US Dollar Bets Rise a Seventh Week; Asia Nervous at Open on Drone
New Zealand (Dec 19) The dollar gained versus most major peers after data showed bets on the greenback climbed for the longest stretch since August 2015. Asian stock markets face a challenging opening to the week after the political storm spurred by China’s seizure on Thursday of a U.S. naval drone northwest of Subic Bay in the Philippines.
Futures indicated Japanese, Australian and Chinese shares may open lower after news that broke Friday on the confrontation drove up Treasuries and saw U.S. stocks erase what had been modest gains. The dollar rose against the euro and the Aussie on Monday after two Federal Reserve governors who spoke Friday highlighted prospects for a tighter policy path in 2017.
Traders will be monitoring developments after U.S. President-elect Donald Trump lashed out at China over the weekend, while China’s Communist Party-affiliated Global Times mocked Trump’s demeanor as “lagging far behind the White House spokespersons.” The incident threatens to impede the momentum of what has been called the global reflation trade: gains in stocks and the dollar and a slide in bonds, spurred by prospects that Trump’s spending agenda will fuel inflation in the world’s biggest economy. Volumes are expected to thin in coming weeks before the December holiday season and end of the year.
The dollar’s tumble against the Japanese currency Friday was “a timely reminder that the yen remains the preeminent safe haven currency and that in 2017 it’s likely to be a case of ‘two steps forward, one step back,’ if higher U.S. yields alongside successful BOJ yield curve control do continue to drive the pair onwards and upwards,” Ray Attrill, global head of foreign exchange at National Australia Bank Ltd. in Sydney, said in a note to clients.
Australia will release an update on its federal budget on Monday amid concern that its worsening fiscal position could trigger a downgrade of its top credit score. Japan reports trade data Monday before a Bank of Japan policy decision due Tuesday.
Stocks
•Futures on the Nikkei 225 Stock Average slid more than 0.6 percent in most recent trading late Friday New York time. Contracts on the Australian and South Korean benchmarks were each down 0.1 percent and FTSE China A50 Index futures lost 0.2 percent.
•The S&P 500 fell 0.2 percent to 2,258 on Friday, after rising as much as 0.2 percent. The measure barely moved in the week after rising to a record. The Dow added 0.4 percent in the five days, for its sixth straight weekly gain, the longest run in a year.
Currencies
•The dollar rose 0.1 percent Monday to $1.0438 per euro. It reached $1.0367 on Thursday, its strongest level since January 2003. The greenback was little changed at 117.96 yen and gained 0.2 percent to 72.88 U.S. cents per Australian dollar.
•Net long positions on the dollar rose by 11,897 contracts to 318,330 contracts in the week to Dec. 13, according to Commodity Futures Trading Commission data released Friday. That’s the highest level since Jan. 19.
•The New Zealand currency climbed 0.1 percent to 69.72 U.S. cents.
Source: Bloomberg
