U.S.:
Dollar Drops to Weekly Low as Dip in Treasury Yields Adds Weight
The dollar dropped to its lowest of the week and remained defensive as U.S. Treasury yields fell to fresh lows after another well-received auction saw $28 billion of 7-year notes snapped up at a yield of 2.284%, while month-end portfolio rebalancing also weighed, though foreign exchange flows remained modest and participation light overall. The dollar was also pressured Wednesday when Treasury yields fell after an auction of 5-year notes was equally well-received by investors. Yields fell along the curve today as markets got jostled by year-end trading flows; the yield on the U.S. 10-year briefly fell below 2.46%, the lowest since Dec. 14. The greenback relinquished weekly gains that had seen it peak near its Dec. 20 high, the highest level since 2002, as measured by the DXY Dollar Index
<https://www.bloomberg.com/news/articles/2016-12-29/dollar-erases-weekly-gain-as-month-end-rebalancing-takes-a-bite>
Europe:
Euro Jumps 1.6 Percent in Minutes as Algo Orders Surprise Market
The euro surged as much as 1.6 percent against the dollar in the Asian morning Friday as a rush of computer-generated orders caught traders off guard. The sudden move started under $1.05 and algorithmic orders snowballed above that level, causing what little liquidity there was on the year’s last trading day to vanish, according to foreign-exchange traders. In minutes, Europe’s single currency jumped to a high of $1.0653, forcing some dealers to take losses to cover positions.
<https://www.bloomberg.com/news/articles/2016-12-30/euro-surges-amid-thin-liquidity-as-algo-orders-surprise-traders>
Canada-EU Trade Deal Could Survive Brexit in U.K., Freeland Says
Trade Minister Chrystia Freeland says Canada will seek to build on its EU trade deal within the U.K. once Brexit occurs, rather than striking a separate bilateral pact. The Canada-EU Comprehensive Economic and Trade Agreement is set to go into force provisionally in early 2017, about the same time the U.K. only begins official talks to exit the European Union. The timing leaves Freeland optimistic the pact will take effect in the U.K. — and, once it does, both sides can reach a deal to preserve it.
<https://www.bloomberg.com/news/articles/2016-12-30/canada-eu-trade-deal-could-survive-brexit-in-u-k-freeland-says>
Asia:
China economy improving, rate hike a possibility-c.bank adviser
Interest rates in China are already on an upward trend as the economy improves, People’s Bank of China (PBOC) adviser Sheng Songcheng told Reuters in an interview. "The economy is improving…so interest rates and prices will move in a positive direction," Sheng said on Thursday. "Under the right circumstances, if conditions allow, we can consider a rate hike." After starting 2016 under a cloud, China’s economy has performed better than expected this year, fueling speculation that the central bank may be considering a policy shift after years of ultra-loose monetary conditions that have spurred an explosive rise in debt.
<http://www.reuters.com/article/china-economy-rates-idUSL4N1EP1Y2>
