Ugandan shilling strengthens; offshore FX inflows help
At 0726 GMT, commercial banks quoted the shilling at 3,628/3,638, compared with Wednesday's closing rate of 3,638/3,648.
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Reuters
3 hours ago
- Reuters
Dollar mixed as traders wait on Jackson Hole
NEW YORK, Aug 19 (Reuters) - The dollar was mixed on Tuesday as traders awaited the Federal Reserve's Jackson Hole Economic Policy Symposium later this week for further clues on U.S. interest rate policy. A speech on Friday by Fed Chair Jerome Powell is this week's main focus, with little major economic data to drive market direction. Traders are tuned into whether Powell will push back against market pricing of a rate cut in September. Traders ramped up bets on a rate cut at the Fed's September 16-17 meeting after a weak July jobs report, and as last month's consumer price inflation report showed limited upward pressure from tariffs. But a hotter-than-expected July producer price reading has tempered some rate-cut expectations. Powell has said he is reluctant to cut rates due to an expected increase in inflation this summer from tariffs. "Last week, when we had about 25 basis points priced in for September, and more than two cuts for the rest of the year, there was probably some risk that the Powell speech would disappoint those expectations if he wasn't clear enough in committing to a September cut," said Vassili Serebriakov, an FX and macro strategist at UBS in New York. "Now that we're pricing in about 20 basis points for September and just slightly over 50 basis points for the rest of the year, I think the risks are much more balanced," Serebriakov added. Traders are pricing in 54 basis points of cuts by year-end. The Fed will also release minutes from its July 29-30 meeting on Wednesday, though they may offer limited insight as the meeting came before July's weak jobs report. Data on Tuesday showed groundbreaking for new U.S. single-family homes and permits for future construction rose in July even as high mortgage rates and economic uncertainty continued to hamper home purchases. The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, was last up 0.15% on the day at 98.27, with the euro down 0.12% at $1.1646. Against the Japanese yen , the dollar weakened 0.22% to 147.54. Currency moves have been relatively muted for the past few weeks following a steep drop in the dollar in the first half of the year. "There's been a bit of de-risking in FX over the summer and now investors are just waiting for the more clear catalyst for the next move," said Serebriakov. In other currencies, sterling slipped 0.16% to $1.348. The Aussie dropped 0.62% to $0.6451, the weakest since August 5. Traders are also focused on any developments in peace talks to end the Russia-Ukraine war. U.S. President Donald Trump said on Tuesday he hoped Russian President Vladimir Putin would move forward on ending the war in Ukraine but conceded that the Kremlin leader may not want to make a deal at all, adding this would create a "rough situation" for Putin. In cryptocurrencies, bitcoin fell 2.88% to $113,112.
Reuters
5 hours ago
- Reuters
Breakingviews - Dear retail traders: 'can't lose' means can't win
NEW YORK, Aug 19 (Reuters Breakingviews) - Everyone loves a casino, except when they lose. As excitable retail traders flood into stocks, cryptocurrencies and more, Wall Street is selling them promises of safe seats at the highest-stakes tables. Unfortunately, 'can't lose' in this case also mostly means 'can't win.' Investors poured $65 billion into so-called buffer exchange-traded funds over the past five years, according to Morningstar, while BlackRock expects them to reach ten times that size by 2030. The gist is simple: take an underlying investment, like the S&P 500 Index (.SPX), opens new tab. Then, wrap it in options that eliminate losses up to a certain threshold, typically 10%. Paying for this requires relinquishing gains, which are usually capped at 15%. So if the market drops 15%, you lose 5%. If it rises 35%, your investment grows only 15%. These funds gained traction after 2022, when both stocks and bonds fell, rendering diversification less effective. Over time, a standard buffer ETF should return about 90% of the market's performance, according to fund managers. In theory, that might be a reasonable cost for protecting against drawdowns. In practice, though, research from hedge fund AQR, opens new tab finds that 80% of buffer ETFs inflict greater-than-claimed maximum losses. Defenders say they work if bought on launch day and held for exactly one year. Yet they trade tick-by-tick, like any stock. The theory goes further awry in more exotic terrain. Gambling on hyper-risky assets – like crypto or speculative technology firms – without chancing catastrophe would obviously be appealing. Ark Investment, run by tech investor Cathie Wood, plans to launch a buffered version of its Innovation ETF. It aims to halve losses, in exchange for surrendering the first 5% of returns and keeping only 60% of upside from there. The problem is the cost of protection on something so risky. Based on the Innovation fund's past performance, an investor who put $1,000 into the buffer fund 10 years ago would have missed $380 in gains annually to pay for options, Breakingviews calculates. That would leave a gain of $2,057.51, slightly underperforming the S&P 500 and with little benefit in terms of volatility. Then there's the 2x Capped Accelerated TSLA ETF, a buffer wrapped around a twice-leveraged Tesla (TSLA.O), opens new tab fund. A $1,000 investment five years ago would have ended up losing $200, Breakingviews calculates, despite Tesla's stock more than doubling. Themes, the fund's manager, says it works — but only if held for exactly one month. The danger is that this keeps pushing into ever-diminishing payoffs for ever-racier ostensible investments. Just imagine if someone wrapped, say, a bitcoin-hoarder stock like Strategy (MSTR.O), opens new tab in a leveraged ETF, then wrapped it again in a buffer. Or don't: one of those launched last week. Follow Stephen Gandel on LinkedIn, opens new tab and X, opens new tab.
Reuters
6 hours ago
- Reuters
Oil prices fall as traders bet Russia sanctions could end soon
HOUSTON, Aug 19 (Reuters) - Oil prices fell on Tuesday as traders thought a possible cease-fire in Russia's war with Ukraine might lead to easing or the end to sanctions on Russian crude oil, which would in turn boost global supply. Brent crude futures were down 50 cents, or 0.75%, at $66.10 a barrel at 10:38 a.m. CDT (1538 GMT). U.S. West Texas Intermediate crude futures for September delivery, set to expire on Wednesday, were down 72 cents, or 1.14%, at $62.70 per barrel. The more active October WTI contract was down 66 cents, or 1.05%, at $62.04 a barrel. "Even with this peace dividend, we have a record short position," said Phil Flynn, senior analyst with Price Futures Group. "Because of the size of the short position, people are betting on a cease-fire and if we don't get one there could be a bounce." Following a White House meeting on Monday with Ukrainian President Volodymyr Zelenskiy and European allies, U.S. President Donald Trump announced in a social media post that he had spoken with Russian President Vladimir Putin. Trump said arrangements were being made for a meeting between Putin and Zelenskiy, which could lead to a trilateral summit involving all three leaders. Suvro Sarkar, lead energy analyst at DBS Bank, said Trump's softened stance on secondary sanctions targeting importers of Russian oil had reduced the risk of global supply disruptions, easing geopolitical tensions slightly. Chinese refineries have purchased 15 cargoes of Russian oil for October and November delivery as Indian demand for Moscow's exports has fallen away, two analysts and one trader said on Tuesday. Zelenskiy described his talks with Trump as "very good" and noted discussions about potential U.S. security guarantees for Ukraine. Trump confirmed the U.S. would provide such guarantees, though the extent of support remains unclear. Trump has pressed for a quick end to Europe's deadliest war in 80 years, but Kyiv and its allies worry he could seek to force an agreement on Russia's terms. "An outcome which would see a ratcheting down of tensions and remove threats of secondary tariffs or sanctions would see oil drift lower toward our $58 per barrel Q4-25/Q1-26 average target," Bart Melek, head of commodity strategy at TD Securities, said in a note.
