HELSINKI (Reuters) -Telecom equipment maker Nokia (NYSE:NOK) reported stronger-than-expected third-quarter operating profits on Thursday as development investments, strategy updates and cost cuts continued to drive a turnaround in the business.

Third-quarter net sales rose 2% to 5.4 billion euros ($6.27 billion) from 5.3 billion a year ago, in line with analyst expectations.

“The third quarter saw us achieve 2% constant currency net sales growth despite the impact of earlier communicated headwinds in North America for Mobile Networks and global supply chain constraints,” Chief Executive Pekka Lundmark said in a statement.

He added that Nokia now expects comparable operating profit margin to be towards the upper end of the target range of 10% to 12%.

July-September comparable operating profit rose to 633 million euros from 486 million last year, beating the 488 million euro mean forecast of eleven analysts polled by Refinitiv.

Nokia had warned profits would be less pronounced in the second half of 2021 due to possible problems from the semiconductor shortage, lost market share and having to lower prices in the highly competitive North American market.

In July, Nokia won its first 5G radio contract in China, while Nordic rival Ericsson (BS:ERICAs) lost market share after Sweden last year decided to ban Chinese vendors from their 5G networks.

By Peter Nurse – The dollar edged higher in early European hours Thursday, with policy decisions by central bankers in Australia, Japan and Europe jolting trading.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher at 93.835, with movements seen limited ahead of next week’s policy-setting meeting by the Federal Reserve.

USD/JPY traded 0.2% lower at 113.56 after the Bank of Japan kept its interest rates and asset buying plans unchanged Thursday. The central bank also cut its projection for economic growth this fiscal year and also reduced its inflation forecast to zero for the year ending in March 2022 from 0.6%, suggesting it will lag other central banks in reining in its accommodative monetary policies. 

Earlier in the day Australia’s central bank decided against buying a government bond central to its stimulus program even though yields were well above its target of 0.1%. This fuelled market expectation that the Reserve Bank of Australia will lift its 0.1% benchmark interest rate much sooner than the previous guidance of 2024, perhaps even by mid-2022.

AUD/USD traded 0.1% lower at 0.7504, still near its three month high.

Additionally, USD/CAD rose 0.2% to 1.2374 after the Bank of Canada ended its bond-buying stimulus on Wednesday, suggesting it could hike interest rates as soon as April 2022 as it seeks to tackle elevated inflation levels. 

EUR/USD traded flat at 1.1604, just above its 15-month low of 1.1523 hit earlier this month ahead of the European Central Bank’s policy-setting meeting later Thursday.

The ECB is widely expected to use its December meeting to announce key decisions about its emergency stimulus policies, but the strong rise in inflationary pressures has lifted rate-hike expectations.

“It still seems rather far-fetched that the ECB will move its benchmark rates as early as next year,” said analysts at Nordea, in a note, “and [ECB President Christine] Lagarde will probably seek to tone down current market pricing.”  

Elsewhere, GBP/USD edged lower to 1.3742 the day after U.K. Chancellor of the Exchequer Rishi Sunak delivered his annual budget, committing to real-term increases in spending on the back of upgraded forecasts to economic growth and tax revenues.

The dollar was down on Wednesday morning in Asia but held near a one-year high amid rising speculation that the U.S. Federal Reserve will announce the beginning of asset tapering in November 2021, followed by potential interest rate hikes by the middle of 2022.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies edged down 0.20% to 94.332 by 11:17 PM ET (3:17 AM GMT). It touched 94.563 for the first time since late September 2020 on Tuesday.

The USD/JPY pair edged down 0.13% to 113.45.

The AUD/USD pair inched down 0.07% to 0.7344 while the NZD/USD pair inched up 0.10% to 0.6940.

The USD/CNY pair inched up 0.02% to 6.4475. Chinese trade data, including exports, imports and trade balance, is due later in the day while inflation data, including the consumer and producer price indexes, will be released on Thursday.

The GBP/USD pair was up 0.23% to 1.3617.

Three Fed officials, including Vice Chairman Richard Clarida, said on Tuesday that the U.S. economy has healed enough to begin to scale back the U.S. central bank’s asset-purchase program. Money markets are now pricing about a 50-50 chance of a rate increase by July 2022.

Meanwhile, surging energy prices continue to fuel inflation concerns and increased bets that the Fed could normalize its monetary policy much sooner than planned, sending two-year Treasury yields to their highest levels in more than 18 months during the previous session.

Investors now await the U.S. consumer price index, due later in the day, for clues to the Fed’s interest rate hike timeline.

“CPI is the main economic draw” and “has the potential to see Fed rate hike expectations move again, one way or another,” National Australia Bank head of foreign exchange strategy Ray Attrill told Reuters.

With most Fed policymakers insisting that inflationary pressures are transitory, investors now await comments from Fed Governors Lael Brainard and Michelle Bowman, among others, due to speak later in the day. The central bank will also release the minutes from its latest meeting.

In cryptocurrencies, bitcoin traded around $56,500, after reaching a five-month high of $57,855.79 at the beginning of the week.

The pound is unlikely to be rescued by the increasing odds of a Bank of England rate hike as the currency may struggle to escape the clutches of stagflation just as the impact of Brexit begins to emerge. 

GBP/USD was flat at $1.3594.

“GBP’s fall from grace has been swift. Stagflation is the current buzzword which seems to be hitting UK harder than most,” Bank of America said, according to Forexlive.

“Our concerns about structural Brexit headwinds have crystallised. 2022 could put even greater focus and pressure on GBP,” BofA added as it maintained its bearish outlook on the GBP.

The malaise in the pound comes just days after the Bank of England governor Andrew Bailey hinted at a sooner rather than later rate hike to stave off the threat of inflation spiralling out of control.

“[We] have got to in a sense prevent the thing becoming permanently embedded because that would obviously be very damaging,” BoE Governor Bailey said on Saturday.

The Bank of England has held off any clear signaling on tighter amid uncertainties over the labor market outlook but as signs emerge that the unemployment rate is unlikely to pick up steam in the near term, the door to a rate hike is widening.

“Bailey thought that a pickup in unemployment over the near term was now unlikely, a view that was seemingly supported by the record high vacancy-to-employee ratio in today’s figures,” Daiwa Capital Markets said Tuesday.

“There is certainly a non-negligible chance of a 15bps hike in Bank Rate (to 0.25%) at next month’s MPC meeting, when the BoE will update its economic forecasts. And if that hike is not forthcoming, a clear signal of the likelihood of a hike before year-end might now seem more likely than not.”

The dollar is approaching ‘critical resistance’ that may force some to take profit, but this isn’t the time to turn bearish as any dips will likely be bought paving the way for further upside, experts say.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose 0.22% to 93.99.

The dollar is approaching “critical resistance” of 94.47 to 94.76, and could be set for “some consolidation,” Commerzbank said in a note.

While the short-term path for dollar is likely paved with resistance, the overarching backdrop for the dollar is favorable as further positive economic data will likely strengthen the Federal Reserve’s case to tighten its monetary policy measures.

Data on Tuesday showed the ISM services index rose to 61.9 from 61.7, confounding economists’ expectations for a decline to 59.9.

In sign that inflationary pressures remain elevated, the prices paid component of the ISM non-manufacturing report showed prices paid rose to 77.5 from 75.4.

“Prices paid remains at a very high level, and it is consistent with a host of other metrics that reflect elevated prices pressures,” Jefferies said in a note.

The ongoing pace of inflation could force the Fed to hike rates sooner than many expect.

“[A]gainst the backdrop of elevated inflation and rapidly rising energy costs, many market participants are skeptical the FOMC will be able to maintain these low rates for another year, let alone two,” Stifel said in a note.

As well as expectations for tighter monetary policy, the dollar has been boosted by a rise in safe-haven demand in the wake of difficulties in China that are set to continue.

“The headwinds to risk sentiment stemming from China’s property sector are far from over,” ING said. “In FX, we think this will continue to provide reasons not to turn any bearish on the dollar…”

The dollar edged higher on Wednesday amid nervousness that surging energy prices could spur inflation and interest rate hikes, and as traders awaited U.S. jobs data for clues on the timing of Federal Reserve policy tightening.

The Reserve Bank of New Zealand lifted its official cash rate for the first time in seven years but its resolutely hawkish tone only seemed to add to expectations that the Fed will follow suit and the kiwi dipped as U.S. yields rose.

The kiwi was last 0.4% weaker at $0.6928 and the Australian dollar fell by the same margin to $0.7265.

The euro was pinned below $1.16 and last bought $1.1589, scarcely higher than the 14-month low of $1.1563 it struck last week.

The yen fell to a one-week low of 111.72 per dollar in tandem with a rise in Treasury yields, which can draw investment flows from Japan. It was within range of the 18-month trough of 112.08 that it visited last Thursday.

The greenback has won support as investors brace for the Fed to begin tapering asset purchases this year and lay the ground for an exit from pandemic-era interest rate settings well before central banks in Europe and Japan.

“Interest rate differentials are starting to have more of an influence on currencies than they have for quite some time,” said Kim Mundy, analyst at the Commonwealth Bank of Australia in Sydney, as an era of suppressed super-low rates starts to end.

“Now that the Fed is starting to look to taper and look to the exit, we think we might see a lift in market pricing for rate hikes which will help to support the USD,” she added.

Fed funds futures markets are priced for rate hikes to begin around November 2022, but anticipate rates topping out at just over 1% through most of 2025 even though Fed members project rates reaching 1.75% in 2024.

Longer-dated U.S. yields rose on Wednesday and the U.S. dollar index rose 0.1% to 94.082. [US/]

U.S. non-farm payrolls data due on Friday is seen as crucial to informing the Fed’s tone and timing, especially should the figures wildly impress or disappoint. Private payrolls figures, a sometimes unreliable guide, are due around 1215 GMT.

A large miss on market expectations for around 428,000 jobs to have been added in September could dampen expectations for Friday’s broader figure, which is forecast at 473,000.


Nervousness about higher energy prices dragging on growth or flowing through to broader inflation took the edge from the support that the surge had lent to commodity-linked currencies.

The Canadian dollar eased from a one-month peak and the Norwegian crown pulled back from a three-month top.

Sterling has recovered some of last week’s sharp selloff against the dollar but lost momentum through the Asia session and it steadied at $1.3616 and held just below Tuesday’s three-week peak on the euro.

In New Zealand a 25 basis point rate hike and familiar hawkish tone from the central bank did little to support the currency, despite expectations for further hikes in November and February.

“We’re on a path towards a series of rate hikes and the market is well priced for that,” said Jason Wong, senior market strategist at BNZ in Wellington.

For the kiwi, that means “the U.S. dollar is in charge,” he said.

“That’s about the Fed, really, but globally what we’re seeing in China and the energy crunch we’re seeing in Europe all feeds into the mix and all makes markets nervous which adds to support for the dollar.”

Central bank digital currencies (CBDCs) can slash the time needed for cross border payments to seconds from days and cut costs, the Bank of International Settlements (BIS) said, citing a pilot scheme to test the digital forms of fiat currencies.

The trial showed cross border transactions could be made in a few seconds, instead of three to five days, as CBDCs help skirt complicated arrangements under which payments are passed via a network of banks, the BIS said in a report on Tuesday.

CBDCs also helped reduce costs by up to 50%, it added.

Typically, global banks with no network in a given country channel payments there via a local bank that acts on its behalf.

But the process has become long and complicated with banks cutting ties with potentially risky partners and withdrawing from some markets due to compliance and cost reasons.

“Enabling faster and cheaper cross-border wholesale payments, including to jurisdictions that don’t benefit from a vibrant correspondent banking system, would be positive for trade and economic development,” said Benedicte Nolens, head of the BIS Innovation Hub, Hong Kong Centre.

Many governments and central banks around the world are exploring the use of CBDCs. Some, like China, are testing retail-focused CBDCs designed to replicate cash in circulation, while others are considering using so-called wholesale CBDCs to improve the internal workings of their financial systems or cross border financial flows.

The BIS-backed pilot scheme, which initially involved the Hong Kong and Thai central banks, used blockchain to synchronise transaction data across participants in the payment chain.

It helped to slash costs by up to half by reducing some liquidity management, compliance and foreign exchange operations, BIS said in its report.

The project has since expanded to include China and the UAE’s central banks, and is now known as the “mBridge”.

The next steps, the report said, include “developing the prototype into a production-ready solution”.

The dollar traded near its strongest levels of the year on Wednesday, after driving higher with U.S. yields and benefiting from investor nervousness about the Federal Reserve starting to withdraw policy support just as global growth headwinds gather.

The yen, which is sensitive to U.S. yields as higher rates can draw flows from Japan, touched an 18-month low of 111.685 per dollar early in the Asia session.

The euro, which fell to a one-month low overnight, sat at $1.1687 and was close to testing major support around its 2021 low of $1.1664 and its Nov. 2020 low of $1.1602.

Elsewhere, the dollar was firm after broad gains overnight lifted the dollar index against other major currencies to an 11-month high of 93.805. It was last marginally below that level at 92.728.

U.S. Treasury yields have surged lately – with benchmark 10-year rates up 25 basis points in five sessions to 1.5548% – as Fed tapering looms before the year’s end and as inflation starts to look stickier than first thought. [US/]

“Compared to the unencumbered optimism at the start of the year, it is a twilight zone for markets as 2021 approaches its end,” Deutsche bank strategists said in note that upgraded forecasts on the dollar and recommended a bet against the euro.

“Persistently stagflationary dynamics – lower growth but a hawkish Fed – leave little room for a dollar downtrend,” they said.

Along with the Fed’s tone, energy prices are surging and concerns are gathering about the growth outlook in China – now at risk both from a messy collapse at developer China Evergrande and rolling power outages that are hitting output.

Sterling copped a particular beating overnight as concern over the economic impact of a shortage of gas and a scramble for fuel pulled it 1.2% lower on the stronger dollar, its largest daily fall in more than a year. [GBP/]

MSCI’s emerging markets currency index suffered its sharpest fall in three weeks overnight and extended its decline on Wednesday to a one-month low. [EMRG/FRX]

“In our view the dollar is unlikely to retreat significantly until confidence in emerging markets has been lifted,” said Jane Foley, senior FX strategist at Rabobank in London.

“This will be more difficult to achieve in an environment in which is dominates by fears of both higher energy prices and firmer U.S. rates … our 6 month euro/dollar target of 1.16 looks set to be hit sooner that we had been anticipating.”

The Australian and New Zealand dollars were languishing and the kiwi slipped to a fresh one-month low of $0.6939. The Aussie dipped to $0.7227. [AUD/]

Central bank meetings loom next week in both countries and swaps pricing points to the Reserve Bank of New Zealand following Norges Bank and lifting rates.

“NZD/USD remains stuck around $0.7000, as the effect of the hawkish RBNZ is offset by increasing expectations of the Fed,” said Westpac analyst Imre Speizer.

Ahead on Wednesday, Japan’s ruling party votes for a new leader who will almost certainly become the country’s next prime minister.

European Central Bank (ECB) President Christine Lagarde, Fed Chair Jerome Powell, Bank of England Governor Andrew Bailey and Bank of Japan Governor Haruhiko Kuroda are panelists at an ECB forum.

The U.S. dollar eased slightly from a near one-month high as global markets firmed somewhat on Tuesday a day after a risk-off mood dominated by solvency uncertainty of China’s Evergrande, while investors awaited the results of the Federal Reserve’s two-day policy meeting.

After reaching its highest level since Aug. 23 on Monday, the dollar straddled around the unchanged mark on the day, briefly moving higher as early gains on Wall Street’s benchmark equity indexes faded.

Investors are looking toward the Fed’s policy announcement on Wednesday for any signs of when the central bank will begin to scale back its massive bond-buying program, in a week filled with policy statements expected from a host of central banks around the globe.

“The market was trying to get a sense of was this turnaround Tuesday going to last, and if we had that continued improvement of risk appetite the dollar was going to pull back even more here,” said Edward Moya, senior market analyst at OANDA in New York.

“But there is just a lot of wait-and-see as far as what is going to happen with the Fed, what is going to happen with Evergrande. And right now if you are trying to make a dollar bet you really just want to wait until you get a better sense of what is going to happen with Evergrande and what the Chinese government is going to do.”

The dollar index fell 0.019% after reaching a high of 93.455 on Monday, while the euro was down 0.01% to $1.1724.

The greenback strengthened on Monday, along with other safe-havens such as the yen and Swiss franc, as concerns about the fallout from the possible default of China Evergrande unnerved financial markets.

Those concerns overshadowed efforts by Evergrande’s chairman to lift confidence in the embattled firm on Tuesday, as Beijing showed no signs it would intervene to stem any domino effects across the global economy.

The offshore Chinese yuan weakened versus the greenback to 6.4817 per dollar.

Before Evergrande’s debt crisis rattled markets, the dollar had been supported ahead of the Fed meeting this week, with economists surveyed in a Reuters poll expecting policymakers to signal expectations of a tapering plan to be pushed back to November.

The Japanese yen strengthened 0.13% versus the greenback, to 109.23 per dollar, while Sterling was last trading at $1.3658, up 0.01% on the day.

The Canadian dollar was poised to halt three straight days of declines against the greenback, after Canadian Prime Minister Justin Trudeau was re-elected to a third term but failed to win a majority in the parliamentary elections.

The Canadian dollar rose 0.06% versus the greenback at 1.28 per dollar.

In cryptocurrencies, bitcoin last fell 2.01% to $42,172.11.