Gold gains as US Fed minutes pressure dollar

Oct 12 (Reuters) – Gold prices firmed on Wednesday, drawing support from a drop in the dollar and US Treasury yields in the wake of minutes from the Federal Reserve’s last policy meeting.

Spot gold rose 0.5% to USD 1,673.59 per ounce by 2:40 p.m. ET (1840 GMT). US gold futures settled down 0.5% at USD 1,677.50.

Fed policymakers agreed they needed to move to a more restrictive policy stance, and then maintain that for some time, to meet the US central bank’s goal of lowering inflation, a readout of last month’s two-day meeting showed on Wednesday.

That said, several participants in the discussion said it would be important to “calibrate” the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.

“The market is grasping for any sign of dovishness and are looking at the word ‘calibrate’, hence the dip in the US dollar and pop in gold,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York, adding that the minutes should, however, still be read as hawkish.

The dollar weakened, making gold less expensive for other currency holders. Benchmark US 10-year Treasury yields also eased.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

US consumer price index data is due on Thursday, which is expected to remain stubbornly elevated.

“Gold and silver look set to benefit from the eventual turnaround in the dollar and yields, hence the continued focus on inflation and economic data for sign of any weakness to support a shift in the hawkish stance being signalled by the Federal Reserve,” Ole Hansen, head of commodity strategy at Saxo bank, said in a note.

Spot silver XAG= fell 0.8% to USD 19.03 per ounce, platinum firmed 0.2% to USD 886.94, and palladium edged 0.2% higher to USD 2,144.68.

(Reporting by Bharat Govind Gautam and Brijesh Patel in Bengaluru; Editing by Maju Samuel and Shounak Dasgupta)

Dollar at 24-year top on yen after US yields jump; sterling choppy

TOKYO, Oct 12 (Reuters) – The dollar scaled new 24-year heights on the yen on Wednesday, breaching levels that prompted intervention by Japanese officials last month, while investors in sterling were scratching their heads about the Bank of England’s plans.

The dollar reached as high as 146.39 yen in early Asia trade, the first time at that level since August 1998. It was last up 0.2% at 146.18.

Japanese authorities staged their first yen-buying intervention since 1998 on Sept. 22, when the yen weakened to 145.90 per dollar.

Officials have reiterated they remain ready to take appropriate steps to counter excessive currency moves, though whether they wish to defend particular levels is less clear.

“Given the overriding strong dollar trend in place, it’s possible that instead of defending the yen at a particular level, the Bank of Japan would try to slow down the pace of the dollar-yen’s rise by defending at a higher level” than previously, said Alvin Tan, head of Asia currency strategy at RBC Capital Markets.

The Japanese currency is particularly sensitive to the gap between U.S. and Japanese long-term bond yields. The benchmark 10-year Treasury yield jumped to the cusp of a 14-year high overnight at 4.006%, while the equivalent Japanese government bond yield is pinned near zero by the Bank of Japan.

The other main focus of the day was sterling, which slipped to a new two-week trough of USD 1.0925 in early Asia trade after Bank of England (BoE) Governor Andrew Bailey reiterated that the central bank would end its emergency bond-buying programme on Friday and told pension fund managers to finish rebalancing their positions within that time frame.

It rebounded slightly after a report in the Financial Times said the BoE has signalled privately to lenders that it was prepared to prolong its bond purchases, and was last at USD 1.1015, up 0.5% on the day.

“Confusing much?” Jordan Rochester, executive director of FX strategy summarised the situation in emailed comments.

“Either way it’s a stop gap and eventually will come to an end, it has allowed GBP some respite but it’s not a reason in itself to go long GBP. It’s simply a matter of time before the support for the long end is reduced and GBP heads lower with it,” Rochester added.

The emergency programme was a response to turmoil in Britain’s government bond market following a mini-budget that also sent the pound to a record low of USD 1.0327.

Wednesday data showing Britain’s economy shrank by 0.3% in August, hit by weakness in manufacturing and maintenance work in North Sea oil and gas fields just, to the confusion.

Elsewhere, the euro slumped to its weakest since Sept. 29 overnight at USD 0.9670 and remained not far from that level, trading flat on the day at USD 0.9715.

Traders are watching European Central Bank President Christine Lagarde’s speech at the IIF annual meeting in Washington for any signals about euro zone rate increases.

The risk-sensitive Australian dollar sank to a 2 1/2-year low of USD 0.62395.

(Reporting by Kevin Buckland and Georgina Lee; Additional reporting by Vidya Ranganathan, Alun John
Editing by Shri Navaratnam, Robert Birsel)

Japan shares close flat as tech offsets travel boost

By Sam Byford

TOKYO, Oct 12 (Reuters) – Japanese stocks ended flat after a bumpy trading session on Wednesday, with sliding tech companies countering gains in travel-related firms in a market that lacked direction ahead of this week’s key U.S. inflation data.

The Nikkei share average opened down 0.18% and swung between losses and gains throughout the day, before closing down 0.02% at 26,396.83. The broader Topix .TOPX lost 0.12%.

The biggest loser on the Nikkei was semiconductor equipment maker Tokyo Electron Ltd 8035.T, which fell 4.39% amid ongoing struggles in the chips industry. The Philadelphia semiconductor index .SOX has declined for four straight sessions.

“It doesn’t look like growth stocks, in particular semi-conductor-related stocks, have bottomed out,” said Hiroyasu Mori of Okachi Securities, who pointed to reports of Apple’s suspension of an iPhone production increase as a spark for the trend.

“For now, it seems the market will be selling off high-tech stocks and buying stocks related to domestic demand,” he said.

Demand was strong for system-on-chip designer Socionext Inc 6526.T, however, which started trading on Wednesday after what is said to be the biggest IPO in Japan so far this year.

Shares in Socionext closed at 4,200 yen, 15.07% higher than the initial offer price.

The yen plunged to new 24-year lows, falling as far as 146.39 to the dollar. The Japanese currency hadn’t fallen below 146 since 1998, and the Ministry of Finance intervened to prop it up in September when it reached 145.9.

A weaker yen can help some Japanese exporters, who benefit from cheaper foreign sales. Topix transportation equipment stocks .ITEQP.T were up 1.06%, though that included several automakers like Mitsubishi Motor 7211.T, which fell 3.91%.

Overall, the market lacked direction as it awaited the Consumer Price Index (CPI) report on Thursday, which will be scoured for clues to inflation and rate hikes that could follow to tame it.

“The CPI has often caused turbulence until now, so a lot of investors want to wait and see what happens,” said a strategist at a domestic securities firm.

The best performers on the Nikkei were related to travel and retail, as Japan opens its borders for regular tourism this week.

Central Japan Railway Co 9022.T and West Japan Railway Co 9021.T both gained more than 2%, while 7-11 owner Seven & I Holdings Co Ltd 3382.T and department store operator Aeon Co Ltd 8267.T jumped by more than 3% each.

Of the Nikkei’s 225 constituents, 143 declined, 75 advanced, and seven traded flat.

(Reporting by Sam Byford and Tokyo markets team; Editing by Subhranshu Sahu)

((Sam.Byford@thomsonreuters.com;))

Philippine central bank’s policy settings remain accommodative, says governor

MANILA, Oct 12 (Reuters) – The Philippines central bank’s monetary policy settings remain accommodative, its governor said on Wednesday.

Bangko Sentral ng Pilipinas Governor Felipe Medalla also told a banking forum bringing inflation back to target remains the bank’s “paramount” focus.

(Reporting by Neil Jerome Morales; Editing by Kanupriya Kapoor)

Oil recoups some losses on supply fears, strong dollar weighs

Oct 12 (Reuters) – Oil futures recouped some losses on Wednesday after dropping by 2% in the previous session, supported by supply worries stemming from OPEC+ production cuts, although a stronger dollar weighed on market sentiment.

Brent crude futures were down 2 cents, or 0.02%, to USD 94.27 a barrel by 0727 GMT after hitting a session low of USD 93.33 a barrel.

US West Texas Intermediate crude was at USD 89.14 a barrel, down 21 cents, or 0.24%. The contract fell to a session low of USD 88.27 per barrel earlier in the day.

“Crude oil prices will gain further momentum after a brief retreat and can edge higher towards USD 104 a barrel for Brent and around USD 98 a barrel for WTI crude amid supply tightness caused by OPEC and allies-led output cuts and disruptions to Russian oil production,” said Sugandha Sachdeva, vice president of commodity and currency at Religare Broking.

Last week, the Organization of the Petroleum Exporting Countries and allies including Russia, together known as OPEC+, decided to cut their output target by 2 million barrels per day.

Citi Research expects US crude prices to average USD 96 a barrel and Brent prices to average USD 101 per barrel in 2022 in response to tightening supplies due to the output cut.

“Although OPEC+’s 2 million bpd headline oil output cut from the August quotas looks large on paper, the effective cut would be smaller,” Citi Research said in a note.

“We assume the final cut to be less than 0.9 million bpd partly amid poor compliance from Iraq,” Citi said.

Also on the supply side, Russia’s Transneft TRNF_p.MM state-owned pipeline monopoly said on Wednesday it had received notice from Polish operator PERN about a leak on the Druzhba oil pipeline, Interfax reported.

Meanwhile, the US dollar hit a new 24-year high against the yen on Wednesday on concerns about inflation and the pace of US rate increases. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies and tends to weigh on oil and other risk assets.

“Despite fundamentals auguring higher for oil and a rather hefty production cut OPEC backstop, any breakdown in risk assets may continue to hurt oil prices until some semblance of bottom forms in risk assets,” Stephen Innes, managing partner at SPI Asset Management said in a note.

“So, a hot CPI and even a dreary US earning season could negatively impact oil markets,” Innes added.

The US consumer price report is due on Thursday.

Also on the downside, the International Monetary Fund on Tuesday cut its global growth forecast for 2023 and warned of increasing risk of a global recession.

US inventory data has been delayed by a day this week because of a holiday on Monday. Industry data from the American Petroleum Institute is due at 4:30 p.m. EDT (2030 GMT) on Wednesday while the U.S. Energy Information Administration, will release its data at 11 a.m. EDT (1500 GMT) on Thursday.

(Reporting by Mohi Narayan in New Delhi and Isabel Kua in Singapore; Editing by Shri Navaratnam, Richard Pullin and Jane Merriman)

Oil down on strong dollar, recession worries and hawkish Fed talk

NEW YORK, Oct 12 (Reuters) – Oil futures fell for a third day in a row on Wednesday, fueled by ongoing concerns about demand, the dollar’s strength and expectations for more interest rate hikes by major central banks.

Both OPEC and the US Energy Department slashed their demand outlooks. Last week, together with allies including Russia, OPEC sent prices rising when it agreed to cut supply by 2 million barrels per day (bpd).

Brent crude futures settled down USD 1.84, or 2%, to USD 92.45. US West Texas Intermediate crude ended down USD 2.08, a 2.3% drop, to USD 87.27 a barrel.

OPEC on Wednesday cut its outlook for demand growth this year by between 460,000 bpd and 2.64 million bpd, citing the resurgence of China’s COVID-19 containment measures and high inflation.

“The world economy has entered into a time of heightened uncertainty and rising challenges,” OPEC said in its monthly report.

The US Energy Department lowered its expectations for both production and demand in the United States and globally. It now sees just a 0.9% increase in US consumption in 2023, down from a previous forecast for a rise of 1.7%. Worldwide, the department sees consumption rising just 1.5%, down from a previous forecast for 2% growth.

“We’re not trading a slowdown in the economy – it’s fear of a slowdown in the future,” said Phil Flynn, analyst at Price Futures Group in Chicago.

The energy market is under pressure as well from the dollar, which rallied against low-yielding currencies like the yen. The Federal Reserve’s commitment to keep raising interest rates to stem high inflation has boosted yields, making the US currency more attractive to foreign investors.

Minneapolis Fed President Neel Kashkari said on Wednesday the central bank will stick to its current course as “we have not yet seen much evidence that underlying inflation … is yet softening.”

US producer-level inflation fanned worries on Wednesday as wholesale prices rose more than anticipated. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies and tends to weigh on oil and other risk assets.

OPEC’s decision angered the United States, with President Joe Biden vowing unspecified “consequences” for relations with Saudi Arabia after the move due to current tightness in supply worldwide.

Russia’s state-owned pipeline monopoly Transneft on Wednesday said it had received notice from Polish operator PERN about a leak on the Druzhba oil pipeline, Interfax reported.

The International Monetary Fund on Tuesday cut its global growth forecast for 2023 and warned of increasing risk of a global recession.

(Reporting by David Gaffen; Additional reporting by Noah Browning in London; Editing by David Goodman, Will Dunham, Emelia Sithole-Matarise and David Gregorio)

Gold steady as investors brace for Fed minutes, inflation data

Oct 12 (Reuters) – Gold prices held steady on Wednesday as investors looked for more clues on the pace of US monetary tightening from Federal Reserve minutes and inflation data due this week.

Spot gold was little changed at USD 1,667.60 per ounce, as of 0737 GMT, after hitting a one-week low on Tuesday. US gold futures were down 0.6% at USD 1,675.80.

Investors are awaiting the release of minutes from the Fed’s September meeting, at 1800 GMT. Focus is also on the inflation reading due on Thursday, which could shine some light on the Fed’s rate-hike trajectory.

“Gold prices seem to be consolidating. There is a pause in the market ahead of major event risks, with Fed minutes and CPI report due,” said Ilya Spivak, a currency strategist at DailyFX.

“The more aggressive the Fed is, the less attractive gold looks. Market expects the minutes to just confirm the Fed’s appetite for tightening.”

Gold is considered an inflation hedge but rising interest rates reduce the non-yielding bullion’s appeal.

Federal Reserve Bank of Cleveland President Loretta Mester said even with a large amount of rate rises this year, the central bank has yet to get surging inflation under control and will need to press forward with tightening monetary policy.

The International Monetary Fund warned that colliding pressures from inflation, war-driven energy and food crises and sharply higher interest rates were pushing the world to the brink of recession.

On the physical front, Standard Chartered said in a note that with festival-wedding buying starting in India, demand would continue to firm, but was not expected to be as strong as in the fourth quarter of 2021.

Spot silver fell 0.1% to USD 19.17 per ounce, platinum rose 0.5% to USD 890.35 and palladium gained 0.2% to USD 2,145.00.

(Reporting by Ashitha Shivaprasad and Eileen Soreng in Bengaluru; Editing by Subhranshu Sahu)

What a fine mess

Oct 11 (Reuters) – Sometimes it’s better to say nothing at all.

On Tuesday, investors were breathing a sigh of relief, even though the IMF cut its global growth outlook, warned that “the worst is yet to come” and highlighted significant risks to global financial stability.

Wall Street was still on course for a turnaround on Tuesday, even though the Bank of England intervened in the inflation-linked bond market, and Cleveland Fed chief Loretta Mester said monetary policy needs to stay restrictive “for some time” to bring inflation down.

But at the IMF/World Bank meetings in Washington, BoE chief Andrew Bailey told UK pension funds they had three days to balance their positions before the BoE exits the market. No ifs, no buts.

Wall Street tanked, and sterling plummeted.

For Asia on Wednesday, two key events underscore the challenges economies, policymakers and investors are facing.

The Bank of Korea is expected to raise interest rates by 50 basis points to a decade-high of 3.00%, its latest step to lower inflation from recent 24-year highs and lift the won from its recent 13-year low against the dollar.

In India, meanwhile, figures are expected to show inflation rose last month to 7.3%, creeping back up toward April’s eight-year high of 7.8%. The rupee is even deeper in the mire than the won – this week it hit a record low of 82.82 per dollar.

Both the BoK and Reserve Bank of India have intervened in FX markets this year to support their exchange rates. They – and others – might have to do more, raising the risk that central banks offload more of their US Treasuries.

Key developments that could provide more direction to markets on Wednesday:

South Korea interest rate decision

Japan Tankan manufacturing, services activity (October)

Japan machinery orders (August)

India inflation (September)

India industrial production (August)

IMF/World Bank meetings in Washington

G20 finance ministers and central bankers meet

Fed minutes of Sept. 20 to 21 policy meeting

Fed’s Kashkari, Barr, and Bowman speak

(Reporting by Jamie NcGeever in Orlando, Fla.; Editing by Josie Kao)

Gold jumps on dollar dip as market awaits key US inflation data

Oct 11 (Reuters) – Gold bounced off a one-week low on Tuesday, lifted by a softer dollar, while investors braced for a key US inflation report that is expected to influence the Federal Reserve’s monetary policy stance.

Spot gold rose 0.6% to USD 1,677.70 per ounce at 1418 EDT (1818 GMT), after rising about 1% earlier in the session. US gold futures settled 0.6% higher at USD 1,686.00.

The dollar was down about 0.3% against its rivals, making greenback-priced bullion slightly less expensive for overseas buyers.

Benchmark US 10-year Treasury yields gave up gains from earlier in the day, helping demand for zero-yield bullion.

However, “a lot of the day-to-day price action is pretty much noise at this point,” as the market is still very much waiting to see how the inflation data and Fed minutes play out heading into the next Fed meeting, said Ryan McKay, commodity strategist at TD Securities.

Thursday’s US inflation reading is expected to remain stubbornly high and cement the Fed’s hawkish rhetoric on monetary policy.

“Gold has actually held up quite strong against the rise in real interest rates, so, I think there is some catch up to the downside there,” McKay added.

Rising US interest rates increase the opportunity cost of holding gold, which bears no interest.

Looking ahead, “it’s hard to create a bullish case for gold”, considering peak inflation may be yet to come, with rate hikes likely to continue until such a scenario, said Craig Erlam, senior market analyst at OANDA.

Silver fell 1.2% to USD 19.42 per ounce, platinum firmed 0.2% to USD 900.35, and palladium dropped 1.1% to USD 2,148.08.

Citi analysts said in a note they were relatively bullish on palladium, citing resilient demand on increasing automotive chip supply availability, automotive supply chain re-stocking and rising Russian supply risks.

(Reporting by Bharat Govind Gautam and Brijesh Patel in Bengaluru; Editing by Maju Samuel and Shailesh Kuber)

War and prospect of rate hikes hoist dollar, gilt wipeout hits Treasuries

HONG KONG, Oct 11 (Reuters) – Asian stock markets fell and the dollar rose on Tuesday with investors worried about rising interest rates and an escalation in the Ukraine war, while Treasury yields leapt as a collapse in British gilts unnerved global bond markets.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.8% to a two-year low, led by a deepening slide for chipmakers and China tech stocks in the wake of US export curbs aimed at hurting Chinese technology development.

Taiwan’s Semiconductor Manufacturing Co slumped 8%.

The fall was a catch-up to declines in US stocks on Monday, especially falls in the U.S. semiconductor index, when the Taiwan market was on holiday, said Tsai Ming-han, Cathay Futures Consultant Co analyst.

Japan’s Renesas skidded 5.66% and South Korean firm Samsung fell 1.42%. An index measuring China’s semiconductor firms dropped another 1.91% on Tuesday.

Japan’s Nikkei dropped 2.7%. The risk-sensitive Australian and New Zealand dollars hit 2-1/2 year lows.

“Risk aversion has dominated,” said National Australia Bank currency strategist Rodrigo Catril, as renewed Russian attacks on Ukrainian cities and global recession fears worried markets.

“Sentiment has also not been helped by a big core global bond sell off led by UK gilts, notwithstanding a flurry of announcements designed to calm UK debt markets.”

E-mini futures for the S&P 500 fell 0.5%, while EURO STOXX 50 Index Futures were down 0.45%.

GILTS ROUT

Bonds globally have been sideswiped by the rout in gilts, amid fears pension funds were forced into fire sales and British promises of more tax details and extra emergency measures.

The Bank of England (BOE) on Tuesday expanded its emergency bond purchase programme to include inflation-linked gilts.

The purchase, each up to 5 billion pounds (USD 5.51 billion), will act as backstop to restore orderly market conditions, the central bank said.

Treasury yields jumped when trading resumed after Monday’s US holiday, with 30-year yields up as much as 11 basis points to an almost nine-year high of 3.959% on Tuesday.

On the fresh call of BOE, yield of the 30-year note fell back to 3.9455% at 0622 GMT.

The backdrop of the bond market rout is ever higher interest rates. Nerves are fraying ahead of Thursday’s release of US inflation data which could set the stage for another big hike from the Federal Reserve in November.

“Inflation is stubborn, and the Fed needs to go beyond, above beyond what the market is expecting,” said Tai Hui, chief Asia-Pacific market strategist at J.P. Morgan Asset Management.

Futures pricing shows traders are positioned for about a 90% chance of a 75 basis point Fed hike next month and for the Fed funds rate to hit 4.5% by February and stay there most of 2023.

That outlook is giving dollar bulls another run and has the greenback drifting toward the milestone highs it scaled last month.

The Aussie made a 2-1/2 year low of $0.6261 in the Asia session and the kiwi a low of USD 0.555.

The euro fell 0.19% to USD 0.9683 and was drifting back toward September’s 20-year low of USD 0.9528. Sterling was under pressure and down 0.33% at USD 1.1023.

The Japanese yen, at 145.78 per dollar, was within a few pips of the level that prompted official support a couple of weeks ago.

Brent crude fell marginally to USD 95.85 a barrel. Spot gold fell 0.07% to USD 1,666 an ounce.

(USD 1 = 0.9069 pounds)

(Reporting by Selena Li in Hong Kong; Additional reporting by Emily Chan in Taipei; Editing by Tom Westbrook, Simon Cameron-Moore and Andrew Cawthorne)

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