Aurelia Butler

BENGALURU (Reuters) – The dollar will remain a force to reckon with over the remainder of this year and into the next as U.S. interest rates rise and the economy outperforms its peers, reinforced by its safe-haven appeal when investors choose to worry, according to a Reuters poll.Backed by a strong U.S. economy still creating jobs at a consensus-beating pace, the Federal Reserve has ramped up its fight against inflation by hiking interest rates much quicker than most of its peers. That has helped the dollar turn in one of its best performances in at least a decade.The dollar index which was up around 15% for the year touched a fresh two-decade high of 110.55 on Tuesday.With most outcomes like higher interest rate differentials and safe haven moves expected to favour the dollar, the currency is likely to remain strong for longer.”The dollar between now and at least the end of the year will remain stronger across the board,” said Roberto Mialich, currency strategist at UniCredit.”At the current juncture, the Fed, focusing more on economic growth than inflation would probably be the only reason why the dollar might change its current trend… also the dollar might also benefit from its safe-haven status.”But beyond 2022, the dollar was expected to give up some of those year-to-date gains, the Reuters Sept. 1-6 poll of 70 foreign exchange strategists showed. However, those predicted gains for other currencies would fall short of making up for their current year-to-date losses.While the dollar has dominated nearly every currency tracked by analysts and traders it has performed particularly well against the euro, the Japanese yen and the British pound.All three currencies have either touched multi-decade lows or were close to doing so.The euro already down 13% for the year hit a two-decade low of $0.9876 on Monday as the prospects for a winter without Russian gas sunk in.It was expected to trade below parity over the next three months, suggesting the 75 basis point European Central Bank rate hike forecast for its Thursday meeting would do little to reverse the euro’s fortunes. [ECILT/EU]The common currency was forecast to trade around $1.02 and $1.06 in the next six and 12 months respectively. If realized, those expected gains of around 3% to 7% would fall short in making up for the 13% decline for the year.Those median forecasts for one, three and six month horizons were the lowest in nearly two decades.”If the ECB goes with 50 bps, we would be concerned markets will see them as not committed enough to fighting inflation… A 75 bps hike is not frontloading in our view, but a long-overdue catching up from well behind. The ECB has a lot more to do,” said Michalis Rousakis, G10 FX strategist at Bank of America (NYSE:BAC) Securities.”Still, this may not be enough to support EUR/USD. Communication will matter much more, in our view. The EUR needs strong statements from (ECB President Christine) Lagarde that the ECB will do whatever it takes to bring inflation down to the target.”The Japanese yen, down about a fifth and the worst underperformer among majors for the year, was expected to recoup about half of those losses to trade at 127.0 per dollar in a year. It was last trading around 142 against the dollar.Britain’s struggling currency won’t regain its losses against the U.S. dollar anytime soon as steep interest rate increases from the Bank of England fail to offset an expected recession and increased government spending. [GBP/POLL]Sterling, down about 15% this year, was expected to hover at the $1.16 it was trading around on Tuesday in one and three months time. In six months the pound will have risen to $1.18 and in a year to $1.23, the poll found, still far short of the around $1.35 it started 2022.(For other stories from the September Reuters foreign exchange poll:) More

WASHINGTON (Reuters) -Democratic leadership in the U.S. Senate could add language protecting gay marriage rights to a stopgap measure to keep the federal government funded and running, in a bill that will need Republican support for passage, a Democratic source said on Tuesday.Such a move could up the pressure in the evenly divided chamber, as it faces a Sept. 30 deadline to avoid partial federal agency shutdowns when money runs out. Republicans on Tuesday warned that they considered the pairing a political stunt.Congress has less than four weeks to pass the measure before returning to the campaign trail for the Nov. 8 midterm elections, when President Joe Biden’s Democrats are expected to lose their thin majority in the U.S. House of Representatives. Control of the Senate is also up for grabs.Republican cooperation will be necessary in the Senate to pass the temporary funding bill that may last until December, which is needed because the two parties have yet to agree on a dozen regular funding bills. Democrats control the 50-50 Senate thanks to Vice President Kamala Harris’ tie-breaking vote.Senate Majority Leader Chuck Schumer, the chamber’s top Democrat, vowed to enact the funding package and avoid a politically damaging government shutdown. “Democrats are going to work in good faith to avoid even a hint of a shutdown. And it is my expectation that our Republican colleagues will do the same,” Schumer said in a Tuesday floor speech. He has previously pledged to hold a vote on a House-passed bill codifying the right to same-sex marriage. The idea arose after conservative Supreme Court Justice Clarence Thomas in June wrote that the same logic that caused the court to overturn the national right to abortion could also lead it to reconsider its earlier decision legalizing same-sex marriage.It is not clear that a bill codifying same-sex marriage would have the 10 Republican votes needed to pass. In recent days, senior Democrats have considered the possibility of adding it to the must-pass funding measure in hopes of ensuring approval, the Democratic source said. Some Republicans pushed back on the idea of attaching the same-sex marriage legislation to the government funding measure. “It’s frankly a political stunt. Same-sex marriage … isn’t in political jeopardy,” said Republican Senator John Cornyn, who predicted that combining the two bills could hamper support from his fellow party members.Republicans also reacted skeptically to suggestions that Democrats could add other spending measures to the government funding bill, saying it was not clear why more money was necessary now. On Friday, Biden requested $47.1 billion in new spending, including $11.7 billion in emergency funds to help Ukraine in its fight against Russian forces, $22.4 billion in COVID-19 aid and $4.5 billion to help deal with an outbreak of monkeypox.”It’s a big ask without much explanation,” Republican Senator Roy Blunt told reporters. “There’s a lot of talking to do about what they’re asking for.”With many areas of the United States suffering from climate change-related flooding, Western wildfires and other natural disasters, Biden has requested $6.5 billion in aid.Democratic Senator Joe Manchin may ramp up his push for a bill reforming the way permits are approved for energy infrastructure projects ranging from pipelines to export facilities. It is a measure that some Democrats could have concerns with because of climate change worries.Heading into the final two months of the campaign, congressional Democrats were feeling somewhat more optimistic about avoiding massive losses to Republican challengers.Gasoline prices have fallen and there are signs of a public backlash against the conservative-majority Supreme Court’s overturning abortion rights, which was a Republican Party goal for decades. More

US stocks and government bond prices dropped on Tuesday after an upbeat survey on the country’s vast services industry fuelled expectations of further big interest rate rises by the Federal Reserve.The yield on the 10-year Treasury note, seen as a proxy for borrowing costs around the world, rose 0.15 percentage points to 3.34 per cent, while the yield on the 30-year bond surged to its highest level since 2014. The sell-off in the $23tn US government debt market was widespread, with the yield on the policy sensitive two-year note climbing 0.11 percentage points to 3.50 per cent. Bond yields rise as their prices fall.Meanwhile, the tech-dominated Nasdaq Composite fell for a seventh consecutive session, its longest losing streak since November 2016. The index fell 0.7 per cent, while the broader S&P 500 index slid 0.4 per cent.Those moves, which followed a public holiday in the US on Monday, became more emphatic after a closely watched Institute for Supply Management survey showed that services activity had outpaced economists’ expectations, registering a reading of 56.9 in August compared with forecasts of 55.1 and July’s figure of 56.7. Any figure above 50 signals expansion. Growth in business activity and new orders both accelerated last month, the report said. The data, following on from a robust labour market report last week, encouraged investors to further crank up their projections of how far and fast the Fed will lift borrowing costs to tame inflation.Futures markets show investors think the Fed’s benchmark interest rate will climb to almost 4 per cent by next March. In late July, the same measure showed expectations of less than 3.2 per cent. Markets are pricing in a 75 per cent likelihood that the Fed will lift rates by 0.75 percentage points at its late September meeting, which would mark the third consecutive increase of such magnitude. The central bank’s current target range stands at 2.25 to 2.50 per cent.Analysts at Citi said the ISM survey “points to a resilient services side of the economy, despite pressure from high prices and continued difficulties hiring workers.“This should keep the Fed pursuing a still-hawkish stance with a [0.75 percentage point] hike in September, as the inflationary pressure in services looks more indicative of tight labour markets with less feed- through of commodity shocks.”The strong ISM reading contrasted with a separate survey of the same sector published by S&P Global on Tuesday, which suggested the service sector was in contraction territory. Citi said “the source of the discrepancy is unclear, but the strong ISM reading pushes back on immediate concerns over slowing economic activity”.Government bond yields have climbed in volatile trading in recent weeks after hawkish rhetoric from the Fed and a deepening European energy crisis sent shivers through financial markets. Chair Jay Powell reiterated last month the US central bank’s commitment to curbing rapid price growth, saying the Fed “must keep at it until the job is done”.The European Central Bank will on Thursday deliver its own monetary policy decision, with multiple Wall Street banks anticipating a jumbo three-quarter-point increase. The ECB raised rates in July for the first time in more than a decade by an unexpectedly large 0.5 percentage points.The moves in US government bonds on Tuesday ricocheted into other debt markets. The UK’s 10-year benchmark gilt yield added 0.16 percentage points to 3.1 per cent, having touched 3 per cent on Monday for the first time since 2014, according to Refinitiv data. Ten-year UK government borrowing costs in the gilt market had soared more than 0.9 percentage points last month, the biggest rise since at least 1989. In currencies, Japan’s yen tumbled as much as 1.7 per cent to ¥142.97 against the greenback, marking a 24-year low, as Tokyo’s strict yield curve controls contrasted with soaring bond yields in other major economies — lessening the appeal of the nation’s currency.“The yen’s role as a safe haven has been eroded by Japan’s worsening trade position, and the [fall in the yen] may have further to go until Japanese authorities intervene,” said analysts at ING.In European equities, the regional Stoxx 600 share index closed 0.2 per cent higher. More

Russia is purchasing millions of rockets and artillery shells from North Korea to re-energise its offensive in Ukraine, according to recently declassified US intelligence, as western sanctions begin to choke Moscow’s supply of weapons. The Russian ministry of defence was “in the process of purchasing millions of rockets and artillery shells from North Korea for use on the battlefield in Ukraine”, a US official said, citing intelligence recently cleared for public dissemination. “This purchase indicates that the Russian military continues to suffer from severe supply shortages in Ukraine, due in part to export controls and sanctions,” the official added. Moscow’s military dealings with North Korea come after recent disclosures that it is also relying on another pariah nation, Iran, to support its war in Ukraine. Russia received its first shipment of Iranian combat drones last week and was likely to receive more, US officials said. Iran and North Korea are widely seen as relatively unreliable providers of military equipment. US officials said some of the drones purchased by Russia from Iran had experienced mechanical failures.Thank you for reading FirstFT Asia. Send feedback on today’s newsletter to [email protected]. — Emily Five more stories in the news1. Japanese yen hits 24-year low against dollar The yen yesterday plunged to its lowest level against the US dollar since August 1998 as hedge funds in Europe and the US resumed bets that the Bank of Japan’s ultra loose monetary policy would continue. Japan’s currency dropped as much as 1.7 per cent to a low of ¥142.97 against the dollar.2. Truss takes office, pledging to steer UK out of energy crisis Liz Truss has vowed Britain will “ride out the storm”, as the new UK prime minister began confronting an economic crisis with a massive energy bailout for families and businesses that could cost more than £150bn. Within minutes of entering Number 10, Truss set about forming a cabinet. Here is a look at her administration.Read more on Truss and Europe’s energy crisis: Inside the Tory party: Can Truss govern her own party? UK’s new prime minister will face some of her biggest challenges from within the Tory ranks. EU windfall taxes: Brussels is pushing for national windfall taxes on energy companies’ inflated earnings to counter “astronomic” electricity bills.Big Read: Last year, EU commissioners put the continent on a path to becoming climate neutral. Now, they’re planning tens of billions of euros of spending on fossil fuels amid severe cuts to gas supplies.3. India’s Silicon Valley hit by floods and power cuts Intense flooding has submerged parts of India’s tech capital Bangalore, inundating multimillion-dollar homes, wrecking slum housing and cutting off transport links to offices. The deluge of eastern areas of the city in the southern Indian state of Karnataka follows much more widespread flooding across Pakistan, which has killed at least 1,300 people.4. Singapore’s biggest bank backs crypto despite slump Piyush Gupta, chief executive of DBS, said the bank plans to grow its cryptocurrency and digital assets business despite the crypto bear market, saying it wants to expand its digital exchange and offer services to more of its 300,000 wealthy clients in Asia.5. Juul Labs to pay $438.5mn in underage user settlement The Altria-backed e-cigarette group must pay $438.5mn under a settlement with dozens of US attorneys-general after their two-year investigation concluded it had “cynically” advertised vaping products to underage users.The day aheadAustralia GDP figures Australia’s economy is expected to have grown 1.1 per cent quarter-on-quarter and 3.6 per cent year-on-year when second-quarter figures are released today. (Forexlive) Apple launch event Apple holds its annual event to launch its latest products, including a new series of iPhones. Late last week Apple officially overtook Android devices to account for more than half of smartphones used in the US.China trade figures Monthly and quarterly trade data is set to be released today. US Federal Reserve Beige Book The Fed will publish its report of economic conditions today. Federal Reserve vice-chair Michael Barr will also discuss how to make the financial system safer and fairer at the Brookings Institution, his first public comments since taking the role.Join us on September 7-8 online or in person at The Westin, Singapore, for our Moral Money Summit: Accelerating ESG Integration to Unlock Value and Drive Progress. Register hereWhat else we’re reading and listening toThe battle for control of India’s media Prannoy Roy, a broadcaster and co-founder of New Delhi Television, and his wife and co-founder Radhika Roy are locked in a battle with the world’s third-richest man, Gautam Adani, for control of a media group that supporters say is a bastion of media independence.Taiwan’s military mired in the past Inertia that has hindered efforts to strengthen Taiwan’s defences is rooted in the army’s historical links to the Kuomintang, the Chinese Nationalist party that ruled the country under martial law for decades, experts say. The reform drive has taken on urgency as Beijing ratchets up military pressure. Europe can — and must — win the energy war How Europe responds to this crisis will shape its immediate and longer-term future, writes Martin Wolf. It must resist Putin’s blackmail. It must adjust, co-operate and endure. That is the heart of the matter.Related read: Without immediate political intervention the energy crisis threatens to escalate into an avoidable health emergency that will widen inequality and shorten lives.Why Bloomberg lives on and on and on and on and on and on Industry watchers have been predicting the death of the Bloomberg terminal ever since the financial crisis, writes Rupak Ghose, a former financial analyst at Credit Suisse. But Bloomberg lives on. It thrives. He explains why.A sceptic’s guide to crypto Even after the crypto markets crashed this year, there are still a number of people who believe there’s a future for digital assets and blockchain technology. FT columnist and avowed crypto sceptic, Jemima Kelly, isn’t so sure. On season 4 of Tech Tonic, she takes a trip deep into cryptoland to hear from critics, converts and hardcore believers.Gaming Kill time and zombies at four of Tokyo’s most exciting game centres. From retro-tastic classics to mind-blowing VR adventures — via good old pinball machines — every gaming taste is catered on this FT Globetrotter list. More