Aurelia Butler

SINGAPORE/TOKYO (Reuters) – The dollar rose broadly on Thursday, particularly against the yen, as investors braced for higher U.S. interest rates while expecting anchored Japanese rates to go nowhere anytime soon.The greenback hit a 24-year high of 139.59 against the yen in early Asia trade, a gain of about 0.5% on the previous day’s close.Expectations for a 75-basis-point U.S. rate hike at next month’s Federal Reserve meeting are rising on the back of solid economic data, with Fed funds futures last pointing to a 73% chance of such an increase. “Dollar/yen should break 140 before the September (Fed meeting). Looks like we won’t have to wait much longer,” said Sean Callow, a currency strategist at Westpac in Sydney.”So long as expectations for the peak in the Fed funds rate keep ratcheting higher while the Bank of Japan remains on hold, dollar/yen will be a buy on dips. Anywhere in the low 140s now looks plausible.”Sterling fell about 0.4% to a new 2-1/2 year low of $1.1576, as clouds gather over the British economy. The euro fell 0.3% but was clinging on above parity at $1.0022 as red-hot inflation stokes hike bets in Europe.Euro zone inflation rose to a record high at 9.1% in August, data released on Wednesday showed, solidifying the case for further big European Central Bank (ECB) rate hikes to tame inflation.Markets have priced in about a 40% chance the ECB will increase rates by 75 basis points next week, even as risks of a painful recession rise along with gas prices.”The high inflation and gas supply are still major issues in both the eurozone and the UK, and I think it’s going to keep downward pressure on both those currencies,” said Joseph Capurso, head of international economics at Commonwealth Bank of Australia (OTC:CMWAY).”I can see the euro going back below parity again quite soon.”The U.S. dollar index, which measures the greenback against a basket of currencies, was up 0.12% to 108.99 in early Asia trade, not far off its two-decade high of 109.48 hit on Monday.”The U.S. dollar has a bit more upside, partly because we think the market is underestimating how high the Federal Reserve could take the funds rate,” said CBA’s Capurso.Yields on U.S. Treasuries rose accordingly. The two-year Treasury yields were up at 3.516%, the highest since late 2007, while expectations for the peak in the Fed funds rate crept closer to 4%.The risk-sensitive Australian and New Zealand dollars were under pressure, with the Aussie down 0.3% at $0.6821, while the kiwi fell 0.3% to $0.6102. More

(Reuters) -Zambia won International Monetary Fund approval for a $1.3 billion, 38-month loan program on Wednesday, a crucial step in the southern African country’s quest to restructure its debts and rebuild an economy ravaged by mismanagement and COVID-19.The IMF said in a statement that the new Extended Credit Facility arrangement would provide total funding of 978.2 million Special Drawing Rights – about $1.3 billion at current exchange rates – equivalent to 100% of Zambia’s Fund quota, or shareholding.Approval by the IMF’s Executive Board will unlock an immediate disbursement of about $185 million, the Fund said.Zambia’s creditors led by China and France pledged in late July to negotiate a restructuring of the country’s debts, a move that IMF Managing Director Kristalina Georgieva had welcomed as “clearing the way” for the new Fund program.”Zambia continues to face profound challenges reflected in high poverty levels and low growth,” Georgieva said on Wednesday. “The ECF-supported program aims to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth.”The IMF program aims to restore Zambia’s macroeconomic stability through fiscal adjustment and debt restructuring and strengthening economic governance.Georgieva said this would require “sustained” spending reductions and that Zambian authorities were appropriately focused on eliminating “regressive” fuel subsidies, reforming agricultural subsidies, reducing inefficient public investments and increasing tax revenues. This will free up some fiscal space to increase social spending to ease transition burdens on the most vulnerable, she said.The IMF said the loan also will catalyze much-needed financial support from development partners and donor countries.DEBT RESTRUCTURING ‘MILESTONE’In 2020, Zambia became the first African country in the pandemic era to default. The restructuring of its external debt, which amounted to more than $17 billion at the end of 2021, is seen by many analysts as a test case for the region.It is one of three African countries, along with Chad and Ethiopia, that have sought restructuring under a G20 common debt restructuring framework. The IMF had reached a staff-level agreement with Zambia last December for up to $1.4 billion loan, but it was contingent upon Zambia’s ability to reduce debt to levels the Fund deems sustainable.Georgieva said in a Twitter (NYSE:TWTR) message https://twitter.com/KGeorgieva/status/1565117265649061891 the Zambia loan approval was a “major milestone” for the long-stalled G20 effort, showing that it can deliver results for other debt-burdened countries.The Fund said the next step in the debt restructuring process was for Zambia’s official creditor committee to agree on specific steps on how to deliver debt relief, in the form of a memorandum of understanding to be reached by the end of 2022. More

Asian markets kick off the new month on Thursday, glad to see the back of a turbulent August but wary of what September holds.The driving forces last month – heavy selling in fixed income, rising global interest rate expectations, the looming energy crunch in Europe, and China’s deepening economic, energy, and financial problems – will not suddenly evaporate with the date change. Equity investors may look to start the month on the front foot and pick up some relative bargains, however, after the S&P 500 and world stocks both fell more than 4% in August. Bond investors may think the same – two-year German yields, for example, have been crushed lately, and the increase in yield last month was the steepest in 40 years.But Wednesday’s newsflow was not encouraging, particularly from Europe. Headline inflation in the euro zone rose to a record high of 9.1%, and economists at Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) now predict that the ECB will raise rates by a punchy 75 basis points in September.According to Goldman Sachs financial conditions indexes, financial conditions in China are their tightest since May, and the tightest in the United States in over a month and close to a new post-pandemic peak. Recession fears continue to push stocks and oil prices lower. Brent crude slumped around 12% in August, down for a third straight month. The corporate calendar in Asia is light on Wednesday, with PMIs from Australia, South Korea and Indonesia the most relevant economic indicators for markets.Key developments that should provide more direction to markets on Thursday: Australia housing loans (July)Australia capex (Q2)Australia PMI (Aug)Indonesia PMI (Aug)S Korea PMI (Aug)S Korea GDP (Q2 revised) More

Amid widespread staff shortages and a clamour from businesses to raise the country’s immigration intake, Albanese on Thursday said Australia would create 180,000 more fee-free seats for students looking to gain technical skills in a A$1.1 billion ($752 million) package.The recently-elected centre-left Labor government is hoping to find solutions for soaring inflation and the fall in real wages during the two-day meet, with Albanese saying “compromises will need to be negotiated, sacrifices will need to be made.”Even as Australian business groups and unions assembled at the national capital for the summit, Sydney, the country’s biggest city, is facing a protracted strike by train employees and protests by nurses seeking higher wages.Treasurer Jim Chalmers said the summit was being held at a “critical juncture” for the economy.”This summit is just one step – a major step, yes, but one step. Our expectations are tempered and realistic,” Chalmers said.The government will release the outcomes of the summit on Friday that will outline the immediate actions it would pursue.Despite Australia’s unemployment sitting at a near 50-year-low of 3.4%, the central bank sees inflation heading to three-decade highs requiring further hikes in interest rates that would sharply slow growth. Wages are also rising but not as fast as inflation.A blowout in visa processing times in Australia has left about a million prospective workers stuck in limbo, worsening the acute staff shortages.Businesses have been urging the government to raise the cap on annual immigration from 160,000. Chalmers said “that will be an important part of the conversation” during the summit.”There’s an appetite to lift that in a responsible way,” he said. “But (that) should never be a substitute for training Australians for opportunities here as well.”($1 = 1.4620 Australian dollars) More

The S&P Global (NYSE:SPGI) purchasing managers’ index (PMI) fell to a seasonally-adjusted 47.6 in August from 49.8 in July, remaining below the 50-mark that separates expansion from contraction in factory activity for a second month and hitting the lowest since July 2020.Output and new orders weakened by the sharpest since June 2020, while new export orders fell by the most since July 2020.”Firms often commented on concerns that the economy would continue to perform poorly amid weak demand and challenging global economic conditions,” said Usamah Bhatti, economist at S&P Global Market Intelligence.”The outlook for output over the coming year dimmed in August as concern that the economic slowdown would deepen grew among manufacturers, while businesses also noted the lingering impact of inflation and the war in Ukraine.”The weaker demand did however help ease price pressures. Input and output prices rose by the slowest rate in 19 and 18 months, respectively.There were also signs of improvement in supply chain snags. Suppliers’ delivery times, which show the degree of disruption, deteriorated, but by the least in 21 months, while the backlog of work decreased for the first time in 22 months, as firms were able to complete work in hand amid weak inflow of new orders.Manufacturers remained optimistic over the coming year for output, but the level of optimism was the weakest since October last year. More

That was slightly faster than a 0.6% growth in the first quarter but slower than 1.3% in the last quarter of 2021, according to the Bank of Korea data.By expenditure, private consumption advanced 2.9%, while construction and facilities investment grew 0.2% and 0.5%, respectively. Exports shrank 3.1%.The country’s gross domestic product expanded by 2.9% on a year-on-year basis, also unchanged from the earlier estimate. More

“Being president of the Dallas Fed and as a policymaker, our number one priority has to be to restore price stability,” Logan said on Wednesday in a virtual event held by the regional Fed bank to introduce her. The Fed is raising interest rates at a pace not seen since the 1980s to fight inflation that is running at a 40-year high.Logan was reflecting on the several days she spent last week attending a global central bankers’ conference in Jackson Hole, Wyoming, where Fed Chair Jerome Powell signaled he would raise U.S. borrowing costs as high as needed to cool price pressures, even as he acknowledged that doing so would bring “some pain” to households and businesses as growth slowed and the labor market softened. “The theme was very clear… the clear priority was bringing inflation down, because it’s having significant implications and hardships for businesses and households,” Logan said. “And that really lines up with my own priority.”Logan has only been running the Dallas Fed since Monday, but she is no stranger to the U.S. central bank, having most recently been in charge of the New York Fed desk that manages the Fed’s $8 trillion balance sheet and implements the Fed’s interest-rate decisions. In that role she has attended a number of Fed rate-setting meetings to brief policymakers about developments in the financial sector. On Sept. 20-21 she will attend for the first time as one of 19 Fed officials to discuss the state of the economy and make a decision on how much further to lift the policy rate, now targeted in a range of 2.25%-2.5%. Policymakers are expected to weigh at that meeting whether to deliver a third straight 75-basis point rate hike, or to downshift to a smaller half-point hike in light of recent data showing what Atlanta Fed President Raphael Bostic said was “glimmers” of good news in the inflation fight.Logan did not address anything specific as to how she is leaning as far as September’s decision, or the forward path of interest rates or even her economic outlook. “Our goal here at the Dallas Fed is building a stronger economy together,” she said several times during the half-hour program. More