Dollar hovers near two-month high amid economic, political risks - Reuters News

Dollar off two-month high after best week in almost six months

Big net short dollar position points to chance of further rise

Euro hampered by concerns about infections

Turkish lira at record low as rate hike boost fades

Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Ritvik Carvalho

LONDON, Sept 28 (Reuters) - The dollar hovered near a two-month peak against a basket of currencies on Monday as doubts about economic recovery persisted before a barrage of economic data and political developments in the United States.

A rebound in U.S. stocks on Friday has helped curb the ascent of the dollar, considered a safe haven, but signs of slowdown in the nascent recovery from the pandemic and political uncertainties have kept investors on guard.

The dollar index slipped to 94.21 =USD. It reached a two-month high of 94.745 last week and posted its biggest weekly rise since early April. Against the yen, the dollar was more subdued at 105.36 yen JPY=.

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The pound jumped to $1.2896 GBP=D3 on hopes Britain could secure a Brexit trade deal with the EU.

The euro rose 0.3% to $1.1661 EUR= after dropping to $1.16125 on Friday, its lowest in two months.

"Last week, widening credit spreads as seen in iTraxx Crossover and in European financials were seemingly a key driver for weakness in euro/dollar," said Christin Tuxen, head of research at Danske Bank.

"Indeed, rising global and notably European risk aversion continue to be clearly U.S. dollar positive, and notably investors entered this period of questioning the risk/reflation/recovery theme stretched on dollar shorts."

Data on U.S. currency futures positions released on Friday also pointed to further upside potential for the dollar, with speculators holding a big net short position in the currency which they could move to cover if the greenback moves higher. IMM/FX

U.S. Commodity Futures Trading Commission data showed speculators held a net short position of $33.989 billion NETUSDALL=, up from $31.524 billion the week before and near the highest level in almost 10 years. (Full Story)

The flip side of that was a large net long positions in the euro, which showed a slight increase last week to $27.922 billion EURNETUSD=.

"We think euro/dollar should find good long-term demand below the 1.1600 area, but really require some better news on the global recovery - effective lockdowns, vaccines, new stimulus - before the euro/dollar rally fully resumes," ING said in a note to clients.

Investors are now looking to the first U.S. Presidential debate on Tuesday.

"Few people will be trying to bet on the election outcome. At least they will wait until tomorrow's TV debate," said Kyosuke Suzuki, director of forex at Societe Generale.

The New York Times reported on Sunday that President Donald Trump paid little in income taxes in recent years, claiming heavy losses from his business enterprises that offset hundreds of millions of dollars in income. (Full Story)

Meanwhile, worries are growing that the economic recovery is slowing as many stimulus programmes have expired, curbing consumer spending.

The week provides markets with more data on the health of the world's biggest economy, including consumer confidence on Tuesday, a manufacturing survey and consumer data on Thursday and jobs data on Friday.

Elsewhere, the Turkish lira briefly dropped 1.6% to a record low of 7.8000 per dollar TRYTOM=D3.

The lira had enjoyed a rare bounce after an interest rate increase late last week, but the gains faded amid scepticism about how it would filter through into financial market rates.

China's industrial profits grow for fourth straight month - Reuters News

Industrial profits grow for 4th month in August

Growth helped by commodity price rebound

Liabilities roughly steady

SHANGHAI, Sept 27 (Reuters) - Profits at China's industrial firms grew for the fourth straight month in August, buoyed in part by a rebound in commodities prices and equipment manufacturing, the statistics bureau said on Sunday.

China's recovery has been gaining momentum as pent-up demand, government stimulus and surprisingly resilient exports propel a rebound.

Industrial firm profits grew 19.1% year-on-year in August to 612.81 billion yuan ($89.8 billion), the statistics bureau said.

That compares with a 19.6% increase in July and is the fourth straight month of profit growth.

However, industrial firms' profits still face external pressures as rising tensions between Washington and Beijing cloud the global trade outlook. (Full Story)

Raw material manufacturing profits increased by 32.5% in August, up from 14.7% in July, according to Zhu Hong, an official at the statistics bureau. This was driven in part by a rebound in the prices of international commodities such as crude oil and iron ore, he added.

Meanwhile, profits of the general equipment manufacturing sector notched up 37% in August on-year, with electrical machinery up by 13.3% over the same period.

Economic indicators in August, ranging from exports to producer prices and factory output, all pointed to a further pickup in the industrial sector.

However, factory activity grew at a slower pace with smaller firms facing sluggish market demand and financial strains. (Full Story) (Full Story) (Full Story) (Full Story)

The country has introduced a slew of measures to kick-start the economy, from tax and fee reductions to grace periods for the calling in of debt.

China's economy may stagnate if it fails to rise up the value chain, as it faces increasing competition from countries with advanced technologies and lower labour costs, economists warned. (Full Story)

Authorities have pledged to boost investment in strategic industries including core tech sectors such as 5G, artificial intelligence and semiconductors, and accelerate new material development to ensure stable supply chains. (Full Story)

For January-August, industrial firms' profits fell 4.4% from a year earlier to 3.72 trillion yuan, better than the 8.1% decrease in the first seven months.

Liabilities at industrial firms rose 6.6% on-year at end-August, edging higher than the 6.5% at end-July.

Earnings at state-owned industrial firms were down 17% on an annual basis for the first eight months of the year, versus a 23.5% decline in the first seven months.

Private-sector profits fell 3.3% in January-August, narrowing from January-July’s 5.3% fall.