MARKET UPDATE

British Pound Rebounds on Report of Extended BoE Bond Buying

The British pound rebounded in Asian trade on Wednesday after a report said that the Bank of England signalled to bankers it may extend its bond-buying program beyond a Friday deadline if market conditions required it.

The pound rose 0.3% to 1.0991, reversing overnight losses and briefly trading above 1.1.

The Financial Times reported that the central bank signalled privately to bankers that it could push its emergency bond-buying program past a Friday deadline, citing sources close to the matter.

The report contrasts an October 14 deadline set by Governor Andrew Bailey, who warned pension funds on Tuesday that they have three days left to fix their issues.

Bailey’s warning had sent the pound plummeting to a near two-week low on Tuesday, as markets feared that a withdrawal of debt support could further stress fund managers reeling from a major sell-off in gilts.

 

Oil Sinks Further on China COVID Jitters, IMF Warning

Oil prices fell further on Wednesday, extending steep losses from the prior sessions amid growing concerns that a new COVID outbreak in China and a worsening global economic outlook will severely crimp demand.

Brent oil futures dropped 0.7% $93.66 a barrel, while U.S. West Texas Intermediate futures fell 0.8% to $88.58 a barrel by 22:02 ET (02:02 GMT). Both contracts are down over 4% this week.

Oil prices fell sharply in recent sessions as major Chinese cities including Shanghai and Shenzhen ramped up COVID testing and introduced new curbs amid a spike in infections.

Beijing’s zero-COVID policy ground Chinese economic growth to a halt this year as the government introduced a flurry of lockdowns in major business hubs. This saw oil imports by the country slow steadily through the year.

 

Dollar at 24-year peak to yen after U.S. yields jump, sterling choppy

The dollar scaled fresh 24-year heights on the yen on Wednesday, breaching levels that prompted intervention by Japanese officials last month, as traders braced for U.S. inflation data and its implications for further Federal Reserve rate hikes.

Sterling slipped to a new two-week trough after Bank of England Governor Andrew Bailey reiterated that the central bank will end its emergency bond-buying program on Friday and told pension fund managers to finish rebalancing their positions within that time frame.

However, the pound rebounded slightly after a report in the Financial Times said the BoE has signalled privately to lenders that it’s prepared to prolong its bond purchases.

The risk-sensitive Australian dollar sank to a 2 1/2-year low.

The dollar strengthened 0.22% to 146.18 yen in Asian trading, after pushing as high as 146.39 for the first time since August 1998.

The Japanese currency is particularly sensitive to the gap between U.S. and Japanese long-term bond yields. The benchmark 10-year Treasury yield jumped to the cusp of a 14-year high overnight at 4.006%, while the equivalent Japanese government bond yield is pinned near zero by the Bank of Japan.

Japanese authorities staged their first yen-buying intervention since 1998 on Sept. 22, when the yen tumbled to as low as 145.90 per dollar.

 

 

 

 

 

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