FOREX-Dollar mauled as euro leads vicious short squeeze

1. Dollar speculators squeezed out of crowded positions
2. Euro rallies as EU yields spike, Greek creditors make offer
3. ECB meets later in day, Australia GDP a test for Aussie

By; Wayne Cole

SYDNEY, June 3 (GNN) - The U.S. dollar was broadly lower on Wednesday as hopes for progress in Greek debt talks and a huge spike in European yields combined to give the euro its biggest gain in three months.

The dollar index, which measures it against a basket of six major currencies, was down at 95.943 having shed 1.5 percent on Tuesday in its biggest one-day drop since July 2013.

The euro was enjoying the view at $1.01150, having climbed 2 percent overnight, while the dollar lapsed back to 124.08 yen and away from a 12-1/2-year peak of 125.070.

CitiFX head G10 strategist, Steven Englander, said the violence of the shift reflected just how much speculators had been long of dollars and short of euros.

"Today's EUR move started as a rates move and looks now to be a position unwind. We estimate that a third of the EURUSD move is driven by the change in rates, and 67 percent by positioning unwinds."

The initial catalyst was EU data showing a surprisingly large increase in headline and core inflation which suggested the European Central Bank's latest easing campaign was gaining traction. [TOP/CEN}

German 10-year Bund yields surged 16 basis points to 0.68 percent, the biggest jump in about three years, while Spanish, Italian and Portuguese yields hit 2015 highs.

The central bank holds a policy meeting later Wednesday and will likely reaffirm its commitment to the trillion euro asset purchase programme.

The euro got another leg up when the ECB, the European Commission and the International Monetary Fund agreed on the terms of a cash-for-reform deal to be put to Greece in a bid to conclude four months of debt stalemate.

It was far from clear if the leftist government of Prime Minister Alexis Tsipras would accept the plan, but the market took it as an encouraging step forward.

Dealers said the speed and size of the euro rally argued for consolidation in the very term, while the technical background looked better after a break of the 20-day moving average at $1.1132. The next major chart target was $1.1210/20 and a breach there could trigger a move to the $1.1325/40 zone.

Still, there is a host of U.S. economic data yet to come this week, including the payrolls report on Friday, and any signs of strength could revive dollar bulls.

For now, the dollar's retreat has lifted commodities and related currencies.

The Australian dollar shot to $0.7762, having jumped 2.2 percent on Tuesday, with the New Zealand dollar not far behind at $0.7175.

The Australian currency faces a hurdle in the form of gross domestic product data later in the session, where an outcome of less than the expected 0.7 percent gain could cause a pullback. (Reuters)(Editing by Eric Meijer)

FOREX -Dollar slips vs yen as Tokyo shares slip; Aussie up on China data

* Dollar slips broadly at start of second quarter

* Yen firmer as weak Tokyo shares weigh on risk sentiment

* Better-than-expected China factory data bolsters Aussie

* ADP jobs report could provide clue to Friday payrolls (Adds comments, updates prices)

By Masayuki Kitano and Lisa Twaronite

SINGAPORE/TOKYO, April 1 (GNN) - The dollar slipped versus the yen at the start of a new quarter on Wednesday, as a soft reading on Japanese business sentiment dented Tokyo shares and helped bolster the safe haven yen.

The Australian dollar gained a lift from a better-than expected reading of Chinese factory activity and that added to the broadly weak tone of the greenback, traders said.

"Dollar/yen has led this move today and I think it's basically trading off the back end of the Nikkei," said Stephen Innes, senior trader for FX broker Oanda in Singapore.

The dollar fell 0.5 percent to 119.56 yen, down from Tuesday's one-week high of 120.37 yen.

Japan's benchmark Nikkei share average was last down about 1 percent, as investors booked profits on the first day of Japanese financial year and after soft reading on the Bank of Japan's tankan business sentiment survey.

Weakness in Japanese equities can dent risk sentiment and lend support to the yen.

"Any sort of negative sign, when the market gets over-extended like it is right now, you're going to see some type of profit-taking or pullback," Innes said, referring to long positions in the U.S. dollar.

The Australian dollar rose 0.4 percent to $0.7636, having clawed up to as high as $0.7664 after China's official Purchasing Managers' Index (PMI) showed that activity in China's factory survey unexpectedly picked up in March.

The Australian dollar is sensitive to Chinese data due to Australia's large trade exposure to China.

The better-than-expected China PMI helped lift the Australian dollar and likely triggered some paring back of bullish bets on the U.S. dollar, said Jesper Bargmann, head of trading for Nordea Bank in Singapore.

"Market will have been a little bit of long of (U.S.) dollars, I assume, so we're just seeing a little squeeze on the back of that number," Bargmann said.

The euro rose 0.5 percent to $1.0789, getting some respite after suffering its worst quarterly performance ever in the first quarter.

The euro slid 11 percent against the dollar in January-March, its biggest quarterly drop since its 1999 launch, due to the the European Central Bank launching its quantitative easing programme, with the U.S. Federal Reserve is expected to start raising interest rates this year.

The euro will probably remain under pressure this quarter, although it is unlikely to fall as fast as it did in the previous three months, said Nordea Bank's Bargmann.

"I think the theme is kind of intact, until we start seeing the first hike out of the U.S. We still have the Greek situation looming, so overall there will still be pressure on the euro," he said.

"Against the dollar we found a very important support level around $1.04/$1.05. I think it will be challenged again and I think we may test around parity," Bargmann added.

The euro has regained some ground in the past couple of weeks after setting a 12-year low of $1.04570 in mid-March.

Later on Wednesday, the ADP National Employment Report will provide a picture of the U.S. private sector employment situation and could offer some clues to Friday's non-farm payroll report. (Reuters)(Editing by Simon Cameron-Moore)

GLOBAL MARKETS-Dollar sags, bonds boom as Fed takes dovish tack

* Dollar extends fall as market sees slower US rate lift off

* Fed lowers projected outlook for growth, inflation, rates

* Stocks, commodities encouraged by thought of extended stimulus

* Japanese shares buck trend as rising yen prompts profit taking

By Wayne Cole

SYDNEY, March 19 (GNN) - The dollar was giving ground in Asia on Thursday as investors priced in a later start and a slower pace for future U.S rate rises, slashing bond yields globally and firing up stocks.

The formerly friendless euro found itself up at $1.0880 , having jumped 2.8 percent on Wednesday, while oil held gains of 5 percent as the dollar retreat benefited commodities.

MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.3 percent for its best daily performance in five weeks, while Australia's main index jumped 1.4 percent.

The only laggard was the Nikkei which slipped 1.1 percent in reaction to a rising yen.

Short-term U.S. yields had boasted their biggest drop in six years after the Federal Reserve trimmed forecasts for inflation and growth, and said unemployment could fall further than first thought without risking a spike in inflation.

The median projection for the Fed funds rate at the end of 2015 was cut to 0.625 percent, down half a point from December.

Fed Chair Janet Yellen also sounded uncomfortable with the strength of the dollar, saying it would be a "notable drag" on exports and a downward force on inflation.

"There was nothing in the statement to suggest that the Fed is leaning toward a June hike," said Michelle Girard, chief U.S. economist at RBS.

"Developments leave us feeling more comfortable with our official call for the first rate hike being in September."

The market reaction was immediate and violent. Fed fund futures <0#FF:> surged as investors sharply scaled back expectations for how fast and far rates might rise.

Yields on two-year notes nosedived 11 basis points to 0.56 percent as prices rose, the biggest daily rally since 2009.

The drop in yields pulled the rug out from under the dollar, as investors have been massively long of the currency in the expectation its interest rate advantage could only get wider.

Against a basket of currencies the dollar was down a further 0.3 percent, having shed 1.8 percent on Wednesday.

The Swiss franc, sterling and the Australian dollar all enjoyed similar gains, while the New Zealand dollar got an extra boost from upbeat growth data.

The dollar also skidded to 119.80 yen, having been around 121.00 before the Fed's statement.

Wall Street was encouraged by the prospect that policy would stay super-loose for longer and the Dow ended Wednesday up 1.27 percent. The S&P 500 rose 1.21 percent and the Nasdaq 0.92 percent.

Among commodities, gold rallied to $1,173 an ounce, having climbed from $1.145 on Wednesday.

U.S. crude was off 34 cents at $44.32, but that followed a gain of 3 percent on Wednesday. Brent was 5 cents easier at $55.86 a barrel. (Reuters)(Editing by Eric Meijer)

GLOBAL MARKETS-Asia stocks fall as risk aversion prevails, dollar soars

1. * MSCI Asia-Pacific index hits 2-month low
2. * Markets continue digesting possibility of earlier U.S. rate hike
3. * Dollar hits new 12-year high against euro
4. * Japan shares buck trend on upbeat data, Nikkei up 0.5 pct

By Shinichi Saoshiro

TOKYO, March 11 (GNN) - Asian stocks fell to a two-month low on Wednesday as nervous markets recoiled on worries about an earlier U.S. interest rate hike, while such a prospect helped send the dollar to a 12-year high against the euro.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent after touching its lowest since January. Australian and South Korean shares each lost 0.5 percent and Malaysian and Indonesian stocks also declined.

Riskier assets both in the United States and elsewhere have come under pressure after Friday's robust U.S. employment data increased expectations that the Federal Reserve could raise rates as soon as June -a prospect that appeared relatively more remote a few weeks prior.

The possibility of higher U.S. yields siphoning away funds from riskier assets gave the S&P 500, at a record high two weeks ago, its worst decline in two months overnight and emerging market stocks declined to their lowest since early January.

Mexico's peso weakened to a record low and its Malaysian, South Korean, Brazilian and South African counterparts have also suffered heavy hits.

Renewed concern about Greece's debt talks with euro zone partners and deflationary pressures in China have also weighed on emerging markets in general. China will release industrial output, retail sales and investment data later in the day which are all expected to show slowing growth.

Japan's Nikkei bucked the trend and rose 0.5 percent as better-than-expected machinery orders helped offset Wall Street losses.

But the deepening decline in the yen, usually a positive factor for Japanese stocks as it buoys exporters, had some worrying about other consequences.

"The market started to worry about side effects from a further slide in the yen," said Hiroichi Nishi, general manager at SMBC Nikko Securities in Tokyo, adding that there are also concerns that a stronger dollar hurts U.S. multinational companies' earnings.

In currencies, the euro fetched $1.0695 after touching a 12-year trough of $1.0666. Downward pressure on the common currency increased after the European Central Bank kicked of its quantitative easing programme and began its bond-buying on Monday.

"In addition to the ECB's starting its bond buying, Greek concerns are likely to weigh on the euro again this week, when there are several Greek-related events scheduled," said Masafumi Yamamoto, market strategist at Praevidentia Strategy in Tokyo.

Technical talks between finance experts from Athens and its international creditors are due to start later in the day with the aim of unlocking further funding.

The dollar traded at 121.315 yen, pulled down from an eight-year high of 122.04 scaled overnight as the broad slide in equities favoured the safe-haven yen.

The dollar index remained close to its 11-1/2 year peak of 98.808 climbed the previous day.

Hit by the greenback's broad strength, the Australian dollar hovered close to a six-year trough of $0.7603 reached on Tuesday.

U.S. crude oil bounced modestly after falling sharply overnight on the dollar's appreciation, which makes commodities denominated in the greenback costlier for holders of other currencies.

U.S. crude was up 1.3 percent at $48.93 a barrel after falling 3.4 percent the previous day. (Reuters)(Additional reporting by Ayai Tomisawa in Tokyo; Editing by Kim Coghill)

#GNN finance news - GLOBAL MARKETS-Stocks wobble on Ukraine news, bond yields slide

* Ukraine news sparks market turmoil, but stocks pare losses

* German Bund yields plumb record lows below 1 pct

* Safe-haven yen, Swiss franc gain (Adds close of U.S. markets)

By Herbert Lash

NEW YORK, Aug 15 GNN - Global equity markets seesawed and government bond yields fell sharply in a flight to safety on Friday after Ukraine said its artillery shelled a Russian armored column on Ukrainian soil in a report that raised fears of escalating tensions.

The government in Kiev said its artillery partially destroyed the Russian column in fighting overnight, but Russia denied its forces had crossed into Ukraine and called the Ukrainian report "some kind of fantasy."

Investors have worried about a worsening stand-off between Ukraine and Russia, even as recent signs of easing tensions had lifted equity markets, especially in Europe. Investors on Friday were less than sure about the seriousness of the fighting.

"The fact that the market sold off relatively hard on the Ukraine report but came back in the last hour or so is a reflection of us not getting any additional confirmation on the Russian column being attacked," said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York.

MSCI's gauge of global equity performance pared losses in late trading to end at break-even, while the benchmark S&P 500 closed only 0.01 percent lower on the day. But bond prices reflected a rush into traditional safe havens.

The yield on German 10-year Bunds dropped to a record low of 0.958 percent in their biggest weekly percentage fall in almost 11 months. The 10-year U.S. Treasury slid to 2.3415 percent, and 10-year UK bond yields fell to 2.328 percent at the close, the lowest since August 2013.

"The falling yield levels are a reaction to panic," said Chris Orndorff, a portfolio manager at Western Asset in Pasadena, California.

Most U.S. stock indexes also pared losses to trade slightly lower, but the tech-heavy Nasdaq ended in positive territory.

The Dow Jones industrial average closed down 50.67 points, or 0.3 percent, to end at 16,662.91 and the S&P 500 lost 0.12 point, or 0.01 percent, to 1,955.06. But the Nasdaq Composite added 11.925 points, or 0.27 percent, to 4,464.927.

The FTSEurofirst 300 index of leading European shares fell 0.45 percent to close at 1,323.10, after trading 0.8 percent higher earlier in the session.

The safe-haven yen and Swiss franc advanced after news of the Ukraine event. The Swiss franc hit a 19-month high against the euro and a three-week peak versus the dollar. The yen reversed losses against the dollar, turning higher.

The dollar fell as much as 0.09 percent against the yen to 102.34 yen, after hitting its highest in more than a week. The dollar last traded at 0.9027 franc, down 0.4 percent.

The euro, meanwhile, tumbled versus the Swiss franc to its lowest since January 2013. It was last at 1.2093, down 0.19 percent.

Crude oil prices rose on the Ukraine news, after Brent had stabilized close to a 13-month low on ample supplies of high-quality oil and signs that faltering global economic growth may cap fuel demand.

October Brent crude rose $1.46 to settle at $103.53 a barrel, while U.S. crude rose $1.77 to settle at $97.35 a barrel. (GNN)(Reuters)(Reporting by Herbert Lash; Additional reporting by Nigel Stephenson in London; Editing by Dan Grebler and Chizu Nomiyama)

Related articles

• Asia stocks cautious, bonds up on Ukraine tensions (news.yahoo.com)
• Ukraine Crisis Roils Global Markets (online.wsj.com)

Japan investors bulk up on French bonds, bet on euro zone "Japanisation"

* Japanese investors bought 60 pct or more of French debt in May-June

* Buying up six-fold from last year

* Euro zone a déjà vu for Japanese investors seared by long deflation

* French debt yields more than Germany's, rated higher than Italy's

* ECB easing seen as "biggest event of the year" for Japanese investors, broker says

By Hideyuki Sano

TOKYO, July 14 (GNN) - Japanese investors have been buying most of France's government debt recently in a record surge spurred by expectations that Europe faces the kind of deflation and growth that Japan suffered for decades.

Since the European Central Bank (ECB) signalled in May it would take radical steps to ease monetary conditions, banks and other big investors in Japan have piled into French bonds, convinced from their own experience that the debt of a country where the central bank is battling deflation represents a winning bet, market participants say.

"In a way, they are expecting Japanisation - deflation and a long period of zero interest rates," said Hiroki Shimazu, senior market economist at SMBC Nikko Securities.

Japanese investors bought a net 1.9 trillion yen (14 billion euros) of French bonds in May, equal to more than 60 percent of the government's new issuance that month, Japanese Finance Ministry data shows.

Data is not available for June, but market participants say Japanese buying of French bonds has picked up from May amid a broader increase in buying of euro-zone debt. One suggested Japanese investors may have bought the equivalent of three-fourths of the French new issuance.

French bonds represents a Goldilocks trade for Japanese investors keen for euro-zone exposure: they yield more than German bonds, while lower credit ratings on Italy's bonds - the region's third-most-liquid market - deter active Japanese buying.

On a gross basis, Japanese investors bought 6.60 trillion yen ($65.2 billion) of French government debt in May, dwarfing last year's 1 trillion yen average and by far the most since the ministry began compiling such data in 2005.

JAPAN DEJA-VU

While the euro zone's financial crisis has seen spikes in market interest rates as bond prices plunged, Japanese investors have strong memories of a completely different dynamic.

As Japan suffered years of falling prices and tepid growth, the government's bond market proved one of the world's great long-term bull markets.

Having slashed interest rates to zero during this period, the Bank of Japan invented the now globally recognised idea of "quantitative easing" - mass purchases of bonds and other debt to inject cash into the economy.

"If you want to make money investing, you have to take the largest position you can take on the most important event of the year - that's how you win," said the Tokyo director of fixed income at a European brokerage. Japanese investors "think the ECB's easing is the biggest event of the year."

The ECB under President Mario Draghi has cut rates, pledged to keep them low "for an extended period" and said it will continue market operations that allot banks their full funding requests at a very cheap rate until December 2016.

Japanese investors have taken that as a signal rates won't rise for more than two years. That means free money by playing for "roll-down" gains on the yield curve: a five-year bond bought now at a 0.47 percent yield and held for two years should rise in price if market rates remain the same, given that three-year debt now yields 0.08-0.09 percent.

Helped by heavy Japanese buying, the French 10-year bond yield fell to a record low 1.5 percent last week.

But that is still nearly triple the yield that Japanese investors can get at home, where the BOJ's massive purchases - the central bank gobbles up the bulk of domestic JGBs - has crushed the 10-year yield to a 15-month low of 0.54 percent .

The ECB says there is little risk that the euro zone will slip into deflation, but it is déjà vu for Japanese investors, where the BOJ's unprecedented easing is only now generating a modest rebound in prices.

The euro zone inflation rate has slid for three years to 0.5 percent, with Italy at 0.2 percent in June.

Bank lending in the euro zone is falling as companies shed debt.

Wage growth is slowing, with some countries in southern Europe seeing wages falling.

Japanese investors keenly recall how, during long periods of stagnation, consumers stuffed their money into bank deposits and borrowing slumped, leaving banks with little choice but to plough their cash into Japanese government bonds.

Rising domestic savings boosted Japan's current-account surplus, supporting the yen and inflaming deflationary pressure - another parallel with the euro zone now. The euro zone's current-account surplus hit a record high in January, helping to support the euro despite the ECB's attempt to talk it down. (Reuters)(AIP)(Editing by William Mallard and Neil Fullick)

Sluggish euro zone business, dovish ECB pushes bond yields lower

* Surveys show private sector expansion slowing unexpectedly

* ECB signals low rates through to end-2016

* Bund yields fall close to 2014 lows (Adds fresh comment, updates prices)

By Marius Zaharia

LONDON, June 23 (GNN) - Euro zone bond yields fell on Monday after business surveys showed a feeble and uneven economic recovery and the European Central Bank signalled interest rates will stay low until at least the end of 2016.
Expansion of the euro zone private sector unexpectedly slowed this month, according to Markit's Composite Purchasing Managers' Index (PMI). German activity kept expanding robustly but failed to meet investor expectations, while activity in France shrank at the fastest rate in four months.


"The French data was weak, and even the German data was slightly underwhelming ... and that is leading us to this rebound," said RBC's head of European rates strategy Peter Schaffrik, adding that the weak data underlines the need for the European Central Bank to maintain its ultra-loose monetary policy stance.

The data overshadowed upbeat Chinese manufacturing figures, which pushed yields higher in early trade, and an unexpectedly strong U.S. expansion which was the fastest in four years.

German 10-year Bund yields, the benchmark for euro zone borrowing costs, fell 3 basis points to 1.32 percent, within reach of 2014 lows of 1.285 percent. All other euro zone sovereign 10-year yields also dipped.

"German Bunds are expensive, but it's not easy to see a jump in yields with no inflation expectations and still depressed growth," ING rate strategist Alessandro Giansanti said.

Short-dated yields across the euro zone dipped after ECB President Mario Draghi told Dutch paper De Telegraaf that prolonging banks' access to unlimited liquidity up to the end of 2016 was a signal on rates.

His Austrian colleague Ewald Nowotny also said rates would only rise when growth picked up at a pace faster than 2 percent, which was unlikely to happen before 2016.

German two-year yields dipped 1 basis point to 0.03 percent in early trading, with other similarly dated yields in the euro zone falling 1-4 bps.

"Clearly Draghi wants to strengthen the forward guidance and he has put more flesh on the bones with those comments," said Jan von Gerich, chief fixed income analyst at Nordea.

CURVE PLAYS

Natixis fixed income strategist Cyril Regnat said the ECB's stance and the poor economic data will force investors to switch into bonds with longer maturities in search for yield, flattening yield curves across Europe and especially in Germany.

"German 10-year Bunds are really expensive, but if we get inflation at 0.2 or 0.3 percent in June or July we can have even lower yields," Regnat said.

Other strategists say the ECB's ultra-easy policy stance will eventually foster growth and recommend investors to position for steeper curves. They say Bund yields might track moves higher in U.S. Treasuries and British gilts, as the Federal Reserve and the Bank of England prepare to change course on policy.

Rabobank rates strategist Lyn Graham-Taylor recommends investors position for a wider yield gap between five- and 10-year Dutch bonds, with the five-year supported by the ECB outlook and the 10-year more sensitive to the Fed outlook.

Traders said a slight weakness in peripheral debt on Monday morning was evidence of some profit-taking on this year's rally before the end of the quarter, although bonds pared their early losses as the day progressed.

This supportive market backdrop should help Italy sell up to 3.5 billion euros of inflation-linked debt and zero-coupon bonds on Wednesday, and medium- and long-term bonds on Friday. (GNN) (Reuters)

(Reporting by Marius Zaharia; Additional reporting by John Geddie; Editing by Catherine Evans)