Aurelia Butler

SINGAPORE (Reuters) – The dollar was parked below recent peaks on Tuesday, as a three-week rally faded and traders waited on economic data to figure on whether it’s warranted to push the dollar up any further.Strong U.S. labour data and sticky inflation have raised U.S. rate expectations and supported the dollar’s rally so far this month – Tuesday’s European and U.S. manufacturing data and Friday’s core PCE price index will guide the next steps.After a quiet Monday thanks to the President’s Day holiday in the United States, the dollar stood steady at 132.24 yen and $1.0687 per euro, with the common currency finding strong support above $1.06.The U.S. dollar index has climbed three weeks in a row for a gain of about 1.7% through February so far, but has steadied at 103.86, down from a six-week high of 104.67 hit on Friday. “Friday’s inability of euro/dollar to push lower after breaking below $1.0650 rather sums up the FX market for me,” said Societe Generale (OTC:SCGLY) strategist Kit Juckes.”There are two reasons why the dollar’s bounce is getting stuck,” he added, noting that European and U.S. growth forecasts are converging and the difference in relative rate expectations is narrowing.”I suspect that further significant dollar strength will require the Fed Funds futures market to start pricing in a 50 basis point rate hike in March,” he said.Fed funds futures currently imply about a 16% chance of that, while in Europe a 50 bp hike in March is all but priced in. Elsewhere currency markets were broadly steady.Gains in oil prices and a steady Chinese yuan gave support to the Australian dollar which sat at $0.6920 as traders awaited the release of minutes from the Reserve Bank of Australia’s February meeting.The New Zealand dollar held at $0.6259 ahead of a central bank meeting on Wednesday. Markets are pricing a 50 bp hike to bring New Zealand’s benchmark interest rate to 4.75% and are also weighing the economic impact of Cyclone Gabrielle.”As markets contemplate the cost of rebuilding and the impact that’s likely to have on inflation, insurance flows and infrastructure spending, it’s quickly becoming a potential driver of sustained New Zealand dollar strength,” ANZ analysts said.Sterling was steady at $1.2042. Overnight the Swedish crown jumped as inflation turned sticky and central bank minutes showed policymakers prepared to keep hiking.Bitcoin found support after Hong Kong’s markets regulator published proposed rules to licence crypto exchanges, seen as a step in the direction of encouraging the city’s development as a crypto hub.========================================================Currency bid prices at 0007 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.0681 $1.0685 -0.04% -0.32% +1.0687 +1.0681 Dollar/Yen 134.3150 133.9500 +0.00% +2.07% +134.3550 +0.0000 Euro/Yen 143.47 143.46 +0.01% +2.27% +143.5300 +143.4500 Dollar/Swiss 0.9233 0.9232 +0.03% -0.13% +0.9234 +0.9230 Sterling/Dollar 1.2031 1.2040 +0.02% -0.42% +1.2043 +1.2040 Dollar/Canadian 1.3458 1.3453 -0.01% -0.72% +1.3458 +1.3452 Aussie/Dollar 0.6904 0.6911 -0.10% +1.28% +0.6915 +0.6904 NZ Dollar/Dollar 0.6249 0.6253 -0.04% -1.57% +0.6261 +0.6250 All spotsTokyo spotsEurope spots Volatilities Tokyo Forex market info from BOJ More

US curbs on China’s access to advanced technology are killing its viability as a manufacturing base for exports, according to the head of Japan’s Kyocera, as one of the world’s largest makers of chip components shifts its production elsewhere and invests heavily in facilities at home.Hideo Tanimoto, president of a company that is an important part of the chip supply chain, made his stark assessment as he leads an aggressive investment strategy for Kyocera that includes construction of its first factory in Japan in nearly two decades. “It works as long as [products are] made in China and sold in China, but the business model of producing in China and exporting abroad is no longer viable,” Tanimoto told the Financial Times. “Not only have wages gone up, but obviously, with all that’s happening between the US and China, it’s difficult to export from China to some regions.”In October, the US announced export controls that will severely hamper efforts by Chinese companies to develop cutting-edge technologies. Last month, Japan and the Netherlands also agreed with the US to restrict exports of chip manufacturing tools to China. Kyocera’s products include phones, printers and solar panels and it holds a 70 per cent global market share in ceramic components for chip manufacturing equipment. Tanimoto said US export controls were part of the reason the company cut its full-year operating profit forecast this month by 31 per cent.“If chip equipment makers stop shipments to China, our orders will be somewhat affected . . . They are now even [being] asked not to ship their non-cutting-edge tools,” Tanimoto said. Kyocera had already found itself increasingly caught up in the trade dispute between the world’s two largest economies.In 2019, it relocated the manufacturing of its copiers for the US market from China to Vietnam to avoid tariffs on China imposed by the Trump administration. It also transferred the production of in-vehicle cameras for the US from China to Thailand. Tanimoto said it would now be nearly impossible to produce hardware in China without access to the chips technology affected by the tightened regulations, although the country may still have a competitive edge in software and artificial intelligence.For decades, the Kyoto-based manufacturer has taken a conservative stance towards investments to focus on generating profits. But under Tanimoto, who took over as president in 2017, the company has shifted gears to explore new growth opportunities, spending ¥62.5bn ($464mn) to build a facility for semiconductor packaging at its plant in Kagoshima in southern Japan.In November it pledged to nearly double capital spending over the next three years to ¥900bn, to expand production of chip-related components and capacitors used in smartphones and other products. Its first domestic plant built in nearly 20 years will be an electronics components factory in Nagasaki, planned to begin operations in 2026.

Investors have welcomed Kyocera’s bolder spending plans but have also called on the company to improve its corporate governance and return on equity by selling its 15 per cent stake in telecoms business KDDI, which was started by the group’s founder Kazuo Inamori. He died in August. Tanimoto said the company would not reduce its stake in KDDI, which is worth ¥1.4tn, and would instead use it as collateral to borrow ¥500bn for its acquisition plans in electronic components.“If you sell it, you will be taxed quite significantly as it is a capital gain. If you borrow money, using it as collateral, you can borrow at a lower interest rate and still receive dividends,” said Kyocera’s president. “Dividends are much higher than interest rates . . . [Keeping the stake] can accelerate the growth of our company.”In response to shareholder calls to offload Kyocera’s underperforming businesses such as smartphones, Tanimoto said the company would first focus on generating profits by shifting to selling its devices to businesses rather than consumers. “I believe we can get back to double-digit profits after pivoting to business use,” Tanimoto said. “I told our team to achieve it in the next three years for the survival of our communications business.” More

Federal and state governments’ tax revenue increased to a total of 58.03 billion euros ($62.01 billion), according to the ministry’s monthly report.Germany needs a turnaround not only with respect to security policy, but also in economic and financial terms, with a focus on strengthening growth, the finance ministry said in the report. The finance ministry will modernize Germany’s tax law with legislative initiatives that foster growth, according to the ministry’s report. Draft legislation will focus on making taxation simpler and more transparent, the report added. For 2023, experts have forecast tax revenues will increase to 857.2 billion euros, up 5.2% from the previous year, according to the report.($1 = 0.9358 euros) More

Campaigners have called on the UK government to freeze household energy costs beyond the end of March as falling wholesale prices sharply reduce the amount of government subsidy needed to hold bills steady.The average UK household bill is set to rise to £3,000 per annum between April and June under the UK’s energy price guarantee (EPG) scheme, up from £2,500 today, as chancellor Jeremy Hunt has argued that the government cannot afford to keep subsidising bills at the lower level.Households face even steeper increases as the government’s energy bill support scheme, which shaved an additional £400 off every household payment, is set to end.But the latest forecasts for UK household energy costs show the regulator’s price cap — which sets the unsubsidised price of energy for the majority of homes — will not rise as much as previously feared, reaching around £3,300 in April and dropping below £2,200 from June.Late last year it was predicted that it would rise well above £4,000 as energy prices soared.Cornwall Insight, a consultancy, estimated on Monday that the additional cost to the government of freezing bills at £2,500 between April and June would be £2.6bn, or less than 10 per cent of the total cost of the EPG that has been in place since October.“The greater the disparity between the cost of the two schemes the higher the governmental expense,” Cornwall Insight said.“If the EPG were to increase to £3,000 as planned, the estimated cost [to the government] would be £26.8bn while if it were to remain at £2,500, the estimated cost would be £29.4bn.”Investec, the investment bank, said on Monday that its “final” forecast for the price cap in the April to June period was £3,332, while Cornwall Insight forecast £3,294.

Both have a strong record of accurately predicting the cap and see it falling to below £2,200 in June — freeing the government from subsidies for the average household entirely — as a slide in wholesale gas prices of almost 65 per cent since early December starts to feed through. The official price cap announcement from regulator Ofgem is due on February 27. Ed Davey, leader of the Liberal Democrats, said the Conservative party would demonstrate it was “out of touch” if it let bills rise as households struggle with the cost of living crisis.“It would be irresponsible and deeply unfair for the government to increase people’s energy bills now,” Davey said. Simon Francis of the End Fuel Poverty Coalition said the government should have additional funds available, with wholesale gas prices falling by almost 80 per cent since their peak in August and 65 per cent since early December.“The government has not had to spend as much as they thought they were going to,” Francis said. “The money is presumably still there and they should be able to help people even further.”Before the energy crisis, the average household bill for homes with normal gas and electricity usage was generally around £1,200 under the regulator’s price cap, before Russia restricted gas supplies to Europe.HM Treasury has so far been cautious on the prospect of extending additional support to keep average bills at £2,500, warning that the government would be on the hook if wholesale prices were to quickly rebound. “Prices are volatile and can increase as fast as they fall,” a Treasury spokesperson said. “If prices return to their late-August level, the government would need to borrow an extra £42bn and potentially increase taxes.”Officials added proceeds from the windfall tax on energy companies were also likely to undershoot earlier predictions given the fall in wholesale prices, offsetting some of the benefit to the government. “It would be irresponsible to plan fiscal policy on such volatile prices,” one official said.Meanwhile, the government has appointed Alison Rose, chief executive of banking group NatWest, to co-chair its Energy Efficiency Taskforce, set up recently to cut Britain’s power consumption.The task force will aim to accelerate boiler upgrades, household insulation and business efficiency measures to try to cut the country’s energy use by 15 per cent within seven years.The appointment will be confirmed by Hunt on Tuesday at a meeting with nearly 100 representatives of UK-based green companies. Lord Callanan, a junior business minister, will be the other co-chair. More