Month: September 2017

Most Asia markets pressured after North Korea missile, dollar recoups losses

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Most indexes in Asia were moderately lower on Friday after North Korea launched a missile in the direction of the east.

The unidentified missile flew over Japan before landing 2,000 km east of Hokkaido, Reuters said, citing Japanese broadcaster NHK. Following the North’s latest launch, South Korea has responded by firing its own missile into the sea, according to Reuters.

The hermit state had warned through a state agency on Thursday that it would “sink” Japan, Reuters reported. North Korea had fired another ballistic missile which passed over northern Japan before falling into the sea on Aug. 29 local time.

By 8:38 a.m. HK/SIN, the dollar recouped losses against the safe-haven yen, trading at 110.13 yen after falling as low as 109.54 on the news. The Swiss franc, another safe-haven currency, traded at 0.9627 francs to the dollar after strengthening as high as 0.9610 earlier.

Gold prices climbed as high as USD 1,334.36 an ounce before paring gains to trade at USD 1,331.90 by 8:37 a.m. HK/SIN. Still, that remained a touch above the USD 1,329 seen before the news. The yellow metal is often regarded as a safe haven in times of geopolitical uncertainty.

In equities, Nikkei 225 shrugged off elevated geopolitical tensions in the region to advance 0.24 percent.

South Korea’s benchmark Kospi index, however, came under some pressure. The index lost 0.46 percent in early trade. Defense names like Korea Aerospace and Victek rose 1.07 percent and 4.02 percent, respectively, while blue chips like Samsung Electronics and Hyundai Motor edged lower.

Down Under, the S&P/ASX 200 shed 0.39 percent with the 1.14 percent fall in the materials sub-index driving losses on the broader index.

Elsewhere, markets digested better-than-expected US August consumer prices released on Thursday. The consumer price index rose 0.4 percent in August, a touch above the 0.3 percent increased forecast by economists in a Reuters poll. Some investors speculated that the beat could potentially influence the US Federal Reserve to hike interest rates once more this year.

The Bank of England was also on the radar after it kept interest rates on hold at 0.25 percent, but noted that a withdrawal of monetary stimulus could be required “over the coming months.” The pound traded as high as USD 1.3406 following the news compared to the USD 1.32 handle seen before.

Stateside, major indexes closed mixed. The Dow Jones industrial average rose 0.2 percent, or 45.3 points, to close at 22,203.48, but the tech-heavy Nasdaq underperformed, sliding 0.48 percent by the end of the session.

In corporate news, the contest to buy Toshiba’s memory chip unit plodded along. Toshiba said Thursday that Western Digital “persistently overstates” its rights over the Japanese company’s flash memory unit. Still, Toshiba said in its statement that it was committed to selling Toshiba Memory Corporation by March 2018. Toshiba stock rose 1.9 percent, leading gains among Japanese tech stocks that were largely mixed in early trade.

Meanwhile, bitcoin fell on Thursday after one of the largest exchanges in China announced it would stop all trading on Sept. 30. The cryptocurrency traded at USD 3,295.18 at 8:29 a.m. HK/SIN, compared to a record high of USD 5,013.91 touched earlier in September.

On the energy front, oil prices edged down after rising in the previous session on forecasts for stronger oil demand and the weaker dollar. Brent crude declined 0.27 percent to trade at USD 55.32 a barrel after hitting its highest levels in five months on Thursday. US West Texas Intermediate crude slipped 0.24 percent to USD 49.77.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

JPMorgan CEO Jamie Dimon says bitcoin is a ‘fraud’ that will eventually blow up

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Fred Imbert
CNBC

JPMorgan Chase CEO Jamie Dimon took a shot at bitcoin, saying the cryptocurrency “is a fraud”.

“It’s just not a real thing, eventually it will be closed,” Dimon said Tuesday at the Delivering Alpha conference presented by CNBC and Institutional Investor.

Dimon joked that even his daughter bought some bitcoin, looking to cash in on a trend that has seen it soar more than 300 percent this year.

“I’m not saying ‘go short bitcoin and sell USD 100,000 of bitcoin before it goes down,” he said. “This is not the advice of what to do. My daughter bought bitcoin, it went up and now she thinks she’s a genius.”

In an appearance at a separate conference earlier in the day, Dimon said bitcoin mania is reminiscent of the tulip bulb craze in the 17th century.

“It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed,” Dimon said at a banking industry conference organized by Barclays. “Currencies have legal support. It will blow up.”

Dimon also said he’d “fire in a second” any JPMorgan trader who was trading bitcoin, noting two reasons: “It’s against our rules and they are stupid.”

Bitcoin fell to its session lows after Dimon’s comments. As of 3:01 p.m. in New York, bitcoin traded at USD 4,106.23, down 2 percent.

Dimon’s criticism comes at a time when some of the most well-known figures on Wall Street are starting to embrace the cryptocurrency.

Fundstrat’s Tom Lee said he sees bitcoin surging to USD 6,000 next year and value investor Bill Miller reportedly owns bitcoin.

Even Dimon’s own bank, JPMorgan, has reportedly begun a trial project using blockchain as it tries to cut trading costs. Blockchain is the technology behind bitcoin.

Bitcoin has already soared 315 percent this year.

Earlier on Tuesday, Dimon warned about further declines in trading revenue for the banking giant.

Dimon said third-quarter trading revenue will drop about 20 percent on a year-over-year basis. Dimon also said the bank may not give intra-quarter guidance in the future.

JPMorgan’s stock fell off its session highs on the comments but remained up 1.4 percent on the day.

This comes just a day after Citigroup CEO John Gerspach issued a similar warning. On Monday, Gerspach said Citi’s trading revenue could fall 15 percent, citing low market volatility.

2017 has been the calmest market in decades. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, hit its lowest level in more than 20 years earlier this year.

The second quarter was also a weak one for JPMorgan’s trading unit as revenue fell 14 percent during the period on a year-over-year basis.

Dimon will also be speaking later Tuesday at the Delivering Alpha conference in New York.

–With reporting by Wilfred Frost and Jeff Cox

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

‘Future will be electric’: European carmakers take fight to Tesla

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Traditional European automakers are increasingly prioritizing the development of electric cars over combustion engines as they seek to gain market share in a space dominated by U.S. upstart Tesla.

“It is quite clear the future will be electric,” Ralf Speth, Jaguar Land Rover chief executive, told CNBC on Tuesday.

“We are going to deliver a step-by-step complete electrified portfolio and from 2020 onwards all of our cars will deliver the option to be electrified,” he added.

A global crackdown on diesel cars in the wake of Volkswagen cheating on emission tests has ramped up the pressure on automakers to rapidly develop electric alternatives.

‘We will see battery cars faster than anybody expected’

Speaking on the sidelines of the Frankfurt Motor Show, Speth argued a collaborative effort between governments and energy markets would ultimately alleviate any lingering worries throughout the industry.

Several automakers have previously expressed concerns that a lack of infrastructure investment could stall the rollout of electric cars over the coming years.

“I am absolutely confident we will see battery cars faster than anybody expected on the street and therefore all of the infrastructure will catch up,” he added.

Traditional carmakers, such as Jaguar Land Rover, BMW and Ford have all sped up their respective plans to mass produce electric cars in order to challenge the likes of Tesla.

“We have got an investment of about $4.5 billion in electrified vehicles coming over the next few years. And the first one of those for us, as a specific electrified vehicle in Europe, will be in 2020,” Steven Armstrong, EMEA president of Ford, told CNBC on Tuesday.

Armstrong explained the upcoming launch of Ford’s electric model would be a “cross-over” style vehicle with a battery range of about 480 kilometers.

Questions over ‘user convenience’

Despite the buzz around electric vehicles, some automakers have expressed skepticism that consumers will embrace such cars immediately – especially given the current limitations in battery technology.

Toyota Chairman Takeshi Uchiyamada told CNBC in an exclusive interview last week that while the Japanese carmaker insisted it would be “no exception” in the development of electric cars, he raised questions over “user convenience”.

On Monday, German carmaker Daimler warned that, at first, electric cars may only earn half the margin of equivalent vehicles with combustion engines.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Asian shares gain as dollar claws back losses and China eases some yuan trading rules

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Asian stocks rose on Monday as the dollar clawed back losses. Markets also digested headlines concerning developments out of the People’s Bank of China and European Central Bank announced at the weekend.

The Nikkei 225 rallied 1.25 percent and South Korea’s benchmark Kospi index tacked on 0.99 percent as geopolitical tensions eased on the Korean peninsula over the weekend.

The rally took place after no North Korean missile launches materialized on Sept. 9, the anniversary of the country’s founding. There had been speculation in the lead up to the weekend that North Korea could conduct its next missile test then to celebrate the occasion.

Down Under, the S&P/ASX 200 rose 0.48 percent, with the information technology and health care sub-indexes leading gains. The heavily-weighted financials sub-index added 1.07 percent.

China’s central bank intends to ease requirements for financial institutions to set aside foreign-exchange risk reserves for trading yuan forwards as of September 11, Reuters said.

The move comes as the Chinese currency recently erased its entire decline from 2016. The on-shore yuan traded at 6.4773 to the dollar at the end of the trading session on Friday. The offshore yuan was slightly softer at 6.5013.

“Scrapping this requirement put in place in October 2015 to curb foreign exchange speculation suggests a more liberalized approach to yuan trading as the PBOC removes some of the defensive mechanism implemented to reduce capital outflow,” said Stephen Innes, Asia-Pacific head of trading at OANDA, in a note.

China August producer price inflation rose 6.3 percent, compared with a year earlier, Reuters reported on Saturday. That was above the 5.6 percent rise forecast by analysts in a Reuters poll and the 5.5 percent increase seen in July.

Meanwhile, the European Central Bank is weighing an option to to reduce its bond-buying to 20 billion euros or 40 billion euros a month from the current 60 billion euros, Reuters reported, citing three unnamed sources with direct knowledge of the discussion. The central bank’s decision was widely expected to be delivered at its Oct. 26 meeting, Reuters reported.

The euro softened to trade at USD 1.2013 at 8:47 a.m. HK/SIN after fetching as much as USD 1.2092 last week.

Over in the US, New York Fed President William Dudley told CNBC Hurricanes Harvey and Irma would likely contribute to greater economic activity in the long term, even though their near-term impact was negative. The “transitory” nature of the fallout from the hurricanes was unlikely to influence Fed policy, Dudley also said.

In corporate news, South Korean automakers Hyundai Motor and Kia Motors said they were likely to miss their 2017 sales targets, Yonhap reported on Sunday. South Korean exporters have been hit due to a diplomatic tiff with China over the deployment of an anti-missile defense system. Still, Hyundai shares were up 0.37 percent and Kia rose 0.94 percent in early trade.

Also in South Korea, retailer Lotte Shopping could potentially sell its supermarket outlets in China depending on the state of bilateral relations between the two countries, Reuters said on Monday. Shares of Lotte Shopping were 0.44 percent higher.

In currencies, the dollar index, which measures the greenback against a basket of six major currencies, edged up 91.462 at 8:08 a.m. HK/SIN after broadly slumping on Friday. The dollar index had finished the week at 91.325. Analysts had attributed softness in the dollar to geopolitical tensions and potential economic fallout from Hurricanes Harvey and Irma.

Against the Japanese currency, the dollar fetched 108.37 yen after plumbing a low of 107.31 in the last session.

The dollar continued to firm after the release of Japan July core machinery orders, which showed an increase of 8 percent from June, Reuters said. The rise in core orders was the first in four months, according to Reuters.

On the energy front, oil prices edged up after settling 3 percent lower on Friday. US crude added 0.57 percent to trade at USD 47.75 a barrel and Brent crude rose 0.41 percent to trade at USD 54 a barrel.

Stateside, stocks posted weekly losses on Friday. The Dow Jones industrial average rose 0.06 percent to close at 21,797.79, but fell 189.77 points for the week.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Google is apparently ready to buy smartphone maker HTC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Todd Haselton
CNBC

A report from a Taiwanese news outlet called Commercial Times says Google is in the final stages of acquiring all or part of smartphone maker HTC.

The news follows a separate story from late August that suggested Taiwan-based HTC was interested in some sort of sale.

HTC, once one of the more popular smartphone makers in the United States, has fallen off of most carrier store shelves after several consecutive unsuccessful smartphone launches. It recently launched a separate division that sells virtual reality headsets.The report seemThere may still be reaThere

The report seems fishy since Google has already been down this road, but there’s a reason why Google might be interested in HTC.

The Taiwanese company builds the Google Pixel, which means it could be a good fit for Google as it continues to cater to consumers with its “Pixel” smartphone brand.

Here’s where it sounds off base: Google acquired Motorola Mobility and then sold it off just a couple of years later. Why repeat that move?

Commercial Times said HTC’s poor financial position and Google’s desire to “perfect [the] integration of software, content, hardware, network, cloud, [and] AI,” is the driving force behind Google’s interest. The news outlet said Google may make a “strategic investment” or “buy HTC’s smartphone R&D team” which suggests that the VR team would exist as its own.

UBS analyst Eric J. Sheridan explained in a note on Thursday why Google might want to push further into hardware:

“From a strategic standpoint, owning & operating its own mobile operating division would offset some of the key strategic challenges that Google’s mobile computing business might face: a) a deeper integration of hardware/software would offset some of the Android fragmentation issues that do not plague Apple iOS; b) development cycles that maximize forward mobile computing trends (Google Lens, location, ARCore, Google Assistant) with possible greater user adoption; c) an offset to rising Distribution TAC expenses; & d) an offset to any negative industry dynamics (unbundling of apps) resulting from the European Commission’s Android investigation.”

Sheridan said a Google acquisition of HTC would be “immaterial to Alphabet” given its $95 billion cash stash.

Google and HTC declined to comment to CNBC.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

North Korea is ‘behaving very badly, and it’s got to stop’: Donald Trump

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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President Donald Trump on Thursday again refused to rule out U.S. military action in North Korea, telling reporters that the nuclear-armed dictatorship has been “behaving very badly, and it’s got to stop.”

“I would prefer not going the route of the military, but it’s something certainly that could happen,” the president said at a White House press conference with the visiting Emir of Kuwait.

Lauding the recent U.S. military buildup in and around the Korean peninsula, Trump said, “Hopefully we’re not going to have to use [military force]. But if we do, it will be a very sad day for North Korea.”

U.S. markets did not immediately respond to Trump’s latest comments, which were more tempered than some of his recent tweets on the issue.

The comments came just days after North Korea appeared to have tested a hydrogen bomb, sparking renewed fears around the world of what the hermit kingdom might do with such a weapon.

At the time, Trump tweeted a warning to North Korea:

North Korea has conducted a major Nuclear Test. Their words and actions continue to be very hostile and dangerous to the United States…..

— Donald J. Trump (@realDonaldTrump) September 3, 2017

Asked on Thursday whether the United States could tolerate a situation where North Korea retained its nuclear weapons, but was otherwise contained, the president declined to answer: “I don’t put my negotiations on the table,” he said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Google is apparently ready to buy smartphone maker HTC

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

A report from a Taiwanese news outlet called Commercial Times says Google is in the final stages of acquiring all or part of smartphone maker HTC.

The news follows a separate story from late August that suggested Taiwan-based HTC was interested in some sort of sale.

HTC, once one of the more popular smartphone makers in the United States, has fallen off of most carrier store shelves after several consecutive unsuccessful smartphone launches. It recently launched a separate division that sells virtual reality headsets.

The report seems fishy, since Google has already been down this road, but there’s a reason why Google might be interested in HTC.

The Taiwanese company builds the Google Pixel, which means it could be a good fit for Google as it continues to cater to consumers with its “Pixel” smartphone brand.

Here’s where it sounds off base: Google acquired Motorola Mobility and then sold it off just a couple of years later. Why repeat that move?

Commercial Times said HTC’s poor financial position and Google’s desire to “perfect [the] integration of software, content, hardware, network, cloud, [and] AI,” is the driving force behind Google’s interest. The news outlet said Google may make a “strategic investment” or “buy HTC’s smartphone R&D team” which suggests that the VR team would exist as its own.

UBS analyst Eric J. Sheridan explained in a note on Thursday why Google might want to push further into hardware.

Sheridan said a Google acquisition of HTC would be “immaterial to Alphabet” given its $95 billion cash stash.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India tried to get the ‘black money’ out of its banking system – it ended up doing the opposite

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s surprise move to ban several bank notes last November — aimed at rooting out illicit cash — appeared to have achieved the opposite of its intended goal, according to a report from the country’s central bank.

The Reserve Bank of India said in its annual report on Aug. 30 that 99 percent, or around 15.28 trillion rupees ($238.7 billion), of the demonetized 500- and 1,000-rupee notes were deposited or exchanged for new currency. That figure suggests that most people — including corrupt officials, businessmen and criminals said to have hoarded their illicit wealth in cash — have managed to preserve their fortunes.

India’s Finance Minister Arun Jaitley reportedly told a conference in New Delhi that illegal money had indeed found its way into the banking system, but said authorities are investigating 1.8 million bank accounts and 200 individuals to identify and tax that “black money.”

Opponents of Prime Minister Narendra Modi were quick to jump on the RBI’s findings as proof that demonetization had failed. For one, former Finance Minister Palaniappan Chidambaram asked on Twitter if the whole effort had been a laundering scheme.

“Critics have presented this as overwhelming evidence that demonetisation failed in its stated aim of clamping down on illicit wealth, known colloquially as ‘black money,'” Shilan Shah, India economist at Capital Economics, wrote in a Wednesday note.

“After all, the rationale was that demonetisation would penalise those storing illicit cash as they would be unable to declare it,” he added.

A report by the Financial Times said complex money-laundering networks sprang up in Asia’s third-largest economy after the demonetization scheme was announced. Wealthy individuals, attempting to evade tax authorities, sold the banned notes at a discount to brokers who dispatched low-income Indians to deposit or exchange them at banks.

Others turned to friends and relatives to help channel their undeclared cash into the banking system.

Has demonetization done more harm than good?

More than allowing illicit money to be laundered, India’s demonetization exercise did not result in any direct fiscal benefit to the government, Nomura analysts wrote in a note last week.

The RBI’s annual report showed its dividend paid to the government fell 53 percent to 307 billion rupees ($4.8 billion) in the last fiscal year, partly due to a sharp rise in expenditure as the central bank spent more on printing new notes to replace the banned ones.

“To recoup this will require additional belt tightening by the central government as it has already front-loaded some of its spending,” the Nomura analysts said.

The economy was also affected by the shortage of cash. Growth slowed to 6.1 percent in the first quarter and moderated further to 5.7 percent in the subsequent three months, official statistics showed. Before demonetization, India registered a 7.5 percent expansion in the third quarter of 2016.

But not all is lost, analysts said. The move has had “secondary benefits” of encouraging higher due diligence, widening the tax base and boosting digital transactions, DBS economist Radhika Rao said.

Capital Economics’ Shah added that the scheme appeared to be a political success for the Modi government.

“After all, the measures enabled PM Modi to demonstrate in a very visible way his commitment to fighting corruption and black money (even though they proved to be a failure). This helped the ruling BJP to secure major victories in state elections earlier this year,” he wrote. “In turn, this has eased the passage of economic reforms.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

China’s yuan has fully recovered from 2016 and analysts say there’s still room to run

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China’s yuan has been on a tear all year and has now recouped last year’s losses — and analysts say there’s still room to run.

At its strongest level on Tuesday, the yuan was changing hands at 6.5151 against the U.S. dollar, pushing gains to more than 6 percent this year, according to Reuters data. The currency’s appreciation had quickened its pace in August, marking its best month in 2017.

The yuan has strengthened much faster than expected, and it’s even bucked the trend. While other Asian currencies have been falling in the face of rising political tensions between the U.S. and North Korea, the Chinese yuan has actually continued appreciating. Experts say the central bank has succeeded in demonstrating it can withstand downward pressure on the currency by tightening capital controls and with foreign exchange intervention.

There’s even some talk that the yuan is becoming something of a safe-haven play.

The government’s capacity for control “positions the Chinese yuan and China as a source of stability amid uncertain political and economic times,” wrote Callum Henderson, managing director at risk consultancy Eurasia Group, in a note. And “it avoids any possibility that the U.S. administration could accuse China of weakening its currency ahead of the 19th Party Congress and President Donald Trump’s visit to China.”

China’s 19th Party Congress is set to kick off mid-October, and it’s the country’s most important political event in five years, culminating with a change in the upper echelons of leadership. For Beijing, maintaining stability in its economy and markets is a major priority ahead of the power shuffle, which is why the government has been working overtime to support the yuan.

The currency has also been buoyed by a weaker U.S. dollar as buying sentiment for the greenback has soured as the U.S. Federal Reserve has continued signaling it’s unlikely to change interest rates for the rest of this year.

“The combination of improving economic data in China and the ongoing weakness in investment sentiment towards the dollar, is encouraging for the yuan,” said Jameel Ahmad, chief market analyst at FXTM, a forex broker.

At the beginning of the year, many analysts were expecting the yuan to continue its slide against the dollar. But it has instead improved so much this year that it’s already beat many year-end forecasts, prompting analysts to play catch-up with their estimates.

Capital Economics, for instance, issued on Aug. 31 its latest adjusted forecast, with expectations that 6.60 yuan would trade for a U.S. dollar by the end of the year, 6.40 in 2018, and 6.20 in 2019.

But at 9:50 am on Wednesday, the spot rate for the yuan was trading at 6.5311 — already beating the firm’s forecast only a week out of its latest revision. While his firm was early in its calls for the yuan to appreciate, the speed by which it’s occurred has taken many by surprise, said Capital Economics China economist Julian Evans-Pritchard.

Macquarie also sees the yuan appreciating further, forecasting it to hit 6.40 yuan against the dollar over the next 12 months.

Still, a number of risks remain — most notably a longstanding concern that China’s economic growth may falter, and thus, diminish the case for sustained strength in the yuan. There’s also a risk that “strains building in China’s financial system after years of rapid credit growth will precipitate a crisis that in turn will trigger sharp currency depreciation,” wrote analysts at Capital Economics in a recent note.

Another unknown is what reforms, if any, China may choose to pursue after the fall party congress, said Mitul Kotecha, head of foreign exchange strategy for Asia Pacific at Barclays.

Also, it’s important to remember that major moves in any direction for the yuan may not be a good thing from Beijing’s perspective — given its emphasis on keeping calm in the markets this year.

“Stability still seems to be the prime interest here,” said Kotecha. “Dampening volatility, keeping relative stability is probably going to continue to be the aim.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

North Korea tensions aren’t pushing up gold prices – Trump is: Goldman Sachs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Despite many claims to the contrary, North Korea tensions aren’t actually what’s driving the rally in gold, Goldman Sachs said in a Tuesday note.

Instead, the bank said, uncertainty inspired by President Donald Trump has boosted the yellow metal — but that’s set to fade.

Spot gold has certainly rallied of late, climbing from levels under $1,212 an ounce in July to as high as $1,342.90 this week, touching its highest levels in around a year, according to Reuters data.

Gold, which traditionally acts as a safe-haven play when investors turn nervous, was at $1,338.50 an ounce at 9:41 a.m. HK/SIN on Wednesday.

Some of the metal’s gains have coincided with increased tensions on the Korean Peninsula, including when North Korea claimed a successful hydrogen bomb test on Sunday.

Goldman, however, didn’t think the gold rally was unrelated to the North Korean tensions, just that it only explained around $15 of the more than $100 rally.

“We find that the events in Washington over the past two months play a far larger role in the recent gold rally followed by a weaker dollar,” it said, adding that’s the reason the yellow metal likely wouldn’t hold its gains.

Barring a “substantial” escalation of North Korean tensions, Goldman said it was sticking with an end-of-year gold forecast of $1,250 an ounce.

It said Trump’s approval rating was a good proxy for Washington risks, correlating with both interest rates and gold prices. Together with a weaker dollar, that accounted for around 85 percent of gold’s recent rally, it said.

Still, it added, that risk was set to fade.

“In coming months, the unfortunate aftermath of hurricane Harvey suggests that Washington is going to have to overcome their differences, pass spending bills, try harder to avoid a government shutdown and pursue infrastructure projects sooner than later,” it said.

Goldman has lowered its estimate of the probability of a government shutdown to around 15 percent from 35 percent.

It added that gold can offer a good hedge against global risks when the event leads to a debasement of the dollar, but on average, it doesn’t respond too much to geopolitics after controlling for macro variables.

That meant the situation on the Korean Peninsula wasn’t likely to propel gold much, Goldman said.

North Korean tensions were “very serious,” but the market wasn’t adding much of a risk premium, suggesting it still viewed military escalation and disarmament as tail risks, the bank added.

“North Korea may not really have an incentive to launch an attack as this would likely lead to retaliation. But it is also unlikely to give up nuclear capabilities as it likely sees them as a guarantee of its safety,” it said. “As a result, from game theory perspective, it is a stable equilibrium.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow