Author: train2invest Admins

Can Chinese yuan drub US dollar to become the most dominant currency? (firstpost.com)

FP Explainers April 05, 2023 15:02:37 IST

The Chinese yuan can come to par with the US dollar in the global trade markets in the coming future, say experts. Reuters (Representational Image)

The rising influence of China’s currency yuan has prompted questions about whether it can oust the US dollar as the world’s dominant currency.

As per a Bloomberg report on Tuesday (4 April), the yuan has replaced the US dollar as the most traded currency in Russia.

Let’s take a closer look at the rise of the Chinese currency globally and if it can overthrow the US dollar.

Yuan topples US dollar in Russia

Russia turned to China’s currency amid Western sanctions following Moscow’s invasion of Ukraine last February.

According to Bloomberg, the yuan put the dollar behind in monthly trading volume this February in Russia, increasing further in March.

Before Russia’s war in Ukraine, the yuan had a negligible trading volume in the Russian market, noted Bloomberg.

Western sanctions targeting Russia’s financial system pressured the Kremlin and Russian companies to shift their foreign-trade payments from the dollar and euro with alternative currencies.

Beijing has also provided a market for Russian goods as Western sanctions sting Moscow.

The trade relations between the Russia and China have grown after the Ukraine war.

Trade between the two nations touched a record $190 billion last year, with most of these transactions in Chinese and Russian currencies, reported Al Jazeera.

ALSO READ: Will a new BRICS currency replace the US currency for trade?

Dumping dollar, accepting yuan 

Though US dollar continues to lead global trade market, countries have started using other alternative currencies for foreign trade and settlement.

China has expressed interest in setting up Asian Monetary Fund to reduce reliance on the US dollar and the International Monetary Fund (IMF), Malaysian prime minister Datuk Seri Anwar Ibrahim said in Parliament on Tuesday (4 April).

“There is no reason for Malaysia to continue depending on the dollar,” Anwar was quoted as saying by Bloomberg.

The Malaysian leader also stated that the country’s central bank is chalking out plans to negotiate trade matters using the ringgit (Malaysia’s currency) and yuan, reported Bloomberg.

It’s not just Malaysia that wants to ditch the US dollar to water down America’s influence over the world economy.

Brazil recently green-lit yuan for trade settlements and investments with Beijing. Reuters reported on 31 March that the yuan has emerged as the second most important currency in Brazilian foreign reserves, surpassing the euro.

The Chinese currency, which did not have a share in Brazil’s foreign reserves till 2018, accounted for 5.37 per cent of Brazilian central bank holdings by the end of 2022.

However, the US dollar still commanded Brazil’s total foreign reserves last year, with 80.42 per cent share.

Earlier in March, Saudi Arabia said it is open to talks to sell its oil in currencies other than the dollar. As per The Wall Street Journal report, the oil-rich nation is also in discussions with China to accept yuan for some of its oil sales.

Last July, Iran said it has completely abandoned the US dollar for its trade with Russia and would adopt Russian ruble for transactions. It also announced it has similar plans for trade with India, Turkey and China.

China, Indonesia, Malaysia, Hong Kong, Singapore, and Chile decided to contribute 15 billion yuan (around $2.2 billion) to the Renminbi Liquidity Arrangement in July 2022.

Beijing has also been promoting local currency in trade settlement and finance through BRICS collective, consisting of Brazil, Russia, India, China and South Africa.

China’s central bank has approved 31 yuan-clearing banks in 29 countries or regions.

In recent years, China has reported “double-digit growth in yuan-denominated trade settlement and investment”, as per South China Morning Post (SCMP).

As per China’s Ministry of Commerce, commodity trade worth around 7.92 trillion yuan (US$1.15 trillion) was settled in yuan in 2022, a surge of 37.3 per cent from a year before.

Will yuan replace US dollar?

Not for now, at least.

Economists Barry Eichengreen of the University of California Berkeley and Camille Macaire of France’s central bank said in a study that replacing the US dollar will not be a cakewalk for the yuan.

They also noted that yuan reserves are seeing a gradual uptick in nations that have close trade relations with China, reported Yahoo Finance.

The yuan accounted for 2.7 per cent of the total foreign-exchange reserves last year, Bloomberg reported citing IMF data.

The study also said the Chinese currency could become an alternative to the US dollar in a “multipolar” world and this parity with the greenback could happen in a few decades.

“China has already helped launch the Asian Infrastructure Investment Bank (AIIB) as an alternative to the World Bank within the Asian region. If it can indeed tackle the influence of the World Bank and IMF within the region, it might be possible for the yuan to become competitive against the US dollar in the long run,” Dr MM Akash, Chairman, Department of Economics, University of Dhaka, told Bangladesh’s daily newspaper The Business Standard.

Nouriel Roubini, the chief economist at Atlas Capital Team, wrote in The Financial Times in February that the US has taken steps that reduced “the appeal of dollar assets among foes and relative friends.”

“These include financial sanctions against its rivals, restrictions to inward investment in many national security-sensitive sectors and firms, and even secondary sanctions against friends who violate the primary ones,” Roubini, known as Dr Doom economist, said.

However, certain obstacles can hamper yuan’s growth in toppling US dollar as the world’s reserve currency, including its strict currency controls.

The lack of transparency in the economic policy of China and Russia can also spook countries to adopt them against the US dollar for foreign trade.

“When it comes to the (Russian) Ruble or the renminbi (yuan), you cannot rely on the transparency of (Vladimir) Putin or Xi Jinping. Since the decision-making process in these countries is rather undemocratic, it is difficult for traders to rely on these currencies as reliable alternatives” Dr Zaidi Sattar, Chairman of Bangladesh’s Policy Research Institute, told The Business Standard.

Top economist Paul Krugman has also rebuffed concerns of the Chinese yuan ending the dominance of the US dollar in the global financial system, saying in a New York Times op-ed that he does not expect this to happen anytime soon.

With inputs from agencies

Oil prices rose in early Asian trade on Wednesday on anticipated U.S. crude inventory declines and OPEC+’s latest output cut targets.

Brent crude futures gained 38 cents to $85.32 a barrel at 0021 GMT. West Texas Intermediate U.S. crude was up 33 cents to $81.04 a barrel.

Helping boost oil prices was an industry report showing that U.S. crude stocks fell by about 4.3 million barrels in the week ended March 31, according to market sources citing American Petroleum Institute figures on Tuesday.

In Asia, Japan’s service sector grew in March at the fastest rate in more than nine years.

Gasoline inventories fell by about 4 million barrels, while distillate stocks fell by about 3.7 million barrels, according to the sources, who spoke on condition of anonymity because they were not authorized to speak to the media.

The official inventory report by the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due at 1430 GMT on Wednesday.

The latest targets set by the Organization of Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, also helped oil prices. The OPEC+ plan would bring the total volume of cuts by the group to 3.66 million bpd, including a 2 million-barrel cut last October, equal to about 3.7% of global demand.

Keeping oil prices from moving higher were concerns about demand, with U.S. job openings in February falling to the lowest level in nearly two years and U.S. manufacturing activity in March slumping. Weak manufacturing activity in China last month also added to crude oil demand concerns.

Federal Reserve Bank of Cleveland President Loretta Mester said on Tuesday that the U.S. central bank likely has more interest rate rises ahead amid signs the recent banking sector troubles have been contained.

To keep inflation on a sustained downward path to 2% and keep inflation expectations anchored, Mester said she sees monetary policy moving “somewhat further into restrictive territory this year, with the fed funds rate moving above 5% and the real fed funds rate staying in positive territory for some time.”

“Precisely how much higher the federal funds rate will need to go from here and for how long policy will need to remain restrictive will depend on how much inflation and inflation expectations are moving down, and that will depend on how much demand is slowing, supply challenges are being resolved, and price pressures are easing,” Mester said in a speech before a group of economists in New York.

The Fed in late March raised rates by a quarter percentage point, to between 4.75% and 5%. The decision was haunted by banking sector troubles that led policymakers to say that a tightening in financial conditions would likely weigh on economic activity.

“I was very comfortable with moving ahead” with the rate rise, given that authorities had taken steps to manage risks coming from banking sector troubles, Mester said in remarks following her speech.

At the policy meeting, officials also penciled in a single additional rate rise for this year, as the Fed continues to boost the cost of short-term borrowing in a bid to lower inflation.

https://www.cnbc.com/2023/04/05/federal-reserves-mester-says-rate-target-will-need-to-go-over-5percent.html

After seven successive days of gains, the Canadian market turned a bit weak on Tuesday, but still managed a good recovery to eventually end the day’s session with just a marginal loss.

Concerns about economic slowdown weighed even as worries about any aggressive tightening by the Fed faded after data showed a drop in U.S. job openings, and a decline in factory orders.

The benchmark S&P/TSX Composite Index, which climbed to 20,361.26 in early trades, fell to 20,203.25 a little past noon, but recovered to finally end the session at 20,203.25, down just 2.52 points from the previous close.

Communications and materials shares moved higher. Healthcare, consumer discretionary, energy and financials shares were among the major losers.

Agnico Eagle Mines (AEM.TO) climbed more than 5.5%. Rogers Communications (RCI.B.TO), Franco-Nevada Corporation (FNV.TO), BCE Inc (BCE.TO), Constellation Software (CSU.TO), Cogeco Inc (CGO.TO), Wheaton Precious Metals (WPM.TO), George Weston (WN.TO) and Loblaw Co. (L.TO) gained 1.4 to 3.5%.

Spin Master Corp (TOY.TO), BRP Inc (DOO.TO), Stelco Holdings (STLC.TO), Methanex Corporation (MX.TO), TFI International (TFII.TO), Bombardier (BBD.B.TO), West Fraser Timber (WFG.TO), Colliers International (CIGI.TO) and Magna International (MG.TO) lost 2 to 5.2%.

On the economic front, data released by Statistics Canada showed the total value of building permits in Canada advanced 8.6% from a month earlier to $10.7 billion in February 2023, after a downwardly revised 3.7% slump in the prior month.

The day after Glencore PLC GLNCY +1.14%increase launched an unsolicited US$23.1-billion takeover offer for Canada’s Teck Resources Ltd. TECK-B-T -0.51%decrease, and Gary Nagle, Glencore’s chief executive officer, expounded publicly for hours on its merits, the giant Swiss miner has gone silent.

And no wonder.

Norman B. Keevil, whose family investment vehicle controls Teck’s class A super voting shares, told The Globe and Mail that the venerable Canadian mining company, which has been in operation for more than half a century, must remain in Canadian hands. A sellout to Glencore is not in the cards, he said. “It’s not a matter of price, Canada is not for sale.”

Mr. Keevil’s comments recalled the late Peter Munk’s condemnation of the foreign takeover of one big Canadian mining company after another in the mid-2000s. The founder of Barrick Gold Corp. in 2006 urged corporate Canada not to be meek, to fight back, and not simply sell out to the highest bidder.

Investors are now wondering what Glencore’s next move will be after Mr. Keevil invoked similar fiery economic nationalism to explain his rejection of any Glencore takeover of Teck, no matter what the price.

“He is a fiercely proud Canadian, and rightly so,” Dalton Baretto, analyst with Canaccord Genuity Corp., said in an e-mail.

“That said, Glencore would clearly have known that as well, and factored it into their calculus, although at this point I’m not sure how they plan to get around it.”

So what are Glencore’s options?

It will almost certainly try to sway Mr. Keevil, even if his mind already appears made up.

“Dr. Keevil is a critical stakeholder,” Glencore’s Mr. Nagle said Monday in a media call.

“We certainly would not want to bypass him, or go around him. We respect what he’s built, and we will seek to engage further with him, around the potential value creation that this proposal brings.”

Some analysts, including Christopher LaFemina, with Jefferies, are expecting Glencore to hike its takeover proposal, a strategy that may not make sense in this instance.

In a note to clients, Scotia Capital Inc.’s Orest Wowkodaw said that even in the event of a higher offer from Glencore, the likelihood of it working “is very low.” That’s because of the stranglehold Mr. Keevil and Japan’s Sumitomo Metal Mining Co. have on the A shares.

More than half of the A shares are owned by the Keevil family and Sumitomo. Each A share carries 100 votes, compared with one vote for a B share. Mr. Keevil told The Globe on Monday that Sumitomo and he are completely aligned in their thinking.

However, even if a higher takeover offer has no influence over Mr. Keevil and Sumitomo, it potentially could affect the outcome of the shareholder vote that Teck will be holding later this month. Then investors will weigh in on whether they are on board with Teck’s plans to split itself into two separate units, one holding its legacy metallurgical coal unit, and the other holding its copper and zinc assets, a transaction that was announced in February. At least two-thirds of both the class A and class B shareholders must vote in favour for it to succeed.

“The April 26th vote will be critical,” Mr. Baretto said, “as the class B shareholders will vote independently and can make their views known.”

Glencore said Monday if Teck’s vote succeeds, its proposed takeover of Teck is dead in the water.

But if the vote fails, Glencore, at the very least, has a lot more time to try to get its own takeover proposal of Teck done.

Glencore declined an interview with The Globe and Mail on Tuesday

Simply Wall St

Mon, April 3, 2023 at 6:43 AM CDT·4 min read

With its stock down 11% over the past three months, it is easy to disregard Tourmaline Oil (TSE:TOU). But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Particularly, we will be paying attention to Tourmaline Oil’s ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Simply put, it is used to assess the profitability of a company in relation to its equity capital.

Check out our latest analysis for Tourmaline Oil

https://finance.yahoo.com/news/tourmaline-oil-corp-tse-tou-114340353.html

A $400-million lawsuit against four businesses, two of them large corporations, filed on behalf of a group of Mexican migrants who were illegally trafficked across the GTA and housed in York Region, has received a sharp rebuke from Aurora’s Magna International.

At the beginning of March, police announced the shockingly poor living conditions a group of Mexican irregular migrants were forced to withstand as they were trafficked at work places across the GTA.

During a news conference, York Regional Police said 64 Mexicans were illegally brought into the country with promises of well-paying jobs before they were placed in grubby housing in East Gwillimbury and taken across many cities to work places where they were poorly paid and treated.

On March 31, Diamond and Diamond Lawyers announced it is launching a class-action lawsuit on behalf of some of these victims against four businesses, including Magna International and Gwillimdale Farms, alleging the migrants were working at these companies and that the businesses should have known.

“Human trafficking is a reprehensible crime, and we are proud to represent the brave victims in this lawsuit,” Sandra Zisckind, a managing partner at the firm, wrote. “Our goal is to ensure that these corporations are held accountable for their actions and that justice is served for the survivors of this horrific crime.”

Magna and Gwillimdale, along with the other two businesses, “have been accused of being complicit in human trafficking”, she wrote, alleging they either knowingly participated in human trafficking, or chose to “ignore the signs and evidence”.

The other two businesses being sued are a resort in Muskoka and another produce company in northern York Region.

In a statement posted on Magna’s website, spokesperson Tracy Fuerst wrote that in recent weeks, the company has been “voluntarily supporting” the Canadian Border Services Agency in its investigation into human trafficking and illegal migration.

https://www.yorkregion.com/news/crime/magna-responds-to-400m-lawsuit-filed-against-it-on-behalf-of-trafficked-mexican-migrants/article_7b3a54ea-bc3d-52ff-bf23-5c0984864152.html

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Mary Hui

Mon, April 3, 2023 at 6:00 AM CDT·3 min read

In this article:

• MP-2.60%

China may already dominate the world’s supply chains of rare earth metals. Even so, it is increasingly worried about securing enough raw materials to feed its vast industrial appetite.

Numbers bear this out. China’s grip on rare earth production has slipped even as other countries have ramped up their own production. Its share of global mining output fell to 58% in 2021, from a high of 98% in 2010. At the same time, its imports of rare earth raw materials have grown, jumping nearly 40% in 2021, according The Rare Earth Observer, an industry newsletter.

Read more

https://finance.yahoo.com/news/chinas-rare-earths-industry-raw-110000292.html

Published: 3/31/2023 6:09 PM ET

The Canadian market extended its winning streak to a sixth session with stocks from technology, consumer discretionary and industrials sectors posting strong gains on Friday.

The mood was bullish as worries about a banking continued to ease, and data showing an expansion in Canadian economic activity in the month of February aided sentiment.

Data showing an unexpected slowdown in the annual rate of core consumer price growth in the U.S. helped as well.

The benchmark S&P/TSX Composite Index ended with a gain of 158.90 points or 0.8% at 20,099.89, after hitting a high of 20,126.54 intraday. The index gained more than 3% in the week, and 3.7% in the January-March quarter.

The Information Technology Capped Index surged 2.36%. BlackBerry (BB.TO) soared 14.4%. Lightspeed Commerce (LSPD.TO) climbed 6.2%, while Quarterhill (QTRH.TO), Hut 8 Mining (HUT.TO) and Haivision Systems (HAI.TO) gained 4.5 to 5.5%. Shopify Inc (SHOP.TO), Constellation Software (CSU.TO), Celestica Inc (CLS.TO), Descartes Systems (DSG.TO) and Kinaxis Inc (KXS.TO) also posted strong gains.

Among consumer discretionary stocks, Canada Goose Holdings (GOOS.TO) gained more than 5%. Linamar Corp (LNR.TO), Pet Valu Holdings (PET.TO), Magna International (MG.TO), Restaurant Brands International (QSR.TO) and Spin Master Corp (TOY.TO) advanced 2.3 to 3.2%.

In the Industrials sector, Snc-Lavalin, Bombardier Inc (BBD.B.TO), Ballard Power Systems (BLDP.TO), Brookfield Business Partners (BBU.UN.TO), Badger International (BDGI.TO), Finning International (FTT.TO), Richelieu Hardware (RCH.TO), WSP Global (WSP.TO), Toromont Industries (TIH.TO) and Air Canada (AC.TO) gained 2 to 4%.

Cogeco Inc (CGO.TO), Docebo Inc (DCBO.TO), Ag Growth International (AFN.TO), Goeasy (GSY.TO), Cargojet (CJT.TO) and Canadian Tire Corporation (CTC.A.TO) were among the other major gainers in the session.

Shaw Communications (SJR.B.TO) gained about 3.3% after the Minister of Innovation, Science and Industry Francois-Philippe Champagne approved the company’s C$20 billion ($14.8 billion) buyout of Shaw Communications.

Rogers Communications and Shaw Communications announced today that their historic merger is expected to close prior to the outside date of April 7

On the economic front, the Canadian economic activity likely increased by 0.3% over a month earlier in February 2023, preliminary estimates showed.

In January, the GDP increased by 0.5%, following a slight 0.1% contraction in December.

• Several OPEC+ members on Sunday announced intentions to voluntarily cut a further combined 1.16 million barrels per day of production, in a move independent from the broader bloc’s output strategy.
• The reductions will challenge consumer governments, such as the U.S., which are already tackling high inflation and volatility in the banking sector.
• A formal meeting of an OPEC+ technical committee takes place Monday to review the group’s existing strategy. It cannot change policy.

https://www.cnbc.com/2023/04/03/oil-opec-just-made-the-feds-job-more-complicated-heres-what-they-did.html