MARKET UPDATE

Asia FX sinks, yuan near 1-yr low.

Most Asian currencies fell on Monday, with China’s yuan leading losses after a smaller-than-expected cut from the People’s Bank, while anticipation of more U.S. monetary policy cues kept the dollar steady.

The yuan was among the worst performers for the day after the PBOC disappointed markets with cuts to the loan prime rate (LPR). The move raised questions over just how much headroom China has to keep loosening policy, amid worsening economic conditions.

Persistent concerns over higher U.S. rates also weighed on sentiment, ahead of the Jackson Hole Symposium later this week. The dollar steadied after strong gains in the prior week, while Treasury yields also retained most recent gains.

Chinese yuan near 1-year low after rate cut disappointment.

The yuan fell 0.4% on Monday and was trading just above its weakest level since August 2022. The currency also crossed the key 7.3 level to the dollar.

The PBOC cut its one-year LPR by 10 basis points (bps) to 3.45%, while the five-year LPR, which is used to determine mortgage rates, was left unchanged at 4.20%. Analysts expected a 15 bps cut on each count.

 

Oil prices rise past China rate disappointment.

Oil prices rose in Asian trade on Monday, largely shrugging off a disappointing interest rate cut from major importer China as the prospect of tighter supplies supported the outlook.

Concerns over slowing demand in China and rising U.S. interest rates had driven steep losses in crude prices over the past week, pulling them away from 2023 highs and also seeing them snap a seven-week winning streak.

But the prospect of tighter supplies, following deep production cuts from Saudi Arabia and Russia this year, helped keep a floor under prices.

Brent oil futures rose 0.5% to $85.21 a barrel, while West Texas Intermediate crude rose 0.5% to $81.08 a barrel by 21:38 ET (01:38 GMT).

The PBOC cut its one-year loan prime rate by 10 basis points to 3.45%, while the five-year LPR, which is used to determine mortgage costs, was left at 4.20%.

 

Gold edges higher, copper muted after China cuts rates.

Gold prices rose slightly on Monday, steadying after steep losses over the past four weeks as markets awaited more cues on U.S. monetary policy, while copper prices were flat after a Chinese interest rate cut missed expectations.

Focus this week is largely on the Jackson Hole Symposium on Thursday and Friday, where Federal Reserve Chair Jerome Powell is expected to offer more signals on the path of U.S. interest rates.

Gold prices somewhat trimmed recent losses after tumbling below the key $1,900 an ounce level, seeing some safe haven demand as slowing growth in China also weighed on sentiment. The People’s Bank of China largely missed market expectations with changes to its loan prime rate (LPR) on Monday.

Spot gold rose 0.2% to $1,892.68 an ounce, while gold futures expiring in December rose 0.3% to $1,921.95 an ounce by 00:16 ET (04:16 GMT). Both instruments were still trading close to a five-month low.

 

 

 

 

 

 

 

 

 

 

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