Dollar holds steady as US yields hit 19-month low - CNBC

Dollar holds steady as US yields hit 19-month low - CNBC
Cartel currency trading claim in Australia tipped to exceed $69m - Aljazeera.com
Asia markets slip, currencies decline as US adds 9 countries to watch list - CNBC
Treasury Dept. Declines to Label China a Currency Manipulator - The New York Times

Posted: 28 May 2019 03:27 AM PDT

An employee of a bank counts US dollar notes.

Kham | Reuters

The dollar stayed firm against a basket of currencies on Tuesday, supported by trade and political worries and a strong rise in U.S. consumer confidence, even as longer-dated U.S. bond yields dropped to 19-month lows.

The euro rebounded from session lows as investors were relieve that pro-Europe parties won a majority of European parliamentary seats. Currency trading remained light even as U.S. and U.K.-based traders returned from holidays.

"This is the first full day for the markets after holidays in both U.K. and U.S. yesterday and the economic calendar is nearly barren today adding to the lackluster tone in the trade," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.

At 2:36 p.m. ET, an index that tracks the greenback against the euro, yen, sterling and three other currencies was 0.3% higher at 97.93.

The dollar strengthened after the Conference Board said its gauge on U.S. consumer confidence rose to 134.1 in May, the strongest since November. Analysts had forecast a reading of 130.00.

Earlier, benchmark 10-year Treasury yields fell to 2.273% after U.S. President Donald Trump signaled the United States and China were far from a trade deal. It was the lowest 10-year yield since October 2017.

Investors have been loading up on safe-haven U.S. government debt due to trade worries and political uncertainty. Italian Deputy Prime Minister Matteo Salvini, whose far-right League triumphed in European elections on Sunday, said the European Commission could fine Italy 3 billion euros for breaking EU debt and deficit rules, a comment that weighed on the single currency.

The euro has recovered, holding steady at $1.117. The euro hit a near 23-month low of $1.11055 last week.

European leaders now meet in Brussels to begin the process of filling a number of top EU posts, from the head of the European Commission to the European Central Bank.

The yen was little changed at 109.47 per dollar as U.S. President Donald Trump said on Monday he expected Japan and the United States to announce a trade agreement "probably in August."

Cartel currency trading claim in Australia tipped to exceed $69m - Aljazeera.com

Posted: 27 May 2019 01:53 AM PDT

A class action lawsuit has been filed in the federal court of Australia against five major investment banks for allegedly rigging currency exchange rates.

The five international banks - UBS (based in Switzerland), JPMorgan and Citibank (based in the United States), and Barclays and the Royal Bank of Scotland (in the United Kingdom) - have all been accused of engaging in illegal cartel conduct between January 2008 and October 2013.

The Australian case will partly rely on findings from international investigations and admissions made during those inquiries. Earlier this month, JPMorgan, Barclays, RBS and Citibank were among banks fined $1.2bn by the European Union for rigging the foreign-exchange market.

Kimi Nishimura, a principal lawyer at the law firm Maurice Blackburn, told Al Jazeera that she expected the Australian case to exceed 100 million Australian dollars ($69m) - a cost that comes on the heels of a $2.3bn payment in the US and $100m class action payment in Canada.

"It's very early stages, but we do anticipate it will be very large," Nishimura said.

UBS, Citibank and JPMorgan declined to comment on the case. Spokespeople from RBS and Barclays did not respond to phone requests for comment during a UK holiday.

The Australian foreign exchange market is the eighth largest in the world.

The group claim's lead plaintiff is a Sydney-based company that imports dental and medical equipment under the trading name Wisbey Dental.

"Australian businesses shouldn't pay more because the banks got together to work out how to make more profits for themselves. It's hard to take individual action against this kind of price rigging because the price increases are small, but when repeated over thousands of transactions they make a real difference to currency prices," managing director Greg Wisbey said in a statement.

"I rely on forex trading because my business needs to trade with international companies, but to have been subjected to an uneven playing field and paying an inflated price for no good reason, well that's just unfair and hurts Australian businesses like mine."

In a statement, Maurice Blackburn Lawyers claimed there was systematic manipulation to "boost profits at the expense of Australian businesses and investors".

'The cartel'

The Australian claim mentions transcripts of internet chat rooms filed as part of the US class action suit. The chat rooms were colourfully named 'The Cartel', 'The Mafia', 'One Team', 'One Dream', 'The Players' and 'The Three Way Banana Split', among other monikers.

Allegedly, foreign-exchange traders used the chat rooms to disclose confidential customer information and make agreements with traders from other institutions to coordinate foreign-exchange trading "in a manner designed to influence the WMR Fix, ECB Fix, and other FX benchmark fixes and market prices generally".

In addition, the traders are accused of concealing their conversations through the use of codewords and controlling and restricting entry into the chatrooms.

Another blow to confidence

The case comes after a damaging report - issued by Australia's Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry - recommended sweeping reforms to the Australian sector.

Over months of public hearings, the Royal Commission heard of people being charged fees for services that were never received. In some cases, customers were charged fees even after they had died.

In its final recommendations in February, the Royal Commission referred 24 companies to regulators for possible criminal or civil action, including some of the country's biggest financial institutions.

It also recommended greater oversight of regulators with the creation of an independently chaired body to hold them to account.

Nishimura said Australian investors and businesses had been cheated.

"I think this is just another example of people finding out post-fact that the institutions they've relied on, they've been ripped off by," she said.

Asia markets slip, currencies decline as US adds 9 countries to watch list - CNBC

Posted: 28 May 2019 04:35 PM PDT

Stocks in Asia mostly declined in Wednesday afternoon trade following overnight losses on Wall Street that saw the Dow Jones Industrial Average fall more than 200 points.

In Japan, the Nikkei 225 dropped 1.21% in afternoon trade to close at 21,003.37, and the Topix declined 0.94% to 1,536.41. Over in South Korea, the Kospi was down 1.25% to close at 2,023.32, with shares of Samsung Electronics paring some losses to fall 1.76%.

The ASX 200 in Australia shed 0.69% to 6,440.00 as almost all the sectors traded lower.

Mainland Chinese stocks mostly declined by the close, with the Shanghai composite slipping 0.16% to close at 2,914.70, and the Shenzhen component falling 0.28% to 9,010.36. The Shenzhen composite was flat at 1,541.66.

Hong Kong's Hang Seng index slipped 0.48%, with Hong Kong-listed shares of HSBC and China Construction Bank seeing declines.

Asia-Pacific Market Indexes Chart

Overnight on Wall Street, the Dow had fallen 237.92 points to close at 25,347.77. The S&P 500 also slipped 0.8% to finish its trading day at 2,802.39 while the Nasdaq Composite shed 0.4% to close at 7,607.35.

The yield on the benchmark 10-year Treasury note also dropped to around 2.26%, its lowest level in 19 months. Yields move inversely to prices.

Investors remained cautious, awaiting new developments between Beijing and Washington amid the ongoing trade tensions.

U.S. President Donald Trump said Monday the U.S. was "not ready" to strike a deal with China, before adding he expected one in the future. He also said tariffs on Chinese imports could go up "substantially."

"I think at this stage, the U.S. feels very comfortable because they don't see growth really coming off," Adrian Zuercher, head of asset allocation Asia-Pacific at UBS Chief Investment Office Wealth Management, told CNBC's "Squawk Box" on Wednesday. "We think actually growth is actually slowing and underneath there's some cracks, the same on the China side."

For its part, China appeared to have made a veiled threat concerning rare earth minerals, a crucial component to the U.S. technology industry.

Chinese President Xi Jinping recently visited rare earth mining and processing facilities, adding to speculation that Beijing could make the minerals more expensive or unavailable if the trade war continues to expand.

Shares of rare earth companies soared in Wednesday afternoon trade. In China, shares of JL Mag Rare-Earth skyrocketed around 10% while Innuovo Technology jumped 9.95%. Shares of Lynas in Australia — one of the few rare earth miners outside of China — surged more than 15%.

In currency news, the Trump administration refrained from labeling China as a currency manipulator, but kept the country on a monitoring list along with eight other countries such as Germany, Italy, Japan, South Korea, Malaysia and Singapore.

Following the announcement, many of those currencies continued weakening against the dollar throughout the afternoon. The onshore Chinese yuan last traded at 6.9143, while its offshore counterpart was at 6.9343. The Korean won, which has weakened significantly in 2019 amid economic concerns both abroad and domestically, was at 1,195.35.

The Malaysian ringgit slipped to 4.1970 against the greenback. For its part, the Malaysian central bank said the currency's exchange rate is market-determined, Reuters reported.

The euro and the Japanese yen were outliers. The euro was marginally higher at $1.1152, while the yen last changed hands at 109.20 against the dollar after seeing levels above 109.5 in the previous session.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.968 after bouncing from levels below 97.8 yesterday.

Elsewhere, the Australian dollar hovered around $0.6917, just slightly weakened since Tuesday.

Oil prices further deepened losses in the afternoon of Asian trading hours, as the international benchmark Brent crude futures contract fell 1.04% to $69.38 per barrel. U.S. crude futures also declined 1.30% to $58.37 per barrel.

— CNBC's Fred Imbert contributed to this report.

Treasury Dept. Declines to Label China a Currency Manipulator - The New York Times

Posted: 28 May 2019 03:43 PM PDT

WASHINGTON — The Trump administration on Tuesday declined to label China a currency manipulator despite President Trump's repeated complaint that Beijing has weakened the renminbi as a way to take advantage of the United States on trade.

The decision to not formally accuse China of manipulating its currency could avoid further escalating tensions between Washington and Beijing, which have grown heated after a breakdown in trade negotiations this month.

China remains on the Treasury Department's watch list, along with the "currency practices" of Germany, Ireland, Italy, Japan, Malaysia, Singapore, South Korea and Vietnam. And the report continued to raise concerns about China's activity in managing its currency.

The Treasury Department said it had "significant concerns" about China's currency practices and criticized the Chinese government for lacking transparency in how it manages foreign exchange. It noted that the renminbi had fallen by 8 percent in the last year and that China's bilateral trade surplus in goods with the United States grew to $419 billion as of the end of 2018.

"The outsized magnitude of the bilateral deficit is a result of China's persistent and widespread use of nontariff barriers, nonmarket mechanisms, state subsidies and other discriminatory measures that are increasingly distorting China's trading and investment relationships," the report said. "These practices tend to limit Chinese demand and market access for imported goods and services, leading to a wider trade surplus."

The report comes as the United States and China are locked in a protracted trade war. The United States raised tariff rates on $200 billion worth of Chinese imports and is considering imposing tariffs on another $300 billion. China has vowed to hit back with tariffs or other punitive measures of its own.

The biannual currency exchange report — the fifth of Mr. Trump's presidency — also updated its criteria for designating countries as currency manipulators, allowing the United States to monitor the foreign exchange practices of a broader set of economies.

The Treasury Department determines whether a country should be labeled a currency manipulator based on bilateral trade deficits and signs that a country is depressing its currency. The United States has not officially designated another country a manipulator since it assigned that label to China in 1994. Doing so is supposed to prompt negotiations to resolve the problem, but in practice the punitive measures that the designation allows are minor.

The changes put in place in the latest report broadened the criteria necessary to generate the "manipulator" label and gave the Treasury Department more authority to monitor a wider range of countries. Any nation whose trade in goods with the United States exceeds $40 billion will now be monitored.

In addition, if a country actively intervenes in foreign exchange markets for six out of 12 months, rather than the current eight-month threshold, it will be closer to being flagged for manipulation.

A Treasury Department official said that even with the new thresholds, no country in recent years would have been designated. China meets only one of the thresholds, but the department used its discretion to add it to the watch list because of the size of its trade surplus.

Last week, the Commerce Department proposed a rule change that would allow the United States to expand its ability to penalize countries that manipulate their currencies.

It proposed expanding a type of remedy that is typically used to levy tariffs on products that are determined to be unfairly subsidized by foreign governments. Under the proposed rule, so-called countervailing duties could be imposed when foreign governments "subsidize" their products by weakening their currencies relative to the United States dollar, the department said.

A senior Treasury Department official said the Commerce Department proposal was a separate matter that would not affect how the Treasury executed its designations.

Although the Trump administration has complained about China's currency practices, the Treasury secretary, Steven Mnuchin, said during a congressional hearing last week that the weakening of China's currency would help minimize the impact of Mr. Trump's tariffs on Chinese goods.

As a presidential candidate, Mr. Trump made labeling China a currency manipulator a central plank of his economic policy, promising in his "contract" with American voters that he would direct the secretary of the Treasury to label China a currency manipulator in the first 100 days of his presidency.

While the Treasury has not yet done so, the administration has used other avenues to push China to refrain from manipulating its currency, primarily through trade negotiations with Beijing.

During a meeting between the American and Chinese delegations at the White House in February, Mr. Mnuchin said that a currency agreement between the two countries had been reached.

"We actually concluded and reached an agreement — one of the strongest agreements ever on currency," Mr. Mnuchin said.

At that meeting, Mr. Trump said currency manipulation was "a very important subject which a lot people didn't even think in terms of."

American officials described the agreement as a pledge by China not to devalue its currency and to improve transparency around its foreign exchange practices.

In March, the governor of China's central bank, Yi Gang, described the agreement as an understanding that both countries would avoid devaluing their currencies to achieve a competitive advantage for their exports.

He said that both countries would also continue to comply with previous currency agreements among the Group of 20 economies, and maintain close communication about currency markets and disclose detailed information in accordance with International Monetary Fund standards.

Democrats have been pushing Mr. Trump not to settle for a weak deal with China and they seized on the report on Tuesday as sign that the president was being too soft.

"This is the fifth time in a row that the Trump administration has refused to label China a currency manipulator," said Senator Chuck Schumer, Democrat of New York and the minority leader. "I hope this does not portend the administration backing off on Huawei or trade. It would be a tragedy for American workers if they did."

With trade negotiations between the two countries at an impasse, however, it is unclear when or whether the two sides will come to a formal agreement that includes a currency provision. Mr. Trump has accused China of backing out of a trade pact with the United States and said on Monday during a trip to Japan that he was "not ready to make a deal."

While no further discussions between the two countries are scheduled, Mr. Trump said he believed China would eventually agree to America's trade terms.

"I think, sometime in the future, China and the United States will absolutely have a great trade deal," he said.

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