Global Markets News

* CBOE volatility index hits two-week high (Updates to close, adds new comment)

Speculators increased their net short dollar positions in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Monday. The value of the net short dollar position rose to $30.40 billion in the week ended Dec. 29, compared with a net short of $30.15 billion the previous week. In a wider measure of dollar positioning that includes net contracts on the New Zealand dollar,

Speculators increased their net short dollar positions in the latest week, according to calculations by Reuters and U.S. Commodity Futures Trading Commission data released on Monday.

U.S. stocks dropped more than 1% on Monday, the first trading day of the new year, pulling back after recent gains to record highs, while the U.S. dollar was up slightly.

* Dow down 1.54%, S&P 500 down 1.55%, Nasdaq down 1.53% (Updates to mid-afternoon trade, adds new comment, details; changes byline)

* Euro-denominated share trading leaving London for EU (Updates trading volumes, adds Eurex comment)

* Indexes down: Dow 1.8%, S&P 1.7%, Nasdaq 1.4% (Adds comment, details; Updates prices)

* FTSE 100 up 1.7%, FTSE 250 adds 0.2% (Updates to market close, adds analyst comments)

* U.S. bond prices fall (Updates with early U.S. markets; changes dateline; previous LONDON)

The Bank of Israel expects the economy to rebound quickly in 2021 if the country's fast start to vaccinating people against COVID-19 is maintained, the central bank said on Monday after keeping rates unchanged.

The U.S. dollar fell to mid-2018 lows on Monday as bullish sentiment across global markets prompted investors to buy riskier currencies such as the Chinese yuan and the euro, despite a resurgent pandemic. With U.S. interest rates pinned at record lows, massive U.S. deficits and a belief that rebounding world trade will drive non-dollar currencies higher, the dollar weakened on the first day of trading in 2021 after falling nearly 7% last year. The Chinese currency was the biggest beneficiary of the weak dollar trade. The yuan rocketed to a two-and-a-half-year high. "The U.S. dollar slipped further through the threshold of the new year as global risk sentiment stayed buoyant", said Alvin Tan, an FX strategist at RBC Capital Markets. The dollar index touched a low of 89.415, a level last seen in mid-2018, and was down 0.3% at 89.529. The Chinese yuan rose to 6.44 yuan per dollar after Beijing cut the weighting of the U.S. dollar in a key currency index basket. That could push the yuan's value higher against its peers this year, analysts said, while Chinese factory activity continued to accelerate in December. The euro, which had dipped on New Year's Eve profit-taking, rose 0.6% to $1.2294, just short of 2018 highs with positive economic indicators backing the single currency. IHS Markit economist Phil Smith said the latest data showed German manufacturing continued to power on at the end of the year. "With the rollout of the COVID vaccines, it's hoped that the pandemic will become less and less of a hindrance to demand and that investment will continue to recover in the year ahead." Also, a closely watched gauge of growth in British manufacturing activity rose to its highest level in three years as factories rushed to complete work before the end of the post-Brexit transition period on Dec. 31. Sterling abandoned most of its early gains against the dollar, retreating below $1.37 but close to levels last seen in early 2018. The safe-haven yen rose 0.4% to 102.87 per dollar, after Japanese Prime Minister Yoshihide Suga said his government was mulling a state of emergency in Tokyo as coronavirus cases rise. Bitcoin had a rough ride, falling as low as $27,734 at one point, after making dramatic gains over the new year's break. It was last down 6.4% at $30.980. The world's most popular cryptocurrency surged over $30,000 for the first time on Saturday, touched a record high of $34,800 a day later, as investors continued to bet the digital currency was on its way to becoming a mainstream asset. ======================================================== Currency bid prices at 12:08PM in London (01208 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.2291 $1.2218 +0.61% +0.61% +1.2301 +1.2211 Dollar/Yen 102.8950 103.2900 -0.46% -0.47% +103.3100 +102.7300 Euro/Yen 126.47 126.15 +0.25% -0.35% +126.5200 +126.1100 Dollar/Swiss 0.8798 0.8847 -0.54% -0.54% +0.8845 +0.8789 Sterling/Dollar 1.3647 1.3662 -0.10% -0.10% +1.3703 +1.3645 Dollar/Canadian 1.2694 1.2734 -0.43% -0.31% +1.2735 +1.2666 Aussie/Dollar 0.7719 0.7693 +0.34% +0.34% +0.7740 +0.7682 NZ 0.7208 0.7181 +0.40% +0.40% +0.7230 +0.7183 Dollar/Dollar All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ (Reporting by Julien Ponthus; editing by Lincoln Feast, Larry King)

Sri Lankan shares ended 1.8% higher on Monday, closing at a more than five-year high, driven by gains in consumer staples and industrial stocks.

World stock markets hit record highs on Monday, the first trading day of the new year, as investors hoped the rollout of vaccines would ultimately lift a global economy decimated by the COVID-19 pandemic.

Turkey's lira led gains across emerging market currencies on Monday as higher-than-expected inflation fuelled expectations of tight monetary policy, while stocks in the developing world hit a 13-year high as investors hoped for a swift economic recovery in 2021.

The U.S. dollar held near mid-2018 lows on Monday as bullish sentiment across global markets prompted investors to buy riskier currencies such as the Chinese yuan, despite a resurgent pandemic. Low U.S. interest rates, massive U.S. budget and trade deficits and a belief that rebounding world trade will drive non-dollar currencies higher have set the dollar on a downward course. "The U.S. dollar slipped further through the threshold of the new year as global risk sentiment stayed buoyant", said Alvin Tan, an FX strategist at RBC Capital Markets. The dollar index posted its first annual los9s since 2017 last year. It has fallen roughly 13% from a three-year peak at the height of the pandemic panic in March. It was last 0.14% weaker at 89.640 and not far above last week's more than two-and-a-half-year low of 89.515. Manufacturing activity expanded in Japan, South Korea and Taiwan, according to PMI surveys, the latest indication that manufacturers in the region continue to recover from the damage caused by the COVID-19 pandemic last year. The Chinese yuan rose over 0.9% to a 30-month high of 6.4693 per dollar. Chinese factory activity continued to accelerate in December, though the PMI missed forecasts at 53.0. The safe-haven yen rose 0.4% to 102.90 per dollar, and looked to test resistance at 102.55, after Japanese Prime Minister Yoshihide Suga said his government was mulling a state of emergency in Tokyo as coronavirus cases rise. The softening dollar boosted commodity prices and pushed bitcoin as well as several Asian currencies to milestone highs. The Australian and New Zealand dollars each gained close to 0.4% to hold just below multi-year peaks. The euro, which had dipped on New Year's Eve profit-taking, rose 0.4% to $1.2270 while traders waited for a fresh batch of economic indicators throughout the region. Sterling, still boosted by Britain's trade deal with the European Union, gained to $1.3678, levels last seen in early 2018. Investors are now focused on a runoff election in the U.S. state of Georgia on Tuesday that will determine control of the Senate. Jeffrey Halley, a market analyst at Oanda warned his clients against sharp moves in the dollar after that election. "A Democrat win is likely to see a sharp correction higher by the US Dollar, exacerbated by the world being universally short the greenback", he said. "Investors should probably wait for the election dust to settle before committing heavily to new dollar short positions. Minutes of the Federal Reserve's December meeting due on Wednesday should offer more detail on discussions about making the Fed's forward policy guidance more explicit and the chance of a further increase in asset buying this year. The data calendar includes manufacturing surveys across the globe, which will show how industry is coping with the spread of the coronavirus, and the closely watched ISM surveys of U.S. factories and services. Bitcoin on Monday was off Sunday's record high of $34,800 at $32,340. An enormous rally has carried it up 800% since March as institutional investors seem to have turned buyers. ======================================================== Currency bid prices at 8:15AM in London (0815 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.2267 $1.2218 +0.41% +0.41% +1.2271 +1.2211 Dollar/Yen 102.9000 103.2900 -0.39% -0.39% +103.3100 +102.8600 Euro/Yen 126.22 126.15 +0.06% -0.55% +126.5200 +126.1100 Dollar/Swiss 0.8822 0.8847 -0.27% -0.27% +0.8845 +0.8818 Sterling/Dollar 1.3676 1.3662 +0.12% +0.12% +1.3702 +1.3645 Dollar/Canadian 1.2696 1.2734 -0.40% -0.27% +1.2735 +1.2686 Aussie/Dollar 0.7720 0.7693 +0.37% +0.37% +0.7734 +0.7682 NZ 0.7207 0.7181 +0.38% +0.38% +0.7217 +0.7183 Dollar/Dollar All spots Tokyo spots Europe spots Volatilities Tokyo Forex market info from BOJ (Reporting by Tom Westbrook; editing by Lincoln Feast, Larry King)

* HK->Shanghai Connect daily quota used 0%, Shanghai->HK daily quota used 16.7%

China's onshore spot yuan finished its domestic trading session at 6.4628 per dollar on the first trading day of the year on Monday, its strongest such close since June 15, 2018.

China stocks kicked off 2021 on a firm note on Monday, after a survey pointing to a continued recovery in the world's second-largest economy bolstered investor sentiment.

Investors look to have started 2021 looks much like the end of 2020 -- stocks have resumed their ascent as traders cling to hopes for a speedy rollout of COVID-19 vaccines even as a surge in new cases heralds tighter restrictions and economic damage.