Aurelia Butler

BENGALURU (Reuters) – The U.S. dollar will hold steady in coming months despite an expected series of Federal Reserve interest rate cuts, according to median forecasts from FX strategists polled by Reuters who were, however, largely split on the currency’s broad direction.Since July the greenback has lost almost all the near-5% gains against a basket of major currencies accumulated through mid-year on expectations the Fed would reduce its funds rate from what many considered an overly-restrictive level. However, the currency has been mostly stable in recent weeks.With price pressures now broadly thought to have been tamed, the central bank started easing last month with an oversized half-percentage-point cut to forestall any further weakening in the job market in the world’s largest economy.The Fed was expected to cut its key policy rate by 25 bps in both November and December, according to a majority of over 100 economists in a separate snap Reuters survey taken after the September meeting.While in line with the Fed’s own projections and chair Jerome Powell saying policymakers were not “in a hurry” to cut rates, that expectation was shallower than the near-72 bps of easing interest rate futures are currently pricing.Despite this, the dollar would remain resolute in coming months with the euro, currently around $1.11, seen holding that level by year-end and through end-March, according to median forecasts of nearly 80 strategists in a Sept. 30-Oct. 2 Reuters poll.The common currency was then expected to strengthen about 2% to $1.13 in a year, the survey showed, consistent with calls for dollar weakness analysts have held for the majority of this year.”While it has been our view a global soft landing combined with Fed easing should, if realized, eventually result in broad dollar weakness, the path to get to that destination at least in the near-term could be treacherous,” noted Meera Chandan, FX strategist at JP Morgan.Analysts who answered a separate question were split on the dollar’s broad direction over the remainder of the year with slightly over half, 35 of 62, saying it was more likely to trade weaker than they predict. The rest said stronger.”The Fed seems to be very much in risk-management mode and wanting to achieve a soft landing and though employment data is slowing it’s not falling off a cliff either,” said Alex Cohen, FX strategist at Bank of America.”What markets have generally been pricing – a 50 bps cut in November followed by 25 bps in December – we are forecasting that as well. Barring any major upside surprise in labor market data, that’s the path they’ll be on – and that coincides with a softer dollar.”Respondents on the other end of the spectrum highlighted safe-haven demand from increasing risks of widening conflict in the Middle East as being one of a few possible tailwinds for the dollar in coming weeks.The outcome of the November U.S. presidential election and financial markets now fully pricing an October European Central Bank rate cut were also mostly viewed as potential dollar-positive events, the poll found.”The dollar can probably strengthen further, more so into the U.S. election as we don’t think the market is fully pricing any premium for potential Trump tariffs,” said Dan Tobon, head of G10 FX strategy at Citi.”We also think there’s more room for markets to price in a more dovish ECB, though that’s more of a bearish euro view than a view of broad dollar strength.”The Japanese yen, up over 11% since July, was projected to be the top-performer among major currencies, rising over 6% to about 136/$ in a year.(Other stories from the October Reuters foreign exchange poll) More

(Reuters) -Prime Minister Shigeru Ishiba said Japan is not in an environment for an additional rate increase, in an apparent effort to shake off his reputation as a monetary hawk, after a meeting with Bank of Japan Governor Kazuo Ueda on Wednesday.”I do not believe that we are in an environment that would require us to raise interest rates further,” Ishiba told reporters on Wednesday night in the most explicit remark to date from a prime minister pushing back against further rate hikes.The yen weakened after Ishiba’s remarks as markets interpreted them as reducing the chance of a near-term interest rate hike. The dollar was last up 0.77% against the yen at 144.71 yen per dollar.A majority of economists polled by Reuters on Sept. 4-12 had expected the BOJ to raise rates again by year-end.Ishiba, who was officially appointed as prime minister on Tuesday, had been seen by markets as endorsing the BOJ’s policy normalisation, in part because of his comments to Reuters in August that a gradual hike in ultra-low rates will help boost Japan’s profitability.His comments, as well as his focus on pulling Japan fully out of economic stagnation, underscore the new administration’s preference for the BOJ to go slow in hiking rates, analysts say.Ishiba’s newly-appointed economy minister, Ryosei Akazawa, also voiced hope on Wednesday that the BOJ would be cautious about raising rates further.While the BOJ’s current policy rate, at 0.25%, was “abnormal in global standards,” Japan’s priority was to “pull out of deflation,” Akazawa said.BOJ SET TO MOVE ‘CAUTIOUSLY’ Speaking after the meeting with Ishiba, Ueda said he told the premier that the BOJ would move cautiously in deciding whether to raise interest rates further.”I told the prime minister that we are supporting the economy with loose monetary conditions,” Ueda said in his first meeting with Ishiba since he became prime minister.Ueda added the BOJ will raise interest rates if economic and price developments move in line with its forecast.”But I said we will adjust the degree of monetary support cautiously, as we can afford to spend time scrutinising (economic) developments,” he said.The BOJ ended negative rates in March and raised short-term borrowing costs to 0.25% in July on the view Japan was making progress towards durably achieving 2% inflation.Ueda was forced to roll back his remarks, made when the BOJ hiked rates in July, that the bank would keep raising borrowing costs after the hawkish remarks triggered a market rout.In a speech delivered on Wednesday before the meeting with Ishiba, Ueda said the BOJ will be “extremely” vigilant for the time being to economic fallout from unstable markets and global economic uncertainities.The BOJ next reviews rates on Oct. 30-31, when the board also releases fresh quarterly growth and price forecasts. It holds another meeting in December.”The remarks from Ishiba and Akazawa clearly sound negative against a near-term, additional rate hike. A rate hike in October is now out of the question,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.”The hurdle for another rate hike by year-end has also risen,” he said. More

Ports in these regions handle a “meaningful” 30% share of American imports and exports, the analysts noted, adding that water is “the main channel” used to transport these goods.As a result, a prolonged strike could disrupt local production and a reduction in exports, bump up the prices of items like food and beverages, and impact crucial US payrolls figures, the analysts said.Shipments of everything from food to cars have been blocked on ports stretching from the state of Maine in the US Northeast to Texas in the country’s south since the dockworkers initiated the work stoppage earlier this week. Along with improved compensation, the workers are also asking for protections against automation.The walkout comes after talks failed between the International Longshoremen’s Association (ILA), which represents around 45,000 of the dockworkers, and the United States Marine Alliance (USMX) employer organization. The ILA had been pushing for a revamped six-year contract to be agreed on before a deadline of midnight on Sept. 30.However, the ILA refused the USMX’s final offer put forward on Monday, arguing that it did not meet the demands of its members.The USMX had said it had proposed an almost 50% wage increase, an improvement from an earlier offer, and “strongly supports a collective bargaining process,” CNN reported. The group, which represents shipping firms and port authorities, also reportedly called for the ILA to clear a path for a return to the negotiating table.But ILA leader Harold Daggett has said that the workers are “prepared to fight as long as necessary,” Reuters reported. More

In a joint statement on Wednesday, the two companies said the ChatGPT maker would invest directly and indirectly in start-ups developing AI-based products or services through the venture capital arm of CDP.The agreement should give Italian companies access to OpenAI’s advanced technologies and funding from U.S. venture capitalists, the statement added. In April CDP Venture Capital said it would invest 1 billion euros ($1.11 billion) in AI and cybersecurity over the next five years. The agreement follows a meeting between Italian Prime Minister Giorgia Meloni and OpenAI CEO Sam Altman on the sidelines of the UN General Assembly in New York last week, CDP and OpenAI said.($1 = 0.9035 euros) More

The Bank’s twice-yearly systemic risk survey polled 55 financial firms between July 23 and August 12 and asked each participant to list the five risks they believed would have the greatest impact on the UK financial system if they materialised.One-third of participants flagged worries about the threat to the UK financial sector associated with an overseas/global economic downturn, an increase of 19 percentage points and the largest single increase compared with the results of the previous survey in March, the BoE said.The BoE said overall risks to British financial stability were unchanged compared with its last assessment in June, but that it would be wrong to draw comfort from a rapid rebound in asset prices after a drop in August.The two most frequently cited risks to UK financial stability echoed previous surveys. Some 93% of respondents cited geopolitical risk, an increase of 8 percentage points on the BoE’s previous survey, while a cyber attack was cited by 80% of firms, up by 10 percentage points.Respondents reported a range of concerns within these two categories, including ongoing conflicts, global elections, and the potential for cyber attacks to impact the whole financial system including banking system infrastructure.The proportion of respondents citing climate risk has fallen in recent surveys, and came in at 29%, some seven percentage points lower than the previous survey and the lowest since the second half of 2022. More

NEW YORK (Reuters) -President Joe Biden’s administration heaped pressure on U.S. port employers to raise their offer to secure a labor deal with dockworkers on strike for a second day on Wednesday, choking half the country’s ocean shipping.The strike by the International Longshoremen’s Association (ILA) union has blocked goods from food to automobile shipments across dozens of ports from Maine to Texas, a disruption that analysts warn will cost the economy billions of dollars a day.More than 38 container vessels were already backed up at U.S. ports by Tuesday, compared with just three on Sunday before the strike, according to Everstream Analytics. “Foreign ocean carriers have made record profits since the pandemic, when longshoremen put themselves at risk to keep ports open. It’s time those ocean carriers offered a strong and fair contract that reflects ILA workers’ contribution to our economy and to their record profits,” Biden said in a post on X late on Tuesday.He directed his team to monitor for potential price gouging activity that benefits foreign ocean carriers, the White House said.The ILA, which represents 45,000 port workers, launched its strike just after midnight on Tuesday after negotiations with the United States Maritime Alliance (USMX) for a new six-year contract collapsed.USMX had offered the union a 50% wage hike, but the ILA’s fiery leader, Harold Daggett, said the union is pushing for more, including a $5 per hour raise for each year of the new six-year contract and an end to port automation projects that threaten union jobs.”We are prepared to fight as long as necessary, to stay out on strike for whatever period of time it takes, to get the wages and protections against automation our ILA members deserve,” Daggett said on Tuesday.Hundreds of dockworkers demonstrated at a New York City area shipping terminal in Elizabeth, New Jersey, on Tuesday, carrying signs and shouting slogans like “ILA all the way!” as music blared and vendors hawked food. Morgan Stanley economists said in a late Tuesday note that the strike could hit growth and raise inflation “but only if it is long-lasting,” noting that the implication for transport should be limited unless the strike lingers. Retailers accounting for about half of all container shipping volume said they have been busily implementing backup plans to minimize the impact of the strike as they head into the winter holiday sales season.Shares of shipper Maersk fell 2% in Copenhagen on Wednesday, while ZIM Integrated Shipping dipped 4% in pre-market action in New York.WATERWAYS CRUCIAL TO TRADEThe strike, the ILA’s first major stoppage since 1977, is worrying businesses that rely on ocean shipping to export their wares or secure crucial imports. It affects 36 ports – including New York, Baltimore and Houston – that handle a range of containerized goods ranging from bananas to clothing to cars.Roughly half of U.S. imports arrive via water, while 37% of exports are waterborne, Morgan Stanley noted. The walkout could cost the American economy roughly $5 billion a day, JP Morgan analysts estimate.The National Retail Federation called on Biden’s administration to use its federal authority to halt the strike, saying the walkout could have “devastating consequences” for the economy.Republicans, including Virginia Governor Glenn Youngkin, have also called on Biden to end the strike, warning of its effect on the economy. Biden has repeatedly said he will not do so. The U.S. Department of Agriculture said on Tuesday it does not expect significant changes to food prices or availability in the near term. More