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Dollar gives ground to higher-risk currencies as Chinese shares soar

The U.S. dollar fell against most currencies on Thursday as a rally in riskier assets such as global equities and commodities put a dent in safe-haven demand for the U.S. currency.

China’s yuan rose to a four-month high against the dollar, extending recent gains as investors of all stripes increased positions in Chinese stocks due to growing signs of a recovery in the world’s second-largest economy.

The euro was up 0.2% at $1.1355 EUR=EBS even after German export data failed to meet analysts’ expectations.

The common currency jumped earlier to a one-month high of $1.1371.

The British pound rose 0.3% to $1.2647 GBP=D3, a three-week high.

The Chinese yuan soared to a four-month high of 6.9808 in the offshore market and was last up 0.2% against the dollar CNH=EBS.

China’s currency has been a star performer as investors shrug off diplomatic tension between Washington and Beijing to focus on China’s improving economy and its attractive technology sector.

The yuan has risen around 2.3% from a seven-month trough against the dollar set on May 27.

“We’ve seen a more generalised view back to riskier assets. The Chinese equity surge has been the poster child for risk-on move across the last few sessions,” said Jeremy Stretch, CIBC Capital Markets’ head of G10 FX strategy.

Chinese shares continued their recent rally, with the blue-chip CSI300 index soaring to a five-year high on Thursday .CSI300. [MKTS/GLOB]

“Our bias for the currency quarter is 2% to 3% dollar depreciations and we see no reason to change that,” Stretch said, adding that the U.S. currency should fall as the supply from the Federal Reserve rises and the euro is poised for some modest upside gains on the back of the expected euro zone recovery fund.

Elsewhere in currencies, the Swedish and the Norwegian crowns rose to a one-month high against the dollar of 9.15 SEK=D3 and 9.35 NOK=D3 respectively.

Highlighting the dollar’s woes, the New Zealand dollar NZD=D3 rose to $0.6590, the highest since late January.

Graphic: World FX rates in 2019 here

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China bull charge drives stocks and yuan higher

SINGAPORE (Reuters) – Surging Chinese stocks led Asia’s equity markets higher on Thursday, as investors looked past Sino-U.S. tension and renewed coronavirus lockdowns and hoped stimulus washing through the world economy finds its way to company earnings.

Asia’s investors are riding high after a front-page editorial in Monday’s China Securities Journal extolling market fundamentals was seen as official encouragement to buy stocks.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8% and touched a 20-week high. The Shanghai Composite turned in its longest winning streak in more than two years and is up 16% in eight sessions. [.SS]

European futures point to gains from London to Frankfurt, with FTSE futures up 0.5% and Germany’s DAX futures up 1.2%, while U.S. stock futures fell 0.1%.

The yuan rose to a four-month high and the risk-sensitive New Zealand dollar hit its highest since January. [FRX/]

“Broadly speaking, the Chinese economy is coping better not only with a recovery but also in dealing with the potential of a second wave (of infections),” said National Australia Bank FX strategist Rodrigo Catril.

“Rightly or wrongly, that market is liking the idea that the yuan can strengthen on the back of equity inflows.”

China’s factory gate prices fell for a fifth straight month in June but signs of a pickup in some parts of the sector suggest a slow but steady recovery remains intact.

Deutsche Bank’s chief international strategist, Alan Ruskin, said the yuan enjoyed the “perfect combination” of tight monetary policy, yield advantage and equity demand.

In any case, its rally was not to be derailed by growing pressure from the West over China’s tightening grip on Hong Kong, nor was sentiment dented by surging U.S. virus cases and a fresh lockdown of 5 million Australians in Melbourne.

Australia’s benchmark ASX 200 index rose 1% and Japan’s Nikkei rose 0.6%. The Australian dollar rose 0.2% to $0.6995, but – perhaps indicating a cap on exuberance – it was unable to break past resistance at $0.70.

U.S. Treasuries were not sold in to the rally either, and nor were the safe havens of gold or the Japanese yen. The yield on benchmark U.S. 10-year Treasuries remained under pressure at 0.6545% and gold sat at $1,810.73 an ounce.

EARNINGS AHEAD

The U.S. earnings season looms with investor hopes high but warning signals flashing.

Federal Reserve officials raised fresh doubts on Wednesday about the durability of the rebound.

The United States has also posted its largest number of daily new infections since the outbreak began and global tensions are on the rise.

Australia on Thursday suspended an extradition agreement with Hong Kong and urged its citizens to reconsider the need to remain there if they are concerned about new national security laws that extend Beijing’s power in the city.

China’s top diplomat said on Thursday that China-U.S. relations face the most serious challenges since diplomatic ties were established.

U.S. jobs data due at 1230 GMT will offer the next checkup on the recovery’s progress, followed by results next Tuesday from J.P. Morgan, Citigroup and Wells Fargo ahead of Microsoft and Netflix on Thursday.

“Earnings season is upon us, and we really want to see what it looks like,” said Jun Bei Liu, a portfolio manager at Australia’s Tribeca Investment Partners.

The focus will be on the outlook as well as on understanding how deeply stimulus efforts have flowed through the real economy, she said.

Commodities seem to be laying a bet each way. Brent crude was flat at $43.28 per barrel and U.S. crude fell 0.2% to $40.82 per barrel as concerns about oversupply weigh. [O/R]

But Shanghai copper hit a 16-month high on supply worries in top producer Chile.

Graphic: Asian stock markets here

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Dollar falls as yuan leads charge in risk-on trades

TOKYO (Reuters) – The dollar fell against most currencies on Thursday as a rally in riskier assets such as global equities and commodities put a dent in safe-haven demand for the U.S. currency.

China’s yuan rose to a four-month high against the greenback, extending recent gains as investors of all stripes increase positions in Chinese stocks due to growing signs of a recovery in the world’s second-largest economy.[CNY/]

Lingering worries about the spread of the coronavirus could keep some currency pairs in a tight range, but the dollar’s losses are gradually increasing as sentiment favours riskier bets on long-term economic growth.

“Rising stocks and a dip in Treasury yields are slight negatives for the dollar, but the market can’t move too far because we still have to worry about the virus,” said Minori Uchida, head of global market research at MUFG Bank.

“A lot of major U.S. economic data have been positive, so this will be less of a trading factor going forward. People are looking for cues from stocks, yields, and hedging costs.”

Against the euro EUR=, the dollar fell 0.3% to $1.1365, reaching a one-month low.

The euro could get a further boost later in the day as Germany is scheduled to release export data. Economists expect shipments from the euro zone’s largest economy to rebound sharply in May from a large decline in the previous month.

The greenback also fell to a three-week low against the pound GBP= at $1.2637.

Sterling edged up to 89.97 pence per euro EURGBP=D3.

The dollar fell to a four-month low of 0.9365 Swiss franc CHF= on Thursday.

The dollar was little changed at 107.27 yen JPY=.

Chinese shares continued their recent rally and surged to a five-year high during the Asian session. [.SS] Futures pointed to further gains in European equities, highlighting the enthusiasm for risk-on trades.[MKTS/GLOB]

Investors are also looking to U.S. weekly jobless claims later on Thursday, but the dollar looks set to remain on the back foot until then.

The onshore yuan CNY=CFXS burst past the closely watched level of 7 to reach an almost four-month high of 6.9820 per dollar.

China’s currency has been a star performer as investors shrug off diplomatic tension between Washington and Beijing to focus on China’s improving economy and its attractive technology sector.

The yuan has risen around 2.7% from a seven-month trough against the dollar set on May 27.

While some investors are reluctant to take big positions before the traditional summer holiday season amid uncertainty around the coronavirus pandemic, analysts said sentiment favours more U.S. dollar declines as investors try to look past a recent spike in coronavirus cases in some countries.

Elsewhere in currencies, the Australian dollar AUD=D3 rose to a one-month high at $0.695.

Highlighting the greenback’s woes, the New Zealand dollar NZD=D3 rose to $0.6590, the highest since late January.

Graphic: World FX rates in 2020 here

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Asian stocks grind higher as focus turns to earnings

SINGAPORE/NEW YORK (Reuters) – Asian equity markets ground higher as investors tried to look past gathering Sino-U.S. tension and renewed coronavirus lockdowns to upcoming company earnings, hoping that global stimulus efforts will yield upbeat outlooks.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6% and touched a 20-week high as Chinese stocks extended their extraordinary rally.

Japan’s Nikkei edged ahead by 0.2%.

The Chinese yuan rose to a four-month high of 6.9872 per dollar and the greenback sat near a one-month low against a basket of currencies. [FRX/]

China was hit first and so is emerging first from the COVID-19 pandemic. In addition, fiscal stimulus, heavy government borrowing driving up bond yields, and a state-media editorial extolling strong fundamentals have stoked euphoria.

“The yuan has a perfect combination for a currency – relatively tight monetary policy; yield spreads moving in favour of the currency and equity prices also rising more than most,” said Deutsche Bank’s chief international strategist, Alan Ruskin.

“Even before we think of COVID-19 virus divergence indicators, there are enough money and related financial indicators consistent with a dollar/yuan below 7,” he said.

China’s blue-chip index rose for an eighth straight session in early trade on Thursday, gaining 0.6% to touch a five-year high. The Shanghai Composite was up by the same margin and at its highest level since early 2018.

Both have added about 15% this month, and the rally continued in spite of a more circumspect take in Chinese media, which carried a commentary reminding investors about the 2015 crash and suggesting a rational approach to risk-taking.

The mood lifted Australia’s S&P/ASX 200 1%, though New Zealand’s benchmark fell nearly 2% after a Rio Tinto plan to close an aluminium smelter hit energy stocks. [.AX]

Restraint was more evident in other asset classes as investors kept a wary eye on surging coronavirus cases and increasing tension between China and its trading partners, while waiting for U.S. jobs figures at 1230 GMT and next week’s earnings.

U.S. stock futures eased 0.1%, following another session of gains on Wall Street overnight. The yield on benchmark U.S. 10-year Treasuries remained under pressure at 0.6562% and gold sat above $1,800 an ounce.

EARNINGS AHEAD

The U.S. has posted its largest number of daily new infections since the outbreak began and global tensions are on the rise.

Five million Australians are under strict stay-at-home rules in the country’s second largest city of Melbourne.

And – as the West mulls a tougher response to China’s crackdown in Hong Kong – China’s top diplomat said on Thursday that China-U.S. relations face the most serious challenges since diplomatic ties were established.

That has investors hoping to hear some good news about the outlook when U.S. earnings season begins next week.

“Earnings season is upon us, and we really want to see what it looks like,” said Jun Bei Liu, a portfolio manager at Australia’s Tribeca Investment Partners. The focus will be on the outlook as well as on understanding how deeply stimulus efforts have flowed through the real economy, she said.

J.P. Morgan, Citigroup and Wells Fargo report their results on Tuesday, and Microsoft and Netflix on Thursday.

Beyond the yuan, major currencies were mostly steady on Thursday, hanging on to overnight gains against the dollar. The Aussie held near the top of its recent range at $0.6974 and the kiwi briefly made a one-month peak of $0.6583.

Oil prices idled amid concerns about renewed U.S. lockdowns. Brent crude futures was 0.1% weaker at $43.25 per barrel. U.S. crude fell 0.3% to $40.79 per barrel. [O/R]

Graphic: Asian stock markets here

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Dollar steadies near multi-week lows, yuan shines again

TOKYO (Reuters) – The dollar nursed losses against most currencies on Thursday as a rally in riskier assets such as global equities and commodities put a dent in safe-haven demand for the U.S. currency.

China’s yuan rose to a four-month high against the greenback, extending recent gains as investors of all stripes increase positions in Chinese stocks due to growing optimism about the world’s second-largest economy.

Lingering worries about the spread of the coronavirus and a light calendar in Asia could keep some currency pairs in a tight range, but the dollar’s losses are gradually increasing as sentiment favours riskier bets on long-term economic growth.

“Rising stocks and a dip in Treasury yields are slight negatives for the dollar, but the market can’t move too far because we still have to worry about the virus,” said Minori Uchida, head of global market research at MUFG Bank.

“A lot of major U.S. economic data have been positive, so this will be less of a trading factor going forward. People are looking for cues from stocks, yields, and hedging costs.”

The dollar bought 0.9381 Swiss franc CHF= on Thursday in Asia, close to the lowest in almost four months.

Against the euro EUR=, the dollar was quoted at $1.1339, close to a three-week low.

The euro could get a boost later in the day as Germany is scheduled to release export data. Economists expect shipments from the euro zone’s largest economy to rebound sharply in May from a large decline in the previous month.

The greenback was also close to a three-week low against the pound GBP=, last trading at $1.2613.

Sterling held steady at 89.91 pence per euro EURGBP=D3.

The dollar was little changed at 107.33 yen JPY=.

Asian stocks rose on Thursday, following gains in the tech-heavy Nasdaq .IXIC to a record closing high on Wednesday.

The onshore yuan CNY=CFXS rose to 6.9875 per dollar, breaking past the closely watched level of 7 to reach the highest since March 17.

China’s currency has been a star performer against the dollar as investors shrug off diplomatic tension between Washington and Beijing to focus on China’s improving economy and its attractive technology sector.

The yuan has risen around 2.6% from a seven-month trough against the dollar set on May 27.

While some investors are reluctant to take big positions before the traditional summer holiday season amid uncertainty around the coronavirus pandemic, analysts said sentiment favours more U.S. dollar declines as investors try to look past a recent spike in coronavirus cases in some countries.

Elsewhere in currencies, the Australian dollar AUD=D3 stood at $0.6978, close to its strongest level in a month.

The New Zealand dollar NZD=D3 was little changed at $0.6573, also close to a one-month high.

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Asian shares waver with coronavirus, corporate earnings in focus

SYDNEY/NEW YORK (Reuters) – Asian stocks dithered on Wednesday as an increase in new coronavirus cases in some parts of the world cast doubts over the economic recovery while oil prices eased on oversupply fears.

MSCI’s broadest index of Asia-Pacific shares outside Japan were a tad lower after hitting a 4-1/2 month high just on Tuesday.

Chinese shares flickered between green and red. Australian shares were down 0.4% as were indexes for New Zealand and South Korea. Japan’s Nikkei was off 0.1% and Hong Kong’s Hang Seng index was slightly firmer.

E-mini futures for the S&P 500 added 0.18%.

Overnight, U.S. stocks fell, halting a five-day winning streak by the benchmark S&P 500 index, its longest this year and driven by better-than-expected economic data.

Following the recent rally, the declines looked like a consolidation, with the markets largely in “wait and see mode” ahead of the upcoming earnings session, said NAB economist Tapas Strickland.

Second-quarter earnings season will begin in earnest from next week.

“It will be important to watch the number of U.S. deaths in coming weeks and whether greater questions will be asked about the extent of necessary restrictions,” Strickland added.

California reported more than 10,000 coronavirus cases on Tuesday, a record rise for a single day that also surpassed the number of contact tracers recently trained by the state to detect and prevent potential outbreaks.

Coronavirus cases were also on the rise in the Australian state of Victoria, which led to lockdown measures being reimposed in Melbourne, the country’s second-biggest city.

“The second wave of infection will see Victorian economic activity fall sharply and it will continue to lag the rest of Australia,” said NAB economist Kaixin Owyong.

Victoria makes up around a quarter of Australian economic activity, she said.

Citi analysts predicted global equities would hang around current levels in twelve months’ time.

“We expect bullish and bearish forces to cancel each-other out,” they said in a note. “We would not chase markets higher from current levels, but would prefer to wait for the next dip.”

Citi has “overweight” positions on U.S. and Emerging Markets equities.

Most major currencies were trapped in a range.

The U.S. dollar was 0.15% higher on the Japanese yen at 107.65.

The risk sensitive Australian and New Zealand dollars were a shade weaker at $0.6940 and $0.6544, respectively.

The euro was barely changed at $1.1273.

In commodities, gold hovered near a recent 8-1/2 year peak as investors preferred safe-haven assets. Spot gold was last a shade weaker after two straight days of gains at 1,792.5 per ounce.

Brent crude futures fell 8 cents, or 0.2%, to $43 a barrel. U.S. West Texas Intermediate (WTI) crude futures slipped 6 cents, or 0.15%, to $40.56 a barrel.

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Dollar edges higher as virus worries sap risk appetite

NEW YORK (Reuters) – The U.S. dollar inched higher against a basket of currencies on Tuesday, holding above the near two-week low hit in the previous session, as investors turned uneasy over new coronavirus flare-ups and local lockdowns in some countries.

The U.S. Dollar Currency Index, which measures the greenback’s strength against six major currencies, was 0.03% higher at 96.774. On Monday, the index had fallen as low as 96.565 with its 50-day moving average slipping below its 200-day average, viewed as a bearish signal. (Graphic: Dollar death cross, here)

“While risk appetite has held the upper hand, pushing stocks higher and the dollar lower, its grip remains slippery,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

“Data and virus headlines hold the keys to the outlook,” he said.

The dollar, viewed as a safe haven, benefits when investors bail on riskier assets.

Riskier currencies such as the commodity-driven Aussie, Norwegian crown and the Swedish crown, which have rallied strongly since April alongside increased risk appetite in global markets, eased on Tuesday.

Lockdown measures were reimposed in Australia’s second biggest city on Tuesday, confining Melbourne residents to their homes unless undertaking essential business for six weeks, as officials scramble to contain a coronavirus outbreak.

In the United States, Florida’s greater Miami area became the latest hotspot to roll back its reopening as virus cases surged nationwide by the tens of thousands and the U.S. death toll topped 130,000.

U.S. health official Anthony Fauci said on Monday that the current state of the COVID-19 outbreak in the United States “is really not good.”

The surge in U.S. coronavirus cases has made business owners “nervous again,” Atlanta Federal Reserve president Raphael Bostic said on Tuesday.

Sterling held near a three-week high against the dollar as investors awaited details of the government’s plans to support the British economy.

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RBC commits C$150 million to diversity push, aims for more minority executives

TORONTO (Reuters) – Royal Bank of Canada (RY.TO) is committing C$150 million ($111 million) to racial diversity initiatives and aims to increase the proportion of non-white executives to 30% from 20%, Canada’s biggest lender said on Monday.

RBC joins Bank of America (BAC.N), which announced $1 billion to address racial inequality, and others including Alphabet Inc’s Google (GOOGL.O) and Amazon.com Inc (AMZN.O) in committing funds for racial justice causes following the death of George Floyd, a Black man killed by a Minneapolis police officer in May.

“We… know we’re not immune from systemic bias and racism, and we believe we have more work to do to better understand, identify and address issues that impede the success of Black, Indigenous and other racialized groups in our workforce,” RBC said in a statement.

RBC did not say when it seeks to reach the 30% firm-wide target for non-white executives.

The bank pledged C$100 million in small business loans over five years to Black entrepreneurs and a C$50 million investment until 2025 to create opportunities for 25,000 Black, Indigenous and people of color (BIPOC).

It will double its investment in its leadership program to drive development of BIPOC talent, the bank said.

RBC will also establish and measure annual internship and new hire goals for Black and Indigenous talent in Canada, the United States and the U.K. from 2021, it said.

Last month, Manulife Financial Corp (MFC.TO) said it will invest C$3.5 million on diversity initiatives and Bank of Nova Scotia (BNS.TO) said it was committing C$500,000 to organizations fighting racial discrimination.

Canadian banks last week joined a widespread boycott of Facebook Inc (FB.O) seeking to pressure the company to take concrete steps to block hate speech.

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Risk-on move dents dollar; yuan notches best day since December

NEW YORK (Reuters) – The yuan on Monday recorded its best day against the dollar since December as investors lapped up risky assets on growing expectations of a strong Chinese economic rebound and as glimmers of good news in U.S. data drove down demand for the safe-haven dollar.

An index of blue-chip Chinese shares soared to its highest in five years as traders bet on a revival in China, pushing the offshore yuan CNH= to its highest level since March 17, its best daily performance since Dec. 12. It was last at 7.015 yuan per dollar.

“Clearly we have an improvement in global risk appetite. And I would pin the blame for that on Chinese regulators who appear to have encouraged the national team in the markets, and really helped to drive a big spike in equity indices,” said Karl Schamotta, chief market strategist at Cambridge Global Payments.

“What that signals to markets is that, although we’re not seeing a 2009-style stimulus effort in China, at least not from a monetary policy perspective – we are seeing signs of a concerted rescue effort.”

Green shoots in U.S. data also weakened demand for the safe-haven dollar. Against a basket of six rival currencies, it was last down 0.43% at 96.76, having earlier hit its lowest since June 24.

U.S. services industry activity rebounded sharply in June, almost returning to its pre-COVID-19 pandemic levels. A resurgence in coronavirus cases, however, has forced some restaurants and bars to close again, threatening the emerging recovery.

The multi-day move lower in the dollar index triggered a significant technical event called a death cross – in which the dollar index’s 50-day moving average crossed below its 200-day moving average – indicating the potential for a sell-off.

The pattern has been followed by a period of dollar weakness in eight out of nine instances since 1980, analysts at Bank of America said.

“It signals that you’re seeing positive sentiment taking hold… on the back of a more positive view of the global economy,” said Charles Tomes, portfolio manager at Manulife Investment Management.

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China waves the green flag for FX bulls

LONDON (Reuters) – The yuan led commodity currencies higher against the dollar on Monday as investors lapped up risky assets on growing expectations of a strong Chinese economic rebound and the United States continued to report a surge in coronavirus infections.

An index of blue-chip Chinese shares .CSI300 soared to its highest in five years as traders bet on a revival in China, pushing the yuan to its highest levels since March 18 against the dollar =USD.

“The rally in mainland China equities has been the big catalyst,” said Stephen Gallo, European head of FX strategy at BMO Financial Group.

“The only caveat is that China’s economy not driven purely by free-market forces. But if regulators in China are engineering a stronger equity market, it can still feed through to the rest of the world.”

A revival in Chinese economic activity bodes well for Australia and Europe who count Beijing as their biggest trading partner.

The euro rose 0.5% to $1.1303 to a two-week high also supported by strong data: German industrial goods rose by 10.4% in May, rebounding from their biggest drop since records began in 1991 and the bloc’s retail sales figures rose above pre-coronvirus levels in some countries.

The Australian dollar AUD=D3 rose 0.3% to $0.6970 following a 1.2% gain last week, with the market focused on a Reserve Bank of Australia policy meeting on Tuesday.

Against a basket of currencies =USD, the dollar edged 0.3% down to 96.87, its lowest level since July. 2.

The broad recovery in risk appetite pushed the dollar lower. Already grappling with a steady rise of coronavirus infections in the United States, the dollar was further dented by a further culling of economic projections.

Goldman Sachs meanwhile revised its economic projections for the U.S. economy down to a 4.6% contraction in 2020 versus a previous estimate of -4.2%.

“The healthy rebound in consumer services spending seen since mid-April now appears likely to stall in July and August as authorities impose further restrictions to contain the virus spread,” Goldman analysts said in a note.

Speculators’ net bearish bets on the U.S. dollar grew to the largest position in nearly two years in the latest week, according to and U.S. Commodity Futures Trading Commission data released on Friday.

“As long as the Fed is still buying assets and prepared to do more, we expect this negative correlation, Risk On, Dollar Off, to dominate financial markets over the coming quarters,” said Chris Turner, global head of markets at ING.

(Graphic: FX positions, here)

Sterling GBP=D3 moved slightly higher to $1.2509 against the dollar amid reports British Finance Minister Rishi Sunak plans to raise the property tax threshold and temporarily cut the value-added tax (VAT) in the hospitality sector.

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