MARKET UPDATE
Asia FX flat as dollar steadies.
Most Asian currencies moved in a flat-to-low range on Wednesday as the dollar found some strength after Federal Reserve Chair Jerome Powell offered no direct cues on interest rate cuts.
The New Zealand dollar was the worst performer for the day after the Reserve Bank of New Zealand struck a somewhat dovish tone at its meeting.
Dollar steadies after Powell testimony; CPI awaited
The dollar index and dollar index futures recovered further from recent losses, steadying in Asian trade after Powell flagged cooling in the labor market and progress towards bringing down inflation.
But the Fed Chair said that any reductions in interest rates will be largely dependent on data, and reiterated the Fed’s commitment to meeting its 2% inflation target.
Traders largely maintained bets on a September rate cut after Powell’s comments- bets that had battered the dollar in recent weeks. But the greenback found some support as Powell’s comments also put upcoming consumer price index inflation data squarely in focus.
The reading is due on Thursday and is expected to show inflation remained sticky in June.
Oil prices rise as US inventories shrink.
Oil prices edged higher in Asian trade on Wednesday as industry data showed a bigger-than-expected draw in U.S. inventories, although a build in distillate stockpiles somewhat offset optimism over tighter markets.
Crude prices were nursing some losses this week as chatter over a potential ceasefire between Israel and Hamas saw traders price out some risk premium from oil. But recent reports suggested that a deal was nowhere close to being reached.
Prices also fell on Tuesday as the impact of tropical storm Beryl appeared to be much lesser than initially expected, with the storm also weakening as it moved away from key oil infrastructure in Texas.
US inventories see bigger-than-expected draw- API data Data from the American Petroleum Institute showed on late-Tuesday that U.S. oil inventories saw a draw of 1.9 million barrels, compared to forecasts for a draw of 0.25 mb.
Asia shares rise, kiwi slumps.
Asian stocks hovered near two-year highs on Wednesday on growing bets of imminent U.S. rate cuts, while the New Zealand dollar slid after its central bank signalled greater confidence that inflation was coming to heel.
The Reserve Bank of New Zealand (RBNZ) held its cash rate steady at 5.5% on Wednesday as expected, but noted that inflation was expected to return to its target range of 1% to 3% in the second half of the year.
The kiwi fell more than 0.7% in the aftermath of the decision to $0.6079 as analysts said the tone from policymakers was comparatively more dovish than that of May’s policy decision.
“Them kind of saying the CPI is going to drop back into target in the second half of this year… that CPI expectations could normalise more rapidly, I think that contributed,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
“Compared to the more hawkish statement, the tone they had in the May meeting, that stood out.”
Traders were also quick to ramp up bets of rate cuts from the RBNZ later this year, with swaps now implying about 30 basis points worth of easing in October, as compared to 16 bps prior to the outcome.
The Aussie, meanwhile, rallied more than 0.6% to touch an over one-year high against the New Zealand dollar, with the former underpinned by wagers that the next move in Australian rates might be up given inflation is proving stubborn.
Important Note: The information found on Ausprime platform is intended only to be informative, is not advice nor a recommendation, nor research, or a record of our trading prices, or an offer of, or solicitation for a transaction in any financial instrument and thus should not be treated as such. The information provided does not include any specific investment objectives, financial situation and needs of any specific person who may receive it. The past performance is not a reliable indicator of future performance and/or results. Past Performance or Forward-looking scenarios are not a guarantee of future performance. Actual results may differ materially from those anticipated in forward-looking or past performance statement