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Dollar close to highs as Fed minutes back hike bets

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TOKYO The dollar edged down but stood close to a seven-month high in early Asian trading, getting a lift from Federal Reserve officials’ comments as well as the central bank’s latest meeting that hinted that an interest rate hike could be right around the corner.

The dollar index .DXY =USD was down about 0.2 percent at 99.436, after hitting a high of 99.853 overnight, closing in on its 12-year peak of 100.39 set in March.

The minutes showed that Fed policymakers made an unusually direct reference to a possible December rate increase at the central bank’s Oct. 27-28 meeting.

A chorus of Fed officials also backed investors’ expectations of a rate hike, with Fed President Dennis Lockhart, New York Fed President William Dudley and Cleveland Fed President Loretta Mester all expressing confidence that the policy tightening, when it comes, will be implemented smoothly for markets.

“It seems the argument has moved on from when the Fed will raise rates to how many hikes we will see in 2016,” Chris Weston, chief market strategist at IG Ltd in Melbourne, said in a note to clients on Thursday.

The Fed funds futures curve is pricing in just over two hikes throughout 2016, which Weston said was the best guide for trading the dollar.

“With a further widening of the U.S. Treasury/German bund yield spread, the odds of traders buying the USD ahead of the 16 December FOMC meet and then selling once we get confirmation of the hike seems elevated,” Weston said.

Against the yen, the dollar inched down about 0.1 percent to 123.50 yen JPY= after scaling a three-month peak of 123.77 yen after the Fed minutes.

The Bank of Japan will conclude a two-day monetary policy meeting on Thursday, at which it is widely expected to hold steady despite the country’s slip into a technical recession after two quarters of contraction.

The decision is expected sometime around 0300 GMT.

At his post-meeting briefing, BOJ Governor Haruhiko Kuroda is expected to reiterate that tightening labour markets will push up wages and help Japan recover from a temporary soft patch.

Some economists, though, fear the soft patch is deeper than officials admit. Ministry of Finance data released early on Thursday showed that Japan’s exports fell 2.1 percent in October, posting the first year-on-year decline in more than a year, underscoring weak external demand hit by China’s slowing growth.

The euro added about 0.2 percent to $1.0677 EUR=, not far from Wednesday’s fresh seven-month low of $1.0617, with expectations that the European Central Bank will take fresh monetary easing steps next month continuing to pressure the common currency.

(Reporting by Lisa Twaronite; Editing by Eric Meijer)

Source: R-Business


Asia shares rise on Wall Street bounce as Fed hikes seen gradual

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SYDNEY Asian share markets rose on Thursday as Wall Street bounced on expectations the Federal Reserve would be confident enough of the U.S. economy to raise rates in December but would then proceed with great caution on further tightening.

The prospect of the first U.S. hike in almost a decade kept the dollar strong overall and commodities under severe pressure. Investors also have to steer past a Bank of Japan policy meeting and minutes of the European Central Bank’s last meeting.

Japan’s Nikkei .N225 firmed 1 percent, brushing aside a disappointing report on exports and imports.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.6 percent. Australia’s main index AXJO rose 1.1 percent, aiming for a third straight session of gains.

Sentiment was supported by the Dow .DJI which ended Wednesday with a gain of 1.43 percent, while the S&P 500 .SPX added 1.62 percent and the Nasdaq .IXIC 1.79 percent.

Major European stock indexes fell as security issues remained a focus for investors. A suicide bomber blew herself up in a police raid that sources said had foiled a jihadi plan to hit Paris’s business district, days after attacks that killed 129 across the French capital.

The French CAC 40 index .FCHI fell 0.6 percent.

Minutes of the Fed’s last policy meeting showed most members were ready to sanction a lift off in December as long as further moves were then highly dependent on the economy continuing to perform well.

“If – when – they lift rates in December, the Fed will likely be very aggressive in highlighting the idea of a very gradual pace,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets.

“We fully expect Yellen to promote this heavily at her press conference.”

The bond market seemed to get the message with longer-term debt outperforming and the yield curve flattening noticeably. While two-year yields US2YT=RR rose 3 basis points those on 30-year paper US30YT=RR actually dipped a basis point.

The premium offered by U.S. two-year debt over its German counterpart also yawned out to 124 basis points, the fattest margin since 2006 and a fillip to the dollar.

The dollar hit a seven-month peak against a currency basket .DXY and a 10-month high on the Swiss franc CHF=. The euro edged up to $1.0676 EUR=, having hit its lowest since August.

The dollar was steady on the yen at 123.51 JPY=, after touching a three-month peak of 123.67.

The Bank of Japan holds a policy meeting Thursday and is thought likely to maintain its current pace of asset buying despite the economy slipping back into recession.

Minutes of the European Central Bank’s last policy meeting are also due later Thursday and will likely reinforce expectations of further easing in December.

In commodity markets, the high dollar and worries about Chinese demand saw zinc, copper, lead and nickel prices near their lowest in five to seven years. [MET/L]

Oil prices came off three-month lows as short-covering lifted a market initially suppressed by worries about a global supply glut. U.S. crude CLc1 was up 13 cents to $40.88 a barrel, while Brent LCOc1 stood at $43.14. [O/R]

(This story adds missing word “on” to headline)

(Reporting by Wayne Cole; Editing by Eric Meijer)

Source: R-Business


Sluggish economies weaken business jet sales

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LAS VEGAS Weakening or sluggish economies around the globe are taking a toll on business aircraft sales and prices, forestalling an incipient recovery that had raised the hopes of plane makers and suppliers.

Manufacturers attending the industry’s largest jamboree this week predicted flat or lower sales next year, and possibly in 2017, before the arrival of new models stirs interest and buying later in the decade to restart industry growth.

Prices also are falling. When buying last peaked in 2008, a new Bombardier (BBDb.TO) Global 5000 aircraft, a so-called “super large” jet, cost about $52 million. “Now you can get the same aircraft with a better cockpit for $43 million, almost $10 million less,” said Chad Anderson, president of Jetcraft, a major aircraft broker.

Such discounts are distorting the market and even affecting used aircraft prices, said Richard Aboulafia, an analyst at the Teal Group.

Amid the weakness, Bombardier scaled back production of Global 5000 and long-range Global 6000 planes. Buyers are more cautions about big plane purchases and more used planes are on the market, industry experts said.

Anderson said he expects Gulfstream (GD.N) will have to slow production of some of its G450 and G550 planes, also considered “super large” jets. Gulfstream said it is “evaluating 2016 production rates right now” and will announce them in late January.

Even companies positioned with better-selling light and mid-sized jets have concerns. “2016 will be a challenge,” said Marco Tulio Pellegrini, chief executive of Embraer (EMBR3.SA) Executive Jets, which has seven models mostly in the small and mid-size categories. “It will be as tough as 2015.”

The shifts suggest a continued slow recovery from a 2011 nadir. But the activity at the National Business Aviation Association convention shows aircraft makers are not betting on weakness for long, and that a strong recovery is due by the end of the decade.

“Some countries, where we have good hopes in terms of selling our (Falcon) 7x and 8x long-range planes, like Brazil, like India like China, are getting slow a little bit,” said Dassault Aviation (AVMD.PA) Chief Executive Eric Trappier.

He and others see stronger sales in the United States and northern Europe. “So we cannot imagine China staying at this level of growth. It will be back to a better growth. They need to travel because they need to meet their customers,” he said.

Similarly, Anderson and others said corporations are renewing their jet fleets after the downturn in recent years, and are also taking advantage of lower prices. But there are fewer emotional buyers and more focus on value, he said.

Manufacturers also are investing in new models in anticipation. Textron (TXT.N) announced plans for a new large business jet, the Cessna Citation Hemisphere, due out in 2019. Fractional aircraft firm Flexjet placed a $2.4 billion order for 20 sleek supersonic AS2 jets from Aerion, with deliveries starting in 2023.

“Deals will be hard,” said Anderson, whose business jet sales forecast predicts 7.4 percent annual growth over the next 10 years. “But with the North American demand that exists, deals can be had. They have to be done at the right price.”

(Reporting by Alwyn Scott and Allison Lampert; Editing by Tom Brown)

Source: R-Business

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