MARKET UPDATE

Dollar slips as risk appetite rises

The dollar moved broadly lower on Tuesday, while Australia’s and New Zealand’s currencies climbed with a rise in risk appetite after China said it would scrap its COVID-19 quarantine rule for inbound travellers – a major step in reopening its borders.

The New Zealand dollar surged more than 0.5% in early Asia trade and was last 0.28% higher at $0.6288, while the Aussie gained 0.27% to $0.6750 in mostly thin trading during the year-end holiday season. The two currencies are often used as liquid proxies for the Chinese yuan.

The offshore yuan rose more than 0.1% to 6.9681 per dollar.

China will stop requiring inbound travellers to go into quarantine on arrival starting Jan. 8, the National Health Commission said on Monday, even as COVID cases spike. At the same time, Beijing downgraded regulations for managing COVID cases to the less strict Category B from the top-level Category A.

 

Oil price cap may widen Russia’s 2023 budget deficit, says Finance Minister

Russia’s budget deficit could be wider than the planned 2% of GDP in 2023 as an oil price cap squeezes Russia’s export income, Finance Minister Anton Siluanov said, an extra fiscal hurdle for Moscow as it spends heavily on its military campaign in Ukraine.

Russia last week said price caps on its crude and refined products could see it cut oil output by 5%-7% early next year, but regardless of how deep the cuts are, Siluanov promised that spending commitments would be met, tapping borrowing markets and the country’s rainy-day fund as needed.

“Is a bigger budget deficit possible? It is possible if revenues are lower than planned. What are the risks next year? Price risks and restrictions,” Siluanov told reporters in comments cleared for publication on Tuesday.

He said a reduction in the volume of energy exports was possible, as some countries shun Russia and Moscow looks to develop new markets, a process that will dictate Russia’s export returns.

 

Oil prices climb on easing China COVID-19 curbs, concerns over U.S. storm impact

Oil prices rose to three-week highs on Tuesday as China’s latest easing of COVID-19 restrictions raised fuel demand hopes and concerns that winter storms across the United States are affecting energy production continued to buoy prices.

Brent crude was up 88 cents, or 1.1%, at $84.80 a barrel by 0253 GMT, while U.S. West Texas Intermediate crude was at $80.44 a barrel, up 88 cents, or 1.1%. The two benchmarks touched their highest since Dec. 5 earlier in the session.

On Friday, Brent rose 3.6%, while WTI gained 2.7%. Both benchmarks recorded their biggest weekly gains since October. British and U.S. markets were closed on Monday for the Christmas holiday.

China will end its quarantine requirements for inbound travellers starting on Jan. 8, the National Health Commission said on Monday, dropping a rule in place since the start of the pandemic three years ago. That spurred optimism of higher demand from the top crude oil importer.

The greenback softened on Tuesday following this announcement. A weaker dollar makes oil cheaper for holders of other currencies and usually reflects greater investor appetite for risk.

A lethal blizzard paralysed Buffalo, New York, on Christmas Day, trapping motorists and rescue workers in their vehicles, leaving thousands of homes without power, and raising the death toll from storms that have chilled much of the United States for days.

 

 

 

 

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