Business borrowing in US for equipment rises 17 per cent in June

Borrowings by US companies for capital investments rose about 17 per cent in June from a year earlier, the Equipment Leasing and Finance Association (ELFA) said.

The companies signed up for $10.4 billion in new loans, leases and lines of credit last month, up from $8.9 billion a year earlier. Borrowings rose 28 per cent from the previous month.

“Despite slower-than-desired vaccinations in certain parts of the US, consumer spending is accelerating, markets remain strong and unemployment continues to slowly abate, all of which are contributing to a strong economy,” ELFA Chief Executive Officer Ralph Petta said.

He said these trends serve as a good indication for the equipment finance sector as it moves into the second half of 2021.

Washington-based ELFA, which reports economic activity for the nearly $1-trillion equipment finance sector, said credit approvals totaled 76.7 per cent down from 77.4 per cent in May.

ELFA’s leasing and finance index measures the volume of commercial equipment financed in the United States.

The index is based on a survey of 25 members, including Bank of America Corp, CIT Group Inc and the financing affiliates or units of Caterpillar Inc, Dell Technologies Inc, Siemens AG, Canon Inc and Volvo AB.

The Equipment Leasing and Finance Foundation, ELFA’s non-profit affiliate, reported a monthly confidence index of 72.9 in July, up from 71.3 in June.

Meanwhile the US dollar on Friday notched a second week of gains, after a few volatile days when currencies moved with shifting risk appetite, as the market shifted focus to next week’s Federal Reserve meeting. Some analysts wondered, though, whether the dollar’s recent rally might be losing momentum.

The dollar index, which measures the greenback against a basket of six major currencies, was slightly higher on the day at 92.873. For the week, it was up 0.1 per cent, after rising 0.6 per cent previously. But that was off a 3-1/2-month high of 93.194 hit on Wednesday, bolstered by strong Wall Street earnings that helped investors regain some confidence in the midst of worries that the Delta coronavirus variant could derail the global recovery.

Risk appetite remained high on Friday, with the rise in US stocks, the sell-off in Treasuries, gains in most commodity currencies, and the greenback coming off its peaks. “Medium-term oscillators and momentum are in sync on the upside suggesting potential higher highs to come, such as 94.30-94.72 (on the dollar index),” said Dave Rosenberg, chief economist and strategist at Rosenberg Research. He also cited the potential of a “Golden Cross” in the dollar index, a chart pattern in which the 50-day moving average crosses above the 200-day moving average, a bullish signal.

“Overall, the dollar(index) leans toward further upside which could add to recent pressure in commodity prices and other currencies. Support is at 92.00-91.50,” said Rosenberg. So far in July, the dollar has gained 0.6%, after rising 2.8% in June. US dollar positioning among short-term investors in the week ended July 20 has flipped to net longs for the first time since March 2020.

Erik Nelson, macro strategist, at Wells Fargo Securities in New York, however, was not convinced the dollar could hold its gains in the coming weeks given the decline in US yields.

“The dollar looks tired especially after the rally of the last few weeks,” he said. “It seems to be running out of steam both from a fundamental and technical perspective.” Since the beginning of July, US benchmark 10-year Treasury yields have lost 18 basis points, their largest monthly fall since March 2020. The dollar typically moves in tandem with US yields.

Nelson also believes the Fed is going to be a laggard among central banks in normalizing monetary policy. Investors’ next major focus is the Fed’s two-day policy meeting next week. Since the June 16 meeting, when Fed officials dropped a reference to the coronavirus as a weight on the economy, cases have risen. Many economists still expect the meeting to advance discussions for a tapering of stimulus. Against the safe-harbour yen, the dollar rose 0.3 per cent to 110.54 yen.

Meanwhile, the euro was flat at $1.1775, showing little reaction to the purchasing manager surveys coming out of France, Germany and the eurozone as a whole. Eurozone business activity expanded at its fastest monthly pace in over two decades in July as the loosening of more COVID-19 restrictions gave a boost to services, but fears of another wave of infections hit business confidence.

The US Trade Representative’s office said it had determined that no tariff action against Vietnam was warranted after the country’s central bank agreed with the US Treasury not to manipulate its currency for an export advantage.

In a statement, USTR said it found that the US Treasury-State Bank of Vietnam agreement earlier this week “provides a satisfactory resolution of the matter subject to investigation and accordingly that no trade action is warranted at this time.”