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    Funds maintain large short yen position ahead of BOJ decision: McGeever

    ORLANDO, Florida (Reuters) -Hedge funds have cut back their huge bet against the yen ahead of the Bank of Japan’s policy decision on Tuesday, but not by much, suggesting they don’t believe a landmark interest rate hike would do much to improve the currency’s immediate fortunes.The BOJ is expected to deliver its first rate hike in 17 years on Tuesday, bringing the curtain down on eight years of negative interest rate policy (NIRP), and the latest move to end decades of deflation-fighting, accommodative policy.As historic as that would be, however, it probably won’t move the dial much for currency traders unless it is followed up with further action, and unless the yen’s yield gap with other currencies like the dollar shrinks significantly.More clarity on that will no doubt come from BOJ Governor Kazuo Ueda on Tuesday, and the U.S. Federal Reserve in its policy statement and Fed Chair Jerome Powell in his press conference on Wednesday. But until then, the jury is out and speculators are reluctant to buy into the view that Japan’s first baby step into the world of policy normalization is a game-changer for the yen.The latest Commodity Futures Trading Commission data show that funds cut their net short yen position by 16,521 contracts to 102,322 contracts in the week ending March 12.That follows a reduction of almost 14,000 contracts in the prior week, marking the first time this year funds have scaled back their bearish yen bets two weeks in a row.A short position is essentially a wager that an asset’s price will fall, and a long position is a bet it will rise. Hedge funds often take directional bets on currencies, hoping to get on the right side of long-term trends.These figures show that funds have cut their yen position by around 20% from what was the largest net short in more than six years at the end of February. At almost 133,000 contracts, it was one of the most bearish yen bets on record.In dollar terms, the latest position roughly equates to a $8.65 billion leveraged bet on the yen weakening. That’s still large by historical standards, so there is room to reduce that further and put upward pressure on the yen.But that will need a catalyst.Given how historic a Japanese rate hike would be, it is reasonable to assume BOJ policymakers will want to proceed cautiously. The fact that only 25 basis points of tightening this year is priced into Japanese swaps attests to that.The U.S. rate outlook, meanwhile, appears to be moving in the dollar’s favor. The amount of Fed policy rate easing expected by markets this year continues to be trimmed back, which helps explain why dollar/yen is closer to 150.00 than 145.00.Given how closely dollar/yen has correlated this year with the spread between two-year U.S. and Japanese yields, the yen might need a substantial narrowing in the spread to get any real momentum behind it.”Every delay in the market’s expectation for the Fed to start the cutting cycle ended up with pressure on the yen and 10-year JGB (Japanese Government Bond) yields,” analysts at Natixis wrote in a client note this past weekend.Morgan Stanley analysts note that a “soft landing” and only gradual U.S. rate cuts continue to be the market’s default position, while expectations for the BOJ over the next 12 months haven’t actually changed that much recently.”This in turn implies that the prospective US-Japan policy trajectory should be little changed, suggesting … USD/JPY should continue to perform reasonably resiliently,” they wrote on Sunday.The yen goes into the BOJ meeting as the worst-performing major currency this year. Funds are taking some chips off the table but are still betting that U.S.-Japan rate and yield spreads will stay wide, to the detriment of the yen.(The opinions expressed here are those of the author, a columnist for Reuters.)(By Jamie McGeever; Editing by Paul Simao) More

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    Morning bid: Tech tonic as world awaits BOJ fireworks

    (Reuters) – A look at the day ahead in Asian markets.The waiting is almost over. The Bank of Japan delivers its potentially historic policy decision on Tuesday against a backdrop of positive investor sentiment after a wave of bullish tech sentiment offset higher U.S. bond yields, and lifted stocks around the world on Monday. Tech and megacaps drove Wall Street higher, led by Alphabet (NASDAQ:GOOGL)’s 4.6% rise – its biggest in four months – on a media report that Apple (NASDAQ:AAPL) is in talks to build Google’s Gemini AI engine into the iPhone, while Nvidia (NASDAQ:NVDA) rose too ahead of its annual developer conference.With Japan’s Nikkei already kicking off the week with a 2.7% gain of its own and China delivering a broadly positive batch of economic data on Monday, markets around the world are on a solid footing ahead of the BOJ bonanza.Apart from the decision and Governor Kazuo Ueda’s press conference on Tuesday, the Asia and Pacific calendar also includes the Reserve Bank of Australia’s latest policy decision, so the Aussie dollar could be one of the most heavily traded currencies along with the yen.Indeed, the Aussie/yen cross, often a good measure of investors’ thirst for carry trades and global risk appetite in general, could be the currency pair to watch on Tuesday.Not only is the BOJ expected to raise rates for the first time in 17 years, ending eight years of negative interest rate policy, it may also call time on its yield curve control and purchase of risk assets, Nikkei newspaper reported on Monday.If the BOJ does make a triple-pronged moves on rates, YCC and purchases of risky assets, Japanese markets could be in for a wild rise on Tuesday.As far as the yen is concerned, much will depend on the spread between Japanese and U.S. yields. Hedge funds and speculators have trimmed their short yen position, but it remains substantial by historical standards.There’s a lot of scope for short-covering, but there may be little appetite for that against a backdrop of dollar-supportive spreads. Especially with the Federal Reserve announcing its latest policy decision and economic projections on Wednesday.Australia’s central bank, meanwhile, is widely expected to hold its cash rate at 4.35% for a third straight meeting on Tuesday and at least until end-September, according to a Reuters poll of economists who see at least two rate cuts in the final quarter of 2024.While financial markets have priced in rate cuts for some major central banks such as the Fed and European Central Bank starting around June, the RBA is a notable outlier with no such mid-year pricing.Here are key developments that could provide more direction to markets on Monday:- Japan monetary policy decision- Australia monetary policy decision- Japan industrial production (February, final) (By Jamie McGeever; Editing by Josie Kao) More

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    Japan poised to end negative rates, closing era of radical policy

    TOKYO (Reuters) – The Bank of Japan is expected to end eight years of negative interest rates and other remnants of its unorthodox policy on Tuesday, making a historic shift away from a focus of reflating growth with decades of massive monetary stimulus.While the move would mark Japan’s first interest rate hike in 17 years, it would still keep interest rates stuck around zero as a fragile economic recovery forces the central bank to go slow in any further rise in borrowing costs, analysts say.The move would make Japan the last central bank to ditch negative rates and end an era in which policymakers around the world sought to prop up growth through cheap money and unconventional monetary tools.While a majority of economists polled earlier this month had expected the BOJ to wait until April for it to end negative rates, sources say bigger-than-expected pay hikes announced by major firms last week now heighten the chance the bank will make that decision at its two-day meeting ending on Tuesday.If the nine-member board believes the conditions are right, the BOJ will set the overnight call rate as its new target and guide it in a range of 0-0.1% by paying 0.1% interest on excess reserves financial institutions park with the central bank.”What we expect overall is a return to a much more simple policy framework that focuses on targeting the front end” of the yield curve, said Izumi Devalier, head of Japan economics at BofA Securities.”This would be the first rate hike in 17 years, so it has a lot of symbolic significance. But the actual impact on the economy is very small,” she said, noting the BOJ will likely maintain its resolve to keep monetary conditions ultra-loose.Upon exiting its negative rate policy, the BOJ will also ditch its bond yield control and discontinue purchases of risky assets such as exchange-traded funds (ETF), sources have told Reuters, putting a formal end to the radical monetary experiment put in place by former Governor Haruhiko Kuroda since 2013.There is still a chance the BOJ might wait until April if a majority in the board sees the need to scrutinise more data before pulling the trigger.A poll taken in March showed 35% of economists expected the BOJ to end negative rates at the two-day meeting ending on Tuesday, up from the previous month’s 7% but still below 62% projecting such action at its subsequent meeting on April 25-26.With an end to negative rates seen as nearly a done deal, the market’s attention is shifting to any clues the BOJ could give on the pace of any interest rate hikes thereafter.The stakes are high. A spike in bond yields would boost the cost of funding Japan’s huge public debt which, at twice the size of its economy, is the largest among advanced economies.An end to the world’s last remaining provider of cheap funds could also jolt global financial markets as Japanese investors, who amassed overseas investments in search of yields, shift money back to their home country.Upon an exit from negative rates, the BOJ is likely to reassure markets that such a move won’t be a prelude to the kind of aggressive rate hikes seen in the United States in recent years.The new guidance could come either in the statement announcing the policy decision, or comments from Governor Kazuo Ueda’s scheduled post-meeting news conference.Under previous Governor Kuroda, the BOJ deployed a huge asset-buying programme in 2013, originally aimed at firing up inflation to a 2% target within roughly two years.The central bank introduced negative rates and yield curve control (YCC) in 2016 as tepid inflation forced it to tweak its stimulus programme to a more sustainable one.As the yen’s sharp falls pushed up the cost of imports and heightened public criticism over the cost of Japan’s ultra-low interest rates, however, the BOJ last year tweaked YCC to relax its grip on long-term rates. More

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    US standards body says ByteDance researcher wrongly added to AI safety groupchat

    WASHINGTON (Reuters) – A researcher from TikTok’s Chinese owner ByteDance was wrongly added to a groupchat for American artificial intelligence safety experts last week, the U.S. National Institute of Standards and Technology (NIST) said Monday.The researcher was added to a Slack instance for discussions between members of NIST’s U.S. Artificial Intelligence Safety Institute Consortium, according to a person familiar with the matter.In an email, NIST said the researcher was added by a member of the consortium as a volunteer.”Once NIST became aware that the individual was an employee of ByteDance, they were swiftly removed for violating the consortium’s code of conduct on misrepresentation,” the email said. The researcher, whose LinkedIn profile says she is based in California, did not return messages; ByteDance did not respond to emails seeking comment.The person familiar with the matter said the appearance of a ByteDance researcher raised eyebrows in the consortium because the company is not a member and TikTok is at the center of a national debate over whether the popular app has opened a backdoor for the Chinese government to spy on, or manipulate Americans at scale. Last week, the U.S. House of Representatives passed a bill to force ByteDance to divest itself of TikTok or face a nationwide ban; the ultimatum faces an uncertain path in the Senate.The AI Safety Institute is intended to evaluate the risks of cutting edge artificial intelligence programs. Announced last year, the institute was set up under NIST and the founding members of its consortium include hundreds of major American tech companies, universities, AI startups, nongovernmental organizations and others, including Reuters’ parent company Thomson Reuters (NYSE:TRI).Among other things, the consortium works to develop guidelines for the safe deployment of AI programs and to help AI researchers find and fix security vulnerabilities in their models. NIST said the Slack instance for the consortium includes about 850 users. (This story has been refiled to add the dropped word ‘Consortium’ to the name of the AI body in paragraph 2) More

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    US agency probes driver assistance system use in fatal Ford crash

    WASHINGTON (Reuters) -The National Highway Traffic Safety Administration said on Monday it has opened an investigation into a recent Ford (NYSE:F) Mustang Mach-E fatal crash in San Antonio, Texas, where authorities suspect an advanced driver assistance system was in use.On Friday, the National Transportation Safety Board opened a separate investigation into the Feb. 24 crash, saying initial information indicated the Ford struck the rear of a Honda (NYSE:HMC) CR-V that was stationary in a traffic lane on Interstate Highway 10.A San Antonio police report said the Ford had “partial automation” engaged at the time of the crash.NHTSA is opening a special crash investigation into the Fatal Ford accident. The agency typically opens more than 100 special crash investigations annually into emerging technologies and other potential auto safety issues.Since 2016, NHTSA has opened more than three dozen Tesla (NASDAQ:TSLA) special crash investigations where advanced driver assistance systems such as Autopilot were suspected of being used with 20 crash deaths reported. This is NHTSA’s first special crash probe involving a Ford advanced system.The police report said the driver of the Honda CR-V, 56-year-old Jeffrey Allen Johnson of Austin, was taken to a hospital and later pronounced dead.Ford has said its BlueCruise is an advanced hands-free driving system that operates on 97% of U.S. and Canadian highways with no intersections or traffic signals.The NTSB said it was investigating the crash “due to its continued interest in advanced driver assistance systems and how vehicle operators interact with these technologies.”A Ford spokesperson said the automaker “reported this incident to NHTSA as soon as we were made aware, and we are actively researching all available information. Safety is a top priority for all of us at Ford, and we will collaborate fully with any resulting investigation.”The NTSB has opened several investigations in recent years into advanced driver assistance systems, including Tesla’s Autopilot. More

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    Canada’s federal budget set to allocate billions to tackle housing crisis, says minister

    OTTAWA (Reuters) – Canada’s federal budget, due next month, is likely to allocate billions of dollars for investing in building homes and low cost housing programs, Housing Minister Sean Fraser said on Monday.Canada faces a housing affordability crisis as a rapidly increasing immigrant population has far outpaced the number of available homes.Stubbornly high inflation and interest rates at their highest in 22 years have also driven up rent and mortgage costs.”I don’t want to necessarily preview what’s going to be revealed in the upcoming federal budget, but there needs to be very substantial investments (for housing),” Fraser told the media on the sidelines of a housing conference in Ottawa. The expenditure will cover building homes and also support for low cost housing programs, Fraser said.”When we put those low cost financing programs on the table, we are talking about billions, sometimes tens of billions of dollars to help support the construction of new homes,” he said, without specifying if all will be part of the federal budget announcement or mentioning precise figures.”So, this has got to be a substantial level of investment with the combined direct spend and financing program and certainly total of billions of dollars.”Finance Minister Chrystia Freeland is expected to present her budget in the Parliament on April 16.As housing affordability emerges as a hot-button issue ahead of next year’s election, Conservative Party leader Pierre Poilievre, Prime Minister Justin Trudeau’s main opponent, has blamed the Liberal government for the crisis.The government has responded with a series of measures to boost supply over the last year, but it has said they will not provide immediate relief.To keep pace with the rising population, Canada needs to build 315,000 new residences every year between now and 2030, or more than a third above the pace of current housing completions, according to Robert Hogue, assistant chief economist at RBC. More

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    Trade data fuels eurozone recovery hopes

    This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.Promising eurozone trade data this morning has fuelled hopes that the big shock caused by Russia’s full-scale invasion of Ukraine is finally being unwound as energy prices fall back and exports pick up.The balance of trade in goods hit €28bn in January, its highest level since authorities started tracking the data in 2002. Last year, the eurozone recorded a trade surplus of €64bn, in contrast with the record €335bn deficit it suffered in 2022.Today’s data comes as a welcome antidote to a run of poor news on the strength of the single currency bloc, especially in Germany, its biggest economy. That country accounted for much of the eurozone’s improved position with its highest overall trade surplus for more than six years. Germany was the world’s worst-performing big economy last year, according to the IMF, thanks to a combination of high interest rates and inflation, raised energy prices and lower export demand. Although growth is forecast to be just 0.2 per cent this year, after a shrinking of 0.3 per cent in 2023, Berlin does not expect a large impact on unemployment.France, the bloc’s second-biggest economy, has a budget shortfall for this year “significantly” above target and is planning more spending cuts.The war in Ukraine is creating additional financial stress for Europe’s Nato members, which are under pressure to increase defence spending to meet the alliance’s target of 2 per cent of gross domestic product. According to Germany’s Ifo Institute, many of the EU states with the biggest shortfalls — including Italy, Spain and Belgium — also have among the highest levels of debt and budget deficits in Europe.Business also faces a tough year ahead. European banks need to steel themselves for a year of rising insolvencies, geopolitical risks and upheaval in energy-intensive industries, according to the eurozone’s new banking supervisor.The European Central Bank’s Claudia Buch told the FT in an interview today that the sector was “not out of the woods yet” and that the effect of record high interest rates still had to filter its way through the financial system, with loan defaults and bankruptcies likely to continue for some time. Stickier-than-expected eurozone inflation — confirmed today at 2.6 per cent for February — suggests the last mile of the fight to constrain rising prices could be harder than expected.ECB chief Christine Lagarde has said she still wants “more evidence” that inflation has been tamed, signalling that June was likely to be the earliest time to cut interest rates. The ECB has, however, cut its forecasts, suggesting inflation for this year will fall to 2.3 per cent before hitting its 2 per cent target next year.Global inflation and interest rate tracker: see how your country comparesNeed to know: UK and European economyUK Prime Minister Rishi Sunak said the economy had “turned the corner” as he sought to quell discontent from his party over his leadership. He also announced reforms to help small businesses, including cuts to red tape and a new task force for female entrepreneurs. Chief economics commentator Martin Wolf says the country needs a broader transformation. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.A case in point is the war on poverty. An FT Big Read details how almost a third of children are living in relative poverty in the UK, where it has increased more than in any advanced economy.Climate activists prosecuted in England and Wales for criminal damage have lost the right to use an important defence that has led to a series of acquittals, following a landmark ruling from the Court of Appeal. Judges said evidence presented by defendants about the effects of climate change would be “inadmissible” in future cases.Need to know: global economyThe Federal Reserve will need to hold interest rates at a higher level for longer than markets and central bankers anticipate, according to economists in an FT-Chicago Booth poll. Traders have been expecting three cuts this year, beginning in June or July. Columnist Rana Foroohar says that, despite moves on subsidies and tariffs, the US still lacks an industrial policy.China’s industrial activity jumped 7 per cent at the start of the year, boosting hopes of an economic recovery after a period marked by deflation, low consumer confidence and a property cash crunch.The International Development Association, the World Bank’s fund for the poorest nations, is seeking a record amount of money to tackle mounting debt and climate crises, its chief fundraiser told the FT. The Dominican Republic has bucked the downward trend in Latin American economies, delivering Asian-style growth averaging 4.9 per cent a year over the past half-century. The reason, President Luis Abinader told the FT, was its pro-investment, pro-business government, balanced by increased social spending. Need to know: businessMike Lynch, founder of UK software company Autonomy, goes on trial in San Francisco today, 13 years after what US prosecutors have called “the largest fraud in the history” of Silicon Valley. Lynch, who sold the company to Hewlett-Packard for $11.7bn in 2011, faces charges that he falsified Autonomy’s accounts in the two years before the deal.Telecom and tech giants are being forced to reroute internet traffic after attacks in the Red Sea put undersea cables at risk, affecting connectivity and services around the world. A group of the world’s biggest oil and gas companies are expanding a satellite monitoring campaign to detect methane emissions in emerging economies after 26 large leaks of the planet-warming gas were found over Kazakhstan, Egypt and Algeria. Saudi Aramco’s chief executive said the world should “abandon the fantasy of phasing out oil and gas”.Commodity traders are sitting on cash reserves of up to $120bn after five years of record growth, largely as a result of the Ukraine war. Retail correspondent Laura Onita assesses how John Lewis and Marks and Spencer are faring in the battle for affluent English shoppers. John Lewis last week reported a return to profit after three years of losses.The world of workUK statisticians are threatening to strike over an order to go back to the office. The PCS union said that workers at the Office for National Statisticshad been given flexibility to work where they wanted and many of its members had accepted jobs at the agency on that understanding.Globally, women still earn 77 cents for every $1 paid to men, and spend an average of 2.4 hours more a day doing unpaid care work. The failed referendum on the role of women in Ireland is just the latest example showing the long effort to overturn inequality still has much further to go, argues columnist Pilita Clark. Workaholism, which can cause profound and long-term damage to individuals, is an addiction that needs to be recognised and treated, just like any other substance or behavioural issue, says Working It newsletter and podcast host Isabel Berwick.Innovation editor John Thornhill says we should treat the forthcoming AI-driven changes to employment as an opportunity rather than a threat.Chat apps such as Slack that have helped create a new workplace culture of nonstop, informal chatter are here to stay, writes the Lex column’s Elaine Moore.Some good newsA new drug could be a promising weapon in the fight against Lyme disease, a problem that affects humans and pets alike. About 476,000 people in the US are diagnosed and treated for it each year.Recommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from Work & Careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at disruptedtimes@ft.com. Thank you More

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    Three cheers for supply?

    Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Would-be homebuyers who have been dreaming of Federal Reserve rate cuts might need to dial down their hopes. The good news is that US mortgage rates have been falling this month, and remain well below peaks levels from late last year. But financial markets are now assigning just a coin-flip probability to a Fed cut in June, and 75bp for the year, according to CME data. US interest rates are now expected to fall much more slowly than they were two months ago. In other words, a persistent and sharp decline in long-dated rates — which would be needed to drive mortgage rates quickly lower — is unlikely unless the Fed keeps rates too high for too long and creates a recession. (And in that case, many households will have bigger problems than home affordability.) As we’ve covered before, high current mortgage rates + homeowners locked into 30yr rates below 1 per cent = very few homeowners who want to sell today. That’s pushed costs up and affordability down, as Bank of America shows in this handy chart from a note today: This chart makes it pretty clear that last year was a bad one for homebuyers. Even the inventory of new homes dipped a bit in 2023, as high mortgage rates put a damper on Americans’ desire to finance anything. From BofA: The bright spot is that the trend appears to have reversed. And the National Association of Home Builders reported today that homebuilder confidence made a surprise rebound this month. From BofA: Mortgage rates have eased — now hovering just around 7% — and we expect the first Fed cut . . . in June. While mortgage rates remain elevated, even incremental declines can help support activity on the margin through improved affordability. Affordability may also improve if our expectation for more supply hitting the market is realized, helping to promote a healthier pace of activity, and limiting any rise home prices.In fact, we may be seeing some signs of this improvement already. Existing home sales posted a 3.1% m/m increase to 4.0mn saar in January, the highest level since August. New home sales also picked up to 661k saar in January, the highest level since October.And in an unusual development, new home prices are declining a bit while existing home prices keep rising: Quelle surprise: Having a 1-per-cent interest rate locked in for 30 years is a powerful reason to hang on to your house. So powerful, in fact, that further declines in new mortgage rates probably won’t change the trend, the bank says: Looking ahead, should mortgage rates continue to fall further, we expect more inventory in existing homes, but it may not be enough to forestall further increases in existing home prices. This is one reason we still think the situation bodes well for single family starts. Single family permits, which have held up over the past year, provide some support for this view. This should support residential investment going forward: recall that the single-family sector is a bigger driver of GDP growth than multi-family. Affordability is likely to improve as the Fed cuts rates beginning in June, and we should see a more stable and healthier housing market.In other words, it could be a good time for Americans to start researching homebuilders and contractors in their area. Another bright spot? Because single-family homebuilding gives a bigger boost to GDP growth than multi-family development, Millennials are finally doing their part to stimulate the economy. Further reading:— Millennials and boomers are competing for homes. Guess who’s winning?— The uneasy US housing stalemate More