Aurelia Butler

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TOKYO (Reuters) – The dollar hovered close to a three-month peak on Wednesday in a big week for macroeconomic data that could reveal the path for U.S. monetary policy.The Australian dollar edged closer to a three-month trough after some stickiness in inflation suggested a Reserve Bank of Australia interest rate cut is unlikely this year.Mixed U.S. indicators overnight, showing a loosening U.S. jobs market but a confident consumer, provided little clarity on the outlook for Federal Reserve easing, allowing the greenback to drift lower with Treasury yields on Tuesday following a strong seven-year note auction. Recently though, economic readings have pointed to a resilient economy, particularly for employment, spurring a paring back of bets on the pace of rate reductions. The ADP employment report is due later in the day, ahead of the potentially crucial monthly payrolls report on Friday.”The U.S. dollar continues to garner strong support as markets adjust their rate path expectations,” said James Kniveton, senior corporate FX dealer at Convera.”The American economy is currently firing on all cylinders.”Meanwhile in Australia, “the increased inflation number in services is likely to mean rate reductions this year are a very distant prospect,” Kniveton said.The Reserve Bank of Australia’s preferred inflation gauge, the trimmed mean measure, slowed to 3.5% from 4.0% in the third quarter, but service-sector inflation remained elevated. On a quarterly basis, the gauge increased by 0.8%, topping forecasts for a 0.7% rise.The Aussie was little changed at $0.6562 as of 0101 GMT, not far from Tuesday’s low of $0.6545, a level that had last been seen on Aug. 8.The U.S. dollar index, which measures the currency against six major rivals including the yen and euro, was little changed at 104.24, after reaching the highest since July 30 at 104.63 on Tuesday before finishing the day almost flat.The 10-year Treasury yield slid to 4.2461% on Wednesday, after reaching the highest since July 5 at 4.3390% in the prior session.Both the dollar and U.S. bond yields have also been buoyed in recent days by rising speculation in markets and on some betting sites on a victory on Nov. 5 for Republican presidential candidate Donald Trump, whose tariff and immigration policies are seen as inflationary. That also helped leading cryptocurrency bitcoin surge to near its all-time high from March at $73,803.25. The token last changed hands at about $72,082, after pushing as high as $73,609.88 in the previous session.Opinion polls still indicate the race is too close to call.The dollar-yen pair, which tends to track U.S. yields closely, slipped 0.06% to 153.27, after retreating from a three-month peak of 153.87 on Tuesday.The yen has also been weighed down by political uncertainty since a disastrous weekend election for Japan’s ruling coalition saw it lose its majority in parliament, ushering in a period of horse trading that is likely to result in expanded fiscal spending and could potentially delay rate hikes.The euro edged up 0.06% to $1.0824 ahead of the release of readings on gross domestic product across Europe later in the day, that could shed light on whether the European Central Bank will opt to cut rates by 25 or 50 basis points at its next meeting in December.Sterling traded flat at $1.3016 ahead of the Labour government’s first budget on Wednesday.Finance minister Rachel Reeves, along with Prime Minister Keir Starmer, has reiterated the need for tough fiscal measures to help close a hole in British public finances. They are seeking to retain the confidence of investors, two years after then-Prime Minister Liz Truss’ tax-cutting plans sparked a crisis in the bond market.Key for sterling will be estimates from the UK’s Office for Budget Responsibility, which makes the forecasts that underpin the government’s spending and tax plans. More

HONG KONG/SINGAPORE (Reuters) – Investors are selling yen and taking shelter in cash, India, pockets of China’s markets and Singapore dollars ahead of a U.S. election that could shake out global money and trade flows.Asia’s financial markets stand on the front line of what could be a wild ride when votes are tallied and in the months ahead since the region is an export powerhouse and shares and currencies are sensitive to changes in U.S. trade policies.That has money managers shying away from outright wagers on the outcome and looking instead to reduce exposure to vulnerabilities from Japanese manufacturers to Hong Kong stocks and make bets in India or China that stand to gain regardless of the U.S. leader.”We actually view China as a decent place to hide,” said Jon Withaar who manages an Asia special situations hedge fund at Pictet Asset Management, since the market has a lot of domestic drivers and lower correlation with global asset moves.”The best thing for us to do is just sit on the sidelines and wait,” he said, having already cut down on bets in Japan, where tariffs pose a risk for automakers and Hong Kong, where foreign selling of Chinese assets is likely to focus.In the final stretch to the Nov. 5 election, betting odds have Republican Donald Trump leading Democrat Kamala Harris and financial markets have moved to sell U.S. bonds and buy dollars in anticipation a Trump administration would increase inflation.In Asia, the low-yielding yen is favoured for selling against the dollar. Vantage Point Asset Management chief investment officer Nick Ferres is not directly trading the election but is keeping a short yen position and owns Japanese stocks.”Our sense is that the Donald is going to win and it might even be a Republican sweep,” he said.”The implication for the dollar is Trump is probably a bit more pro-growth…the consequence is likely higher path of rates and even more of the rate cuts that are still there for the Fed might be priced out.”The yen’s 6.5% drop on the dollar through October is the largest fall of any G10 currency.CLOSE CALLInvestors say they are also seeking markets least exposed to tariff risks or where other big tailwinds, from demographics to China’s promised stimulus plans, look to be blowing.The Singapore dollar would stand tall against regional currencies, as the city-state guides the currency, said Ray Sharma-Ong, head of multi asset investment solutions for Southeast Asia at abrdn, while Indian stocks may be insulated.”India benefits from strong domestic economic growth, low exposure to potential trade conflict due to low export-to-GDP ratio exposure and a tilt towards services exports, supported by strong earnings that are not reliant on tech,” he said.”We also expect the equity market to prefer defensive sectors with lower exposure to exports and potential tariffs,” such as staples and utilities.”To be sure polls show the race is too close to call and the range of outcomes, including a drawn-out or contested vote count, mean policy implications may not be immediately obvious.”I honestly don’t know what Trump can achieve,” said John Hempton, founder and chief investment officer of hedge fund Bronte Capital in Sydney.”If I genuinely don’t know what I’m doing, then I just try and stay out of the way – try to minimise the damage.”Still, Goldman Sachs notes that emerging market funds have been raising exposure to China and North Asia over the past month, which could accelerate rapidly once the election passes and uncertainty hanging over investors lifts.”We see emerging markets equities to be well placed to outperform next year regardless of the outcome,” said Gary Tan, portfolio manager, Allspring Global Investments, as China bolsters its economy and the U.S. cuts interest rates.”We see a Harris win being marginally more positive for emerging markets.” More

Data from the Australian Bureau of Statistics on Wednesday showed the consumer price index (CPI) rose 0.2% in the third quarter, under forecasts of a 0.3% increase. Annual inflation dropped to 2.8%, from 3.8%, taking it back into the Reserve Bank of Australia’s (RBA) 2%-3% target band for the first time since late 2021.The RBA is more focused on core inflation and the trimmed mean measure increased by 0.8% in the quarter, just above forecasts of a 0.7% gain. The annual pace slowed to 3.5% from 4.0%, with service-sector inflation still elevated. More

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The small South American nation is hoping that an upcoming $10.5 billion oil and gas project operated by France’s TotalEnergies (EPA:TTEF) and U.S. APA Corp will help boost an economy still recovering from a heavy debt burden.Finance Minister Stanley Raghoebarsing urged caution, saying the government would not apply for another IMF program immediately after the current $688 million program expires in March. Suriname last week did, however, join a World Bank agreement unlocking $22 million to improve living conditions.In a separate statement, Raghoebarsing also ruled out taking out new loans using future oil revenues as collateral.”In no way do we want to sell the oil we have yet to produce and use it as collateral for easy money, which would burden the next generation,” he said. He also ruled out debt-for-nature swaps to repay existing debt early. The TotalEnergies-APA project is expected to begin output in 2028. State oil company Staatsolie has predicted the project could generate as much as $26 billion, benefiting Suriname’s economy and population of 650,000 through government royalties.The government is also studying an amendment to a law on oil revenues that seeks to balance their use between current and future generations. More

(Reuters) – Google parent Alphabet (NASDAQ:GOOGL) said on Tuesday its AI investments were “paying off” as it reported a 35% surge in its cloud business and U.S. election-related spending lifted YouTube ad sales in the third quarter.Alphabet shares rose nearly 6% in after-market trading on Tuesday. Shares of Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), the top cloud companies, were up about 1% after hours.Alphabet topped third-quarter revenue and earnings expectations. Its mainstay Search business jumped 12% and as did revenue from YouTube ads.”Alphabet is the first major tech name to report earnings, and it hasn’t disappointed,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Cloud growth was strong … which continues to support the argument that the major cloud providers are well-placed to benefit from the AI revolution.”Perceived as slow to catch up with Big Tech rival Microsoft in the AI race, Google has been beefing up its Gemini AI chatbot and improving its AI-powered Search. The company is continuing to spend big on AI.Its new chief financial officer, Anat Ashkenazi, fielding her first analyst call, said Alphabet’s capital expenditures in 2025 would be higher than this year.In the third quarter, Alphabet’s capex rose 62% to $13 billion. The fourth quarter is expected to be similar, she said.Some analysts said Alphabet’s quarter looked impressive compared with low expectations, and that its small but growing cloud business could slowly fill in for its slowing ad business.Google’s long-established dominance of the digital ad market is under threat from Amazon and TikTok, which have become popular with advertisers looking to tap a ready pool of buyers. Its Search business is also facing scrutiny from regulators seeking to break up the company.But its cloud business grew at the fastest pace in eight quarters – to $11.35 billion – thanks to enterprises doubling down on cloud spending, which is essential to power artificial-intelligence technologies. Analysts estimated $10.86 billion.”I do think it was an impressive quarter because the fact that Google Cloud could more than offset Search decline speaks both to the growing importance of cloud revenues and the fact that the company continues to diversify its revenue base,” said Bob O’Donnell, president of TECHnalysis Research.Google has rolled out ads in AI Overviews, which use generative AI to summarize content from a range of sources and display concise results for search queries. Analysts said users think the company’s new AI tools are more effective than previously – a significant improvement from earlier this year when the feature drew harsh criticism for displaying inaccurate answers, including a pizza recipe that listed glue as an ingredient.Alphabet also beat profit expectations with earnings of $2.12 per share, compared with an average market estimate of $1.85, according to LSEG.LOSING SHARE”We had a slight tailwind from election-related ad spend in the third quarter, which was a little bit more pronounced in YouTube ads,” Google’s chief business officer, Philipp Schindler, said on a post-earnings call.Social media company Snap, which also depends on advertising, posted good news for shareholders, topping Wall Street targets for quarterly revenue and user growth, sending shares up 6% in after-hours trading.Alphabet’s digital advertising sales – the biggest chunk of its total revenue – rose 10% to $65.85 billion in the third quarter. But that pace of growth slowed from the second quarter.”I completely expect Google to start losing share in the ad market over the next two to three years,” said Angelo Zino, senior equity analyst at CFRA Research. “Clearly, as we kind of move towards more of an AI-driven market, there’s going to be increasing competitive pressures out there as a result.”According to data from eMarketer, Google’s share of U.S. search advertising revenue is projected to fall below 50% next year, for the first time in at least 18 years. Meanwhile, Amazon’s share is expected to grow to 24% from 22% this year.Alphabet’s total revenue increased 15% to $88.27 billion in the July-September period, while analysts on average expected $86.30 billion, according to LSEG data. Pulling forward the company’s smartphone launch this year helped boost revenue. More