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· Dollar hovers near seven-week high after boost from euro selloff

The dollar hovered near a seven-week high on Tuesday, benefiting from a euro selloff overnight after coronavirus lockdowns choked consumer spending in Germany, and on short-covering in the over-crowded dollar-selling positions.

The euro sank the most in 2-1/2 weeks on Monday after data showed retail sales in Europe’s biggest economy plunged by more than forecast in December, with the continent still struggling with vaccine rollouts.

A buy back into the U.S. currency was long overdue, some analysts said, with speculators’ net dollar selling near a 10-year peak.

The dollar index eased a touch by 0.1% to 90.87 amid further gains for Asian stocks but stayed not far from its overnight high of 91.063, its highest since Dec. 10.

The euro edged up 0.2% to $1.20805 after dropping 0.7% on Monday, the most since Jan. 15.

Against the yen, the dollar briefly crossed 105 yen for the first time since mid-November and held firm at 104.875 yen.

Many see the dollar’s rebound since early last month as a correction after its relentless decline -- the dollar index lost almost 7% in 2020 -- on expectations of a global pandemic recovery amid massive fiscal spending and continued ultra-easy monetary policy.

Yet some think the dollar’s new found firmness could reflect a retreat of the bearish sentiment on the currency.

Elsewhere, the Australian dollar pared gains after the country’s central bank said it will extend its quantitative easing program to buy additional $100 billion of bonds, a decision that many market players thought could wait until next month.

The Aussie last stood at $0.7625, almost flat on the day and off the day’s high of $0.7662.

· Covid-19 Vaccinations Surpass 100 Million Doses Worldwide

· GOP senator says Covid relief ‘figure should not be foreordained’ after Biden meeting

Republican Sen. Bill Cassidy of Louisiana suggested that the Covid relief figure should not be “foreordained” and should be based on data, moments after his meeting with President Joe Biden.

“If we’re driven by data, we’ll come to the right figure,” said Cassidy to CNBC’s “The News with Shepard Smith” during a Monday evening interview. “That figure should not be foreordained.”

Biden had a face-to-face meeting with 10 Republican senators Monday, including Cassidy. GOP senators have introduced a $618 billion relief bill that is less than one-third of the price of Biden’s $1.9 trillion rescue package.

The direct payments are smaller, and those payments start to phase out at a lower $40,000 income threshold for individuals. There’s also no funding for state and local governments, which has been a major sticking point for Democrats.

Republicans have argued for a “targeted approach” when it comes to relief. Cassidy told host Shepard Smith that while he’s “been a big advocate for state and local aid,” he “needs to have data.”

“Republicans offered something more focused, but another bit of common ground is that we’re talking about data,” Cassidy said. “What does the data show that we need? And the president’s going to have his staff get back to us, and we’ll compare our data points.”

If 10 Republican senators join Democrats on a Covid relief package, then they would overcome the filibuster.

· UK house prices fall for first time since June before tax break ends

British house prices fell in January for the first time in seven months, before the scheduled March 31 end of a tax cut for buyers, mortgage lender Nationwide said on Tuesday, adding that the market could weaken sharply in the months ahead.

House prices fell by a monthly 0.3%, slowing the pace of their annual increase to 6.4% from 7.3% in December, which was their biggest jump in six years.

Economists polled by Reuters had expected a monthly increase of 0.3% and a 6.9% rise in annual terms.

· EU govts working hard on Recovery Plan, any difficulties will be seen at end: Von der Leyen to paper

European governments are working hard on the Recovery Plan and any difficulties will be seen at the end, the president of the European Commission said on Tuesday, when asked whether she was worried about possible delays due to Italy’s political crisis.

· Top Chinese diplomat calls for China and U.S. to mend relations

China’s top diplomat called on Tuesday for Beijing and Washington to put relations back on a predictable and constructive path, saying the United States should stop meddling in China’s internal affairs, like Hong Kong and Tibet.

Yang Jiechi, director of the Central Foreign Affairs Commission of the Chinese Communist Party, is the highest-ranking Chinese leader to speak on China-U.S. relations since President Joe Biden took office.

Yang reasserted that China is prepared to work with the United States to move the relationship forward along a track of “no conflict, no confrontation, mutual respect and win-win cooperation.”

· China’s growth is likely to moderate in the next few months, Goldman Sachs says

China’s growth is likely to moderate in the coming months as the country faces risks on two fronts, according to the chief Asia economist of Goldman Sachs.

“The first is simply policymakers are quite comfortable with the recovery so far and are starting to pull back on policy stimulus to some degree,” Andrew Tilton said on “Streets Signs Asia” on Monday.

“If things do continue to go well, then we could have some inflation risks,” he added.

China is expected to show “spectacular” gross domestic product numbers in the first quarter this year.

The world’s second largest economy showed robust GDP growth in the fourth quarter of 2020, expanding at 6.5% compared to a year ago. It beat market expectations, and made China one of the few major economies in the world to record positive growth for a year mired by the coronavirus pandemic.

Fresh Covid outbreaks in China spark concerns

The second challenge to China’s growth recovery is a resurgence of local outbreaks, said Tilton.

The country is currently battling one of its worst outbreaks since March last year. Chinese authorities have recently imposed new restrictions in an effort to suppress a series of outbreaks in and around Beijing.

“The basic argument is that China’s largely normalized. So there’s more downside if there is a renewed spread of the virus and there’s less upside before you start to reach capacity constraints,” he said.

As far as regional growth is concerned, Tilton remains confident on the strength of Asia’s trade recovery, which reflects the broader global pickup in industrial activity.

Overall, Tilton is bullish about regional growth in Asia for 2021, but thinks “China is likely to come in at, or maybe a little below, consensus.”

· BOJ seen widening yield band, trimming super-long bond buying, says ex-deputy Iwata

The Bank of Japan is likely to allow long-term interest rates to move more widely around its 0% target and reduce purchases of super-long bonds to steepen the yield curve, former deputy governor Kazumasa Iwata said.

· Japan set to extend state of emergency to 7 March to contain Covid

Japanese Prime Minister Yoshihide Suga is set to extend a state of emergency to March 7, as he seeks to control the coronavirus, Kyodo News and other local media reported.

Suga will make the formal move Tuesday after a meeting of an advisory panel beginning at 1:30 p.m., Kyodo said, citing an unnamed source close to the matter. The extension comes as recorded Covid-19 infections have fallen from peaks hit in early January, when the month-long measure was first imposed, but not enough to warrant an end to the emergency that was due to finish Feb. 7.

· EU vaccine curbs may delay Japan's inoculation drive

European Union curbs on exports of novel coronavirus vaccines could delay Japan’s inoculation drive, the minister in charge of the campaign said on Tuesday, while the government is expected to extend a state of emergency in a bid to rein in the epidemic.

Japan is set to begin its vaccination campaign this month, later than most major economies, and any delay could sow doubts about a government aim to secure enough doses for everyone before the Tokyo Olympics this summer.

· Australian central bank keeps interest rates at 0.1%

The Reserve Bank of Australia (RBA) used its first meeting of the year to maintain its official discount rate on Tuesday at 0.1%.

The RBA has also continued its quantitative easing program and has moved to purchase additional A $ 100 billion (US $ 76.2 billion) worth of state and federal government bonds at a rate of A $ 5 billion (US $ 3.8 billion). ) Every week from mid-April.

· Vietnam confirms latest virus outbreak is more contagious UK variant

Vietnam’s health minister said on Tuesday a newly detected coronavirus outbreak, which has infected 276 people and spread to 10 provinces and cities, is caused by the more contagious British variant of the coronavirus.Six days since the virus reemerged in the northern province of Hai Duong, the cluster there was under control, health minister Nguyen Thanh Long said, according to a government statement. Containing the virus in the capital, Hanoi - where 20 new cases have been detected - would take longer, he added:

“Gene sequencing showed that 12 of 276 newly detected patients are positive with the UK variant, although the source of this outbreak remains unknown,” Long told a cabinet meeting. “We need to scrupulously follow mask-wearing regulations”.

· Myanmar's army seizes power, detains Aung San Suu Kyi

· Suu Kyi's party demands her release as Myanmar generals tighten grip on power

The party of Myanmar’s detained elected leader Aung San Suu Kyi called on Tuesday for her immediate release from detention and for the junta to recognise her victory in November elections, a day after a military coup sparked global outrage.

The United States threatened to reimpose sanctions on Myanmar’s generals after they seized power and arrested Suu Kyi and dozens of her allies on dawn raids on Monday.

· China says world should contribute to Myanmar stability

China’s foreign ministry said on Tuesday ahead of a U.N. Security Council meeting that all actions by the international community should contribute to Myanmar’s political and social stability to prevent increasing tensions.

· Japan defence official warns Myanmar coup could increase China's influence in region

· Oil prices rise as producers commit to output restraint

Oil prices rose around 1% on Tuesday after major producers showed they were cutting crude output in line with their commitments on restraint, supporting a market thrown out of kilter by weak demand during the coronavirus pandemic.

Brent crude was up 51 cents, or 0.9%, at $56.86 a barrel by 0134 GMT, while U.S. oil gained 53 cents, or 1%, to $54.08 a barrel. Both contracts rose more than 2% in the previous session.

OPEC crude production increased for a seventh month in January, a Reuters survey found, after the group and its allies agreed to ease supply curbs further, but the growth was smaller than expected.

The Organization of the Petroleum Exporting Countries was pumping 25.75 million barrels per day (bpd) in January, the survey found, up 160,000 bpd from December.

Russian output increased in January but in line with the agreement on reducing production, while in Kazakhstan oil volume fell for the month. Both countries are members of the OPEC+ grouping that banded together to help support prices with production cuts.

Reference: Reuters, CNBC, Bloomberg