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Oct 6 – According to Bank of America research investors have ploughed USD 1 trillion into cash this year. BofA described the mindset as “cautious” and “paid to wait”.

The wait may be over with the end of the US tightening cycle likely to spur a shift away from cash into other assets that will have a big influence on currencies.

If the next move in interest rates is to be the cut that futures suggest, the obvious purchase for investors may be equities, but they are not cheap.

In contrast bonds look cheap with drops technically oversold by almost every measure and with 10-year US debt yielding almost 5% bonds may attract more investors.

Bonds are certainly more attractive than they were when they were sitting at the peaks of a multi-year uptrend with negligible yields. Yet, even then they still drew a lot of investors with a typical portfolio weighted 60% stocks and 40% bonds.

After the recent sharp drop which may be the blow-out of positions that often occurs at the end of big moves, bonds are cheaper.

Should portfolios return to their traditional weightings, a lot cash may head away from the safety of the dollar that’s soared during the rout in bond markets.

If current investments in cash are as overcrowded as they seem to be, investors may not just look for better returns, but also seek to spread their risk away from cash and dollars – underpinning other currencies with similar yields like euro, pound, Canadian and New Zealand dollars.

The more adventurous investors become in the aftermath of the tightening cycle, the greater the appeal of riskier currencies with yields higher than dollar will become – underpinning freely floating currencies like Mexico’s peso, South African rand, Polish zloty, Hungarian forint and Czech crown.

Others that don’t move much like Hong Kong dollar and India’s rupee may also appeal.

They may eventually embrace currencies that don’t float freely but have attractive interest rates like Brazil’s real, Indonesian rupiah and S Korean won. Even Turkey’s ultra-high yield lira could make a comeback.

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)

LONDON, Oct 6 – Oil prices were stable on Friday but were on course for a week-on-week loss, as demand fears driven by macroeconomic headwinds were compounded by another partial lifting of Russia’s fuel export ban on Friday.

On Friday, Brent futures were up 15 cents, or 0.18%, at USD 84.22 at 0817 GMT, while US West Texas Intermediate crude futures were up 20 cents, or 0.24%, at USD 82.51.

Russia announced that it had lifted its ban on diesel exports for supplies delivered to ports by pipeline, under the proviso that companies sell at least 50% of their diesel production to the domestic market.

Almost three quarters of Russia’s 35 million tonnes of diesel exports were delivered via pipeline in 2022.

The ban on all gasoline exports remains in place.

Brent and WTI futures were on course for approximately 12% and 9% week-on-week declines respectively on Friday, driven principally by concerns that higher-for-longer interest rates will slow global growth and hammer fuel demand.

Demand concerns offset announcements by Saudi Arabia and Russia this week confirming that current voluntary supply cuts worth 1.3 million barrels per day (bpd) will be held until the end of the year.

This week saw a steep drop in U.S. Treasury prices to 17-year lows, on concerns the U.S. Federal Reserve will keep rates higher for longer and growing worries about government spending and a ballooning budget deficit in the United States, the world’s top oil consumer.

“Oil prices are stabilizing after a brutal week that saw a relentless bond market selloff trigger global growth worries,” said Edward Moya, an analyst at OANDA.

“The worst week for crude since March is starting to attract buyers given the oil market will still remain tight over the short-term,” Moya said.

Investors will be looking ahead to the U.S. monthly jobs report on Friday for signs of how strong the economy is.

The European Central Bank (ECB) has not ruled out further interest rate hikes if inflation were to keep rising, ECB board member Isabel Schnabel said in an interview with Croatian paper Jutarnji list.

(Reporting by Robert Harvey in London and Sudarshan Varadhan in Singapore; Editing by William Maclean)

SINGAPORE, Oct 6 – The dollar dipped on Friday but traders were largely keeping to the sidelines in both the currency and US Treasury markets as they looked to US nonfarm payrolls data later in the day for potential catalysts.

Friday’s closely-watched jobs report comes on the heels of a run of resilient US economic data which has reinforced the Federal Reserve’s hawkish messaging of higher-for-longer rates and sent the greenback and US Treasury yields surging.

The dollar index , which earlier in the week hit a roughly 11-month high of 107.34, last settled at 106.37, but remained on track for 12 straight weeks of gains.

“There’s an element here of just taking stock ahead of what should be a very important data release,” said Rodrigo Catril, senior FX strategist at National Australia Bank.

“We’ve got to be mindful that at the moment, US Treasury yields and the dollar, in particular, have been very reactive to positive data releases coming from the US, and therefore there’s potential for fireworks tonight.”

A broad selloff in world government bonds also stabilised on Friday, with the 30-year US Treasury yield last at 4.900%, after spiking above 5% for the first time since 2007 earlier in the week.

Bond yields move inversely to prices.

The benchmark 10-year Treasury yield last stood at 4.7269%, while the two-year yield settled at 5.0267%.

The pause in the dollar’s rally has also provided a much-needed reprieve for the yen, which last bought 148.48 per dollar.

Its sudden-but-brief spike of about 2% to 147.30 per dollar on Tuesday stoked speculation that Japanese authorities could have intervened in the currency market to shore up the battered yen, though data from the Bank of Japan (BOJ) seemed to suggest otherwise.

“Whether the BOJ and/or (Ministry of Finance) will intervene at distinct levels … will continue to be a tease, contingent on broader currency markets and momentum,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.

“Currency traders may tease out thresholds, but should be warned to do so only cautiously.”

Elsewhere, the euro slipped 0.03% to $1.0546 and was on track for a 0.25% decline for the week, extending its run of losses into a 12th week.

Sterling edged 0.03% lower to $1.2188 and was likewise headed for five straight weeks of losses, struggling against a dominant dollar.

“The backdrop remains one in which the Fed is sticking its hawkish neck out much further than the European Central Bank, Bank of England, Reserve Bank of Australia (and the) BOJ,” said Thierry Wizman, Macquarie’s global FX and interest rates strategist.

The Australian dollar fell 0.05% to USD 0.6367, while the New Zealand dollar  gained 0.11% to USD 0.59695, after both Antipodean currencies tumbled earlier in the week on the back of their respective central bank decisions.

The RBA on Tuesday held interest rates steady for a fourth month, with the Reserve Bank of New Zealand following suit a day after, both in line with expectations, though their messaging came in less hawkish than expected.

The Aussie was eyeing a weekly drop of more than 1%, while the kiwi was headed for a more than 0.5% fall.

(Reporting by Rae Wee. Editing by Shri Navaratnam)