2024-07-03 10:43

MOSCOW, July 3 (Reuters) - Russia's central bank provided banks with a record 19.5 billion yuan ($2.68 billion) on Wednesday under currency swap transactions, data showed, as lenders seek alternative ways to replenish their foreign currency reserves after dollar and euro trading was restricted. New U.S. sanctions on Russia's key financial infrastructure last month brought exchange trading in dollars and euros to an abrupt halt. The yuan was already the most-traded foreign currency in Moscow as Russia moves away from what it considers "unfriendly" and "toxic" Western currencies. The central bank doubled the yuan swap limit to 20 billion yuan after those sanctions were imposed. The daily volume of 19.5 billion yuan for 231.5 billion roubles ($2.65 billion) was the highest volume since the swap instrument was launched in January 2023, central bank data showed. The central bank provides FX swaps on a repayable basis from reserve assets, half of which were frozen by the West in 2022. ($1 = 7.2734 Chinese yuan renminbi) ($1 = 87.5000 roubles) Sign up here. https://www.reuters.com/business/finance/russian-central-banks-daily-yuan-swap-volume-hits-record-high-2024-07-03/

2024-07-03 10:41

BENGALURU, July 3 (Reuters) - The euro will weaken modestly against the U.S. dollar this month before strengthening by year-end, despite financial markets pricing two more European Central Bank interest rate cuts by then, according to currency strategists polled by Reuters. Having generally underperformed analyst expectations in Reuters surveys over the past year, the euro has fallen more than 1% since French President Emmanuel Macron called for a surprise snap election on June 9. It then gained only slightly as Marine Le Pen's National Rally party won a smaller share of the vote than some polls had initially projected, despite firmly emerging ahead of the pack after the election's first round on June 30. Still, the euro , which is down more than 2.5% against the dollar so far this year, would show resilience against a backdrop of heightened political uncertainty in the second-largest European Union member, according to currency strategists in a June 28-July 3 Reuters poll. The median forecast for how far it could fall this month was $1.06, about 1.5% below where it was trading on Wednesday. "If not for the French election dynamic in the background, we would have expected the euro to be much higher than where it is at the moment," said Dan Tobon, head of G10 foreign exchange strategy at Citi. "But based on where the polls and market expectations are, we don't really see a lot of downside left," Tobon added. Further ahead, the poll showed the euro strengthening in three months' time and by the year-end, even though the ECB was predicted in a separate poll to follow up its June rate cut with two more this year - in September and December. The median projection from nearly 80 foreign exchange strategists was for the euro to gain nearly 1.5% to $1.09 by the end of this year and to trade at $1.10 at the end of the first half of 2025. Back in January, the euro was seen climbing to $1.12 by the end of this year, but since then the resilience of the U.S. economy has made financial markets scale back their expectations for the Federal Reserve's rate cuts, bolstering the dollar. Economists in a separate Reuters survey predicted two U.S. rate cuts this year, but flagged one, or even no rate cuts as a sizeable risk, which could put the euro under pressure. "Markets may be over-pricing Fed rate cuts and in the short term, rate cuts elsewhere too ...There certainly is a risk we see more dollar strength than we're currently forecasting," said Erik Nelson, macro strategist at Wells Fargo Securities. The dollar (.DXY) New Tab, opens new tab has gained more than 4% against a basket of major currencies since January, defying expectations it would weaken that were prevalent at the start of the year. Japan's yen , down about 13% for the year to a 38-year low of 161.97 to the dollar on Wednesday, will be the biggest gainer among major currencies by year-end rising 6.5% to 152, the poll found. So far, Tokyo has primarily relied on market interventions to support the yen, but when asked what the authorities could do to arrest its decline over the coming three months, most analysts said the Bank of Japan would need to hike interest rates aggressively. "The longer (authorities) wait to take the field, the heavier the intervention has to be," said Roberto Mialich, currency strategist at UniCredit. (For other stories from the July Reuters foreign exchange poll click here) Sign up here. https://www.reuters.com/markets/currencies/euro-expected-hold-ground-despite-political-tremors-2024-07-03/

2024-07-03 10:27

Oil and gas revenue jumps as rouble weakens, oil price rises The revenue accounts for a third of Russian budget proceedings Russian economy weathers sanctions MOSCOW, July 3 (Reuters) - Proceeds from oil and gas sales for Russia's federal budget rose by around 41% year on year in the first half of the year 5.698 trillion roubles ($65.12 billion), finance ministry data showed on Wednesday, due to rising oil prices and the weaker rouble. Oil and gas revenues have been the most important single source of cash for the Kremlin, accounting for around a third to a half of total federal budget proceedings for the last decade. The military conflict in Ukraine has prompted the West to impose multiple sanctions aimed at curbing Russian oil and gas income that accounts for about a third of the country's federal budget. During the first half of the year, the price of Russian flagship oil Urals blend averaged at $69.1 per barrel, above the Western-imposed price cap of $60, up from 52.5$ in the same period 2023. At the same time, the rouble rate weakened to 90.8 per $1 for the period from 76.9 in January - June 2023. Oil and gas revenue was down from 794 billion roubles in May and comparing to Reuters forecast of 814 billion roubles. Proceeds from the mineral extraction tax (MET) rose in June to more than 1 trillion roubles from 631.6 billion roubles in the same month of 2023, according to finance ministry. The data also showed that payments to refineries under the "damping mechanism" - introduced to stop companies from capitalizing on high fuel export prices and defend the domestic market - reached 158.1 billion roubles last month, down from 201.7 billion roubles in May and 78.6 billion roubles in June 2023. Russian President Vladimir Putin has hailed high rates of economic growth, saying they outstrip that of Western economies. The economy grew 3.6% in 2023 after a revised 1.2% contraction in 2022. Russia-based economists have highlighted the poor quality of economic growth, saying that production of missiles and shells may contribute to higher GDP but offer limited benefit to the population. For 2024 as a whole, the government budgeted for federal revenue of 10.7 trillion roubles from oil and gas sales, up 21% from 2023, when weaker oil prices and a fall in gas exports reduced the revenue by 24%. Russia has heavily increased defence and security spending since launching what it calls a special military operation in Ukraine in February 2022, leading to two consecutive annual deficits exceeding 3 trillion roubles, about 2% of GDP. It financed these with internal borrowing and by drawing on the rainy day National Wealth Fund (NWF). ($1 = 87.5000 roubles) Sign up here. https://www.reuters.com/business/energy/russian-oil-gas-revenue-soars-41-first-half-data-shows-2024-07-03/

2024-07-03 10:04

July 3 (Reuters) - A look at the day ahead in U.S. and global markets from Mike Dolan Federal Reserve chair Jerome Powell managed to smooth some election-ruffled feathers in bond markets on Tuesday, helping Wall St stocks back to all-time highs as a sweep of labor market soundings are due ahead of the July 4 break. As the Nasdaq (.IXIC) New Tab, opens new tab hit new records and the S&P 500 (.SPX) New Tab, opens new tab closed above 5,500 points for the first time, Tesla (TSLA.O) New Tab, opens new tab stole the show - surging 10% to its highest level since January after it reported a smaller-than-expected 5% drop in vehicle deliveries in the second quarter. The auto giant's shares, the only stock of so-called "Magnificent 7" of U.S. megacaps to be still in the red for the year, was up a further 3% ahead of Wednesday's bell. U.S. Treasuries , which had been hit earlier this week by rising bets on Donald Trump's return to the White House and the fiscal implications of his campaign promises, have calmed somewhat since Powell spoke in Portugal on Tuesday. Ten-year yields have slipped back to 4.43% from peaks close to 4.5% set on Monday - when betting markets pushed former President Trump's chances of beating incumbent Joe Biden in November to more than 60% after Biden's dire TV debate performance last week. Still inverted U.S. Treasury yield curves had steepened into the new week as a result, with the New York Fed's estimate of the 10-year term premium demanded by investors to hold longer-term government debt flipping back positive for only the third time this year. Although still signalling no rush to cut interest rates, Powell offered markets some encouraging noises by saying the United States is back on a "disinflationary path." Part of his discussion was how the Fed needs to keep a balance between sustaining the economy and bearing down on inflation - salient in a week seeing further signs of cooling growth and with critical labor market readouts. An unexpected jump in U.S. May job openings, however, went slightly off script - although it's a month older than most of this week's employment reports. Wednesday sees ADP's private sector jobs data for June, weekly jobless claims and June layoffs data - alongside service sector surveys for last month too. And that all precedes the release of minutes from the last Fed policy meeting. The deluge of data comes as trading is expected to thin ahead of Thursday's holiday. Wall Street futures were steady ahead of the open and the dollar index (.DXY) New Tab, opens new tab was slightly easier - especially against the euro and sterling as British and French elections play out over the remainder of the week. With tactical voting and positioning in the second round of France's assembly elections on Sunday now set to prevent an overall majority for the far right, French government debt premia over Germany fell back below 70 basis points for the first time since mid June. In Asia, however, the story was different - with the dollar hitting new 38-year highs just under 162 Japanese yen - with no intervention from the Japanese authorities yet - and 2024 highs against China's yuan . The latter was hit by surprisingly weak June service sector survey, which also hit mainland Chinese stocks (.CSI300) New Tab, opens new tab - now up less than 1% for the year. Key developments that should provide more direction to U.S. markets later on Tuesday: * US June ADP private sector jobs report, weekly jobless claims, June Challenger layoffs, ISM and S&P Global June service sector survey, May factory goods orders, May international trade balance; Canada May trade balance * Federal Reserve issues minutes of latest policy meeting; New York Federal Reserve President John Williams, European Central Bank President Christine Lagarde and ECB chief economist Philip Lane speak at ECB's annual forum in Sintra, Portugal * US corporate earnings: Constellation Brands * US Treasury 4-week bill auction Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-pix-2024-07-03/

2024-07-03 07:50

MUMBAI, July 3 (Reuters) - The Indian rupee was little changed on Wednesday as a dip in U.S. bond yields did little to help Asian currencies which remained under pressure due to weakness in the Japanese yen and the Chinese yuan. The rupee was at 83.50 against the U.S. dollar as of 10:20 a.m. IST, nearly unchanged from its previous close at 83.5050. The dollar index dipped on Tuesday after comments from Federal Reserve Chair Jerome Powell pushed bond yields in the United States lower, offsetting the impact of a strong domestic jobs report. Powell said the U.S. was "getting back on a deflationary path" but cautioned that the Fed would need more evidence of falling inflation before cutting rates. Weakness in the dollar was of little help to the rupee's Asian peers though as the offshore Chinese yuan fell to 7.31, its weakest level since November, while the Japanese yen was pinned close to its lowest in 38 years. The rupee is likely to "keep its sideways trend", with weakness capped near 83.60, a foreign exchange trader at a state-run bank said. The Reserve Bank of India may allow gradual depreciation if the yuan weakness continues, the trader added. The offshore Chinese yuan has declined about 2.5% over 2024, while the rupee is down about 0.3%. Analysts broadly expect the rising odds of a second U.S. presidential term for Donald Trump to keep the Chinese currency under pressure. "The (Indian) central bank's tolerance for rupee appreciation against yuan beyond current levels might be limited," foreign exchange advisory firm IFA Global said in a note. The focus now is on the minutes of the Fed's latest policy meeting and U.S. ADP employment data, both of which are due later in the day, for cues on the future path of U.S. policy rates. Sign up here. https://www.reuters.com/markets/currencies/rupee-nearly-flat-wedged-between-yuan-weakness-dip-us-bond-yields-2024-07-03/

2024-07-03 07:48

MUMBAI, July 3 (Reuters) - Playing the currencies of the world's two most populous nations against each other has been a popular choice for carry traders and will hold its appeal until at least the results of the U.S. elections later this year, traders and currency analysts said. The Indian rupee's higher yield differential than the Chinese yuan -- by 5.5 percentage points on 1-year rates -- the divergent outlooks of the currencies and their low volatility have made using the yuan to fund long bets on the rupee among the most attractive carry trades in Asia. While there is no measure or data point to gauge the size of positions on the yuan-rupee carry, a senior banker estimates it to be nearly $40 billion based on the flows of his clients. The rising prospect of another presidential term for Donald Trump is only expected to burnish this trade's appeal. Trump kicked off a trade war with Beijing in his first term and has indicated he would continue to target the Asian nation if he wins another term. The odds of that happening rose after the recent debate between Trump and President Joe Biden. The yuan will "have to contend" with the likelihood of increased U.S. and China tensions and will remain under pressure, said Lloyd Chan, senior currency analyst at MUFG Bank. China's central bank is likely to allow measured weakness in the currency heading into the U.S. elections, which may drive the offshore yuan lower towards 7.35-7.40, said Brad Bechtel, head of foreign exchange at Jefferies. The yuan was last at 7.3062 per dollar and the rupee at 83.52. The rupee, though, is expected to be well supported by portfolio inflows and an upbeat economic outlook in comparison to China's, which has sputtered due to the protracted troubles in the real estate sector. All in all, the pressure on the yuan is higher than on the rupee, Societe Generale said in a note. The common factor is both currencies have low volatility relative to their Asian peers, largely due to active forex management by the respective central banks. That, combined with the wide interest rate differential, adds to the trade's appeal, Bechtel said. Sign up here. https://www.reuters.com/markets/currencies/india-rupee-chinese-yuan-carry-trade-hold-appeal-until-us-election-outcome-fx-2024-07-03/