2025-01-09 11:24

BENGALURU, Jan 9 (Reuters) - The Indian rupee will extend its steady decline against a strong U.S. dollar amid heightened market expectations of a Reserve Bank of India interest rate cut next month, a Reuters poll of foreign exchange strategists found. Predictions in the latest poll for the rupee were barely changed from last month. That is despite the unexpected departure of former Reserve Bank of India Governor Shaktikanta Das and arrival of his successor, Sanjay Malhotra, whose views on monetary policy are unknown. The rupee was forecast to remain near Thursday's 85.84 per dollar and to be at 85.50 in three months, before weakening to 86.00 in six months, according to the Jan. 3-9 Reuters poll of 42 foreign exchange analysts. It was expected to lose nearly 1% by year-end, reaching 86.50, a smaller decline compared to last year when the rupee fell 2.8%. It has fallen about 15% over the past three years. "The rupee has been much more stable and stronger than its fundamentals would suggest. I think the RBI can allow a little bit more adjustment in line with regional currencies," said Michael Wan, senior currency analyst at MUFG. The rupee is currently overvalued by 8% compared to its trading peers, according to RBI data on the real effective exchange rate. While remaining the fastest-growing major economy, growth in India has slowed to just above 5% and markets expect a rate cut from the RBI in February, despite inflation sticking well above the RBI's 4% medium-term target. This, along with further strength in the U.S. dollar, could place further pressure on the rupee, suggesting the RBI may need to ramp up its regular interventions in currency markets in the coming months. But in response to an additional question, a strong majority of analysts - 15 of 21 - said the RBI would reduce its pace of market intervention in the near term. "Intervention should be a last resort, as it was in the past. You don't have to eliminate volatility to manage it - some is necessary for hedging," said K. K. Mital, senior economist at Venus India. "Markets expect the new governor to cut rates in February, but I don't think that should happen. It...could backfire by fueling capital outflows." Foreign investors have removed around $2 billion dollars from India's stock market since the start of the year. (Other stories from the January Reuters foreign exchange poll) Sign up here. https://www.reuters.com/markets/currencies/indian-rupees-slide-continue-despite-higher-rate-cut-expectations-2025-01-09/

2025-01-09 11:22

Reeves in spotlight after gilt yields jump 30-year government borrowing costs highest since 1998 Sterling falls along with bond prices Market moves add pressure on Reeves to cut spending Government promises iron grip on public finances LONDON, Jan 9 (Reuters) - Rachel Reeves is facing her first major test as Britain's finance minister after the government's borrowing costs climbed for a third day on Thursday and the pound's losses deepened, potentially forcing her to cut future spending. The Treasury said late on Wednesday that it would maintain "an iron grip" on the public finances after a selloff in debt markets on Tuesday and Wednesday that pushed the yield on 30-year British government bonds to a 26-year high. Gilt yields rose again on Thursday - albeit less sharply than over the previous two sessions - and the pound was headed for its biggest three-day drop in nearly two years. The fall in the value of the pound along with the heavy sales of government bonds prompted some comparisons with the 2022 "mini-budget" crisis that forced former prime minister Liz Truss out of Downing Street. However, this week's market moves have been less sharp and there has so far been no evidence of the kind of strain on institutional investors that forced the Bank of England into emergency bond purchases in 2022. Treasury minister Darren Jones told parliament the UK bond markets "continue to function in an orderly way. Underlying demand for the UK debt remains strong." PIMCO, one of the world's largest bond investors, said it was still positive about UK government bonds and much of the move was being driven by shifts in the U.S. bond market ahead of Donald Trump's presidency. "Although UK-specific factors, such as the budget, have contributed to the rise, most of the increase has been driven by rises in U.S. Treasury yields during the same period," PIMCO economist Peder Beck-Friis said. The new British government launched its plan for more investment in public services and infrastructure to boost economic growth just days before Trump's Nov. 5 election victory which pushed up in borrowing costs globally. That shift in markets has made investors more worried about the combination of high borrowing in Britain planned by Reeves and Prime Minister Keir Starmer, and the impact of their higher taxes for business on an economy that is now stagnating. A survey of recruiters on Thursday showed that vacancies slumped in December, while in Britain's Marks & Spencer and other retailers fell due to concerns about weak consumer confidence. Analysts at Citi said the market reaction to the budget had been "a slow burn" until now but British bonds were being hit by worries about the extent of the government's borrowing plans, which could keep pressure on inflation and prevent the Bank of England from cutting interest rates quickly to help the economy. "The market appears to be questioning the credibility of the fiscal plans, especially with another full fiscal event not due until the autumn," they said in a note to clients. Some analysts said Britain's departure from the European Union had made it more exposed to swings in financial markets. "Brexit UK is vulnerable as a less core asset in global investor portfolios," Krishna Guha and Marco Casiraghi at Evercore ISI, a consultancy, said in a report. Britain is due to issue nearly 300 billion pounds ($368 billion) of government bonds over the coming financial year. OUT OF WIGGLE ROOM In her Oct. 30 budget, Reeves gave herself only a small margin of error for meeting her target of balancing spending on public services with tax revenues by the end of the decade. Economists think the rise in borrowing costs and economic stagnation since July's election mean Reeves is off course to hit that target, putting her under pressure to announce new measures to show investors she can get back on track. Reeves - who was due to travel to China on Thursday for an official visit - has said she does not plan a repeat of big tax increases after her hike in social security contributions for employers from April prompted protests from corporate leaders and caused a slowdown in their hiring plans. Instead, she could announce spending cuts for future years, but anything that smacked of a return to what she derided as austerity under the previous Conservative governments would be another blow to the government's already dwindling popularity. Reeves will deliver a budget update to parliament on March 26 when the official fiscal forecasters will say whether she is on course to meet her targets. She has previously said she favours only one major set of tax and spending announcements a year, reducing the likelihood of major measures being announced in March. The Treasury said on Wednesday that Reeves would deliver a speech in the coming weeks on economic strategy and growth. Mohamed El-Erian, a former chief executive with PIMCO, said Starmer and Reeves got bogged down too quickly in unpopular measures such as cuts to winter fuel welfare for pensioners. "This is an opportunity for the government to regain control of the narrative," he told BBC radio. "But it has to do so in a manner that's credible which means measures, especially on the productivity and growth side." ($1 = 0.8144 pounds) Sign up here. https://www.reuters.com/world/uk/uk-bond-market-sell-off-heaps-pressure-reeves-2025-01-09/

2025-01-09 11:16

PARIS, Jan 9 (Reuters) - The Philippines reported an outbreak of highly pathogenic H5N2 bird flu among backyard ducks, the World Organisation for Animal Health (WOAH) said on Thursday. The virus was detected in 15 out of 428 backyard ducks in the Camarines Norte province, the Paris-based WOAH said in a report citing Philippine authorities. The outbreak occurred in November and was confirmed in December, it said. Highly pathogenic avian influenza, commonly called bird flu, has spread around the globe in the past years, leading to the culling of hundreds of millions of poultry. The H5N2 strain is different from the one that has led to the death of a man in the United States. Sign up here. https://www.reuters.com/business/healthcare-pharmaceuticals/philippines-reports-outbreak-h5n2-bird-flu-among-backyard-ducks-2025-01-09/

2025-01-09 11:10

Reuters poll graphic on Brazil FX reserves: BUENOS AIRES, Jan 9 (Reuters) - Brazil's real currency is forecast to trade slightly stronger, at around 6 per U.S. dollar at the end of 2025 following a punishing year of losses, a Reuters poll of foreign exchange analysts showed. The real , fell around 22% in 2024, mainly due to investor disappointment about a fiscal package introduced by President Luiz Inacio Lula da Silva's economic team to correct worrying debt trends. Losses in Brazilian assets only stopped after Brazil's central bank sold nearly 10% of its reserves throughout the last three weeks of 2024. The real has now stabilized following last month's meltdown to a record low. But like many other emerging market currencies, there is little prospect for making much positive headway this year so long as the U.S. retains its dominance in currency market bets. The currency is expected to trade at 5.94 per dollar in one year, 2.7% stronger than its closing value of 6.10 on Tuesday, according to the median estimate of 25 analysts polled Jan. 3-8. "Pressure on the real was exacerbated by the market's negative perception of progress of the government's spending cut package in Congress," analysts at Sicredi wrote in a report. "Despite the (central bank) intervention, unfavorable dynamics for the Brazilian currency continue to be a significant challenge." In December, Banco Central do Brasil (BCB) sold $22 billion of its reserves in spot foreign exchange markets and another $11 billion through repurchase agreements. It has not intervened again in the first days of 2025. "Higher yields in the U.S. and the perception of greater fiscal risk in Brazil should keep the currency at the new level (6 per dollar)," analysts at Banco Inter wrote in a report. U.S. Treasury yields edged higher on Tuesday after data showed the U.S. economy remained resilient, supporting market expectations the Federal Reserve may have only one quarter-point interest rate cut left to deliver. Latin American currency strategists are also waiting for what U.S. President-elect Donald Trump announces after his inauguration on Jan. 20, wary of any potential plan to apply sweeping tariffs that could hit the Mexican peso even further. The currency fell nearly 19% in 2024 on tariff fears as well as concerns related to controversial judicial reforms. The peso is forecast to trade at 20.90 per dollar in 12 months, or 2.8% weaker than its value of 20.31 on Tuesday. (Other stories from the January Reuters foreign exchange poll) Sign up here. https://www.reuters.com/world/americas/brazils-real-seen-more-stable-trade-close-6-per-us-dollar-end-2025-2025-01-09/

2025-01-09 10:58

STOCKHOLM, Jan 9 (Reuters) - Electricity output from wind hit a record high in Sweden in 2024, with wind exceeding nuclear power for the first three-month period ever in the last quarter, the Swedish Wind Energy Association (SWEA) said in a statement. In December, wind was the largest source of electricity for the first time, ahead of hydro and nuclear power, making up 35% of production, with record monthly output, the SWEA said. "The December outcome gives hope. Wind power can account for a large part of the electricity production needed for electrification not to lose momentum, to enable a climate transition, and to achieve Sweden's climate goals," it said. For all of last year, wind accounted for 25% of generation, up from 22% in 2023, after hydro and nuclear power. Still, the Swedish government in November rejected applications to build 13 offshore wind farms, citing Baltic Sea security concerns. It also removed subsidies for connecting offshore wind projects to Sweden's power grid. The government believes Sweden needs to double electricity output in the next two decades to around 300 TWh to meet higher demand and reach climate targets, and it plans to build out nuclear power. "2024 offered normal winds, but thanks to the expansion of wind power, the annual production was 40.8 TWh, the highest annual production ever," SWEA said, citing official data. An SWEA spokesperson said that, assuming similar wind strengths and electricity prices, output from wind power should be at least as big in 2025 as in 2024. Sign up here. https://www.reuters.com/business/energy/wind-power-tops-nuclear-sweden-first-time-trade-group-says-2025-01-09/

2025-01-09 10:54

LONDON, Jan 9 (Reuters) - British financial markets remain orderly and there is no need for authorities to intervene, deputy finance minister Darren Jones said on Thursday after sterling fell to a 14-month low and 30-year borrowing costs hit their highest since 1998. "UK gilt markets continue to function in an orderly way. Underlying demand for the UK's debt remains strong," Jones told parliament on Thursday. "There is no need for any emergency intervention," Jones added in response to a follow-up question from the Conservative opposition about why finance minister Rachel Reeves - who is due to travel to China - was not in parliament. British government bonds have fallen sharply for three days in a row, underperforming U.S. and German debt, although the higher yields attracted solid investor demand at regular bond auctions on Tuesday and Wednesday. Ten-year gilt yields have risen by 0.22 percentage points this week - representing the biggest jump in a year though much less than the 0.69 percentage point surge that followed the mini-budget of former prime minister Liz Truss in September 2022. Jones stressed the Labour government's commitment to new fiscal rules that target a balanced day-to-day budget and falling public sector net financial liabilities by 2029-30. "These fiscal rules are non negotiable. That is why public spending will be within the numbers set out at the budget." Jones did not directly respond to questions about whether the government would rule out raising taxes given higher borrowing costs. Britain's Office for Budget Responsibility estimated that Reeves had just under 10 billion pounds ($12 billion) of headroom to meet the fiscal rules after her Oct. 30 budget. But the rise in gilt yields and government debt interest payments mean many economists think Reeves is now on course to break the rules - a view a finance ministry spokesperson described as "pure speculation" on Wednesday. The OBR will produce fresh budget forecasts on March 26 and the government will conclude a spending review in June. Sterling and gilt yields were little changed as Jones spoke. Ten-year gilt yields were up 0.02 percentage points on the day at 4.82%, but below a peak of 4.925% hit early in the day. Matthew Amis, investment director at asset manager abrdn, said Jones' remarks had not eased market concerns. "We have the OBR in March, and it's the first week in January, so what happens to the gilt market in between now and March?", he said. "It would have been better if we had more information there, just to calm markets down." ($1 = 0.8139 pounds) Sign up here. https://www.reuters.com/world/uk/uk-minister-financial-markets-functioning-an-orderly-way-2025-01-09/