Yen weakens past 150 per dollar for first time in 32 years

SINGAPORE/LONDON, Oct 20 (Reuters) – The dollar hit the symbolic level of 150 yen on Thursday as the greenback was supported by Treasury yields trading at multi-year highs, keeping markets on high alert for any signs of an intervention from Japanese authorities.

Moves among other majors were more muted with the euro at USD 0.97835 and sterling at USD 1.1217, both failing to regain ground on the dollar, after tumbling the day before.

The fragile yen briefly weakened past 150 per dollar in early European trading for the first time since August 1990. It was last trading flat a little below that level.

It has been on a losing streak for 11 straight sessions as of Wednesday’s close, and has renewed 32-year lows for six sessions now.

“It’s a big psychological level that could trigger intervention … people have been anticipating intervention for a while,” said Sim Moh Siong, currency strategist at Bank of Singapore.

“People are going to look over their shoulders for a while and see whether there’s any action or not, if not, they’re going to push it further, higher. That’s how the market goes. The next resistance I see would be around 153 level.”

Last month, Japan intervened in the foreign exchange market to buy yen for the first time since 1998 in an attempt to shore up the battered currency.

The Japanese currency has been weakening as the country’s central bank has been intervening in markets to keep Japanese benchmark yields pinned near zero, at a time when those elsewhere are rising.

The benchmark US 10-year Treasury yield rose to 4.18% on Thursday, its highest level since mid-2008, while the two-year Treasury yields touched a 15-year high of 4.6079%.

US yields have been driven higher as the Federal Reserve looks set to continue with its aggressive pace of interest rate hikes.

Overnight, Fed officials also continued their hawkish rhetoric, as Federal Reserve Bank of Minneapolis President Neel Kashkari said that US job market demand remains strong and underlying inflation pressures probably have not peaked yet.

The euro climbed a whisker on the pound but the British currency largely ignored the latest political turmoil in the United Kingdom, with the departure of the interior minister being the latest matter to add to the uncertainty.

The surging greenback also pushed the Chinese offshore yuan to a record low in Asia of 7.2794 early in the session, its weakest level since such data first became available in 2011.

It later trimmed intraday losses on a Bloomberg report China is considering a cut in the duration of quarantine for inbound visitors from 10 days to seven days.

(Reporting by Rae Wee and Alun John; Editing by Stephen Coates and Angus MacSwan)

Gold pinned near 3-week low as higher yields, rate-hike bets weigh

Oct 20 (Reuters) – Gold prices stalled near a three-week low on Thursday, as higher US Treasury yields and fears of more sharp rate hikes by the Federal Reserve dampened investor appetite for the metal.

Spot gold was flat at USD 1,627.98 per ounce, as of 0709 GMT. Prices had earlier hit their lowest since Sept. 28 at USD 1,621.20.

US gold futures were down 0.1% to USD 1,632.70.

The dollar index ticked 0.1% lower, alleviating some pressure off the greenback-priced bullion. Meanwhile, benchmark 10-year Treasury yields held near their highest since mid-2008.

“Gold is still vulnerable as the inflation and interest rate environment is far from favourable,” said Craig Erlam, a senior market analyst at OANDA, adding that the metal had found some temporary support around USD 1,620.

“The recent trend is very much against it… A test of USD 1,600 may be on the cards.”

While gold is often considered a hedge against inflation and economic turmoil, rising US interest rates have increased the opportunity cost of holding the zero-yielding metal, which has fallen nearly 11% so far in the year.

The Fed’s “Beige Book” survey showed US economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, while firms noted that price pressures remained elevated.

The report did little to temper expectations for a fourth straight 75-basis-point Fed rate hike in November.

Gold might consolidate above the USD 1,600 level, with the US core personal consumption expenditures data due next week being the next major inflection point, said Ilya Spivak, a currency strategist at DailyFX.

Indicative of sentiment, holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, fell 6.08 tonnes on Wednesday in their biggest one-day outflow since July 6.

Spot silver fell 0.2% to USD 18.40 per ounce, platinum rose 0.1% to USD 884.75 and palladium slipped 0.4% to USD 1,992.88.

(Reporting by Eileen Soreng in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)

Oil prices rise on possible easing in China COVID quarantine measure

SINGAPORE, Oct 20 (Reuters) – Oil prices gained around USD 1 on Thursday as investor sentiment rose on news that China is considering a cut in the duration of quarantine for inbound visitors.

Brent crude futures for December settlement rose 80 cents, or 0.9%, to USD 93.21 a barrel at 0610 GMT.

US West Texas Intermediate crude for November delivery (WTI), which expires on Thursday, rose USD 1.29, or 1.5%, to USD 86.84 per barrel. The WTI contract for December delivery was last up 1.4%, or USD 1.16 cents, at USD 85.68 a barrel.

“The market is bouncing on that quarantine news and by extension a flickering light at the end of the zero-Covid policy tunnel,” said Stephen Innes, managing partner at SPI Asset Management, adding that this is “the first positive sign we have seen out of China on the Covid front.”

China, the world’s largest crude importer, has stuck to strict COVID-19 curbs this year, weighing heavily on business and economic activity which lowers demand for fuel.

Bloomberg news reported on Thursday that China is considering cutting the quarantine period for inbound visitors to seven days from 10 days, citing people familiar with the matter.

The report said officials are targeting a cut in the quarantine period to two days in a hotel and then five days at home, but there is no clarity yet on how the new restrictions would apply to foreigners and other visitors without a residence in China.

Innes, however, cautioned that China’s zero-Covid policy is likely to stay in place “at least through Q1” next year, and maintains a bullish view on oil.

“Short of an unlikely shale oil revival, there are few lasting policy measures the Biden administration can use to effective push oil much lower.”

Oil prices have seen support from a looming European Union ban on Russian crude and oil products, as well as the output cut from the Organization of the Petroleum Exporting Countries and other producers including Russia, known as OPEC+.

The OPEC+ agreed on a production cut of 2 million barrels per day in early October – but analysts expect a smaller decline in actual output of about 1 million barrels per day due to under-production in countries such as Iran, Venezuela and Nigeria.

Separately, US President Joe Biden announced a plan on Wednesday to sell off the rest of his release from the nation’s emergency oil reserve by year’s end, or 15 million barrels of oil, and begin refilling the stockpile as he tries to dampen high gasoline prices ahead of midterm elections on Nov. 8.

However, the release is “too small to impact the market,” said Commonwealth Bank commodities analyst Vivek Dhar in a Thursday note, estimating it would increase global oil supplies by just 0.04 million barrels per day.

“EU sanctions on Russian oil imports will likely become the focus of the oil market in coming weeks… We expect Brent oil futures to average USD 100 per barrel in Q4 2022 on the back of supply disruption from the EU sanctions,” Dhar added.

Meanwhile, global demand for fuel remains uncertain. US economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, the Federal Reserve said on Wednesday in a report that showed firms growing more pessimistic about the outlook.

(Reporting by Laura Sanicola and Emily Chow in Singapore; editing by Richard Pullin, Ana Nicolaci da Costa and Kim Coghill)

Oil near flat, inflation worries counter potential boost in China demand

NEW YORK, Oct 20 (Reuters) – Oil prices were near flat during a choppy trading session on Thursday, as worries about inflation dampening demand for oil contended with news that China is considering easing COVID-19 quarantine measures for visitors.

Brent crude futures fell 3 cents to settle at USD 92.38 a barrel.

US West Texas Intermediate crude for November delivery, which expires on Thursday, rose 43 cents to USD 85.98 per barrel. WTI for December delivery CLc2 edged down 1 cent at USD 84.51 per barrel.

Both Brent and WTI earlier gained by over USD 2 per barrel.

To fight inflation, the US Federal Reserve is trying to slow the economy and will keep raising its short-term rate target, said Federal Reserve Bank of Philadelphia President Patrick Harker on Thursday.

The US dollar index pared losses after the comments, weighing on oil prices. A stronger dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.

“Harker is saying that the war on inflation has just begun,” said Phil Flynn, analyst at Price Futures Group in Chicago. “So it seems like the market is getting nervous.”

Supporting prices, however, Beijing is considering cutting the quarantine period for visitors to seven days from 10 days, Bloomberg news reported on Thursday, citing people familiar with the matter.

“That’s been seen as a positive demand indicator for the market,” said Bob Yawger, director of energy futures at Mizuho in New York.

China, the world’s largest crude importer, has stuck to strict COVID curbs this year, which weighed heavily on business and economic activity, lowering demand for fuel.

A looming European Union ban on Russian crude and oil products, as well as the output cut from the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, have also supported prices.

OPEC+ agreed on a production cut of 2 million barrels per day in early October.

Separately, US President Joe Biden announced a plan on Wednesday to sell off the rest of his release from the nation’s Strategic Petroleum Reserve (SPR) by year’s end, or 15 million barrels of oil, and begin refilling the stockpile as he tries to dampen high gasoline prices ahead of midterm elections on Nov. 8.

The announcement, however failed to ease oil prices, as official US data showed that the SPR last week dropped to their lowest since mid-1984, while commercial oil stocks fell unexpectedly.

(Reporting by Stephanie Kelly in New York; Additional reporting by Ahmad Ghaddar in London and Emily Chow in Singapore; Editing by Marguerita Choy, Kirsten Donovan and David Gregorio)

Wall Street ends red, Treasury yields climb on dour guidance

NEW YORK, Oct 19 (Reuters) – Wall Street closed lower on Wednesday, marking the end of a multi-session rally, and Treasury yields spiked as gloomy data and downbeat corporate outlooks tossed cold water on investor risk appetite.

All three major US stock indexes lost ground, while the benchmark Treasury yield shot up to touch a new 14-year high.

“It’s partly a pause after the rally, some concern over higher-than-expected inflation in great Britain, and some companies expressing caution about the outlook going forward,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “The market is taking a breather.”

Market participants balanced a string of mixed company earnings, notably from Procter & Gamble (PG), Travelers Companies Inc. (TRV), and Baker Hughes Co. (BKR), against ongoing concerns over whether central bank interest rate hikes to contain inflation could push the global economy into contraction.

“The market is still unsure as to when the Fed is going to recognize what they’ve done to date is beginning to take effect,” said David Keator, partner at the Keator Group, a wealth management firm in Lenox, Massachusetts. “The Fed is taking its mandate of tackling inflation seriously, but there’s been chatter of tightening too much.”

The Dow Jones Industrial Average fell 99.99 points, or 0.33%, to 30,423.81, the S&P 500 lost 24.82 points, or 0.67%, to 3,695.16 and the Nasdaq Composite dropped 91.89 points, or 0.85%, to 10,680.51.

Data showing UK inflation hitting 10.1% in September pushed European stocks to break their recent winning streak.

The pan-European STOXX 600 index lost 0.53% and MSCI’s gauge of stocks across the globe shed 0.89%.

Emerging market stocks lost 1.62%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.65% lower, while Japan’s Nikkei rose 0.37%.

A sell-off in US government bonds pushed the benchmark Treasury yield to its highest level since mid-2008 on expectations of continued aggressive interest rate hikes from the Federal Reserve.

Benchmark 10-year note were last at 4.1272%, from 3.998% late on Tuesday.

The 30-year bond yield was 4.1259%, from 4.021% late on Tuesday.

The dollar rebounded from two-week lows as hotter-than-expected UK inflation data fueled recession worries, which dragged down the sterling and helped support the greenback against a basket of world currencies.

The dollar index rose 0.7%, with the euro down 0.83% to USD 0.977.

The dollar also touched a 32-year peak against the yen, hovering close to a level that some believe could trigger intervention by Japan.

The Japanese yen weakened 0.40% versus the greenback at 149.88 per dollar, while sterling was last trading at USD 1.122, down 0.87% on the day.

Crude prices edged higher on tighter supply conditions, bouncing back after hitting two week lows in the wake of US President Joe Biden’s plans to release oil from strategic reserves.

US crude rose 3.30% to settle at USD 85.55 per barrel, while Brent settled at USD 92.41 per barrel, up 2.64% on the day.

Dollar strength weighed on gold, sending prices for the safe-haven metal to a three-week low.

Spot gold dropped 1.4% to USD 1,628.61 an ounce.

(Reporting by Stephen Culp; Additional reporting by Dhara Ranasinghe in London; Editing by Nick Macfie, Chris Reese and Deepa Babington)

US recap: EUR/USD down on Treasury yield rise, haven dollar demand

Oct 19 (Reuters) – The dollar index rose about 1% on Wednesday as record euro zone and 40-year-high UK inflation heightened recession fears, sending safe-haven flows into the US currency.

Meanwhile, 10-year Treasury yields rose to 14-year highs, adding to support for the dollar.

The recent pullback in gilts yields due to the government’s fiscal U-turn and the BoE’s attempts to calm markets persisted, but in curve-flattening fashion after the BoE said that QT beginning on Nov. 1 will not involve maturities beyond 20-years.

Investors shrugged off more weak US housing data, with a fourth consecutive 75bp Fed rate hike still priced in for Nov. 2 and the early 2023 terminal rate now by 5%.

Gilts yields eased on hopes the worst of the UK pension fund crisis is over nL8N31K53F but have become a drag on sterling as Treasury and bund yields rise to new long-term highs.

Sterling fell 1% to tenkan support just above Monday’s 1.1175 low.

EUR/USD fell 0.9% toward tenkan support at 0.9753 amid Wednesday’s risk aversion.

USD/JPY was up 0.4% to its highest since 1998 and very nearly at major psychological resistance at 150. The gain in Treasury yields was unopposed by BoJ-corralled JGB yields and no willingness to lift rates to help the MoF’s interventions to support the yen.

USD/JPY cleared technical hurdles near 149.50. Another bout of Japanese selling would be viewed as a buying opportunity unless materially weaker US employment and inflation data pointed to a nearer peak in Fed funds and Treasury yields.

USD/CNH and USD/CNY were up 0.66% and 0.39%, with the offshore yuan making record highs and USD/CNY close to September’s 14-year highs, as the Chinese economy struggles with a weakening property sector, ongoing COVID lockdowns and widening Treasury yields spreads over Chinese government debt. Also worries about delayed China economic data releases.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

Gold hits 3-week low on robust dollar, firmer yields

Oct 19 (Reuters) – Gold prices dropped over 1% to a three-week low on Wednesday as the US dollar and Treasury yields rose, further pressured by prospects of aggressive rate hikes from the Federal Reserve.

Spot gold fell 1.5% to USD 1,627.81 per ounce by 1:41 p.m. ET (1741 GMT), after touching its lowest since Sept. 28 earlier in the session.

US gold futures settled down 1.3% at USD 1,634.2.

“The market continues to be quite worried about aggressive Federal Reserve monetary tightening,” said Bart Melek, head of commodity strategy at TD Securities.

“We’re gonna have a fairly steep run up in interest rates and probably not a very quick pivot, so gold market is responding (to that).”

Several Fed officials have reiterated the US central bank’s commitment to raise interest rates aggressively to battle surging inflation, with markets pricing in a 75-basis-point hike in November.

Although gold is seen as a hedge against inflation, rising interest rates increase the opportunity cost of holding the non-yielding asset.

“A drop below September’s low at (around) USD 1,615 looks very likely now, with USD 1,600 being the next target for the bears,” Fawad Razaqzada, market analyst at City Index, said in a note.

Making bullion more expensive for overseas buyers, the dollar rose 0.7%, while benchmark 10-year Treasury yields hit their highest since 2008.

“(Gold’s) three-month rolling correlation with other assets has strengthened too, namely with the S&P 500, bitcoin, Brent and with the VIX volatility index,” Standard Chartered said in a note dated Tuesday.

Meanwhile, spot silver dropped 2% to USD 18.38 per ounce.

Silver is well poised for a significant climb upwards but for the time being the downward pressure from large rate hikes by global central banks is keeping its price subdued, said Rupert Rowling, a market analyst at Kinesis Money, in a note.

Platinum fell 2.3% to USD 886.75 per ounce while palladium dropped 1.1% to USD 1,990.22.

(Reporting by Kavya Guduru in Bengaluru; Editing by Shailesh Kuber and Vinay Dwivedi)

Sterling slips amid red-hot inflation, dollar holds at 32-year peak vs yen

LONDON/TOKYO, Oct 19 (Reuters) – Sterling weakened on Wednesday after hotter-than-expected consumer price inflation and fears of a deeper recession bolstered expectations of a less aggressive rate hike by the Bank of England in November.

The US dollar held at a 32-year peak against the yen and rose from a two-week trough against a basket of major peers, underpinned by expectations of aggressive US Federal Reserve interest rate hikes.

The British pound fell 0.6% at 0827 GMT to USD 1.12500 after data showing Britain’s annual consumer price inflation inched up to 10.1% in September, rising more than expected and returning to a 40-year high hit in July.

Investors expect sterling to remain under pressure amid the outlook for rising inflation and a recession in Britain which could lead the BoE to hike by 75 basis points rather than 100 bps at its November meeting.

“Sterling edged lower against its peers after yet another upside surprise in the latest UK inflation data… The outlook for the UK economy remains relatively murky, with ballooning borrowing costs, soaring consumer prices and a government in chaos with its credibility shot to bits unlikely to inspire much confidence,” said Matthew Ryan, Head of Market Strategy at Ebury.

“Following the budget fiasco, there is also a great deal of uncertainty as to the pace of upcoming Bank of England interest rate hikes,” he added.

Money markets are pricing in a total 300 bps of BoE interest rates hikes by May, according to Refinitiv data. IRPR

The BoE said it would start selling some of its huge stock of British government bonds from Nov. 1, but would not sell this year any longer-duration gilts that have been at the centre of market volatility in the wake of the government’s “mini-budget” fiasco.

Elsewhere, the dollar pushed as high as 149.48 yen for the first time since August 1990 in early London trading. Dollar/yen pair was last up 0.1% at 149.40 yen.

Traders are on high alert for the Ministry of Finance and Bank of Japan to step into the market again, as the currency pair pushes toward the key psychological barrier at 150. A cross of 145 a month ago spurred the first yen-buying intervention since 1998.

Japanese Finance Minister Shunichi Suzuki said on Wednesday that he was checking currency rates “meticulously” and with more frequency, local media reported.

“Intervention risk remains present, since the MOF has already crossed the Rubicon (but) its purpose is surely only to limit the scale of speculative positioning rather than driving a sustained reversal,” said Sean Callow, a currency strategist at Westpac in Sydney.

Given the BOJ’s position as the only developed-market central bank pursuing a negative interest rate policy, “it’s hard to see why the pair wouldn’t extend into the 150-155 area”, Callow added.

DOLLAR KING

The dollar index – which measures the currency against six peers including the yen, sterling and euro – added 0.46% to 112.49, after dropping to the lowest since Oct. 6 at 111.76 on Tuesday.

The greenback, which currently reigns as the safe-haven currency of choice, has sagged this week amid the bear rally in equities globally following some upbeat earnings.

But underlying support continues to come from market pricing for two more 75 bps hikes from the Fed this year as it focuses on red-hot inflation, even at the risk of sparking a recession.

Fiscal uncertainty in Britain is also clouding the outlook for markets globally.

The euro sank 0.45% to USD 0.98175, retreating from Tuesday’s high of USD 0.98755, a level last seen on Oct. 6.

Economists in a Reuters poll predict another 75 bps rate hike from the European Central Bank on Thursday of next week.

The New Zealand dollar remained elevated, up 2% this week, following Tuesday’s blowout consumer price data, which raises expectations for continued aggressive tightening by the Reserve Bank of New Zealand. The currency last traded 0.2% lower at USD 0.56760, close to Tuesday’s two-week high of USD 0.5719.

(Reporting by Joice Alves and Kevin Buckland; Editing by Nick Macfie)

Philippines wants predictable forex rate, says minister

MANILA, Oct 19 (Reuters) – The Philippines must “do something” about sharp fluctuations in the foreign exchange rate to make the currency’s movement predictable, its economic planning secretary said on Wednesday.

The Philippine peso is Southeast Asia’s worst-performing currency, having lost 13.4% against the US dollar so far this year as the Fed’s aggressive policy tightening to combat inflation boosts the greenback’s safe-haven appeal.

“We have to watch out for any sharp changes in the exchange rate and be able to do something about it,” Economic Planning Secretary Arsenio Balisacan told reporters on the sidelines of a business forum.

“What’s important are the swings. We don’t want that,” Balisacan said, adding the government will not dictate policy to the Bangko Sentral ng Pilipinas (BSP).

The central bank has said it was active in the forex market and selling strategically to prevent “excessive” forex movements.

At a senate hearing on Wednesday, senior central banker Iluminada Sicat said the BSP “will always be ready to participate” in the forex market but only to “smooth out” excessive volatility “rather than defend a specific level or trend of the peso”.

“The BSP is also prepared to utilise other tools to respond to fluctuations in exchange rate,” Sicat said, citing as examples, the US dollar repo facility and currency swap arrangements.

President Ferdinand Marcos Jr said on Tuesday his government was prepared to defend the peso, and would continue to use interest rates to combat inflation that is already at four-year highs.

The central bank, which has two more policy meetings left this year, has so far raised key policy rates by 225 basis points (bps) this year, including an off-cycle 75 bps hike in July, to tame inflation and slow the peso’s decline.

Separately, Balisacan told a business forum he does not favour granting universal subsidies and removing value-added tax on certain goods to tame prices.

(Reporting by Neil Jerome Morales; Writing by Karen Lema; Editing by Martin Petty and Kanupriya Kapoor)

Oil up in tight market as US sets release of more reserves

NEW YORK, Oct 19 (Reuters) – Oil prices rose on Wednesday as caution over tightening supply countered the negative impact of uncertain demand, and news that the United States will release more crude from its reserves.

Brent crude futures for December settlement ended up USD 2.38, or 2.6%, to USD 92.41 a barrel. US West Texas Intermediate crude (WTI) for November, which is expiring on Thursday, ended at USD 85.55 a barrel, up USD 2.73, or 3.3%.

“Realistically an SPR release is near-term bearish, long-term bullish because eventually you’re going to have to buy it back,” said Gary Cunningham, director of market research at Tradition Energy. “Overall the market continues to swing wildly and chop around on erratic news.”

In the previous session, the benchmarks hit a two-week low after US President Joe Biden said he plans to release 15 million barrels of oil from the Strategic Petroleum Reserve (SPR).

Biden, in remarks Wednesday, noted US plans to repurchase oil for the reserve if prices fall enough. The reserve release would be the last sale from the planned sale of 180 million barrels of oil announced shortly after Russia invaded Ukraine in February.

Oil prices have rallied since the Organization of the Petroleum Exporting Countries agreed to reduce its production target by roughly 2 million barrels a day – though that is expected to only include about 1 million barrels of actual output declines.

“They want Brent around USD 90, so they’re going to get it and going to continue to cut output to hold that number,” Cunningham said.

US crude inventories fell unexpectedly last week – down 1.7 million barrels, weekly government showed, against expectations for a build of 1.4 million barrels. SPR levels fell 3.6 million barrels to just over 405 million, the lowest since May 1984.

A pending European Union ban on Russian crude and oil products and the output cut from the Organization of the Petroleum Exporting Countries and other producers including Russia, a group known as OPEC+, of 2 million barrels per day also supported prices.

The EU’s sanctions on Russian crude takes effect in December, and sanctions on oil products will take effect in February.

(Additional reporting by Stephanie Kelly; Editing by Marguerita Choy, Paul Simao and David Gregorio)

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