Economy

SYDNEY (Reuters) – The dollar fought for a footing in choppy trade on Thursday, with support from upbeat U.S. data and hawkish policymaker comments, while the prospect of higher energy prices helped exporters’ currencies and weighed on those of importers.The dollar rose 1% on the euro and 1.3% on sterling overnight and was trying to hold those gains in bumpy early trade in Asia. The euro has now made two unsuccessful attempts to regain parity this week and last bought $0.9916. Sterling’s rebound from record lows has paused just below $1.15.The U.S. services industry posted another month of expansion in September, data showed overnight, while labour market figures were solid and the trade deficit narrowed. San Francisco Fed President Mary Daly reiterated policymakers’ focus on inflation fighting and dismissed market hopes for rate cuts in 2023.”I think that just reminded people that you might be a bit premature in trying to price in rate cuts in the U.S.,” said Westpac currency strategist Imre Speizer.”That pushed up rates and pushed up the U.S. dollar,” he said, as the Federal Reserve’s aggressive moves to rein in inflation sets the pace for central banks around the globe.”Its one trade for the whole world,” said Speizer. “No one currency’s interest rates are really able to go off and do their own thing independently.”Bond markets globally sold sharply. Interest rate futures imply more than 130 basis points of tightening ahead for the Fed before the middle of next year. [US/][GVD/EUR][GB/]The U.S. dollar index wobbled 0.06% lower to 110.86, off lows near 110 from earlier in the week, though some distance below last week’s 20-year high of 114.78.Sterling last bought $1.1367, while the Australian and New Zealand dollars each rose about 0.4%, taking the Aussie to $0.6518 and the kiwi to $0.5772. [AUD/]The yen, which has been held steady by the risk of further Japanese intervention, sat at 144.57 per dollar.The Saudi Arabia-led cartel of oil producers agreed to steep production cuts on Wednesday, lifting Brent crude futures to a three-week high of $93.99 a barrel. [O/R]”Higher energy prices would have a much more direct impact on the European region given the more direct relationship to their finances,” said NatWest Markets’ strategist Jan Nevruzi.Later on Thursday the European Central Bank releases minutes from last month’s policy meeting. Traders are also awaiting Friday’s U.S. labour market data to gauge how fast and far the Fed might be willing to lift interest rates.========================================================Currency bid prices at 0058 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $0.9916 $0.9886 +0.32% -12.77% +0.9925 +0.9881 Dollar/Yen 144.5950 144.5450 +0.03% +0.00% +144.6050 +144.4150 Euro/Yen 143.39 143.00 +0.27% +10.03% +143.4100 +142.8500 Dollar/Swiss 0.9808 0.9830 -0.22% +7.53% +0.9830 +0.9802 Sterling/Dollar 1.1362 1.1319 +0.52% -15.87% +1.1383 +1.1302 Dollar/Canadian 1.3594 1.3617 -0.19% +7.49% +1.3620 +1.3581 Aussie/Dollar 0.6510 0.6491 +0.33% -10.41% +0.6525 +0.6488 NZ Dollar/Dollar 0.5771 0.5746 +0.53% -15.61% +0.5785 +0.5740 All spotsTokyo spotsEurope spots Volatilities Tokyo Forex market info from BOJ More

JOHANNESBURG/BENGALURU (Reuters) – Central bank intervention via U.S. dollar sales won’t strengthen emerging market currencies against an ever-dominant greenback, a Reuters poll found, and many analysts expected authorities to sit this round out or hike rates more aggressively.Most emerging market currencies have hit their lowest levels in at least a decade and will probably remain around there or sink deeper as the dollar is yet to reach an inflection point, according to currency strategists polled by Reuters Sept. 30-Oct. 5.After the U.S. Federal Reserve turned to an uber-hawkish stance earlier this year to tame stubbornly high inflation, a few emerging market central banks began selling dollar reserves to stem capital outflows and defend local currencies. However, the sell-off has not abated.”Selling the U.S. dollar might help limit the depreciation of emerging market currencies, but it won’t be enough to stop it as risk aversion will continue to increase,” said Hendrix Vachon, a senior economist at Desjardins.In response to an extra question, around one third or 14 of 45 strategists said nothing could be done to strengthen emerging market currencies over the coming six months.About 40% said hiking interest rates more aggressively was the best approach to stem the downturn, while 13% proposed continuing selling dollars. GRAPHIC – Reuters Poll- Emerging market currency outlook The decision by OPEC+ at a Vienna meeting on Wednesday to cut oil production by the deepest level since the 2020 COVID pandemic is set to steamroll emerging market currencies and intensify the gnawing investor sentiment.The most traded currency in emerging markets – the tightly controlled Chinese yuan – was expected to hover around 7.13/$ after hitting 7.25/$ last week, a level last seen during the global financial crisis of 2008.That weakness was despite interventions by Chinese authorities in recent weeks to slow the yuan’s slide, showing relative success compared with other battered currencies. But analysts said they face long odds against an unstoppable dollar.The yuan was expected to recover marginally to 7.03 per dollar by end-March.”China’s trade and basic balance…is expected to deteriorate more sharply going into 2023-24FY at a time when policy rates will remain unchanged and its widening negative rate differentials with the U.S. could continue to exert more depreciation pressure,” noted Johanna Chua, chief economist for Citi Asia-Pacific.Like other smaller EM currencies, South Africa’s rand – heavily reliant on China’s appetite for its commodities – was unlikely to mimic its biggest single country trading partner’s currency. The rand was expected to lose another 0.5% to 17.92/$ within a month and trade near those levels by year-end.Mark Cus Babic, macro research analyst at Barclays (LON:BARC), noted the rand should remain affected by global risk sentiment.Terms of trade have deteriorated in Africa’s biggest economy and the current account was expected to swing to deficit in the coming year, according to a separate Reuters poll.The Russian rouble, which has also been artificially propped up since the invasion of Ukraine was expected to lose 7% to 65.00/$ in six months. Barclays said in a note the rouble no longer seemed to react to economic developments.    Asia’s third largest economy, India, was likely to see its battered currency trading around its current level of 81.5/$ by end-year, vulnerable to a worsening trade balance and aggressive U.S. Federal Reserve rate-hiking. (For other stories from the October Reuters foreign exchange poll:) More

Huawei, the Chinese technology group, is planning to relaunch 5G phones as soon as next year to overcome the stranglehold of US sanctions and win back market share.The company is blacklisted by Washington from acquiring US technology for 5G smartphones but has been developing strategies to bypass the sanctions, according to three people familiar with the matter.One approach is to redesign its smartphone without using restricted advanced chips, said two people familiar with the company’s plans. Huawei used to produce Kirin chipsets designed by HiSilicon and manufactured by leading chipmaker Taiwan Semiconductor Manufacturing Co before the US tightened restrictions. The company is reworking its phones to use less advanced chips made by Chinese companies that will enable 5G. The less advanced chips may impact user experience, especially compared with phones from Huawei’s previous generations and rival Apple’s iPhone 14.Huawei, a Chinese national champion caught by rising geopolitical tension between Washington and Beijing, is working to reclaim lost market share after its sales plunged following the imposition of US sanctions in 2019. Revenues from its smartphone-led consumer business fell 50 per cent year on year in 2021.“This company cannot wait endlessly and needs to bring 5G phones back to the market as soon as possible,” said one person familiar with Huawei’s plans. “Huawei has lost its leading position in the mobile phone market to American sanctions years ago. Now even their domestic market share keeps dwindling.”Another sanctions workaround that Huawei is considering is collaborating on a phone case product which enables 5G, according to two people briefed on the matter.There are already phone cases on the market. One case, developed by Shenzhen-listed company Soyea Technology, has a built-in eSIM module with chips that support a 5G connection.Within weeks of Huawei launching its Mate 50 series in September, China Telecom, a Chinese state telecom group, began to sell the phone with the cases. This year, Soyea also launched phone cases for Huawei’s P50 Pro.“The company is trying its best to appeal to users at a time when the consumer market is weak,” said a Shanghai-based tech analyst, who asked to remain anonymous for fear of repercussions.Huawei’s quest to overcome the US restrictions and reclaim its position as the world’s biggest smartphone vendor is a matter of national importance to Beijing as it works to develop technological self-sufficiency, said analysts. “China’s technology self-sufficiency plan could be a potential driver in helping Huawei to join the 5G competition,” said Will Wong, a Singapore-based analyst at research company IDC. But as long as the US sanctions are in place, Huawei is at a severe disadvantage, experts said.“It would take Huawei so long to build up internally or externally the supply chain it needs to pull this off from that we’ll probably be in the 6G era before this can be done,” said Douglas Fuller, an expert in China’s semiconductor industry.The sanctions have frustrated Huawei’s plans to take on Apple. Richard Yu, chief executive of Huawei’s consumer business group, admitted in a July media interview that the group was “the only manufacturer selling 4G phones in the 5G era”, which he said was “a joke”.

Customers in China have started pushing back against the high price tag of Huawei’s phones lacking 5G services. “In just a week [after Huawei launched Mate 50], hundreds of people have approached me to modify their Mate 50 so that it can support 5G networks,” said Michael Li, owner of a Shenzhen-based repair shop.Some customers even brought in their Mate 40, a previous generation Huawei 5G phone, and asked if Li could put old phones’ chips into the new one. “Of course, that is beyond my ability.”Huawei did not immediately reply to a request for comment. More

BENGALURU (Reuters) – The unstoppable dollar, which is already having a banner year, is likely to extend its dominance beyond 2022, according to a Reuters poll of foreign exchange strategists who said the currency was still some distance from an inflection point.Up over 16% so far in 2022, the dollar index has already had its best year in at least five decades, with the currency exhibiting few signs of slowing anytime soon.Underpinning the greenback’s ascendancy were the U.S. economy’s superior performance, the Federal Reserve hiking interest rates by 300 basis points this year – with more expected – and the role it plays as a safe-haven currency.With those broad narratives supporting the dollar well into next year the greenback was likely to be well bid over the short-to-medium term.An overwhelming majority of 85% of analysts, 47 of 55, in the Sept. 30-Oct. 5 Reuters poll who answered an additional question said the dollar’s broad strength against a basket of currencies hasn’t yet reached an inflection point.When asked when it would be reached, 25 of 46 who responded said within six months and 17 said within three months. Among the remaining four analysts three said within a year and one said over a year. Graphic: Reuters Poll-Currency market outlook – https://fingfx.thomsonreuters.com/gfx/polling/lgvdwrxjxpo/Reuters%20Poll-Currency%20market%20outlook-%20October.PNG “It’s definitely too early to start calling the pivot points in the dollar…in the short term we still see more dollar upside,” said Simon Harvey, head of FX analysis at Monex Europe.”We don’t necessarily see a bigger turning point for the greenback until at least Q2 of next year when we think we will start to see potentially U.S. fundamentals turn against the Fed’s stance of restrictive policies.”The dollar’s extended rally is bad news for most major currencies which have not only accumulated heavy losses so far this year but have also surprisingly underperformed their emerging market counterparts.Nearly all major currencies – eight among the G10 – which were down in double digits for the year were not expected to recoup their year-to-date losses over the next 12 months, the poll showed.The euro which was down 12% for the year against the dollar and has largely traded below parity since August was expected to stay there for at least another six months.This is the first time in over two decades median forecasts in Reuters polls have predicted the common currency to trade below parity over a six-month horizon.It was then expected to gain around 4% to reach $1.03 in a year from $0.991 it was trading around on Wednesday.Japan’s yen, which hit a 24-year low of 146/dollar recently, was expected to recover some of its losses in a year. [JPY/POLL]The safe-haven currency was forecast to trade around 144.0, 140.5 and 135.0 per dollar over the next three, six and 12 months, respectively.If realised that would amount to only about a 7% gain against the dollar in 12 months for a currency already down more than 20% for the year and the worst performer among majors.Much of the weakness was down to the Bank of Japan sticking to its ultra-easy monetary policy when nearly every other central bank is moving in the opposite direction.”The Bank of Japan is still not signalling any change to its ultra-accommodative monetary policy. Adopting a less-dovish monetary policy would probably have a greater, more lasting effect on the yen’s exchange rate,” noted Jimmy Jean, vice-president, chief economist and strategist at Desjardins.Trading around $1.12 on Wednesday the latest poll showed sterling would fall to $1.09 in a month and be at $1.10 in six months. It was predicted to be around 3.6% stronger at $1.16 in a year. [GBP/POLL](For other stories from the October Reuters foreign exchange poll:) More

BENGALURU (Reuters) – Japan’s yen will recoup only a third of its big losses against the dollar in the coming year as the policy gap between the ultra-hawkish U.S. Federal Reserve and the extremely dovish Bank of Japan is set to widen further, a Reuters poll found.The policy divergence has battered the currency. It has lost over a fifth of its value this year and hit a 24-year low of 146/dollar recently, so authorities intervened in the foreign exchange market for the first time since 1998 last month, spending 2.8 trillion yen.Despite the intervention and expectations of more to come, the yen’s weakness is not over yet as BOJ Governor Haruhiko Kuroda is unlikely to reverse his long-held pledge to keep policy ultra-loose anytime soon.The currency, the worst performer among its G10 peers, will trade around the current 144 versus the U.S. dollar at year-end, according to FX strategists in a Reuters Sept. 30-Oct. 5 poll.If realised, the yearly loss of more than 20% would be the biggest since 1970.”USD/JPY’s uptrend unlikely to reverse as it is supported by U.S.-Japan policy gap and balance of payment deficit, while intervention was unilateral,” said Shusuke Yamada, FX strategist at Bank of America (NYSE:BAC) Securities. “The Ministry of Finance trying to manage FX volume may suggest the BOJ not yet under pressure from the government to modify policy in response to weak yen.”This year’s rise in U.S. Treasury yields has put upward pressure on benchmark 10-year JGB yields leading the BOJ, which remains an outlier among global central banks, to go for massive bond-buying to protect its de facto yield cap that fuelled the yen’s slide.Core consumer inflation in Tokyo was its highest since 2014 in September and is a leading indicator of nationwide price rises. That means inflation is likely to stay above the central bank’s 2% target in the near future, potentially making it harder for the BOJ to justify its ultra-easy policy.Meanwhile, the Federal Reserve, which delivered its third straight 75 basis points hike last month, was expected to continue with aggressive rate hikes, paving the way for the U.S. dollar to remain strong.Although the yen, until recently a safe haven for investors during financial market turmoil, was predicted to gain around 7% to trade at 135 against the dollar over the coming year it would be only a third of this year’s losses of over 20%.Also, nearly a third, 18 of 60 strategists predicted the currency to trade above the 24-year low of 145.89/$ at some point in the next year.”The determination of the BOJ to maintain its ultra-loose monetary stance through yield curve control has been a clear signal for selling the yen,” noted Derek Halpenny, head of research at MUFG.”It is hard to see a turn in USD/JPY now even after intervention by the MoF. The Fed and global central banks have more tightening to do while the BOJ does nothing but ease.”(For other stories from the October Reuters foreign exchange poll:) More

SEOUL (Reuters) – Samsung Electronics (OTC:SSNLF) Co Ltd’s third-quarter profit could tumble 25%, the first year-on-year decline in nearly three years, as an economic downturn saps demand for electronic devices and the chips that power them.Globally, inflation is on the rise, central banks are aggressively hiking interest rates, fears of recession are growing and uncertainty about the fallout from Russia’s invasion of Ukraine is ever-present. As a result, businesses and consumers alike have reined in spending.Operating profit for Samsung (KS:005930), the world’s biggest memory chip and smartphone maker, likely fell to 11.8 trillion won ($8.3 billion) in the July-September quarter, according to a Refinitiv SmartEstimate from 22 analysts.”Being the world’s top memory chip maker, top in TV and mobile OLED displays, and top in smartphone shipments, Samsung is highly sensitive to the economy, with profits easily linked to demand,” said Greg Roh, head of research at Hyundai Motor Securities. It would be the first profit decline since the first quarter of 2020, early on in the pandemic, and the lowest level of quarterly profit since the first quarter of 2021. Until this latest quarter, robust demand for devices as people were forced to stay at home has driven large profit gains for the South Korean tech giant.Operating profit for Samsung’s chip business likely fell by nearly a third to 6.8 trillion won, an average of seven estimates showed.Prices of some DRAM memory chips, widely used in smartphones and PCs, tumbled 14% in the quarter while prices for NAND flash chips, used in data storage, fell 8%, according to TrendForce data. Shares in Samsung, which will announce preliminary results at about 8.40 local time on Friday (2340 GMT on Thursday), have fallen about 30% this year. That compares with a 37% slump for the Philadelphia Semiconductor index. Samsung’s mobile business is also expected to see profits tumble with forecasts calling for a 17% fall to 2.8 trillion won, although the launch of the company’s pricy new foldable phones during the quarter raised the average selling price.Kim Yang-jae, an analyst at Daol Investment & Securities, estimates that Samsung’s smartphone shipments dropped 11% in the quarter from the same period a year earlier to about 62.6 million smartphones after distribution channels cut orders.Memory chip rival Micron Technology (NASDAQ:MU) last week significantly cut its investments for the next year and warned of tougher times ahead.($1 = 1,421.5600 won) More

Stealth freezes in tax and benefit thresholds will take twice as much money from UK households as they stand to gain from the government’s cuts to headline rates, the Institute for Fiscal Studies said on Thursday.Liz Truss stood by her tax-cutting strategy at this week’s Conservative party conference, arguing that it was essential to jolt the economy into higher growth — even as she was forced to abandon her most eye-catching measure, the abolition of the 45p top rate of income tax. In tandem with the prime minister, chancellor Kwasi Kwarteng insisted that the Tories would “deliver lower taxes for you and your family”.But the IFS analysis showed that even after Kwarteng’s reversal of his predecessor’s increase in the rate of national insurance contributions, and acceleration of the 1p cut to the basic rate of income tax, people in every part of the income distribution were set to lose more than they gained.“Freezes far more than outweigh headline policies . . . and they are set to drag millions more into the tax system and into higher rates of tax,” said Tom Waters, senior research economist at the IFS. “Giving with one hand and taking with the other in this way is opaque and stealthy — and when inflation is volatile, the impact can vary hugely from what the government initially intended,” he added.A four year freeze in the tax-free personal allowance of £12,570 means the number of income tax payers will rise by 1.4mn to 35.4mn — two-thirds of adults — by 2025-26. Over the same period, a freeze in the higher-rate threshold will increase the number paying the 40p rate by 1.6mn to 7.7mn — the highest on record.Meanwhile, the £150,000 threshold at which people start paying the top 45p rate has been frozen since it was introduced in 2010 — and by 2025-26 the number caught by it will have trebled since its inception, from 240,000 to 760,000.These freezes will reduce households’ income by £1,250 on average by 2025-26, the IFS said. Many households will also be caught by freezes in the thresholds at which certain benefits are withdrawn. After factoring in these and other planned changes to the welfare system, households will lose £1,450 a year on average by 2025-26 — bringing in £41bn for the exchequer.

That is double the £20bn cost to the exchequer of Kwarteng’s high profile cuts to personal tax rates — although the IFS stressed that, relative to previous plans, the cuts would place big strains on the public finances.The combined effect of the changes to headline tax rates, policy rollouts and freezes will hit the poorest households most, the IFS said. This means that Kwarteng’s tax plans remain highly regressive, even if the government does not impose further real-terms cuts to benefits in next year’s uprating.Because some freezes are indefinite — especially those to benefits values — the impact grows over time, with the tenth highest income households seeing a 1.3 per cent fall in income by 2030-31 and the poorest tenth seeing their incomes fall by 4.7 per cent. More

The UK’s main communications union has called out “hypocrisy, greed and arrogance” among executives on UK boards as hundreds of emergency call operators join a strike.Meanwhile, the Royal College of Nursing launched “the biggest strike ballot in its 106-year history”, the latest in a wave of industrial disputes triggered by a cost of living squeeze. The Communication Workers Union on behalf of BT staff is protesting against a £1,500 pay rise given to 58,000 front line workers in April, equating to between 3 and 8 per cent depending on base salaries and averaging at a 4.8 per cent increase to remuneration. More than 500 operators will join the strikes. The union had previously exempted staff handling emergency 999 calls from taking industrial action, but has since changed its position.“The chief executive and the board of BT need to get in the room, get their hands dirty and start negotiating,” Dave Ward, CWU general secretary, told Sky News on Thursday. “These people are refusing to negotiate. Every other dispute in the UK at the moment is actually involving talks.”Philip Jansen, the chief executive of Britain’s largest telecoms group BT, in July dismissed the notion of increasing the company’s pay offer.“There’s a disease in the UK today in the boardrooms of hypocrisy, greed and arrogance and until that changes you’re going to see more and more strikes,” Ward said on Thursday.UK households face a cost-of-living squeeze as winter looms with inflation at a 40-year high, prompting many, including nurses, train drivers, rail staff and postal workers, to down tools and demand more pay.The nurses union is balloting its 300,000 UK members and has asked them to support strike action. It is campaigning for a rise of 5 per cent above inflation. The CWU has also announced 19 days of strike action from postal workers in the build-up to Christmas. More