Depressed dollar sinks to three-month low

Depressed dollar sinks to three-month low
Janet Yellen, the former Federal Reserve chair and likely new Treasury secretary, is an advocate of more fiscal spending. (Reuters)
Short Url
Updated 26 November 2020

Depressed dollar sinks to three-month low

Depressed dollar sinks to three-month low
  • Riskier assets benefit from vaccine hopes and likely US fiscal boost

LONDON: The dollar traded near its lowest levels in nearly three months on Wednesday as progress in developing a novel coronavirus vaccine and expectations for a fiscal boost from a new US government triggered a shift of funds from the greenback to riskier assets.

The US currency traded near a two-month low against the Australian dollar and a two-year low against the New Zealand dollar, both considered barometers of risk sentiment due to their close ties with the global commodities trade.

The greenback recovered some ground by midday in London, however, as some of the early boost to risk appetite faded with stocks in Europe turning negative. The euro fell 0.1 percent to the dollar to $1.18820.

Still, the dollar is expected to continue to fall as progress on a vaccine and the expected choice of former Federal Reserve Chair Janet Yellen as the next US Treasury secretary relieved two big uncertainties for investors.

“From here, the Fed will prove a mere auxiliary to maximize fiscal impact by ensuring cheap funding,” said John Hardy, head of FX strategy at Saxo Bank.

He said the Fed would do this by printing money and keeping rates low across the yield curve.

“On that note, it makes sense to have a former Fed chair helping to maximize that fiscal-monetary coordination under a Biden administration. So the long-term implications of the Yellen nomination are distinctly dollar negative,” Hardy added.

The British pound bought $1.3326, close to its highest in more than two months.

Against the yen, the dollar gained marginally to 104.48.

Research suggesting that a COVID-19 vaccine could be available before the end of the year has sent US stocks surging to record highs and reduced the appeal of holding the dollar as a safe-harbor currency.

Risk appetite has also improved after US President Donald Trump’s administration began cooperating with President-elect Joe Biden’s transition team, and after reports that Yellen, an advocate of more fiscal spending, will take the top job at the Treasury.

The dollar index, pitting the dollar against a basket of six major currencies, was at 92.235 after falling 0.4 percent on Tuesday.

The onshore yuan rose to 6.5739 per dollar on hopes for better Sino-US ties under Biden. Other Asian currencies also edged higher.

The antipodean currencies, which benefited earlier as investors unwound bets for additional monetary stimulus in both countries, eased by midday in London.

Improving risk appetite means the Australian dollar’s next target is its high of $0.7413 on Sept. 1.

The New Zealand dollar, which has rallied 5.5 percent so far this month, is trading just shy of its strongest since June 2018.

Bitcoin, the most popular cryptocurrency, climbed to $19,241 just short of its record of $19,666 from December 2017.


Intel avoids outsourcing embrace, investigates hack of results

Intel avoids outsourcing embrace, investigates hack of results
Updated 29 min 34 sec ago

Intel avoids outsourcing embrace, investigates hack of results

Intel avoids outsourcing embrace, investigates hack of results

The incoming chief executive of Intel Corp. said on Thursday that most of the company’s 2023 products will be made in Intel factories but he sketched a dual-track future in which it will lean more heavily on outside factories.
The lack of a strong embrace of outsourcing from new CEO Pat Gelsinger drove shares down 4.7% after hours. Shares rose 6.5% during regular trade, when the results were released ahead of the close. The company said it was investigating “non-authorized” access to some of the results, with the Financial Times quoting its chief financial officer as saying the microchip maker had been hacked.
Intel also forecast first-quarter revenue and profit above Wall Street expectations, continuing to benefit from pandemic demand for laptops and PCs that have powered the shift to working and playing from home.
Gelsinger said he was “confident that the majority of our 2023 products will be manufactured internally” though he also said the use of outside chip factories is likely to increase “for certain technologies and products.”
Intel has been considering since last July whether to drop its decades-old strategy of both designing and making chips by turning for help on its central processing units, or CPUS, to “foundry” manufacturers. Those partners could be Taiwan Semiconductor Manufacturing Co. and Samsung Electronics. Intel’s manufacturing technology, called a 7-nanometer process, is expected in 2023.
“We didn’t get our answer on which foundries and when,” said Patrick Moorhead of Moor Insights & Strategy. “They pushed the can down the road.”
Kinngai Chan, analyst at Summit Insights Group, said Intel is not likely to outsource its flagship chips.
“Intel’s 14-nanometer chip transistor speed has always been faster than what any foundry can offer even at 7-nanometer,” Chan said. “We believe it will increase its use of external foundries over-time — just not for its large-core CPUs.”
Keeping manufacturing in-house means higher investments. Bernstein analyst Stacy Rasgon questioned whether Gelsinger, currently the chief executive of VMware Inc. who previously spent 30 years at Intel and announced his intention to return just last week, has had sufficient time to dig into the issue.
“It was pretty obvious they were trying to borrow his credibility” when Gelsinger endorsed Intel’s delayed 7-naonmeter technology, Rasgon said.
Intel’s decision coincides with US lawmakers having passed bipartisan legislation to fund US chip manufacturing. But the new law has yet to specify funding levels or recipients, and Forrester Research analyst Glenn O’Donnell said Intel might take the opportunity to solicit US government support for domestic manufacturing.
Boosted by a new high-end PC processor, Intel regained some momentum in the PC market, with volumes of PC chips rising 33%, faster than the 26% rise for the overall PC market, according to data from IDC.
Data center group sales, which powered Intel’s growth over the past several years, were $6.1 billion compared with analyst estimates of $5.48 billion, according to FactSet data.
But sales to cloud computing customers, some of the largest and fastest-growing purchasers of data center chips, were down 15% in the fourth quarter. Data center chip operating margins were 34% in the quarter, down from 48% a year earlier.
“We think (data center) operating margins are going to improve as we get toward the second half of the year, when we expect to see a rebound in cloud” chip sales, Intel Chief Financial Officer George Davis said.
The company also raised its dividend by 5%.
The chipmaker said it expects fiscal first-quarter adjusted sales of $17.5 billion and adjusted earnings per share of $1.10, both ahead of analyst consensus, according to IBES data from Refinitiv.
Fourth-quarter revenue of $20 billion and adjusted earnings per share of $1.52 also beat Wall Street targets.