2024-09-05 18:51

Loonie trades in a range of 1.3504 to 1.3525 Ten-year yield hits a one-month low at 2.969% Economists expect a gain of 25,000 jobs for August TORONTO, Sept 5 (Reuters) - The Canadian dollar steadied against its U.S. counterpart on Thursday as investors awaited U.S. and Canadian jobs data that could guide expectations for the size of expected central bank interest rate cuts. The loonie was trading nearly unchanged at 1.3510 to the U.S. dollar, or 74.02 U.S. cents, after trading in a range of 1.3504 to 1.3525. "I think tomorrow's big NFP (nonfarm payrolls) event is what's holding it back right now," said Erik Bregar, director of FX and precious metals at Silver Gold Bull. The options market shows traders are preparing for potentially big moves in currencies on Friday when U.S. nonfarm payrolls data for August is due to be released. Softening U.S. labor market data has led some investors to expect that the Federal Reserve will begin its monetary policy easing cycle later this month with an oversized half-percentage-point reduction in interest rates, rather than a quarter-percentage-point move. Canada's employment report for August is also due to be released on Friday, with economists expecting an increase of 25,000 jobs. On Wednesday, the Bank of Canada lowered its key policy rate by 25 basis points to 4.25%, and Governor Tiff Macklem, citing weak economic growth, said a larger cut could be in order if the economy needs a boost. "Zooming out though, I think the trend is still higher for the Canadian dollar ... and I think that will remain the case so long as this week's lows hold," Bregar said. The loonie is set to give back some of its recent gains over the coming months but could make another move higher in 2025 if central bank easing cycles revive the global economy, spurring demand for commodities, a Reuters poll found. Canadian bond yields eased across the curve, tracking moves in U.S. Treasuries. The 10-year was down 2.6 basis points at 2.969%, its lowest level since Aug. 2. Sign up here. https://www.reuters.com/markets/currencies/c-steadies-ahead-expected-volatility-around-jobs-data-2024-09-05/

2024-09-05 18:44

BRASILIA, Sept 5 (Reuters) - Brazil's central government posted a primary budget deficit that came in higher than expected, official data showed on Thursday, even after a strong expansion in public revenues. The deficit was 9.283 billion reais ($1.66 billion) in July, the Treasury said, while economists polled by Reuters were expecting a 8.8 billion real shortfall. For the month, net revenue expanded 9.5% in real terms to 183.5 billion reais, but spending topped that at 192.8 billion reais even as it decreased 6%. In the 12 months to July, the deficit totaled 233.3 billion reais, equivalent to 2.04% of Brazil's gross domestic product (GDP), still far from the government's official target of zeroing it this year. The target has a tolerance margin of 0.25% of GDP, which means that the deficit for the year could be around 29 billion reais. Speaking at a news conference, Treasury Secretary Rogerio Ceron said the annual data reflects the government's decision to load the first few months of the year with some major spending. "Now the trend is starting to reverse," he said, adding that August's tax revenue, which will be officially released later this month, was very strong. According to Ceron, the government is readying new revenue measures if necessary to ensure that this year's target is met. The fresh measures could be released in the bimonthly revenue and expenditure report later this month. ($1 = 5.5804 reais) Sign up here. https://www.reuters.com/world/americas/brazils-central-government-budget-deficit-reaches-166-billion-july-2024-09-05/

2024-09-05 17:16

CAIRO, Sept 5 (Reuters) - Egypt's central bank as expected left its overnight interest rates on hold on Thursday, saying inflation pressures had subsided but that economic growth had softened. The lending rate remained at 28.25%, while the deposit rate stood at 27.25%, the bank said in a statement. It was the third time that it left rates unchanged since a 600 basis point (bps) hike on March 6, when it signed a $8 billion financial support agreement with the International Monetary Fund. All but one of 15 analysts polled by Reuters this week had expected rates to remain on hold, with a sole analyst predicting a 100 bps cut. "With the gradual easing of previous shocks, inflationary pressures continued to subside, as annual headline and core inflation edged downward for the fifth consecutive month," the central bank's monetary policy committee (MPC) wrote in a statement accompanying the decision. Egypt's economy, already shaky, has been buffeted successively by the coronavirus, Russia's invasion of Ukraine and the war in Gaza. Inflation dropped to 25.7% in July, the first time the real interest rate has been positive since January 2022. Inflation fell gradually from an all-time peak of 38% in September. August inflation figures are due on Tuesday. "Domestically, real GDP growth softened to 2.2 percent in Q1 2024 compared to 2.3 percent in Q4 2023," the MPC said. "The softening is driven by declining public contribution to economic activity due to the impact of Red Sea maritime trade disruption on the service sector." The MPC said it expected economic growth to recover gradually in the fiscal year that began on July 1 and that inflation would decline significantly in the first quarter of 2025. "The gradual unwinding of food inflation along with the improvement of inflation expectations suggest that inflation is currently on a downward trajectory," it said. Sign up here. https://www.reuters.com/world/egypts-central-bank-leaves-overnight-interest-rates-steady-2024-09-05/

2024-09-05 17:04

BRASILIA, Sept 5 (Reuters) - Brazil's central bank's director of economic policy said on Thursday that since their latest interest rate-setting meeting, policymakers have observed stronger economic growth in the country and the trends they had been monitoring have proven to be persistent. Speaking at a UBS event, Diogo Guillen noted that the exchange rate "is a bit higher" than in July, while inflation expectations have remained broadly unchanged and de-anchored, a source of discomfort for the central bank. Data released by Brazil's statistics agency this week showed stronger-than-expected activity in the second quarter, reinforcing market bets that had already pointed to the central bank raising rates at its upcoming Sept. 17-18 meeting. Brazil's benchmark interest rate has been held steady at 10.50% since June. After central bank chief Roberto Campos Neto said that any potential adjustment in borrowing costs would be gradual, Guillen noted that minutes from their last meeting had already shown policymakers discussing keeping rates unchanged for a sufficiently long time while stressing they would raise them if necessary. "For me, this is already a strong indication that the start of the cycle would be gradual," he said. Guillen added that the credibility of policymakers comes from doing what is necessary to bring inflation to its 3% target. "I think it's much more about if the economic conditions ask for a cycle or not to get inflation into the target. And given that, we will have to do what we what we have to do," he said. He emphasized that the strong commitment to achieving the inflation target is collective and "quite important," adding that there is a lot of cohesion within the rate-setting board (Copom) regarding their assessment of the domestic economy, external uncertainties, and the slowdown in global growth. Sign up here. https://www.reuters.com/business/finance/brazils-central-bank-sees-stronger-growth-higher-fx-since-latest-policy-meeting-2024-09-05/

2024-09-05 16:34

NEW YORK, Sept 5 (Reuters) - Looming interest rate cuts may not immediately spur a rush out of cash-like instruments, as yields on some shorter-dated government bonds could take months to fall below those on longer-term debt, analysts at JPMorgan said. The closely watched gap between two-year and 10-year Treasury yields turned positive for the first time in about a month on Wednesday, partially reversing an anomaly during which shorter-dated government bonds yielded more than their longer-dated counterparts. But so-called inversions in other parts of the yield curve could last longer and investors are unlikely to rush out of shorter-dated debt, where they have been enjoying yields as high as over 5%, JPMorgan fixed income strategists Teresa Ho and Pankaj Vohra wrote in a note on Wednesday. For instance, the part of the Treasury yield curve comparing three-month bills to two-year notes , is deeply inverted, with the shorter-dated securities yielding about 133 basis points more than the two-year paper on Thursday. Historically, it took months for that part of the yield curve to turn positive after rate cuts began, the analysts said. In 2001 and 2019 - an aggressive and shallow rate-cutting cycle, respectively - the spread turned positive about three months after the first cut. "As liquidity investors tend to be yield investors, this implies that it could take at least three months before cash meaningfully begins to shift out, regardless of how the upcoming easing cycle unfolds," the analysts wrote. So far there has been little evidence that investors are abandoning cash. Assets in U.S. money markets surged to a record $6.24 trillion in August, data from the Investment Company Institute showed. "We wouldn’t be surprised if MMF AUMs (money market funds assets under management) continue to rise into year-end, even if the Fed begins the easing cycle this month," the JPMorgan analysts said. "Declines in MMF balances will likely be more of a 2025 story." Sign up here. https://www.reuters.com/markets/us/cash-could-stay-attractive-months-despite-rate-cuts-jp-morgan-says-2024-09-05/

2024-09-05 12:30

MOSCOW, Sept 5 (Reuters) - Major Russian banks have called on the central bank to take action to counter a yuan liquidity deficit, which has led to the rouble tumbling to its lowest level since April against the Chinese currency and driven yuan swap rates into triple digits. The rouble fell by almost 5% against the yuan on Sept. 4 on the Moscow Stock Exchange (MOEX) after the finance ministry's plans for forex interventions implied that the central bank's daily yuan sales would plunge in the coming month to the equivalent of $200 million. The central bank had been selling $7.3 billion worth of yuan per day during the past month. The plunge coincided with oil giant Rosneft's 15 billion yuan bond placement, which also sapped liquidity from the market. "We cannot lend in yuan because we have nothing to cover our foreign currency positions with," said Sberbank CEO German Gref, stressing that the central bank needed to participate more actively in the market. The yuan has become the most traded foreign currency on MOEX after Western sanctions halted exchange trade in dollars and euros, with many banks developing yuan-denominated products for their clients. Yuan liquidity is mainly provided by the central bank through daily sales and one-day yuan swaps, as well as through currency sales by exporting companies. Chinese banks in Russia, meanwhile, are avoiding currency trading for fear of secondary Western sanctions. At the start of September, banks raised a record 35 billion yuan from the central bank through its one-day swaps. "I think the central bank can do something. They hopefully understand the need to increase the liquidity offer through swaps," said Andrei Kostin, CEO of second-largest lender VTB, stressing that exporters should sell more yuan as well. The acute yuan shortage also follows months of delays in payments for trade with Russia by Chinese banks, which have grown wary of dealing with Russia after U.S. threats of secondary Western sanctions. These problems culminated in August in billions of yuan being stuck in limbo. Russia and China have been discussing a joint system for bilateral payments, but no breakthrough is in sight. VTB's Kostin said that since Russia's trade with China was balanced, establishing a clearing mechanism for payments in national currencies should not be a problem. Sign up here. https://www.reuters.com/markets/currencies/major-russian-lenders-say-yuan-coffers-empty-urge-central-bank-action-2024-09-05/