Overseas Headlines – December 12, 2016

Dollar hits 10-month high vs yen as oil spurs reflation bets
Dec 12 The dollar rose to its highest since February against the yen on Monday as U.S. bond yields climbed on the back of expectations of broadly higher inflation, driven by a 5 percent rise in global oil prices. The Norwegian crown and Canadian dollar were the other big gainers after OPEC and non-OPEC producers struck their first deal since 2001 to curtail output jointly, driving crude prices to their highest levels in a year and a half. Added to gains for the euro and sterling that held the dollar flat against the basket of currencies used to measure its broader strength and traders said the market was cautious ahead of the U.S. Federal Reserve’s meeting on Wednesday.

Sterling rises as busy UK data, policy week gets under way
Sterling edged up on Monday, recovering some ground lost last week as investors braced for what is shaping up to be a busy week with the latest top-tier UK economic data releases and Bank of England policy meeting. Britain’s benchmark 10-year government bond yield rose to 1.50 percent on Monday for the first time since May, and the two-year spread over comparable German yields hit its widest since late October at 93 basis points. At 0845 GMT sterling was up 0.2 percent against the dollar at $1.2599 and the euro was down 0.1 percent at 83.91 pence.


Long-dated JGBs tumble, 10-year yield hits 10-month high
Long-dated Japanese government bond prices tumbled on Monday, driving the benchmark 10-year yield to its highest in 10 months, on the back of continuing gains in U.S. bond yields and Japanese shares. The longest end of the yield curve came under strongest pressure on growing perception that the Bank of Japan is more tolerant of rises in yields on those maturities than it is on shorter yields. The 30-year yield rose 8.5 basis points from its previous close to 0.785 percent, now more than 25 basis points above its levels in September when the central bank said it would guide the yield curve where it was then. "The market is broken. The brokerages who bought a large amount in the previous 30-year bond auction last week are selling them at a discount to investors," said a trader at a Japanese brokerage.