Reuters: The South African rand edged lower in early trade on Tuesday as markets await local inflation figures and a central bank interest rate decision in the days ahead.
South African rand edged lower
At 0614 GMT, the rand traded at 19.0275 against the dollar , more than 0.1% weaker from Monday. The dollar last traded around 0.095% stronger against a basket of global currencies.
The rand is likely to take its cues from August inflation data to be released on Wednesday and an interest rate decision by the South African Reserve Bank (SARB) on Thursday. Most analysts polled by Reuters expect the SARB to leave its main interest rate unchanged at 8.25%. South Africa’s benchmark 2030 government bond was marginally weaker in early deals, with the yield up 0.5 basis point to 10.515%.
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U.S. Dollar
Reuters: The dollar traded sideways on Tuesday as investors braced for a slew of central bank meetings this week, while the yen languished near a 10-month low as Japan’s ultra-loose monetary policy once again came under fire. Currency moves were largely subdued in Asia trade as the Federal Reserve’s impending rate decision on Wednesday stayed top of mind, with the spotlight in Asia also on the Bank of Japan’s (BOJ) policy decision due Friday.
The yen fell 0.1% to 147.76 per dollar and was kept pinned near last week’s 10-month low of 147.95 per dollar. Expectations are for the BOJ to keep interest rates ultra-low on Friday and reassure markets that monetary stimulus will stay, at least for now, even as Governor Kazuo Ueda stoked speculation of an imminent move away from ultra-loose policy. “Our sense is that the BOJ needs ammunition in order to back itself in terms of any shift or even any guidance for (a) potential shift in policy over the coming six months to the next year,” said Rodrigo Catril, senior FX strategist at National Australia Bank (NAB). “And we think that that needs to happen with a set of new forecasts, and that’s why we don’t think that we will get many surprises on Friday.”
Elsewhere, the Aussie slipped 0.09% to $0.64315, shrugging off minutes of the Reserve Bank of Australia’s (RBA) September meeting that showed it considered raising rates by 25 basis points, before eventually deciding to hold the benchmark cash rate unchanged.
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British Pound
FXStreet: Sterling continues with its struggle to gain any meaningful traction and languishes near its lowest level since early June touched on Monday. Spot prices currently trade around the 1.2370-1.2380 region and seem vulnerable to prolonging the recent downward trajectory witnessed over the past two months or so.
Firming expectations that the Bank of England (BoE) is nearing the end of its rate-hiking cycle continue to undermine the British Pound (GBP) and act as a headwind for the GBP/USD pair. The US Dollar (USD), on the other hand, remains on the defensive below a six-month top set last week and helps limit losses for spot prices. Traders also seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of this week’s key central bank event risks – the highly-anticipated FOMC decision on Wednesday and the pivotal BoE meeting on Thursday.
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Global Markets
Reuters: Asian shares sank on Tuesday as worries about the Chinese property sector weighed on markets from Hong Kong to Australia, while Japanese investors sold chip stocks on their return from a holiday-extended weekend. Benchmark U.S. Treasury yields hovered near 16-year peaks and the dollar held close to six-month highs as traders braced for a Federal Reserve rate decision on Wednesday, in a week that also sees policy decisions from the Bank of Japan and Bank of England, among others.
Crude oil continued its rally amid tightening supply, stoking worries about stagflation. MSCI’s broadest index of Asia-Pacific shares slipped 0.3%. Japan’s Nikkei tumbled 1.1% under the weight of big losses for chip-related stocks including Tokyo Electron and Advantest. Japanese markets were closed Monday, when Asian tech stocks sold off following a Reuters report that TSMC had asked its major vendors to delay deliveries. That stock sank 0.4% on Tuesday, flipping from an earlier gain of as much as 0.6%. It tumbled 3.2% on Monday. John Pearce, CIO at Unisuper, called the TSMC news “surprising.” “The one thing you were almost certain of was that demand for semiconductors was only one way,” he said.
Hong Kong’s Hang Seng declined 0.1%, with a subindex of tech stocks sliding 0.6%. An index of mainland blue chips fell 0.3%. Chinese property stocks were volatile, with a subindex of Hang Seng developers dropping as much as 1.2% at one point, before flipping to positive territory around lunchtime, although it was last off 0.4%. Australia’s stock benchmark dropped 0.4%, sagging under the weight of mining stocks amid pessimism over Chinese demand. Providing some rays of hope, though, Country Garden won approval from creditors to extend repayment on another onshore bond, the last in the batch of eight bonds it has been seeking extensions for, sources said.
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Peer Sunac China Holdings got creditor approval for its $9 billion offshore debt restructuring plan, the first green light of a debt overhaul by a major Chinese developer. Weakness in Asian equities weighed on U.S. stock futures, which pointed 0.1% lower. Pan-European Stoxx 50 futures were flat. Currency markets were subdued, with the U.S. dollar index – which measures the currency against six major peers – rising 0.09% to 105.17, edging back toward last week’s six-month peak of 105.43. The dollar added 0.1% to 147.75 yen , bringing it closer to last week’s 10-month top of 147.95. The euro eased 0.1% to $1.0679.
Ten-year yields were little changed at just above 4.31%, holding close to the 4.366% level reached on Aug. 22, which was the highest since 2007. “You can’t blame people for keeping to the sidelines for now,” with the Fed headlining a parade of central bank meetings this week, Kyle Rodda, senior financial market analyst at Capital.com, wrote in a note. “Given the variability in outcomes, there will inevitably be crosscurrents in the markets,” Rodda said. “Price action could be choppy, with risk needing to be managed more carefully.” Traders are all but certain the Fed will leave rates steady again at the conclusion of a two-day meeting that begins later Tuesday, but are split on the chances on another quarter-point increase by year-end. Fed officials will also release their latest predictions on the economy and where rates are likely to be over the coming quarters.
Meanwhile, oil prices rose in early trade on Tuesday for the fourth consecutive session, as weak shale output in the U.S. spurred further concerns about a supply deficit stemming from extended production cuts by Saudi Arabia and Russia. U.S. West Texas Intermediate crude futures rose 99 cents, or 1.1%, to $92.47, while global oil benchmark Brent crude futures rose 58 cents, or 0.61%, to $95.01 a barrel. “Given how supply-constrained energy markets are likely to become, especially amidst harsher weather approaching the end of the year, higher oil prices are both an upside risk to inflation and a downside risk to growth,” Capital.com’s Rodda said. “Markets that don’t export energy and suffer from energy insecurity could underperform.”
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Published by the Mercury Team on 19 September 2023
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