2024-05-31 04:59

NEW YORK, May 31 (Reuters) - The dollar was lower on Friday and on track for its first monthly decline in 2024 after data showed U.S. inflation rose in line with expectations in April, offering little clarity on how soon the U.S. Federal Reserve will be able to cut interest rates. The personal consumption expenditures (PCE) price index increased 0.3% last month, the Commerce Department's Bureau of Economic Analysis said on Friday, matching the unrevised gain in March. "These numbers do not give any sense that the Fed is achieving its goal," said Joseph Trevisani, senior analyst at FX Street. "It's already stated what its goal is, so the markets are willing to give it some time ... but that time I do not think is unlimited." The U.S. dollar index was last down 0.12% at 104.64. The Fed has raised borrowing costs by 525 basis points since March 2022 in a bid to cool demand across the economy. Financial markets initially expected the first rate cut to come in March, but it then got pushed to June and now to September. Official data showed on Thursday the U.S. economy grew at an annualized rate of 1.3% from January through March, down from the previous estimate of 1.6% after downward revisions to consumer spending. Although inflation is "moving in the right direction," said Kyle Chapman, FX markets analyst at Ballinger Group, "policymakers are definitely not out of the woods yet." "I would caution against over-interpreting a single month's data," he said. EURO ZONE INFLATION The euro edged up after data showed price pressures in the euro zone accelerated faster than expected in May, complicating the outlook for the European Central Bank. The euro was up 0.13% to $1.0847. French inflation data released earlier on Friday, and German and Spanish figures earlier this week, came in slightly higher than expected. The numbers have not altered the view in markets that the ECB will cut rates when it meets next week. According to all 82 economists polled by Reuters, an ECB rate cut on June 6 appears certain, with a majority predicting further reductions in September and December. Elsewhere, the yen weakened, leaving the dollar up 0.24% at 157.210 but off this week's four-week high, as Japan's finance minister repeated warnings about excessive currency volatility. Japan's Ministry of Finance released data on Friday confirming that Japanese authorities spent 9.79 trillion yen ($62.2 billion) intervening in the foreign exchange market to support the yen over the past month, in moves that kept the currency from testing new lows but are unlikely to reverse a longer-term decline. "The intervention disclosed by the Ministry of Finance between April 26 and (Thursday) was slightly larger than market estimates derived from the Bank of Japan's accounts, but isn't big enough to trigger fears of a war chest so diminished as to limit further action," Karl Schamotta, chief market strategist at Corpay, said in a note. Data on Friday showed core consumer inflation in Tokyo accelerated in May, but price growth excluding the effect of fuel eased, heightening uncertainty over the timing of the Bank of Japan's next rate hike. Sign up here. https://www.reuters.com/markets/currencies/dollar-regroups-before-inflation-test-yen-brushes-off-tokyo-cpi-2024-05-31/

2024-05-31 03:21

BENGALURU, May 31 (Reuters) - India's central bank has moved a little more than 100 metric tons of gold from the UK to its domestic vaults, the Times of India newspaper reported New Tab, opens new tab on Friday, citing sources. A similar quantity of the precious metal might be coming to the country in the coming months, the report said, adding that the move was for logistical reasons and diversified storage. The Reserve Bank of India held 822.10 tons of gold at March-end, of which 408.31 tons were held domestically. Central banks globally have been increasing reserves held in gold, often seen as a hedge against currency volatility and geopolitical risks. The RBI decided to move gold to India as the stock was building up overseas, the TOI reported. The RBI did not immediately respond to a Reuters request for comment. Sign up here. https://www.reuters.com/world/india/india-cenbank-moves-100-tons-gold-uk-domestic-vaults-toi-reports-2024-05-31/

2024-05-31 03:17

BENGALURU, May 31 (Reuters) - The Reserve Bank of India will cut interest rates just once this year, most likely in October-December rather than next quarter, although there was no clear majority among economists polled by Reuters on the timing of the first move. With a growing likelihood many major central banks, including the U.S. Federal Reserve, delay cutting interest rates, there is little upside for the RBI to step in front. With near-8% growth, the fastest among major world economies, and above-trend inflation there is also little urgency for the RBI to begin cutting rates unless concerns emerge about a slowdown. All but one of 72 economists in a May 17-30 Reuters poll expected the RBI to hold the repo rate at 6.50% (INREPO=ECI) New Tab, opens new tab at the conclusion of its June 5-7 meeting, just a few days after election results are due. "Taking a leaf out of the global monetary policy playbook, the RBI too is likely to err on the side of caution and adopt a significantly restrained approach to rate cuts," said Aditi Gupta, an economist at Bank of Baroda. "Given how the domestic growth and inflation dynamics have been placed, we do not foresee a possibility of the RBI preceding the Fed." Nearly half of economists surveyed, 33 of 71, predicted the RBI's first repo rate cut would take place in Q4 2024, giving a median forecast of 6.25%. In April, the most popular choice for the first cut was Q3. By end-2024, 33 of 71 said rates would be 25 basis points lower at 6.25%, 15 said 6.00%, and five expected 5.75% or lower. The remaining 18 forecast no rate change this year. Those predictions come despite widespread expectations inflation will stay above 4%, the mid-point of the RBI's preferred 2%-6% range, this year and next. At 4.83% in April, inflation is expected to dip to 4.00% next quarter before rising in subsequent quarters, the poll showed, averaging 4.5% this fiscal year and next. Economic growth was forecast to average 6.8% this fiscal year and 6.6% next. "With the still-robust growth outlook creating no urgency to cut rates and inflation still above target, driven mainly by food ... we do not expect the majority of the MPC to see a reason to cut before December," Shreya Sodhani of Barclays noted. While a smaller number of forecasters provided rate views well into next year, median forecasts showed no further cuts beyond 6.00%. (For other stories from the Reuters global economic poll:) Sign up here. https://www.reuters.com/world/india/reserve-bank-india-delay-interest-rate-cut-late-this-year-2024-05-31/

2024-05-31 02:54

MUMBAI, May 31 (Reuters) - The Indian rupee on Friday is set to receive a boost from the dip in U.S. Treasury yields before key inflation data and likely equity inflows. Non-deliverable forwards indicate the rupee will open at 83.28 to the U.S. dollar, compared with 83.3175 in the previous session. India's national election exit polls will be out on Saturday. "I would say interbank is right now slightly short (on dollar/rupee) heading into the exit polls," a currency trader at a bank said. The dollar and U.S. yields pullback alongside possible inflows may push the dollar/rupee down to 83.20, he said. The MSCI index adjustment, which will come into effect from May 31, is expected to bring in foreign inflows of $2.5 billion. Most of the passive flows related to this either come on the same day of the adjustment or the day before, a foreign exchange spot trader at a foreign bank said. The MSCI inflow was cited for the recovery in the rupee later in Thursday's session. Asian currencies were slightly higher on the day on the back of a pullback in U.S. yields and the dollar index. Data showed the world's largest economy grew more slowly than previously estimated in the first quarter amid a downward revision in consumer spending, boosting demand for U.S. Treasuries. Focus now turns to the April U.S. core personal consumption expenditure (PCE) data due later in the day, which will hold cues on whether the Federal Reserve will cut interest rates later this year. The U.S. first quarter core PCE number, released alongside the GDP numbers, was revised lower to 3.6% than the initial print of 3.7%. "That revision is likely to be carried through to today's monthly April core PCE figures and adds some downside risk to the 2.8% on-year consensus forecast," ING Bank said in a note. KEY INDICATORS: ** One-month non-deliverable rupee forward at 83.36; onshore one-month forward premium at 7 paise ** Dollar index up at 104.82 ** Brent crude futures down 0.3% at $81.6 per barrel ** Ten-year U.S. note yield falls to 4.54% ** As per NSDL data, foreign investors sold a net $517.4mln worth of Indian shares on May. 29 ** NSDL data shows foreign investors bought a net $172.4mln worth of Indian bonds on May. 29 Sign up here. https://www.reuters.com/markets/currencies/rupee-inch-higher-pullback-us-yields-possible-inflows-2024-05-31/

2024-05-31 01:04

MUMBAI, May 31 (Reuters) - India's six-week long national election is in its final phase, with voting concluding on Saturday, and financial markets are keenly awaiting the verdict after counting scheduled for June 4. Pollsters and political analysts differ on the possible outcome of the election, with lower voter turnout and apathy seen as risks for the government of Prime Minister Narendra Modi and his Hindu nationalist Bharatiya Janata Party (BJP). The BJP and its allies won 352 of the 543 seats in India's lower house of parliament at the last election in 2019 with the BJP alone winning 303 seats. No exit polls are permitted before this year's voting ends on Saturday, but the BJP was expected to sweep the election according to opinion polls in early April. The shadow betting market, tracked by traders for cues, predicts the BJP will win close to 300 seats this time, about the same as in 2019. Ahead of the 2024 verdict, here is how fund managers, analysts and economists expect markets to react under different scenarios: BJP STRENGTHENS ITS POSITION If the BJP wins a stronger majority than 2019, equity markets will rally in anticipation of growth-supportive economic policies, such as spending on infrastructure and a push for the manufacturing sector, said Rajesh Bhatia, chief investment officer of ITI Mutual Fund. Benchmark indices S&P Sensex (.BSESN) New Tab, opens new tab and NSE Nifty 50 (.NSEI) New Tab, opens new tab could rally 4-5% in this scenario, said Abhishek Goenka, founder of IFA Global, a forex consultancy and asset management firm. The rupee could appreciate to around 82.80 levels against the dollar from 83.32 at the close on Thursday, while the benchmark bond yield may dip to 6.90%-6.92% from near 7% currently, VRC Reddy, treasury head at Karur Vysya Bank. Modi's return is viewed by the market as a positive because it demonstrates political stability and implies policy continuity, said James Thom, senior investment director of Asian equities at abrdn, based in Singapore. BJP HOLDS ON TO POWER BUT WINS FEWER SEATS If the BJP and its allies win fewer seats than in 2019 but are still above the 272 seats needed to form a government, markets may see some volatility in the short-term but settle quickly. The market seems to have already adjusted to the possibility that the margin of victory for BJP and its allies may be lower than earlier estimated, said Gaurav Dua, head of capital market strategy at Sharekhan, a brokerage. A seat count below 300 for the current government will not alter the market's trajectory, said Umeshkumar Mehta, chief investment officer at Samco Asset Management. The rupee and bond yields may not see a significant reaction in this case either, said Vijay Sharma, senior executive vice president at PNB Gilts. OPPOSITION-LED COALITION GOVERNMENT A surprise BJP loss and the possibility of a coalition government led by Congress could lead to a sell-off in markets until the new government's policies become clear. The market is hoping for continuity, so another party winning could lead to a knee-jerk reaction, said Mittul Kalawadia, senior fund manager, equity, ICICI Prudential Mutual Fund. "Whether in the long run things are positive or negative we will know later, but in the short-term any change which impacts policy level continuity will be a big negative," Kalawadia said. IFA Global's Goenka said he expects an up to 10% fall in benchmark stock market indices in such a scenario immediately after the verdict, while Sharekhan's Dua said the fall could be as large as 15-20%. In this scenario, the central bank may intervene to stem a decline in the rupee, said Anindya Banerjee, head of foreign exchange research at Kotak Securities. Foreign outflows in bonds could lead to an immediate rise of 10-15 basis points in yields, he said. Sign up here. https://www.reuters.com/world/india/india-election-2024-how-markets-may-react-outcome-2024-05-31/

2024-05-31 00:42

Japan spent 9.79 trillion yen to prop up currency Yen under pressure with BOJ's easy-money stance, Fed hawks Investors brace for further action but effects seen short-lived TOKYO, May 31 (Reuters) - Japanese authorities spent 9.79 trillion yen ($62.23 billion)intervening in the foreign exchange market to support the yen over the past month, in moves that kept the currency from testing new lows but are unlikely to reverse longer-term declines. The Ministry of Finance data released on Friday confirmed the suspicions of traders and analysts that Tokyo entered the market in two rounds of massive dollar-selling intervention shortly after the yen hit a 34-year low of 160.245 per dollar on April 29, and again in the early hours of May 2 in Tokyo. "This was larger than expected, underscoring Japan's resolve to ease the pain of imported inflation," said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley Securities. "Authorities will likely continue to spend big on intervention." Despite those billions of dollars of foreign reserves spent, the effect has not been sustained, and market attention has shifted to whether and how soon Japan might step into the market again as the yen languishes near the 160 threshold that is widely seen as authorities' line in the sand for intervention. The yen traded at 157.235 per dollar as of 1020 GMT on Friday. Finance Minister Shunichi Suzuki issued a fresh intervention warning earlier in the day, reiterating that officials are watching currency markets closely and stand ready to take all necessary measures. Authorities have refrained from commenting on whether they forayed into the market, but have consistently warned they stand ready to act at any time to counter excessive volatility. Friday's monthly data set only shows the total amount Tokyo spent on currency intervention during the period. A more detailed daily breakdown of intervention will only be seen in data for the April-June quarter, likely to be released in early August. Much of the yen's woes is down to the resilience of the U.S. economy and the resulting delay in Federal Reserve rate cuts, while the Bank of Japan (BOJ) is expected to take its time in raising interest rates this year. Last week, Japan renewed its push to counter excessive yen falls during a weekend gathering of Group of Seven (G7) financial leaders, which was helped by the group again warning against excess currency volatility. "Given that there was no opposition from other countries, Japan will likely continue efforts to curb excessive yen falls through intervention," said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities. However, U.S. Treasury Secretary Janet Yellen said last week intervention should be restricted to "exceptional" cases, underscoring her "belief" in the market-set exchange rates. Top currency diplomat Masato Kanda said last week that authorities are prepared to take action at "any time" to counter excessive yen moves. Having engaged in the past yen-selling intervention more than two decades ago, Kanda, now the vice finance minister for international affairs, led yen-buying operations in September and October of 2022, spending about 9.2 trillion yen over three days. Although Japan has had only limited success in arresting sharp yen swings, there's a good chance it could act again even if the currency does not break beyond the 160-to-the-dollar mark, said Masafumi Yamamoto, chief FX strategist at Mizuho Securities. "Japan must have won backing from G7 including the U.S. to intervene in the currency market again," he said. "If the yen makes sharp single-day moves from the current level to say, 158 yen or beyond, it might take action again." ($1 = 157.3200 yen) Sign up here. https://www.reuters.com/markets/currencies/japanese-data-confirm-fx-intervention-yen-weakness-persists-2024-05-31/