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SINGAPORE, Oct 11 – The dollar dipped broadly on Wednesday, tracking a slide in US Treasury yields weighed down by dovish Federal Reserve comments, as traders looked to the central bank’s policy meeting minutes out later in the day for clues on its interest rate outlook.

A slew of Fed officials have signalled in recent days that the US central bank may not need to tighten monetary policy much further than initially thought.

Atlanta Fed Bank President Raphael Bostic said on Tuesday the central bank did not need to raise borrowing costs any further, and Minneapolis Fed President Neel Kashkari followed with similar remarks later in the day.

The comments pushed the greenback to a two-week trough against a basket of currencies in the previous session, with the dollar index languishing near that level in early Asia trade. It last stood at 105.66.

Sterling rose to a three-week high of USD 1.2296, while the euro last bought USD 1.0606, not far from Tuesday’s more than two-week top of USD 1.0620.

“The Fed is shifting away from further rate hikes, and its tightening bias too may be dropped by December,” said Thierry Wizman, Macquarie’s global FX and interest rates strategist.

US Treasury yields have similarly tracked lower following the dovish Fed comments, with the two-year yield, which typically reflects near-term rate expectations, hitting a one-month low of 4.9260% on Tuesday. It was last at 4.9675%.

The benchmark 10-year yield stood at 4.6468%.

The focus now turns to minutes of the Fed’s September policy meeting out later on Wednesday, which could offer further clues on its interest rate outlook. US inflation data is due the next day.

“I think markets will be particularly interested in whether or not the (Federal Open Market Committee) will follow through with the extra 25-basis-point hike forecast in (its) latest dot plot,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA).

“Any comments that are perceived to be slightly dovish, I think the unwind of yields can continue and that can weigh down on the U.S. dollar more.”

China aid?

The Australian dollar rose to a roughly one-week high of USD 0.6440 while the New Zealand dollar scaled a two-month top of USD 0.6050, helped slightly by a report saying China is weighing new stimulus measures.

The two Antipodean currencies are often used as liquid proxies for the yuan.

China is looking to increase its budget deficit for 2023 as the government prepares to bring a new round of stimulus to help the economy meet Beijing’s annual growth target, Bloomberg News reported on Tuesday.

“Markets are still pretty cautious about whether or not the government will introduce a large scale stimulus given they have been reluctant this past year about unleashing any large scale stimulus. So I think markets are a little bit unsure whether that report is real,” said CBA’s Kong.

“If that report is true and Chinese officials come out with a big stimulus package, that will obviously boost (the yuan) and currencies linked to the Chinese economy.”

The offshore yuan, which touched a roughly one-month high of 7.2700 per dollar on Tuesday, last bought 7.2839.

(Reporting by Rae Wee; Editing by Jamie Freed)

Oct 11 – Oil prices were little changed in early Asian trade on Wednesday, as concerns eased about potential supply disruptions due to the conflict between Israel and the Palestinian Islamist group Hamas.

Brent crude rose 12 cents at USD 87.77 a barrel by 0009 GMT. US West Texas Intermediate (WTI) crude rose 3 cents to USD 86.00 a barrel.

Brent and WTI surged more than USD 3.50 on Monday as the military clashes raised fears that the conflict could spread beyond Gaza, but settled lower in Tuesday’s session.

While Israel produces very little crude oil, markets worried that if the conflict escalates it could hurt Middle East supply and worsen an expected deficit for the rest of the year.

US officials have pointed fingers at Iran as being complicit in the Hamas attack on Israel, but credible evidence of the Islamic Republic’s role has yet to appear.

Political risk has kept crude prices from falling further.

Israel says it has razed sections of Gaza as it takes revenge for the Hamas assaults.

Powerful Iraqi and Yemeni armed groups aligned with Iran have threatened to target US interests with missiles and drones if Washington intervenes to support Israel.

In a more positive sign for supply, Venezuela and the U.S. have progressed in talks that could provide sanctions relief to Caracas by allowing at least one additional foreign oil firm to take Venezuelan crude oil under some conditions.

(Reporting by Laura Sanicola; Editing by Leslie Adler)

By Stefano Rebaudo

Oct 10 (Reuters) – Euro area government bond investors took a breather on Tuesday after rushing into safe-haven assets the previous day on fears that military clashes between Israel and the Palestinian Islamist group Hamas could widen beyond Gaza.

Meanwhile, Federal Reserve and European Central Bank policymakers sent dovish messages as the recent rise in long-dated yields is already tightening financial conditions.

The Islamist militant Hamas movement threatened to execute an Israeli captive every time Israel bombed a Palestinian home after Israel called up an unprecedented 300,000 reservists and imposed a blockade on the Gaza Strip.

Germany’s 10-year government bond yield DE10YT=RR, the benchmark for the bloc, rose 2 basis points to 2.78%.

Bond prices move inversely with yields.

Inflation should still land at the European Central Bank’s target of around 2% by the end of 2025 despite the violence that has flared up in Israel since Saturday, ECB policymaker Francois Villeroy de Galhau said on Tuesday.

Markets are closely watching oil prices – which eased on Tuesday after rallying in the previous session – as a further spike might fuel inflation, affecting monetary policy.

Top-ranking Federal Reserve officials indicated on Monday that rising yields on long-term U.S. Treasury bonds, which directly influence financing costs for households and businesses, could steer the Fed from increases in its short-term policy rate.

The return of U.S. investors after the Columbus Day holiday should provide a better read of the market impact of the clashes in the Middle East.

In early London trade, U.S. Treasuries rallied, catching up with their European counterparts as U.S. markets reopened after the holiday, with the 10-year yield US10YT=RR down 10 bps at 4.68%.

“We felt the rise in EUR real yields looked a tactical fade, not least as any further sell-off would likely bring out ECB protests given over-tightening risk,” Citi analysts said in a research note.

The first reaction to the Middle East conflict was a rush into safe-haven assets, which drove yields down, while a jump in oil prices fuelled inflation fears.

German real rates dropped sharply on Monday, with Germany’s inflation-linked 10-year yields DE10YIL=RR down 17.8 bps, in their biggest daily fall since early February. On Tuesday, they were down 0.5 bps at 0.431%.

The conflict did little to affect a key gauge of euro zone long-term inflation expectations EUIL5YF5Y=R, which rose above 2.5% on Monday, to levels seen last week.

Italy’s 10-year yield IT10YT=RR, the benchmark for the euro area periphery, was down 3.5 bps at 4.80%.

The spread between Italian and German 10-year yields DE10IT10=RR tightened to 203 bps after widening to 209 bps the day before as investors rushing into safe-haven assets preferred German Bunds to more risky Italian bonds.

(Reporting by Stefano Rebaudo, editing by Susan Fenton)

((stefano.rebaudo@thomsonreuters.com;))

LONDON, Oct 10  – Oil prices eased on Tuesday after rallying more than 4% in the previous session, with traders cautious as they watched for potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group Hamas.

Brent crude fell 36 cents to USD 87.79 a barrel by 0805 GMT, while US West Texas Intermediate (WTI) crude eased 35 cents to USD 86.03 a barrel. Both benchmarks had fallen by more than USD 1 in earlier trading before recovering slightly.

Brent and WTI had surged more than USD 3.50 on Monday as the clashes raised fears that the conflict could spread beyond Gaza into the oil-rich region. Hamas launched the largest military assault on Israel in decades on Saturday, while fighting continued into the night on Monday as Israel retaliated with a wave of air strikes on Gaza.

“There is still plenty of uncertainty across markets following the attacks in Israel over the weekend,” said ING analysts on Tuesday, adding that oil markets are now pricing in a risk premium.

“If reports of Iran’s involvement turn out to be true, this would provide another boost to prices, as we would expect to see the U.S. enforcing oil sanctions against Iran more strictly. That would further tighten an already tight market,” the ING analysts added.

While Israel produces very little crude oil, markets worried that if the conflict escalates it could hurt Middle East supply and worsen an expected deficit for the rest of the year.

Israel’s port of Ashkelon and its oil terminal have been shut in the wake of the conflict, sources said on Monday.

Iran is complicit even though the United States has no intelligence or evidence that points to Iran’s direct participation in the attacks, a White House spokesperson said on Monday.

“If the U.S. finds evidence directly implicating Iran, then the immediate reduction in Iran’s oil exports becomes a reality,” said Vivek Dhar, an energy analyst at CBA.

“We continue to believe that Brent oil will ultimately stabilise between USD 90-USD 100/bbl in Q4 2023,” said Dhar, adding that the Palestine-Israel conflict raises the risk of Brent futures tracking at USD 100/bbl and above.

In a more positive sign for supply, Venezuela and the U.S. have progressed in talks that could provide sanctions relief to Caracas by allowing at least one additional foreign oil firm to take Venezuelan crude oil under some conditions.

(Reporting by Paul Carsten in London and Jeslyn Lerh in Singapore; Additional reporting by Arathy Somasekhar in Houston; Editing by Jamie Freed, Kim Coghill and Susan Fenton)

SINGAPORE, Oct 10 – The dollar softened on Tuesday along with U.S. interest rate expectations and a fall in Treasury yields as investors detected a slight dovish shift in Federal Reserve officials’ tone.

The yen held small gains as violence in the Middle East supported buying of safe-haven assets, and last traded firmly at 148.34 per dollar. The Swiss franc has also gained and was edging higher at 0.9045 to the dollar.

The euro was up 0.1% in early Asia trade to USD 1.0580. The Israeli shekel steadied at 3.95 to the dollar, just off an almost eight-year low, after the central bank promised USD 30 billion in foreign exchange selling.

Investors are bracing for a drawn-out conflict after a weekend attack from Palestinian militants – and Israel’s retaliation – has claimed more than 1,500 lives.

However, comments from two Fed officials turned around the mood and U.S. rate forecasts overnight after noting the recent selloff in bonds might negate the need for further hikes.

“If long-term interest rates remain elevated because of higher term premiums, there may be less need to raise the Fed funds rate,” said Dallas Fed president Lorie Logan — a notable shift from previously hawkish rhetoric.

Fed Vice Chair Philip Jefferson said the central bank would need to “proceed carefully” given the recent rise in yields. Futures-implied pricing for the chance of another Fed hike this year fell from above 40% last week to about 26% on Monday.

“A handful of other officials, including Fed Governor Christopher Waller, are scheduled to speak today. Markets will closely watch their comments for further clues on the path of (Fed) policy,” said CBA strategist Carol Kong in a note.

Ten-year Treasury yields, which have been zooming, dived more than 13 basis points to 4.63% at the open in Tokyo on Tuesday on both rates relief and a safe-haven bet after the cash market had shut for Columbus Day on Monday. US/

Sterling  was a fraction firmer against the dollar at USD 1.2244. Against the Australian and New Zealand dollars the greenback was also a fraction weaker, with the Aussie up 0.2% to USD 0.6420 and the kiwi up 0.2% to USD 0.6031.

China’s return from a week’s break has traders’ eyes back focused on the daily fix of the yuan’s trading band, which has for weeks on end been far firmer than market expectations.

Ahead of the onshore open, the yuan held overnight gains to trade just above its 50-day moving average in the offshore market at 7.2876 per dollar.

(Reporting by Tom Westbrook. Editing by Sam Holmes)

Oct 10 (Reuters) – Oil prices edged down slightly on Tuesday after gaining more than 4% in the previous session as markets weighed the potential for supply disruptions as the conflict between Israel and the Palestinian Islamist group Hamas continued.

Brent crude fell 18 cents, or 0.2%, to USD 87.97 a barrel at 0017 GMT, while US West Texas Intermediate crude eased 16 cents or 0.2% to USD 86.22 a barrel.

Both benchmarks had gained more than USD 3.50 on Monday on news of the conflict after falling steeply in volatile trading last week.

Hamas’ launched the largest military assault on Israel in decades on Saturday. Fighting continued into the night on Monday as Israel retaliated with a wave of air strikes on Gaza.

While Israel produces very little crude oil, markets worried that if the conflict escalates it could hurt Middle East supply and worsen an expected deficit for the rest of the year.

Israel’s port of Ashkelon and its oil terminal have been shut in the wake of the conflict, sources said on Monday.

The fighting could also derail US efforts to broker a rapprochement between Saudi Arabia and Israel and any associated increase in output next year as part of the deal.

The turmoil may also cause US to tighten its sanctions on Iran and hurt export of Iranian oil, analysts said.

Iran is complicit even though the United States has no intelligence or evidence that points to Iran’s direct participation in the attacks, a White House spokesperson said on Monday.

In a more positive sign for supply, Venezuela and the U.S. have progressed in talks that could provide sanctions relief to Caracas by allowing at least one additional foreign oil firm to take Venezuelan crude oil under some conditions, sources said.

(Reporting by Arathy Somasekhar in Houston; Editing by Jamie Freed)

NEW YORK, Oct 9 – Oil prices jumped more than 4%, gold gained and the safe-haven US dollar edged up against the euro on Monday as military clashes between Israel and the Palestinian Islamist group Hamas fueled worries that the conflict could spread beyond Gaza.

US stocks ended higher, with energy shares rising along with oil prices. The S&P 500 energy index ended up 3.5%.

Israel’s shekel weakened sharply. The dollar was up about 3% at 3.955 shekels.

The Bank of Israel earlier said it would sell up to USD 30 billion of foreign currency to maintain stability. Israeli government bonds also fell.

The Israeli military said on Monday it had called up an unprecedented 300,000 reservists and was imposing a total blockade of the Gaza Strip, in a sign it may be planning a ground assault in response to the devastating weekend attack by the Hamas gunmen.

“Typically the most sensitive asset classes to geopolitical risk are emerging markets, commodities and currencies – and, true to form, we’ve seen hits in all of those areas,” said Tina Fordham, geopolitical strategist and founder of Fordham Global Foresight.

“Wars are inflationary and wars in the Middle East especially are inflationary,” she said.

Brent crude rose USD 3.57, or 4.2%, to settle at USD 88.15 a barrel, while US West Texas Intermediate crude settled at USD 86.38 a barrel, up USD 3.59, or 4.3%.

Emerging market stocks lost 0.20%, while safe-haven gold was in demand, rising 1.6% to USD 1,860 an ounce.

On Wall Street, shares of US airlines, hurt by rising oil prices, ended sharply lower. United Airlines UAL.O, Delta Air Lines  and American Airlines  suspended direct flights to Tel Aviv.

Still, the Dow Jones Industrial Average rose 197.07 points, or 0.59%, to 33,604.65, the S&P 500  gained 27.16 points, or 0.63%, to 4,335.66 and the Nasdaq Composite  added 52.90 points, or 0.39%, to 13,484.24.

The pan-European STOXX 600 index lost 0.26% and MSCI’s gauge of stocks across the globe gained 0.40%.

“We don’t see a ‘sell now, ask questions later’ market,” said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

“The market at this point has focused on the diplomatic efforts to keep Israel focused on Hamas and reduce the prospect of escalation. There’s an all-out global diplomatic effort to keep this conflict from expanding into the oil-rich region,” she said.

Against the dollar, the euro fell 0.19% to USD 1.0566, while the dollar index, a measure of the U.S. currency against six others, retreated 0.16% after earlier trading higher.

The cash Treasury market was closed on Monday for Columbus Day. 10-year Treasury futures rose.

The conflict in the Middle East comes at a time when markets are jittery and bond yields around the world are at multi-year highs.

Investors are anxiously awaiting US consumer price data, due later this week.

The unofficial kickoff of the third-quarter US. corporate earnings season is also this week, with J.P.Morgan JPM.N and other banks due to report results.

(Reporting by Caroline Valetkevitch in New York; additional reporting by Karin Strohecker, Alun John in London and Wayne Cole in Sydney. Editing by Christina Fincher and Matthew Lewis)

LONDON/SINGAPORE, Oct 9  – The safe-haven dollar and Japanese yen inched higher on Monday as military clashes between Israel and the Palestinian Islamist group Hamas deepened political uncertainty across the Middle East.

Risk sentiment was fragile after Israeli forces fought gunmen from the Palestinian group Hamas over the weekend, hours after the militants launched an attack on Israel in the deadliest day of violence in the country for 50 years.

The Israeli shekel was last roughly 2.5% lower at 3.9325 per dollar after the Bank of Israel announced it would sell up to USD 30 billion of foreign currency in the open market to maintain stability. The shekel tumbled earlier more than 3% to an almost eight-year low of 3.9880 per dollar.

The dollar index was last 0.33% higher at 106.57, while the Japanese yen- another traditional safe-haven currency – edged 0.1% higher to 149.15 per dollar, in thinned Asian trade, with Japan closed for a holiday.

“If a war breaks out anywhere in the world it is a good idea to hold U.S. dollars. It can therefore come as no surprise that the greenback started trade last night with some gains,” said Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank.

The dollar also drew support from Friday’s data showing U.S. employment increased by the most in eight months in September, potentially setting up for a higher-than-expected inflation print later this week.

“The resoundingly strong employment report will likely keep the (Federal Open Market Committee) on guard as it watches for signs that a tight labour market could prevent inflation from returning to 2% on a sustained basis,” economists at Wells Fargo said.

“Another rate hike before the end of the year is a possibility, but for now our base case remains that the last rate hike of the tightening cycle occurred in July.”

Market pricing shows a roughly 78% chance that the Federal Reserve will keep rates on hold at its November policy meeting, according to CME Group data.

Elsewhere, risk-sensitive euro and sterling fell against the broadly strengthening dollar. The eurodropped 0.6% to trade at USD 1.0522, while sterling fell 0.5% to USD 1.2167.

Data showed on Monday that German industrial production fell slightly more than expected in August by 0.2% compared to the previous month, rising recession fears in the euro zone.

The Australian dollar, seen as a proxy for risk appetite, slid 0.45% to USD 0.6356.

(Reporting by Joice Alves in London and Rae Wee in Singapore; Editing by Alison Williams)

Oct 9  – Gold prices climbed more than 1% on Monday as dramatic clashes between Israeli and Hamas forces over the weekend raised the risk of a wider Middle East conflict and spurred a rush to safe-haven investments like bullion.

Israel pounded the Palestinian enclave of Gaza on Sunday, killing hundreds of people in retaliation for one of the bloodiest attacks in its history when Islamist group Hamas rampaged through Israeli towns on Saturday.

Spot gold jumped 1% to USD 1,849.90 per ounce by 0753 GMT, having hit its highest level in a week. US gold futures climbed 1.1% to USD 1,864.50.

“Gold has regained its safe-haven status following the geopolitical events over the weekend,” City Index Senior Analyst Matt Simpson said.

“We see the potential for gold to head for USD 1,880, but unless we see bond yields move materially lower, I doubt it can break USD 1,900 any time soon.”

The spiralling violence threatens to start a major new war in the Middle East, sending oil prices higher and boosting the demand for safe-haven assets like Treasuries, the dollar and the Japanese yen along with gold.

Gold rebounded sharply from seven-month lows hit on Friday, but its upside remained capped by strong US economic data that has bolstered the view that the Federal Reserve is unlikely to end its monetary policy tightening cycle in the near term.

Last week, data showed that US employment increased by the most in eight months in September, pointing to persistent labour market strength. A hot inflation print later in the week could pave the way for another US interest rate hike this year.

Higher US rates raise the opportunity cost of holding gold, which yields no interest. Investors are also focused on the minutes of the US central bank’s September meeting due on Wednesday.

Among other metals, spot silver gained 0.3% to USD 21.66 per ounce, platinum advanced 0.6% to USD 881.91 and palladium fell 0.4% to USD 1,152.96.

(Reporting by Swati Verma in Bengaluru; Editing by Subhranshu Sahu, Sohini Goswami and Janane Venkatraman)