MARKET UPDATE

Asia FX dips, dollar rebounds.

Most Asian currencies nursed steep losses on Wednesday, while the dollar steadied after a sharp overnight rebound as anticipation of more cues on the Federal Reserve saw markets question expectations for early interest rate cuts.

Sentiment towards Asia also remained fragile following weak economic data from China and a devastating earthquake in Japan.

The Chinese yuan fell 0.1%, with further losses limited by a stronger-than-expected midpoint fix from the People’s Bank of China. The yuan saw renewed weakness this week after dismal purchasing managers index readings for December.

The Japanese yen was static, with local markets closed for a week-long holiday.

Dollar steadies after stellar rebound, more Fed cues awaited

The dollar index and dollar index futures fell slightly in Asian trade, after surging about 0.8% in the prior session. The greenback was now trading comfortably above a more-than five-month low hit towards the end of 2023.

 

Gold prices dip as dollar rebounds.

Gold prices fell in Asian trade on Wednesday, relinquishing a measure of recent gains as the dollar rebounded amid some uncertainty over the timing of the Federal Reserve’s interest rate cuts in 2024.

The yellow metal saw a strong run-up in the final few trading days of 2023, amid growing optimism that the Fed will begin cutting rates by as soon as March 2024. Spot gold was still trading within $100 of a record high hit at the beginning of December.

But markets appeared to be seeking more affirmation that the Fed will begin trimming rates early in 2024. This saw the yellow metal relinquish some recent gains, while the dollar rebounded sharply from near five-month lows on Tuesday.

Spot gold steadied at $2,064.16 an ounce, while gold futures expiring in February fell slightly to $2,072.40 an ounce by 00:04 ET (05:04 GMT). Both instruments lost about 0.3% on Tuesday.

Anticipation of the minutes of the Fed’s December meeting- which are due later in the day- kept markets on edge, as analysts warned that the minutes may not strike as dovish a chord as expected.

 

Oil prices steady as economic concerns offset Red Sea supply.

Oil prices were little changed in Asian trade on Wednesday after sharp moves earlier in the week, as markets weighed concerns about the U.S. economy against potential supply disruptions from ongoing tensions in the Red Sea.

Brent crude fell 1 cent, or 0.01%, to $75.88 a barrel by 0733 GMT, while U.S. West Texas Intermediate crude futures slipped 8 cents, or 0.11%, to $70.3 a barrel.

Oil prices had climbed around $2 earlier in the week following attacks on vessels in the Red Sea by Houthi rebels over the weekend and the reported arrival of an Iranian warship on Monday. A wider conflict could close crucial waterways for oil transportation and disrupt trade flows.

However, the market fell in the previous session as optimism about early and aggressive U.S. interest rate cuts ebbed ahead of the release of Federal Reserve meeting minutes and jobs data.

“The geopolitical risks are not being priced in at the moment on assumption that a regional flare up will continue to be avoided,” said Suvro Sarkar, energy sector team lead at DBS Bank.

Expectations of ample oil supply in the first half of 2024 have kept a lid on prices ahead of OPEC+ plans to hold a meeting of its Joint Ministerial Monitoring Committee (JMMC) in early February. An exact date has not been decided, three sources from the alliance said.

 

 

 

 

 

 

 

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