By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets.
The spotlight on global markets looks set to focus on the dollar on Monday, especially its performance against emerging market currencies, following newly-elected US President Donald Trump’s warning last weekend against the so-called ‘BRICS’ to land.
In a social media post on Saturday, Trump demanded that the ‘BRICS’ countries – Brazil, Russia, India, China and South Africa – commit not to create a new currency or support another currency that would rival the US dollar. replaced, otherwise they would have to deal with 100%. rates.
This comes after Trump injected additional volatility into global currency markets last week by proposing high tariffs on China, Mexico and Canada – countries with which the US has some of the largest trade deficits.
The dollar’s path on Monday will be fascinating to observe. Last week, the index went on an eight-week winning streak, with the steepest weekly decline since mid-August, as expectations for US rate cuts cooled and Treasury yields fell.
But much of the dollar’s downward momentum last week was due to weakness against the euro and yen. It was much firmer against other G10 currencies – not least the Canadian dollar – and especially emerging and Asian currencies.
Sentiment towards emerging markets is still largely gloomy at the start of the last month of the year. Outflows from EM bond funds remain heavy, with EM hard currency bond funds recording the second largest outflows so far this year last week, according to analysts at Barclays.
But there are more encouraging signs from China that Beijing’s series of stimulus and support measures in recent months may be starting to bear fruit.
A private survey on Sunday showed new home prices in China rose 2.40% year-on-year in November, up from 2.08% in October. And on Saturday, China’s official Purchasing Managers’ Index data showed factory activity grew modestly in November for the second month in a row, and at the fastest pace in seven months.
Is there light at the end of the tunnel for China’s domestic economy? As Trump steps up trade threats ahead of his inauguration next month, policymakers in Beijing and China will surely hope so.
Asia’s economic calendar will see a series of manufacturing PMI reports released on Monday, including China’s ‘unofficial’ Caixin manufacturing PMI data for November. Will that reinforce the modestly encouraging signals from the weekend’s ‘official’ figures?
Economists polled by Reuters expect a reading of 50.5, up from 50.3 in October, which would mark the fastest growth rate since June.