the yield down 0.5 basis point to 9.975%. https://www.reuters.com/markets/currencies/south-african-rand-unchanged-ahead-q3-current-account-data-2023-12-07/

2023-12-07 14:53

MOSCOW, Dec 7 (Reuters) - Russia's central bank on Thursday said exporters had increased foreign currency sales to $13.9 billion in November from $12.5 billion in October, as capital controls forced the transfer of FX revenues and buttressed the rouble. The Russian currency strengthened for seven straight weeks from early October to late November, rebounding from more than 100 to the dollar after President Vladimir Putin reintroduced capital controls mandating some exporters convert their FX revenues. The rouble has since weakened to trade close to 93 per dollar now. "The rouble's weakening at the start of December happened due to the seasonal decline of FX supply and the sustained volumes of FX purchases to pay for imports," the central bank said in a report. The bank said Russians bought foreign currency worth 162.9 billion roubles ($1.77 billion) in November, mainly dollars and euros. Finance Minister Anton Siluanov on Thursday said the capital controls were temporary. "I am sure that the restrictions there are today will gradually go away," he said during the 'Russia Calling' financial forum in Moscow. Central Bank Governor Elvira Nabiullina reiterated her opposition to the controls. "I am a big opponent of the constant manipulation with currency restrictions," Nabiullina said. Repeated tweaks could lead businesses to try to preempt tighter restrictions and withdraw funds in advance, she added. "This may additionally stimulate the outflow of capital," Nabiullina said. "They should be temporary." The central bank last week said the measures would stay in place until the end of April. ($1 = 92.2850 roubles) https://www.reuters.com/markets/currencies/russian-exporters-increased-fx-sales-139-bln-november-2023-12-07/

2023-12-07 14:12

ZURICH, Dec 7 (Reuters) - UBS (UBSG.S) has formally begun the integration of Credit Suisse's parent bank, the Swiss bank said, marking a key next step in what is the first merger of two global systemically important banks. UBS said its board of directors had given the green light for the respective parent banks, UBS AG and Credit Suisse AG, to fuse. "The completion of the merger is subject to regulatory approvals and is expected to happen in 2024," UBS said in a statement. It has previously said it expects to merge the parent banks, the respective Swiss businesses, as well as the U.S. intermediate holding companies in 2024. The move will mean that Credit Suisse will no longer function as an independent bank and will allow for the first waves of client migration in its core businesses. UBS's Chairman and CEO have both warned that the integration would not be a straightforward process and that from an operational perspective, 2024 will be a decisive year. UBS CEO Sergio Ermotti said in November synergies were expected to be realised in 2025 and 2026. https://www.reuters.com/markets/deals/ubs-approves-merger-ubs-ag-credit-suisse-ag-2023-12-07/