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Andora Andrei

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Greenback clings to 13-1/2-year peak

On Wednesday, the evergreen buck hovered close to a recent 13 1/2-year high, taking a breather after soaring on expectations that American interest rates will ascend further than earlier anticipated on prospects of increased fiscal stimulus under a Trump administration.
Against a basket of six key currencies, the greenback last traded at 101.05. It leapt from Tuesday's minimum of 100.65 and also not too far from Friday's peak high of 101.48, that turned to be the highest value for the dollar index since April 2003.
Data on Tuesday disclosed that in October, American home resales added to their highest level in more than 9-1/2 years, thus helping to back the greenback.
Still, one factor, which has blunted the greenback’s momentum this week is a pull-back in benchmark American 10-year Treasury yields from recent peaks.
The greenback’s ascend to the near six-month peak against the Japanese yen amounted to a revenue of 10% from its November 9 drop near 101 yen.
The euro stood still at $1.0623, having reached a near one-year minimum of $1.0569 last week.
 

Andora Andrei

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Crude prices drop on renewed doubts on OPEC-led output cut

Crude prices drop on renewed doubts on OPEC-led output cut

On Wednesday, crude prices sagged during Asia trade, thus reversing earlier revenues, as doubts re-emerged over whether OPEC would agree to an oil output cut at a ministerial gathering next week.
A strong greenback, trading close to the 13 1/2-year peak reached the previous week, also applied pressure on prices amid thin trading ahead of the American Thanksgiving holiday on Thursday.
International Brent crude futures sank 8%, hitting $49.04 a barrel, having climbed to $49.42 earlier in Wednesday's trading session on optimism OPEC would agree to a production cut.
Reuters commodities analyst Wang Tao told that Brent could ascend to $49.85 per barrel. The given level is marked by some technical resistance factors.
Meanwhile, US West Texas Intermediate crude futures sagged 8% to $47.95 a barrel, having risen to $48.30 earlier on Wednesday.
With crude output among OPEC members running at approximately 34 million barrels a day, the energy market is suddenly looking at considerable cuts to get back to the level of about 32 million to 33 million barrels a day when output curbs were first mooted earlier this year.
 

Andora Andrei

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Asian Session Forex Recap – Nov. 23, 2016

Asian Session Forex Recap – Nov. 23, 2016

Japan on Labor Thanksgiving Day holiday
China’s MNI business sentiment up from 52.2 to 53.1 in November
AU construction work done (q/q) fell by 4.9% vs. 1.5% decline expected, 3.1% slip in Q2 2016

With our Japanese friends out on a market holiday, Asian session forex traders mostly extended economic themes from the previous sessions. Here’s what’s up!
Major Events:

Overall risk appetite – Since there weren’t a lot of economic reports scheduled during the Asian session, forex traders simply piggybacked from Wall Street’s consecutive gains. If you recall, market players have been buying U.S. assets like crazy since Trump won the elections.
It is believed that his infrastructure and tax cut plans can only be good for Uncle Sam, which is probably why the U.S. indices have been clocking in back-to-back-to-back record highs and U.S. Treasury yields have been dominating most of its counterparts.
Nikkei is out on a market holiday but Australia’s A SX 200 is up by 1.31%, Hang Seng also popped up by 0.19%, and the Shanghai index only saw a 0.05% slip throughout the day.
PBoC back to devaluing the yuan – After breaking its 12-day streak yesterday, the People’s Bank of China (PBoC) is back to devaluing the yuan against the Greenback. China’s central bank set its USD/CNY mid-point fix at 6.8904 today, higher than yesterday’s 6.8779 figure. The move will likely inspire speculations that China will soon intervene in the markets to prevent even more capital flight over the next couple of days.
AUD is king of pips – The Aussie was king of pips today even though Australia printed a weaker-than-expected quarterly construction report. One possible explanation is the continued increase in iron ore prices (it was up by 8% in China today) while the overall risk-friendly vibe didn’t hurt either.
Major Market Movers:
AUD – The Aussie enjoyed a one-two punch of higher iron ore prices and overall risk appetite.
AUD/USD is up by 23 pips (+0.31%) to .7420, EUR/AUD fell by 41 pips (-0.29%) to 1.4321, AUD/JPY shot up by 16 pips (+0.20%) to 82.40, and AUD/CAD popped up by 29 pips (+0.29%) to .9972.
NZD – The New Zealand dollar wasn’t far behind the Aussie, as overall risk appetite also boosted the high-yielding currency.
NZD/JPY hit a session high of 78.59 before settling back down to 78.45, EUR/NZD slipped by 13 pips (-0.09%) to 1.5044, and GBP/NZD inched 11 pips lower (-0.06%) to 1.7579.
 

Andora Andrei

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European stocks rise

European stocks rise

On Wednesday, European stocks rose, as markets were mainly focusing on a string of manufacturing as well as service sector data from the euro zone due throughout the morning.
During European morning trade, the EURO STOXX 50 added 0.19%, French CAC 40 gained 0.18% and German DAX 30 earned 0.23%.
The preliminary reading of Markit’s French services purchasing managers’ index demonstrated 52.6 this month, rising from 51.4 in October. It turned to be the highest outcome in two months and it was better than economists’ predictions for an uptick to 51.9.
The French manufacturing PMI edged down to a two-month low of 51.5, compared to hopes for 51.4 and down from 51.8 in October.
Financial stocks were mostly lower, as French lenders BNP Paribas and also Societe Generale dropped 0.79% and 0.96% respectively, though Germany’s Deutsche Bank as well as Commerzbank lost 0.47% and 1.75%.
Among peripheral lenders, Italian Intesa Sanpaolo and Unicredit lost 1.65% and 2.53% respectively, Spanish bank Banco Santander declined 0.39%.

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Andora Andrei

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ECB looking at lending bonds to stave off a market freeze

ECB looking at lending bonds to stave off a market freeze

On Wednesday, European stocks rose, as markets were mainly focusing on a string of manufacturing as well as service sector data from the euro zone due throughout the morning.
During European morning trade, the EURO STOXX 50 added 0.19%, French CAC 40 gained 0.18% and German DAX 30 earned 0.23%.
The preliminary reading of Markit’s French services purchasing managers’ index demonstrated 52.6 this month, rising from 51.4 in October. It turned to be the highest outcome in two months and it was better than economists’ predictions for an uptick to 51.9.
The French manufacturing PMI edged down to a two-month low of 51.5, compared to hopes for 51.4 and down from 51.8 in October.
Financial stocks were mostly lower, as French lenders BNP Paribas and also Societe Generale dropped 0.79% and 0.96% respectively, though Germany’s Deutsche Bank as well as Commerzbank lost 0.47% and 1.75%.
Among peripheral lenders, Italian Intesa Sanpaolo and Unicredit lost 1.65% and 2.53% respectively, Spanish bank Banco Santander declined 0.39%.
 

Andora Andrei

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Asia stocks slip on specter of higher U.S. rates, dollar is 'a freight train'

Asia stocks slip on specter of higher U.S. rates, dollar is 'a freight train'

Most Asian stock markets fell on Thursday as upbeat economic data strengthened the prospect for higher U.S. interest rates, while the dollar's bull run continued with U.S. bond yields propelled to multi-year highs.
Japanese stocks swam against the tide and rose to a near 11-month high as the yen weakened.
Spreadbetters saw a mixed opening for European stocks, forecasting a slightly lower open for Britain's FTSE .FTSE, a marginally higher open for Germany's DAX .GDAXI and a flat start for France's CAC .FCHI.
The dollar index against major currencies rose 0.1 percent to 101.78 .DXY, not far from a 13-1/2-year high of 101.91 touched overnight.
The greenback drew support from a further rise in U.S. Treasury yields.
The two-year yield US2YT=RR hit its highest levels since April 2010 on Wednesday on further bets the Trump administration will increase debt-funded spending and spur growth and inflation.
Such a view - which has also lifted expectations for more U.S. rate hikes next year - was reinforced on Wednesday after new orders of U.S. manufactured capital goods rebounded in October. Consumer sentiment also jumped in November.
"It (the U.S. dollar) is a freight train that seems over limit at the moment, but it may have a long way to go before what looks and feels like a structural adjustment settles down," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.
The dollar was up 0.1 percent at 112.650 yen JPY= after touching an eight-month high of 112.980 overnight. It has gained roughly seven big figures since Trump's victory earlier this month.
The euro was down 0.1 percent at $1.0543 EUR= after touching $1.0526 overnight, its lowest since December 2015. The common currency has dropped nearly 4 percent in November.
The firm dollar kept most emerging market currencies on the ropes, with China's yuan nearing the 7 per dollar level for the first time since May 2008.
State banks or foreign exchange authorities in China, India, Indonesia and the Philippines were all suspected of intervening to slow the slide in their currencies on Thursday.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS pared Wednesday's gains and lost 0.4 percent as focus returned to the United States. Facing the prospect of higher U.S. interest rates diverting money from emerging markets, it has lost 3.5 percent this month.
Hong Kong's Hang Seng .HSI shed 0.2 percent while higher metals prices lifted China's blue-chip CSI300 index .CSI300 0.4 percent. South Korea's Kospi .KS11 fell 0.7 percent amid receding foreign investor appetite.
"The amount of foreign stock-dumping is likely to increase during the session due to the strong dollar and the absence of any momentum for the South Korean market to rebound," said Ha Keon-hyeong, a foreign exchange analyst at Shinhan Investment Corp.
Japan's Nikkei .N225 was up 1.1 percent, touching its highest level since early January.
Equities in emerging and developed economies have headed in different directions since Trump's win.

Higher U.S. yields have pulled those of other developed economies from rock-bottom levels, with investor money now expected to flow back from emerging markets which had offered relatively higher rates.
The Dow .DJI marked a record closing high overnight. Germany's DAX has gained nearly 2 percent since the victory by the Republican candidate. On the other hand, MSCI's emerging markets index .MSCIEF has fallen 5.8 percent this month.
Japan's 30-year bond yield JP30YTN=JBTC rose to an eight-month peak of 0.650 percent. The German 10-year bund DE10YT=TWEB yielded around 2.6 percent on Wednesday, having climbed from a record low of minus 0.2 percent struck in July.
Oil prices were little changed amid uncertainty ahead of a planned OPEC-led crude production cut at a meeting on Nov. 30.
U.S. crude was up 3 cents at $47.99 a barrel CLc1 and Brent LCOc1 was flat at $48.95.
London zinc CMZN3 hit an 8-year high and copper jumped for a fourth day in a row as funds poured into metals on expectations of growing strength in the U.S. manufacturing sector.
 

Andora Andrei

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Crude prices are static on uncertainty over planned output cut

Crude prices are static on uncertainty over planned output cut

On Thursday, crude prices were little changed, as uncertainty ahead of a planned OPEC-led crude output cut as well as thin liquidity because the American Thanksgiving holiday kept market participants from making big new bets on markets.
International Brent crude futures were trading at $48.90, tumbling 5 cents from their last close. American West Texas Intermediate crude futures were at $47.94 per barrel, descending 2 cents from their last settlement.
Investors told that market activity was low due to the American holiday, and also there was a reluctance to take on big price directional bets because of uncertainty as for a planned crude production cut, led by the Organization of the Petroleum Exporting Countries.
OPEC is due to have a meeting on November 30 to coordinate a cut together with non-OPEC member Russia, though there’s also disagreement within the producer cartel as to which member states needs to cut and by how much.

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Andora Andrei

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European stocks mostly higher, sentiment remains positive; DAX up 0.34%

European stocks mostly higher, sentiment remains positive; DAX up 0.34%

European stocks were mostly higher on Thursday, as market sentiment remained broadly supported since Donald Trump’s electoral win and as investors eyed the release of German business climate data later in the day.

During European morning trade, the EURO STOXX 50 rose 0.20%, France’s CAC 40added 0.26%, while Germany’s DAX 30 gained 0.34%.

Market sentiment has remained supported amid expectations that President-elect Donald Trump’s plans to ramp up fiscal spending and cut taxes will spur economic growth and inflation.

Financial stocks were broadly higher, as French lenders BNP Paribas (PA:BNPP) and Societe Generale (PA:SOGN) rose 0.25% and 0.46%, although Germany’s Deutsche Bank(DE:DBKGn) and Commerzbank (DE:CBKG) added 0.08% and 0.59%.

Among peripheral lenders, Italy’s Intesa Sanpaolo (MI:ISP) and Unicredit (MI:CRDI) gained 0.47% and 1.10% respectively, while Spanish bank Banco Santander (MC:SAN) inched up 0.05%.

ThyssenKrupp (DE:TKAG) added to gains, with shares rising 0.32% even as the German company reported a smaller-than-expected increase in operating profit and announced more cost-cutting.

Volkswagen (DE:VOWG_p) advanced 0.96% after CEO Herbert Diess said the company will no longer offer diesel vehicles in the U.S.

In London, FTSE 100 edged down 0.14%, weighed by Vodafone (LON:VOD), whose shares tumbled 1.64% after the telecom operator launched on Thursday a data offer for its existing customers in Mumbai to upgrade to a 4G SIM with 2 GB free data.

Financial stocks were also mostly lower, as Lloyds Banking (LON:LLOY) slipped 0.15% and the Royal Bank of Scotland (LON:RBS) fell 0.22%, while HSBC Holdings (LON:HSBA) dropped 0.53%. Barclays (LON:BARC) overperformed however, with shares up 0.12%.

Meanwhile, mining stocks were mixed on the commodity-heavy index. Shares in Rio Tinto(LON:RIO) declined 0.66% and Randgold Resources (LON:RRS) plummeted 1.94%, while Glencore (LON:GLEN) gained 0.31% and Antofagasta (LON:ANTO) jumped 1.43%.

Earlier Thursday, Rio Tinto announced plans to raise its cash flow by $5 billion over the next five years.

In the U.S., equity markets pointed to a steady open. The Dow Jones Industrial Average futures pointed to a 0.03% uptick, S&P 500 futures showed a 0.01% gain, while the Nasdaq 100 futures indicated a 0.03% dip.

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Andora Andrei

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Oil companies shoulder pain of downturn with lower output

Oil companies shoulder pain of downturn with lower output

The world’s listed oil companies have slashed oil output by 2.4 percent so far this year during one of the industry’s worst downturns as OPEC battles to agree on its first production cut since 2008.

The aggregated production of 109 listed companies that produce more than a third of the world’s oil fell in the third quarter of 2016 by 838,000 barrels per day from a year earlier to 33.88 million bpd, data provided by Morgan Stanley (NYSE:MS) showed.

By comparison, the Organization of the Petroleum Exporting Countries produced 33.64 million bpd in October. OPEC has struggled to agree on a joint production freeze or cut to support oil prices before its Nov. 30 meeting in Vienna.

In the second quarter of 2016, the companies reduced production by nearly 930,000 bpd, according to Morgan Stanley.

The firms include national oil champions of China, Russia and Brazil, international producers such as Exxon Mobil (N:XOM) and Royal Dutch Shell (L:RDSa), as well as U.S. shale oil producers like EOG Resources (N:EOG) and Occidental Petroleum (N:OXY).

The drop in oil companies’ output is particularly compelling given the increase in 2015, when third-quarter production rose by some 1.9 million bpd.

“Clearly, we have seen a large swing in the year-on-year trend in production, from strong growth as recent as a year ago, now to steep decline. This is the outcome of the strong cutbacks in investment,” Morgan Stanley equity analyst Martijn Rats said.

Capital expenditure for the companies combined more than halved from $136 billion in the third quarter of 2014 to $58 billion in the same period this year, according to Rats.

Oil executives and the International Energy Agency have warned that a sharp drop in global investment in oil and gas would result in a supply shortage by the end of the decade.

Large oilfields, such as deepwater developments off the coasts of the United States, Brazil, Africa and Southeast Asia, typically take three to five years and billions in investment to develop.

Cost reductions and increased efficiencies have only partly offset the drop in production as a result of the lower investment. Technological advancements have also helped boost onshore U.S shale production.

“These declines should temporarily soften in 2017 as new fields are coming on-stream in Canada, Brazil, the former Soviet Union and U.S. tight oil probably stabilizes,” Rats said.

“Still, unless investment rebounds relatively soon, this steep downward trend is likely to resume in 2018 and beyond.”

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Andora Andrei

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Russia to OPEC: Oil Freeze Is All You Get

Russia to OPEC: Oil Freeze Is All You Get

Facing pressure from OPEC to make a significant output reduction, Russia reiterated its readiness to freeze oil production at current levels, arguing that the offer amounted to a cut compared with next year’s plans.
A production cap would mean Russia pumping 200,000 to 300,000 barrels a day less than planned in 2017, Energy Minister Alexander Novak told reporters in Moscow on Thursday. That means a freeze would be “quite a difficult and harsh situation for us as our plans envisioned an output growth next year,” he said.
OPEC, which is seeking to finalize its own supply cuts of as much as 1.1 million barrels a day next week, has asked non-members to cooperate by cutting daily production by 880,000 barrels for six months starting January, Azerbaijan’s Energy Minister Natig Aliyev said in a newspaper article.
The Organization of Petroleum Exporting Countries reached a preliminary agreement in September to reduce collective output to 32.5 million to 33 million barrels a day, compared with the group’s estimate of 33.6 million in October. Talks on individual production quotas continued this week with the aim of securing a final pact by the ministerial meeting in Vienna on Nov. 30. It will meet with non-OPEC producers to discuss cooperation on Nov. 28.

While Russia, the largest crude supplier outside OPEC, has reiterated its preference for a freeze over a cut for several months, members of the group including Saudi Arabia had been expecting the nation would eventually join a cut, according to people briefed on the matter. If Russia and other non-OPEC producers balk at the idea of cutting output, the exporters’ group could reconsider pushing ahead, the people said.
Russia’s position “has remained unchanged and consistent,” Novak said Thursday. “As our president said earlier, we are ready to freeze production at the current levels.” Russian President Vladimir Putin on Monday reaffirmed Russia is willing to freeze, adding he sees no obstacles to an OPEC agreement this month after the group made major progress in overcoming differences.

Russia drafts its 2017 budget using an oil-production estimate at about 11 million barrels a day compared to an average 10.9 million expected this year. Output increased to a record 11.205 million barrels a day in November, near a post-Soviet record. The country has raised its production forecasts several times a year since 2015.

A delegation from Moscow is scheduled to meet OPEC experts in Vienna on Monday. Azerbaijan and Mexico are also set to participate, according to people familiar with the arrangements. Azerbaijan’s Aliyev co-chaired similar talks last month.

"While there’s actually nothing new from Russia today, Moscow is changing its rhetoric to show its commitment to a deal,” said Alexander Kornilov, an analyst at Aton LLC in Moscow. “The new wording shows Russia is trying to convince OPEC partners.”
A delegation from Moscow is scheduled to meet OPEC experts in Vienna on Monday. Azerbaijan and Mexico are also set to participate, according to people familiar with the arrangements. Azerbaijan’s Aliyev co-chaired similar talks last month.

"While there’s actually nothing new from Russia today, Moscow is changing its rhetoric to show its commitment to a deal,” said Alexander Kornilov, an analyst at Aton LLC in Moscow. “The new wording shows Russia is trying to convince OPEC partners.”

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Andora Andrei

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Eur/usd.

Eur/usd.

The USD took another leg up following good data, pushing EUR/USD towards levels last seen last year. But can it go even lower? The team at SocGen discusses:

The bullish US macroeconomic ‘reset’ following the election success of Donald Trump has governed financial markets and sparked the bond market rout and USD buying but it is the threat of political tail risk and splintering of Europe that could decide if EUR/USD tests parity for the first time since 2002.
1. Same place, different time The election victory of Trump was the catalyst for EUR/USD to retreat below 1.06 and close in on levels only observed three times since early 2015. EUR/USD traded at a 1.0458 low shortly after the ECB launched the first purchases of government bonds in March 2015. This marked a bottom that would be followed by a rise to 1.1467 in May. The 1.05 level was revisited in the lead-up to the ECB meeting nearly a year ago on 3 December when President Draghi had signalled strong policy action. In the event, the ECB disappointed and EUR/USD shot up from a 1.0524 low to a high of 1.1376 in February.
2. Parallels with 2013 Italian election? The last leg of EUR/USD to below 1.06 coincided with the widening of 10y Italian BTP/Bund yields to just over 180bp on Friday, the highest level since May 2014. This coincided with a rise in the co-movement (Rs) between the two variables to 0.44. This compares with an Rsq of just 0.15 for EUR/USD and the 10y US/EUR IRS spread. Closer analysis shows that 10y Italian yields became unstuck and started moving away from 1.40% towards 2.10% two weeks before the US election, but this was not picked up by EUR/USD as it rallied from 1.0880 to 1.1140 before the US election on 7 November. However, this has changed over the past week.

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3. And then there is the US The timing and scale of the USD upswing caught virtually everyone by surprise. A clear out of dollar assets was anticipated on a Trump victory, but the U-turn we got instead was not pencilled in until later once the administration had laid out the specifics of its pro-growth and low-tax election agenda.

We expect EUR/USD to touch parity in 1Q 2017 before rising back to 1.09 by the end of 2017. The forecast is based on two rate increases by the Fed next year, but this comes with the risk of more. Before the election of Trump we had anticipated a peak for the Fed funds rate this cycle of 1.25%-1.50%, but we now look for 1.75%-2.0%. For the ECB, our economists believe tapering will start in March with the objective of ending asset purchases in early 2018, market conditions permitting.

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Andora Andrei

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Asia FX news: Yen lower again in Asia today

Asia FX news: Yen lower again in Asia today

The yen weakened again today here in Asia, with USD/JPY pushing higher through its overnight high and above 113.80 at one stage. Japanese inflation data came in, on balance, slightly higher than was expected and slightly ahead of the previous month, but it is still very low and today's data is unlikely to take any pressure off the Bank of Japan to maintain accommodative policy. (Oh, and stay tuned for more inflation data from Japan, the Bank of Japan's own measure will be announced at 0500GMT.)

As the session progressed, though, USD/JPY gave back much of its gain.

Gold, too, was heavy, it dropped under USD1180 and has since had only a small retracement.

EUR/USD gained a few points, as did AUD and the NZD against the USD. CHF, ditto.

Cable has been a bit of a laggard, though with such small ranges I am not drawing any firm conclusions as to its relative strength (or lack of).

USD/CNY was again set higher at the People's Bank of China central rate fixing.

Regional equities:

Nikkei +0.11%
Shanghai -0.13%
HK +0.36%
ASX +0.40%

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Andora Andrei

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European shares edge up in quiet day led by Vestas, Domino's Pizza

European shares edge up in quiet day led by Vestas, Domino's Pizza

* STOXX 600 up 0.3 percent

* Vestas leads gainers after target upgrade

* Domino's surges on expansion plans

* Ex-divs weigh on UK-listed firms

* Monte Paschi up ahead of cash call vote

By Alistair Smout and Danilo Masoni

LONDON/MILAN, Nov 24 European shares edged up on Thursday, remaining within a recent range, as a boost from healthcare stocks was partly offset by weak telecoms and utilities.

The STOXX Europe 600 index ended up 0.3 percent. The session was quiet with Wall Street shut for the Thanksgiving holiday.

Vestas rose 5.2 percent after Credit Suisse lifted its price target on the world's biggest wind power company. The stock had fallen more than 20 percent after climate-change-sceptic Donald Trump won the race to the White House, raising uncertainty on U.S. energy and renewables policies.

Credit Suisse, however, kept its underperform rating on the stock, saying investors should not underestimate its gearing to the U.S. market, which is the company's largest.

"Over time, we expect any relevant changes made by the U.S. President-elect on U.S. renewables to become clearer," it said.

Domino's Pizza was another big riser, up 3.2 percent. The company said it would step up its expansion plans after seeing a strong performance from new outlets and a positive market outlook.

"The group continues to trade well and management is reiterating FY guidance," analysts at Numis said in a note, adding the stock looked cheap compared with competitors.

"With renewed confidence in the rollout opportunity coupled with best practice from other Domino's franchisors we believe the discount to peers is overdone."

Heavyweight pharma stocks Novartis, GlaxoSmithKline and Roche all rose by between 0.5 and 1.1 percent, as their sector rebounded following recent losses.

Chemical firm Arkema rose 1 percent after UBS raised its target price on the stock.

Insurer Direct Line climbed 2.8 percent after it was upgraded to "overweight" from "equal-weight" by Morgan Stanley. In all, insurers were up 0.3 percent.

Ex-divs weighed on the market. TalkTalk, Vodafone and National Grid all traded without entitlement to their latest dividend payouts, dragging down telecoms and utilities.

Italian bank Monte dei Paschi rose 3.3 percent ahead of an investor vote on a 5 billion euro share issue needed to stave off the risk of being wound down.
 

Andora Andrei

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China central bank

China central bank

China's central bank has urged commercial banks in Shanghai to guard against money outflows via the Shanghai Free Trade Zone (FTZ) disguised as foreign investment, two sources with knowledge of the instructions said on Friday.

The Shanghai headquarters of the People's Bank of China asked for particular vigilance against money originating in other provinces or cities in China that flowed into the FTZ en route abroad, the banking industry sources said.

The guidance from the PBOC's was the latest in a string of measures to stem surging capital outflows as the yuan currency plumbs 8-1/2 year lows against the surging U.S. dollar.

"The central bank has urged lenders to strengthen due diligence to prevent capital outflows disguised as outbound investment," said one source, who declined to be identified because he was not authorized to speak publicly about the matter.

The Shanghai headquarters of the PBOC did not have an immediate comment.

On Wednesday it said it would crack down on capital flight and closely monitor abnormal capital flows through the FTZ.

In a report on Tuesday, Capital Economics estimated that capital outflows last month were the largest since January, and posed a threat to China's exchange rate regime.

The Shanghai FTZ was launched in 2013 to promote international trade and cross-border investment, but three years later the city government is trying to balance efforts to accelerate financial reforms in the zone while preventing capital outflows.

While Beijing has been busily damming up official channels for money to leave China, more than ever is leaking out through shady means as investors flee the country's slowing economy and weakening currency, financial industry executives say.
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Dollar Pares Weekly Surge as Stocks, Gold Climb; Crude Declines

Dollar Pares Weekly Surge as Stocks, Gold Climb; Crude Declines

The dollar pared a weekly surge spurred by the prospect of a higher interest-rate environment in the U.S., while global stocks built on gains and Treasuries slipped. Oil fell.

The greenback slipped 0.2 percent versus the yen, paring its steepest three-week climb against Japan’s currency since 1995. Emerging-market currencies including India’s rupee and South Korea’s won clawed back some ground. The MSCI All-Country World Index extended its weekly advance to 1.1 percent and U.S. equity-index futures rose. Benchmark 10-year Treasury yields climbed three basis points following the Thanksgiving holiday. Gold rebounded from a nine-month low, while oil trimmed its second weekly gain in New York.

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Strong economic data and the prospect of increased spending after Donald Trump won the Nov. 8 U.S. presidential vote have fueled a surge in bets on Federal Reserve rate hikes, propelling the greenback to its highest level in a decade versus major peers. Traders see an increase in borrowing costs in December as a certainty, while the odds of additional moves by June have risen to more than 60 percent, according to futures data tracked by Bloomberg.

“The dollar bull run had perhaps become a little stretched," said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We’ve had a very strong run since the election and it’s just a bit of a pull back."

Stocks

S&P 500 Index futures rose 0.2 percent from Wednesday’s close as of 8:09 a.m. in London, with equity markets in the U.S. to close Friday at 1 p.m. local time
The Stoxx Europe 600 Index was little changed as gains by health care shares offset losses by banks
The MSCI Asia Pacific Index increased 0.6 percent, headed for a weekly gain of 1.3 percent following four weeks of losses

Currencies

The yen gained 0.3 percent to 112.99 per dollar. It’s down 1.8 percent in the week, the worst performance among major currencies
The Indian rupee strengthened 0.4 percent after sinking to a record low Thursday, while the won gained 0.2 percent
China’s yuan, which fell to an eight-year low against the dollar this week, was little changed. The yuan rose this week to an August high versus a basket of peers, signaling that its declines against the greenback have been more moderate than those of other currencies

Bonds

Ten-year Treasuries fell, pushing yields to 2.38 percent
The yield on 40-year Japan government bonds fell five basis points to 0.715 percent, reversing an earlier climb after an auction of the debt saw 499.7 billion yen ($4.4 billion) of securities sold at a highest yield of 0.725 percent
“The 40 year bonds were well received in the auction, triggering a bout of bond buying,” said Masahiko Sato, an analyst at Nomura Holdings Inc. in Tokyo
The U.S. debt market usually closes at 2 p.m. in New York the day after Thanksgiving

Commodities

Gold for immediate delivery rose 0.5 percent to $1,187.30 an ounce after falling as much as 0.9 percent
Copper slipped 0.5 percent in London and has surged 7.7 percent this week. The industrial metal has soared 20 percent this month
West Texas Intermediate crude oil slipped 1.1 percent to $47.45 a barrel. OPEC’s focus has shifted to negotiations with Iran and non-member Russia for production curbs after Iraq’s prime minister signaled it will agree to cut output.
 

Andora Andrei

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Japan economic indicators are seen steady, though slow in October

Japan economic indicators are seen steady, though slow in October

In October, Japan's industrial output was generally expected to demonstrate little change, according to a Reuters survey. It suggests uninspiring domestic as well as external demand hampered a steady revival in production.

Industrial production was observed likely to decline 0.1% in October from last month, the Reuters survey of 20 experts disclosed, after a 0.6% ascend in September and a 1.3% surge in August.
Compared with the previous year and early this year, the trend of factory production has revived. However, it hasn’t got back to a steady recovery path because of sluggish domestic and also external demand.
Analysts point out that production in sectors, including electronic parts, transport equipment and devices stood still, though poor exports likely undermined such sectors as business- oriented machinery.
The trade ministry is expected to issue factory output on November 30.

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Andora Andrei

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FTSE 100 rises as miners shift lower

FTSE 100 rises as miners shift lower

On Friday, British shares struggled for direction, ahead of an update on the British economic health, though kept on course for a weekly revenue.

The FTSE 100 gained 2 points, reaching 6,831.26, having darted in and out of positive territory since the start. On Thursday, the London benchmark ascended 0.2% after a choppy trading session. Trading volume happened to be lighter than usual that day, with American equity markets unavailable for Thanksgiving. It’s going to be a shortened American trading session on Friday.

The second estimate of British GDP for the third quarter is scheduled for publication at 9:30 a.m. London time.

The initial reading issued in late October disclosed that economic activity held up stronger than previously expected in the period following Brexit, by surging by 0.5%.

The currency pair GBP/USD acquired 0.0321%, trading at $1.2435, tumbling from $1.2485 late Thursday.

Mining stocks ascended earlier in the trading session as the greenback moved pulled back from peaks not seen in almost 14 years.
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Andora Andrei

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Saudi Arabia's refusal to meet non-OPEC producers signals deal at risk. Oil slides

Saudi Arabia's refusal to meet non-OPEC producers signals deal at risk. Oil slides

Saudi Arabia won't attend breakfast with non-OPEC producers

A planned meeting between OPEC and non-OPEC producers was supposed to take place on Monday in Vienna but Saudi Arabia decided today it won't attend, according to Reuters.

The meeting was planned to talk about ways that non-OPEC countries could contribute to curbing oversupply.

Saudi Arabia isn't attending the meeting because it wants an OPEC deal first.

Maybe I'm reading too much into it, but if OPEC production curbs were the done deal they've been portrayed as, then Saudi Arabia would already be looking ahead.

We also just learned that Algeria's oil minister is making a special trip to Tehran today in a sign that Iran isn't on board.

Oil is down $0.77 to a session low of $47.19. Expect plenty of jitters before Wednesday.

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Andora Andrei

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Gold revives in Asia

Gold revives in Asia

On Monday, gold gained during early Asia trade, as market participants focused on the recent drops as a good opportunity to buy.

In New York, December delivery gold futures ascended 0.73%, hitting $1,187.00 per troy ounce. Meanwhile, silver futures stood still at $16.554 per troy ounce. Simultaneously, copper futures dived 0.24%, reaching $2.657 a pound.

This week brings American nonfarm payrolls report for November on Friday and also data on American economic growth as well as manufacturing for fresh clues on the probability of a December rate lift. Market participants will also be watching euro zone inflation data as well as manufacturing reports out of Great Britain and China.

On Monday, Mario Draghi, European Central Bank President will testify about the ECB’s outlook on economic and also monetary developments, not to mention the consequences of Brexit to the Economic Committee in the European Parliament.

The previous week, gold closed at the lowest level for nine months on Friday, as hopes for higher American interest rates kept clouding the overall demand outlook for the precious metal.

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Andora Andrei

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Brent and NYMEX rebound in Asia

Brent and NYMEX rebound in Asia

On Monday, crude prices rebounded in Asia, as traders bet nervously on a a down-to-the-wire verdict by the OPEC to curb production as proposed.

American crude prices ascended 0.24% to $46.17 a barrel in New York, while global benchmark Brent futures managed to acquire 0.29%, reaching $48.38 a barrel.

The previous week, crude prices dipped steeply on Friday amid uncertainty as for whether the Organization of the Petroleum Exporting Countries can come to a compromise to cut output and prop up markets.

Doubts as for whether key global exporters will be able to reach an agreement on November 30 to restrict output also kept traders on the sidelines. On Wednesday, the OPEC is to hold a gathering in Vienna aimed at finalizing the details of a proposed production cut, which it’s hoped will diminish a global supply glut, which has pressured crude prices lower for more than two years.

The producer cartel is currently trying to get its 14 member states as well as non-OPEC member Russia, to implement coordinated output cuts.

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US Dollar bond yields drop as oil tumbles on output cut doubts

US Dollar bond yields drop as oil tumbles on output cut doubts

The dollar and U.S. bond yields fell on Monday as investors reversed a "Trumpflation" trade that has gripped markets since the U.S. elections, after oil prices slid on fears that producer countries meeting this week could fail to agree an output cut.

Brent crude futures last traded at $47.13 per barrel LCOc1, down slightly on the day, after having fallen by as much as 2.0 percent in early Asian trade, following on from a 3.6 percent fall on Friday as doubts arose over whether the Organization of the Petroleum Exporting Countries would reach a deal later this week.

Prospects of reduced upward pressure on inflation from oil prices, prompted investors to temper expectations for rises in U.S. interest rates, bring down treasury yields and the dollar.
That gave some relief to Asian shares, which had underperformed on worries about capital flight to higher-yielding U.S markets in the weeks since Donald Trump's Nov.8 election win.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.6 percent, led by gains in Hong Kong .HSI and Taiwan .TWII.
In contrast, U.S. stock futures ESc1 slipped 0.2 percent after their stellar performance this month on hopes President-elect Trump's policy of fiscal spending, deregulation and protection of domestic industries will boost U.S. inflation and benefit Corporate America.
European shares are expected to dip, with spread-betters looking at a fall of 0.2 percent in Germany's DAX .GDAXI and 0.1 percent in Britain's FTSE .FTSE.
Japan's Nikkei average .N225, which had performed even better than Wall Street thanks to the yen's fall, ended down 0.1 percent.
"It will be scary to think markets may fully reverse their moves since the elections, changing their mind that Trump's policy may not be so good after all," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.
Wall Street's four main indexes .DJI .SPX .IXIC all hit record highs last week, a feat last achieved in 1999.
Yet some investors question whether the market may have got carried away with optimism on Trump's policy, given the uncertainty on the political neophyte's presidency, including on how closely he can work together with the Congress.
But languishing oil prices, giving investors a more immediate reason to have second thoughts about how prospects for inflation and U.S. interest rates.
Saudi Arabia said on Friday it will not attend talks on Monday with non-OPEC producers to discuss supply cuts.
"Oil prices have fallen considerably on worries about the deal. That would pressure energy shares, and could hit the entire stock markets. Given their rally in recent days, it's no surprise to see some adjustment," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.
Saudi Arabia's energy minister Khalid al-Falih said on Sunday that he believed the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.
His comments raised worries that a preliminary agreement reached in September for OPEC to reduce output to between 32.5 million and 33 million barrels per day may fall apart when OPEC ministers meet on Wednesday to finalize that deal.

OPEC also wants non-OPEC producers such as Russia to support the intervention by curbing their output and many market players still expect them to reach a deal.
As lower oil prices reduce inflationary pressure, they sapped momentum for a sell-off in U.S. Treasuries and a rally in the dollar, the market's favorite play since the U.S. election.
The dollar sank more than 1.6 percent against the yen to as low as 111.355 yen JPY=, down sharply from its eight-month high of 113.90 set just on Friday. It last traded at 111.90 yen.
"As long as the dollar holds above 111-111.50 yen, I do not judge the (dollar's rising) trend has changed," said Koichi Yoshikawa, executive director of financial markets at Standard Chartered in Tokyo.
The dollar's index against a basket of six major currencies .DXY =USD stood at 100.88, slipping 0.6 percent on day and off its 13 1/2-year high of 102.05 touched on Thursday.
ollar shed more than 0.5 percent against many emerging market currencies, including the Mexico peso MXP=, the biggest loser after Trump's election victory, the South African rand ZAR= and the Turkish lira TRY=.
The euro EUR= gained 0.8 percent to $1.0655, extending its rebound from its near one-year low of $1.0518 touched on Thursday.
The single currency has so far shown limited reaction to the French conservatives' presidential primaries on Sunday.
Former Prime Minister Francois Fillon, a socially conservative free-marketeer, won the run-off, setting up a likely showdown next year with far-right leader Marine Le Pen that the pollsters expect him to win.
Gold XAU= bounced back to $1,192.0 per ounce from Friday's low $1,171.5, which was its lowest level since early February.
The yield on 10-year U.S. Treasuries US10YT=RR dropped almost 5 basis points to 2.323 percent, off its 16-month high of 2.417 percent touched on Thursday.
On the other hand, some commodities gained sharply on hopes of strong demand for property and infrastructure investment in China and the United States.
Chinese steel futures SRBcv1 jumped over 6 percent, while iron ore futures DCIOcv1 also gained about six percent and zinc CMZN3, used to galvanize steel, powered to a nine-year high on the London Metal Exchange.
 

Andora Andrei

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Oil prices fall over doubts of planned crude output cut

Oil prices fall over doubts of planned crude output cut

Oil prices fell on Monday, adding to Friday's steep losses as doubts re-emerged over the ability of major producers to agree output cuts at a planned meeting on Wednesday aimed at reining in global oversupply.

Brent crude futures LCOc1 fell 2 percent at one point, but regained ground to trade down 35 cents, or 0.74 percent, at $46.89 per barrel at 0749 GMT.

U.S. West Texas Intermediate (WTI) crude futures CLc1 also retraced early losses and was trading down 38 cents, or 0.78 percent, at $45.70 a barrel.
Monday's fall came amid choppy trading and after prices tumbled more than 3 percent on Friday on disagreement between OPEC and non-OPEC crude exporters like Russia over who should cut production by how much in order to curb a global supply overhang that has more than halved prices since 2014.
Despite the wrangling, traders said they still expected some form of an output restriction to be agreed this week.
"An agreement is needed to avoid (price) downside. So, the question is what kind of agreement will they do? The market is clearly very nervous... We shall see. I think they will reach some form of agreement," said Oystein Berentsen, managing director for crude at oil trading firm Strong Petroleum in Singapore.
The Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna on Wednesday to decide on the details of a cut, potentially including non-OPEC members like Russia. A meeting between OPEC and non-OPEC producers that was to be held on Monday was called off after Saudi Arabia declined to attend.
Saudi Arabia's energy minister Khalid al-Falih said on Sunday that Saudi representatives would not attend the talks originally scheduled for Monday because no agreement within OPEC had been reached so far.
Falih said that the oil market would balance itself in 2017 even if producers did not intervene, and that keeping output at current levels could therefore be justified.
Despite the disagreements among producers, Morgan Stanley said it still expected "at least a paper deal agreement".

Even if a cut is agreed, oversupply may not end soon.
In the United States, the oil rig count exploring for new production rose by three last week, and Goldman Sachs said that "since its trough on May 27, 2016, producers have added 158 oil rigs (+50 percent) in the U.S."
Eiichiro Kitahara, Executive Officer of Japanese refiner TonenGeneral Sekiyu K.K said that "once oil prices reach above $60/barrel, (U.S.) shale oil producers are likely to resume operations, which will weigh on the market."

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OPEC’s Last Cut Shows Oil Market Could Get a Whole Lot Messier

OPEC’s Last Cut Shows Oil Market Could Get a Whole Lot Messier

Last OPEC accord to cut production in 2008 lacked details
Cuts with unclear quotas most likely result: Capital Economics

Anyone planning to trade the outcome of this week’s OPEC meeting might consider the lessons of the group’s last production cut. Then take a deep breath.

In December 2008, as oil demand and prices slumped during the global financial crisis, the Organization of Petroleum Exporting Countries, announced a record output reduction. What was supposed to stabilize the market initially sowed more confusion as the group’s statement bundled together previously announced supply curbs and omitted a breakdown of how much each member would cut -- details of which leaked out days later.

While the deal did eventually halt the slide in prices, the Chicago Board Options Exchange Crude Oil Volatility Index, a common measure of market turbulence, stayed near a record over the following two months amid doubts that OPEC members would comply with their new targets.

“OPEC meetings can be messy, and the outcomes can also be messy,” said Mike Wittner, global head of oil research at Societe Generale SA. “If there is a deal, the question for the markets will be whether it is a strong deal or a weak deal, and this will be determined by the level of detail announced by OPEC.”

In the two-month run-up to this week’s meeting in Vienna, oil has swung between $44 and $53 a barrel amid investor skepticism that OPEC can deliver on its Sept. 28 pledge in Algiers to cut output to the 32.5 million to 33 million barrels a day. A deal founded on a group target would see crude trade around $45 a barrel, preceded by some price volatility, according to Thomas Pugh, a commodities economist at Capital Economics. He assigns a 60 percent probability to that outcome.
Technical Committee

A technical committee of OPEC delegates last week sent a proposal to the organization’s oil ministers, recommending that most members cut output by 4 to 5 percent from the October level estimated by independent sources. Yet, it was unclear whether Iraq and Iran -- OPEC’s second and third-largest producers -- accepted such reductions and what level they would be asked to cut from, forcing the committee to tackle the issue again on Monday.

With Iran and Iraq proving difficult to persuade, OPEC “may have to opt for an opaque statement about burden sharing in order to get an agreement inked,” Helima Croft, head of commodity strategy at RBC Capital Markets, said by e-mail.

Iraq has argued it should be exempted from cuts as it’s fighting Islamic State militants. Its position softened last week after Prime Minister Haider Al-Abadi said his country would share the burden of cutting production along with the rest of OPEC.
Clear Quotas

OPEC’s crude production was 33.64 million barrels a day in October, according to its independent estimates. That means the group would need to cut by 640,000 to 1.1 million barrels a day to comply with the Algiers target range.

Most analysts expect OPEC to sign an accord to reduce output, but only seven out of 20 expect it to specify how much each member should cut, complicating the task of investors assessing the impact on markets.

An OPEC deal with clear quotas would boost prices to $55 a barrel, said Pugh of Capital Economics, with investors switching their focus to the issue of compliance. He assigns that outcome a 25 percent probability, while seeing a 15 percent chance of there being no deal at all, a scenario that would trigger a crash in prices to below $40.

OPEC’s output cut on Dec. 17, 2008, following a slump in prices from a record $147.27 a barrel five months earlier, didn’t initially convince the market. Prices on the New York Mercantile Exchange dropped a further $9 over the three days following the deal, before rebounding to almost $50 a barrel early in 2009. Two months later, crude was still trading below pre-OPEC meeting levels and only made a sustained break above $50 in May.

“The messaging is going to be a huge challenge,” said Croft of RBC Capital Markets. “A statement that is super short on details about the allocation of the cut could be dismissed as a non-event despite key members -- such as the Saudis and the Gulf Countries -- being committed to making the math work.”
 

Andora Andrei

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OPEC’s output cut on Dec

OPEC’s output cut on Dec

Oil prices are correlated to the US dollar, but correlations also break, especially with bigger events. The team at Goldman Sachs casts doubt about the correlation.

Historically, the Dollar has been negatively correlated with oil prices, meaning low oil prices have coincided with a strong Dollar, while high oil prices have typically come when the Dollar has been weak.

We argue that the importance of this empirical relationship is overstated for two reasons.

First, many of the counterpart currencies in broad Dollar indices belong to commodity exporting countries, so that falling (rising) oil prices push down (up) their terms of trade, which weakens (strengthens) their currencies. The negative correlation thus exists almost by construction, i.e. is a bit like looking at the correlation of oil prices with their reciprocal (commodity exporters’ terms of trade). In short, the correlation isn’t really about the Dollar per se, but about commodity exporters.
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Second, fluctuations in oil prices often coincide with other developments that have effects on the Dollar, including global demand shocks or monetary policy changes. Both of these are present in Exhibit 1, which shows the drop in oil prices during the global financial crisis, which – being a negative demand shock originating in the US – moved rate differentials against the Dollar, and the pronounced drop in oil prices in 2014, which coincided with the BoJ and ECB increasing monetary stimulus, moving rate differentials in favor of the Dollar. This is perhaps one reason why the correlation of the Dollar with oil prices is less pronounced in changes than in levels

We examine the correlation of the Dollar with oil prices using daily data, controlling for interest differentials, risk appetite and other factors. It concludes that rate differentials are the most important driver behind recent Dollar moves, followed by oil prices.

We conclude that it is primarily the forces of economic divergence that are driving recent Dollar direction, in line with our forecasts which anticipate more Dollar appreciation (around 7 percent) on these grounds.
 
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