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Economy

U.S. dollar climbs from nine-week low

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By Gertrude Chavez-Dreyfuss and Kate Duguid

NEW YORK (Reuters) – The dollar recovered from a nine-week low on Thursday, lifted by a rise in U.S. Treasury yields after the government reported strong economic growth for the first quarter and an improvement in new jobless claims in the latest week.

U.S. benchmark 10-year Treasury yields rose 2 basis points on Thursday, to 1.639%, boosted by the upbeat economic reports.

Gross domestic product increased at a 6.4% annualized rate in the first quarter, the data showed, the second-fastest growth since the third quarter of 2003. First-quarter growth was powered by consumer spending, which increased at a 10.7% rate versus a 2.3% pace in the fourth quarter.

A separate report on Thursday showed U.S. initial claims for state unemployment benefits fell 13,000 to a seasonally adjusted 553,000 during the week ended April 24.

“Certainly a big part of the dollar’s move is the rise in yields today. There has been a pretty tight correlation between FX and rates,” said Erik Nelson, macro strategist at Wells Fargo Securities in New York.

“Everyone got complacent with the move lower in rates and the dollar got crushed in April. Now that yields are coming up and stabilizing a little bit, we are going to see some dollar strength,” he added.

Strong economic growth typically raises the value of the dollar: higher growth drives more spending, which in turn boosts prices. As prices rise, the Federal Reserve has historically intervened by raising interest rates to prevent inflation.

In afternoon trading, the dollar index, a gauge of the greenback’s value against six currencies, rose 0.1% to 90.596. Earlier, the index hit its lowest level since Feb. 26. The earlier dip in the dollar also drove the euro to a nine-week high, though the single currency has since stabilized to around $1.2116, down 0.1%.

The dollar on Wednesday fell after Fed Chair Jerome Powell dampened speculation about an early tapering of the U.S. central bank’s bond-buying program, saying employment was still far short of target.

The Fed’s dovishness was in marked contrast to the Bank of Canada, which has already begun to taper its asset purchases, sending the U.S. dollar sliding to a three-year trough against the loonie. The greenback was last down 0.2% against the Canadian currency at C$1.2281.

The U.S. dollar also struggled overnight after President Joe Biden’s push for another $1.8 trillion in spending risked expanding the U.S. budget and trade deficits, a perennial Achilles heel for the greenback.

The yen, however, struggled against the dollar, still reeling after the Bank of Japan earlier this week said inflation will fail to reach its key 2% target through early 2023.

The dollar was last up 0.3% versus the yen at 108.88 yen.

In the cryptocurrency market, ethereum, the second largest digital currency in terms of market capitalization, hit another record high on Thursday of $2,800.89. It was last down 0.7% at $2,732.09

Ethereum continues to garner institutional interest, especially with the explosion of decentralized finance, or DeFi, which are crypto platforms that facilitate lending outside of traditional banking institutions. These platforms are built on the ethereum blockchain.

 

 

(Reporting by Kate Duguid and Gertrude Chavez-Dreyfuss; Editing by Marguerita Choy and Paul Simao)

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Toronto Stock Exchange rises 0.64% to 19,310.74

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tsx

* The Toronto Stock Exchange’s TSX rises 0.64 percent to 19,310.74

* Leading the index were Ero Copper Corp <ERO.TO​>, up 13.6%, Nexgen Energy Ltd​, up 12.6%, and Denison Mines Corp​, higher by 10.5%.

* Lagging shares were Kinaxis Inc​​, down 5.2%, Ballard Power Systems Inc​, down 3.9%, and Cominar REIT​, lower by 3.5%.

* On the TSX 132 issues rose and 93 fell as a 1.4-to-1 ratio favored advancers. There were 30 new highs and 1 new low, with total volume of 246.0 million shares.

* The most heavily traded shares by volume were Enbridge Inc, Suncor Energy Inc and Manulife Financial Corp.

* The TSX’s energy group rose 3.28 points, or 2.7%, while the financials sector climbed 2.69 points, or 0.8%.

* West Texas Intermediate crude futures fell 0.58%, or $0.38, to $65.31 a barrel. Brent crude  fell 0.29%, or $0.2, to $68.68.

* The TSX is up 10.8% for the year.

This summary was machine generated May 5 at 21:03 GMT.

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Merkel wants Europe, United States to aim for new trade deal

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BERLIN (Reuters) – A trade agreement between the United States and the European Union would “make a lot of sense”, German Chancellor Angela Merkel said in a speech in which she welcomed the United States’ return to the multilateral fold under President Joe Biden.

German enthusiasm for a trade deal and stronger transatlantic ties may have to contend with a more cautious approach in France, where President Emmanuel Macron has made a priority of reducing European reliance on rival superpowers.

Merkel said that while Germany had no interest in a world divided into camps as it was in the Cold War, it was good that the United States, Europe’s “most important ally”, stood alongside Europe in rivalries with China and Russia.

“I have always supported a trade agreement between the United States of America and the European Union,” she told a Berlin conference on the future of transatlantic ties.

“We have trade agreements with so many of the world’s regions. It would make a lot of sense to develop such a trade agreement here, similar to what we have done with Canada,” she added.

Merkel’s transatlantic coordinator Peter Beyer told Reuters in February that Germany and the new U.S. administration should “think big” and aim for an ambitious agenda including a trade deal to abolish industrial tariffs and a WTO reform to increase pressure on China.

The European Union has put reform of the World Trade Organization at the heart of its trade strategy for the next decade, saying global rules on commerce must be greener, take more account of state subsidies and be enforced.

The EU itself feels bruised by trade wars, Brexit and what it sees as unfair competition from China, which it perceives as a “systemic rival”, and is taking more assertive measures to enforce global trade rules and ensure a level playing field.

Merkel said that despite issues with its ratification in the EU, the bloc’s planned investment agreement with China, the comprehensive agreement on investment (CAI), is a “very important undertaking, because it gives us more reciprocity in market access”.

At the same time, it was necessary to address “the whole range of issues” with China, including its human rights record, she added.

The EU executive has hailed the CAI, struck at the very end of 2020, as a means to secure better access for European companies to Chinese markets and redress unbalanced economic ties.

But concerns over China’s human and labour rights record and scepticism from the United States had already cast doubt on the deal’s approval process even before Chinese blacklisting of five members of the European Parliament in tit-for-tat sanctions.

 

(Reporting by Thomas Escritt, Paul Carrel and Michael Nienaber; EDiting by Giles Elgood)

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Canadian dollar posts three-year high as risk appetite climbs

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar strengthened to its highest level in more than three years against its U.S. counterpart on Wednesday, supported by improved investor sentiment and the Bank of Canada‘s recent shift to more hawkish guidance.

The Dow Jones Industrial Average hit a record high as the market recovered from a steep tech sell-off, after investors were encouraged by U.S. Treasury Secretary Janet Yellen’s new comments on interest rates and a positive private jobs report.

“Risk-on conditions” and the recent move higher in commodity prices bolstered the Canadian dollar,” Ronald Simpson, managing director, global currency analysis at Action Economics, said in a note. “In addition, the BoC’s tapering of its QE program appears to have shifted USD-CAD’s trading range down a notch.”

Last month, the Bank of Canada cut the pace of its bond purchases and signaled it could hike interest rates in late 2022.

Further clues to the central bank’s policy outlook could come from Canada‘s April employment report, due for release on Friday.

The Canadian dollar was trading 0.2% higher at 1.2280 to the greenback, or 81.43 U.S. cents, having touched its strongest intraday level since February 2018 at 1.2252.

U.S. crude oil futures settled 0.1% lower at $65.63 a barrel as traders used weekly inventory figures as an excuse to pull back from the recent rally. Oil is one of Canada‘s major exports.

Home sales in Toronto, Canada‘s most populous city, fell nearly 13% in April from March. That bucked the regular spring trend, as demand began to ease after months of blistering growth.

Canadian government bond yields were mixed across the curve, with the 10-year little changed at 1.521%.

 

(Reporting by Fergal Smith; Editing by Kirsten Donovan and Nick Zieminski)

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