Dollar Mixed; China Announces Plan to Stimulate Growth

 
Snapshot: 

        -Dollar mixed; 10-year Treasury yield at 1.87%; U.S. stock futures gain; Nymex crude at $56.20; gold at $1205
        -Watch for: no major data scheduled; earnings from Morgan Stanley, Halliburton, Hasbro, IBM
        News: Canadian, Mexican Central Bankers Expect U.S. Economy to Bounce Back; Europe Braces for Messy Greek Endgame; China Bank Checks Europe Playbook
        The euro fell around 0.2% against the dollar on Monday to trade at $1.0787, while the dollar inched lower against the yen.
        "The dollar is finding it hard to stay firmly above the Y119-mark, but downside is limited," with many expecting dip buying around the middle of Y118, said Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow.
        "The (dollar's) upside is gradually getting heavier, so it would not be a surprise if we see adjustment to downside" to as low as lower half of Y118 later this week.
        J.P. Morgan said in its morning note that the key is whether the greenback in terms of its effective exchange rate, a weighed average of the exchange rate against the currencies of its trading partners, will "gain (downside) momentum to break below its range" since it entered an adjustment phase in March.
        If the dollar's weakness accelerates to outpace the yen's weakness, the dollar is very likely to go down further against the yen.
        The yield on the 10-year U.S. Treasury moved slightly higher in European trade, but remained rooted in the rough 1.80%-2.0% range seen in the last month.
        Turnover was low with little in the way of European data to promote trade. Fed Fund futures were pricing in a 10% risk of a June rate hike and a 55% risk of a September hike. At 4.55am ET, the June Treasury contract was 6/32 lower at 129-200 and the 10-year cash yield was 1.87%.
        The yield on the German 10-year bond traded just a handful of points off its all-time low at around 0.066%.
        "The timing of reaching 0% in yield appears more a case of 'when' rather than 'if', given the tensions evident with regards Greece," said Mizuho rates strategist Peter Chatwell.
        The yield on Greece's two-year government bond was around 26.47%, while the yield on the 10-year stood at 12.59%.
        U.S. stocks futures are poised to open higher ahead of earnings from a number of heavy-hitters as European markets were given a boost Monday after China announced news measures to stimulate its economy.
        Over the weekend, China announced a surprise one-percentage-point cut in banks' reserve requirement. The move came a few days after data showed China's economic growth decelerated to 7% year-over-year in the first quarter, the slowest pace in six years.
        In Europe, stocks rose in early trade, partially recovering from a fierce selloff at the end of last week, helped by the PBOC's announcement.
        In early trade, the Stoxx Europe 600 rose 0.7%. Strategists said that the early-week recovery may be partially attributable to China on Sunday cutting its bank reserve requirement substantially.
        "So they have reverted to direct stimulus, which should give the wobbling plate a big spin for a while. However, the risk is that the only way we can see acceptable growth is to pump the old credit/investment model and thus further increase the imbalances," said Deutsche Bank strategists Jim Reid and Craig Nicol.
        Oil prices rose on Monday after China announced fresh economic stimulus but analysts remained cautious about the recent strength in oil markets.
        Brent crude for delivery in June rose 0.6% to $63.82 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures traded at $56.18 a barrel, up $0.41, or 0.7%, from Friday's settlement.
        Gold added 0.2% to $1,205 per troy ounce.
        Canadian, Mexican Central Bankers Expect U.S. Economy to Bounce Back
        America's neighbors think its economy is poised to bounce back after a disappointing first quarter. Bank of Canada Gov. Stephen Poloz and Bank of Mexico Gov. Agustín Carstens, in separate interviews, wrote off the first-quarter U.S. growth slowdown to bad weather, the effects of West Coast port strikes and a hit to investment from rapid oil-price declines.
        Europe Braces for Messy Greek Endgame
        It's still possible that Greece can remain in the eurozone-though that is no longer the base case for many policy makers, says Simon Nixon.
        China Bank Checks Europe Playbook
        China's central bank is considering new ways to free up credit as growth in the world's second-largest economy slows.
        China's PBOC Set to Inject Over $60 Billion Into Two State Policy Banks
        China's central bank was set to inject more than $60 billion from nation's foreign-exchange reserves into two state policy banks, Caixin magazine reported.
        China Lists Restricted Investments for Free Trade Zones
        China unveiled its long-awaited list of restricted areas of investments for the nation's four free trade zones. The list included a total of 122 items, down slightly from the 139 that were put in place for the Shanghai Free Trade Area.
        Write to Sarka Halas at sarka.halas@wsj.com
        (END) Dow Jones Newswires

        April 20, 2015 06:13 ET (10:13 GMT)

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