Asian energy shares dropped with oil, while the dollar pared previous day’s gains as traders remain less than convinced that the Fed will raise rates this year; investors look ahead to Yellen’s speech at an annual symposium at Jackson Hole this Friday.
- Treasury yields and USD erased almost all Asian gains as traders in New York and London concluded that comments from Fed Vice Chairman Fischer over the weekend weren’t overly hawkish, suggesting that media interpretation was more hawkish than the actual speech.
- Although Fischer indicated on Sunday that a rate hike by year-end was still in consideration, he also questioned whether the Fed had the power to stimulate productivity and if the economy is “doomed to slow productivity growth for the foreseeable future”. Thus, spurring speculation that the Fed has run out of ideas on what to do next.
- Benchmark Treasury yields declined across maturities, with the 10yr yield falling 4bps to 1.54%.
- The US dollar sold off overnight against most currencies, with the Bloomberg Dollar Spot Index shedding gains of more than 0.5% to end 0.2% higher. The gauge declined further, by another 0.2%, this morning.
- The S&P 500 Index edged lower by less than 0.1%, as energy shares were pressure by an overnight decline in oil prices.
- Yellen’s speech this Friday at Jackson Hole is titled “The Federal Reserve’s Monetary Policy Toolkit”, which traders say may imply a more dovish lean than expected as past toolkit references tended to note other tools that could offer accommodation.
- The stash of gold, silver and gems stored in the vaults and safe deposit boxes of Malca-Amit, a storage and logistics provider, in Singapore has jumped almost 90% in the past year, amid an increasingly popular trend among high net-worth individuals that are looking to seek refuge in a world of negative rates, stagnating economies and political uncertainty.
- RBNZ Governor Graeme Wheeler said he sees no need for rapid interest-rate cuts, sending the New Zealand dollar stronger by as much as 1.1% against the greenback.
- Spot gold was mostly steady earlier today after falling 0.4% in its previous session.
- The precious metal is likely to remain between its support at $1,300/Oz and resistance at $1,360/Oz for the rest of the week, at least until Yellen’s speech at Jackson Hole on Friday.
- Silver for immediate delivery was steady as well, following yesterday’s 1.8% drop below the $19/Oz handle. $18.50/Oz remains the next support level.
- Crude oil futures expiring in September fell overnight for the first time in 8 days, sliding 3.5% to $47.41/bbl. Oil weakness persisted into Asian trade this morning, declining another 1.4% to $46.76/bbl.
- Iran intends to ramp up production by 5% over the next few days after an agreement to resume shipments from 3 oil fields in Kirkuk. Meanwhile Nigerian militants have called an end to hostilities.
- Spot 1.3497
- USDSGD pared last session’s gains, falling by as much as 0.2% back below the 1.3500 handle.
- Spot 0.7630
- AUDUSD reversed recent declines, climbing 0.5% to 0.7674 earlier today.
- The 0.7600 handle has been resilient over the past 2 weeks and should provide some support over the near term.
- Spot 1.2928
- USDCAD was mostly unchanged, as a weaker US dollar offset the effects of weaker oil prices.
- The pair looks likely to remain capped at the 1.3000 resistance level and supported at above the 1.2800 handle for the near term.
- Spot 6.6578
- Offshore and onshore yuan both adopted a mildly firmer tone in early dealings following a stronger PBOC fixing after the dollar lost steam overnight.
- The PBOC set its fixing rate 0.1% stronger at 6.6586 against the dollar, the most in almost a week.
- USDCNH was 0.2% lower at 6.6528.
- It is speculated the authorities may seek to curb excessive moves in the yuan ahead of the G-20 summit in Hangzhou in early September.
- Spot 100.35
- Dollar weakness has resulted in USDJPY testing the key 100 level once again earlier today, reversing all of yesterday’s gains.
- Spot 1.3139
- GBPUSD was 0.5% higher at 1.3157 earlier, helped on by weakness in the greenback.
- Recent US dollar weakness has seen GBP rise above 1.3100 levels over the past week.
- From a technical perspective, a head-and-shoulders pattern has formed over the past 2 months since Brexit, with the currency pair being consistently capped below the neckline over the period. A break above it could signal a possible reversal.