Japan’s FX diplomat vows ‘decisive’ action against volatile yen moves

WASHINGTON, Oct 14 (Reuters) – Japan’s top currency diplomat Masato Kanda on Friday said authorities are ready to take decisive action in the currency market if excessive moves in the yen continue.

In a statement issued on Wednesday, the Group of Seven (G7) finance leaders said they will closely monitor “recent volatility” in markets, and reaffirmed their position that excessive exchange-rate moves were undesirable.

“As mentioned in the statement, excessive volatility and disorderly moves in the currency market have a negative impact on economies,” said Kanda, who oversees Japan’s currency policy as vice finance minister for international affairs.

“If excessive moves in the yen continue, we’re ready to take decisive action any time,” Kanda told reporters in Washington.

The dollar jumped about 1% to a fresh 32-year high of 148.83 yen on Friday as investors remained focused on the policy divergence between the US Federal Reserve’s aggressive interest rate hikes and the Bank of Japan’s ultra-low rates.

Japanese authorities last month sold dollars and bought yen in a market intervention for the first time in 24 years, aiming to slow a rapid slide in the yen that Tokyo considered a threat to the economy.

“I won’t comment on specific market moves,” Kanda said when asked whether the yen’s sharp declines in recent days were deemed volatile. “I will, however, mention that many people believe recent moves have been somewhat rapid,” he added.

His comments came on the sidelines of a gathering of global finance officials in Washington, at which the broad strength of the greenback was a major topic of discussion.

The dollar has strengthened by more than 18% year to date against a basket of major trading partners’ currencies and by nearly 30% against the yen alone.

“I won’t comment on other countries’ central bank policy,” he said when asked whether the Fed’s rate hike plans are driving up the dollar across the board and causing spillovers.

(Reporting by Leika Kihara in Washington; Editing by Mark Porter & Shri Navaratnam)

As US markets churn, some stick with rare 2022 winner: energy shares

NEW YORK, Oct 14 (Reuters) – Gut-wrenching market volatility and attractive valuations are prompting some investors to keep their bullish views on energy stocks, one of the few bets that have thrived in an otherwise punishing year.

It’s not an easy call. The S&P 500 energy sector is already up around 46% this year and monetary policy tightening around the world has bolstered the chances of a global recession that could curtail energy demand.

Still, signs that supply will remain comparatively scarce are prompting some investors to stick with the sector, drawn by attractive earnings prospects and valuations that remain comparatively low despite big gains in many energy stocks this year. The S&P 500 energy sector trades at a trailing price-to-earnings ratio of 9.9, nearly half the 17.4 valuation of the broader index.

Few also see any end to the selloff in broader markets, as stubborn inflation boosts expectations for more market-punishing rate hikes from the Federal Reserve and other central banks. The S&P 500 is down around 24.5% this year while bonds – as measured by the Vanguard Total Bond Market index fund – are down nearly 18%.

“It’s hard to see people giving up on energy because it’s the best of both worlds,” said Jack Janasiewicz, portfolio manager with Natixis Investment Managers Solutions, referring to the sector’s low valuation and potential for more gains if supply remains tight. “If you’re worried about the direction of the market it’s a great place to hide.”

Analysts expect third-quarter earnings per share growth for energy companies of 121% compared with the same period a year ago, while those for the broader index excluding energy fall 2.6%, Refinitiv data showed.

Energy is the only sector in the S&P 500 expected by analysts at Credit Suisse to post positive revisions to their third quarter earnings. US oil giants Exxon Mobile Corp. and Chevron Corp. report earnings on Oct. 28.

In the coming week, investors will be focused on earnings from Tesla Inc., Netflix, and Johnson & Johnson, among others.

Expectations for further tightness in the oil market have been boosted by recent production cuts by OPEC+, as well as the European Union’s plans to move off Russian crude by February.

US output in 2022 is expected to average 11.75 million bpd, down from a previous estimate of 11.79 million bpd, according to the US Energy Department.

Prices for Brent crude stood at USD 91.46 per barrel on Friday, up nearly 10% from a recent low after falling by nearly a third between July and September.

“There is an outsized probability that crude prices can surge higher, particularly if demand concerns fail to materialize to the extent some bears expect,” wrote analysts at TD Securities, who expect oil prices to hit USD 101 in 2023. Analysts at UBS Global Wealth Management expect oil to hit USD 110 by year-end.

Some fund managers remain skeptical that energy can continue its outperformance if the global economy slows in the face of monetary policy tightening from central banks.

“We’re surging toward recession all over the world and that’s going to cut into the demand side,” said Burns McKinney, a portfolio manager at NFJ Investment Group, who is increasing his overweight in dividend-paying tech companies such as Texas Instruments and Cisco.

At the same time, the selloff in the S&P 500 is creating buying opportunities in consumer discretionary and large-cap tech stocks that are more attractive over the long run than energy, said Lamar Villere, a portfolio manager at Villere & Co.

“We’re starting to see opportunities that are harder to not take advantage of,” he said.

Others, however, believe that the fundamentals remain aligned for the sector and see more upside. Saira Malik, chief investment officer at Nuveen, believes that fund managers will remain lightly positioned in energy shares despite recent gains. She is also betting that China’s economy will rebound in coming months, supporting global oil prices

“We still think energy has legs here,” she said.

(Reporting by David Randall; Editing by Ira Iosebashvili, Mark Porter and David Gregorio)

Battered UK markets need more than policy U-Turn before confidence returns

LONDON, Oct 14 (Reuters) – British Prime Minister Liz Truss and new finance minister Jeremy Hunt will have to do a lot more than Friday’s U-turn on corporation tax to restore Britain’s credibility with financial markets after three bruising weeks.

Truss and Hunt, a former foreign minister, will be looking to Oct. 31 – the date of the government’s medium-term budget plan announcement – as a moment to win back the trust of investors.

The pound and British government bond prices rose on Thursday and Friday in anticipation of the policy shift, but they retreated after Truss gave a short news conference on Friday, which underwhelmed analysts.

“Undertaking a U-turn that is forced doesn’t really give the impression that Liz Truss is driving forward with a credible policy plan but rather reacting to developments as they unfold, which itself doesn’t engender much confidence,” said Richard McGuire, head of rates strategy at Rabobank in London.

As Truss spoke on Friday gains made in anticipation of the corporation tax U-turn faded.

Ten-year gilt yields were 40 bps above session lows hit earlier on Friday, also pushed up by moves in bond yields globally. This puts them some 80 bps above their levels before the government’s mini-budget on Sept. 23 that triggered the recent turmoil.

The pound fell more than 1% against the dollar and remains 0.6% below its pre-Sept. 23 levels.

Investors and analysts said the reinstating of a previously scheduled corporate tax hike did little to resolve the challenges the “mini-budget” had originally introduced.

Paul Dales, chief UK economist at Capital Economics, called Friday’s move a “mini-U-turn,” noting there were still 25 billion pounds (USD 28.07 billion) of unfunded tax cuts remaining, down from 45 billion pounds in the original plan.

Without further changes the Office for Budget Responsibility – Britain’s fiscal watchdog – will say a 43-billion-pound hole in the public finances will need to be filled to put the debt-to-GDP ratio on a falling path in three years, he estimated.

Focus also turned to growing political instability with the fourth finance minister in as many months appointed in a country grappling with a cost-of-living crisis, and some questioned how long Truss herself could stay in office.

“Markets are potentially seeking out a hard reset back to square one. Like we’ve seen in Greece and Italy, the market can force a change of leadership if necessary,” said Janus Henderson portfolio manager Bethany Payne.

UNDERWHELMED

Britain’s mini-budget three weeks ago triggered some of the biggest ever jumps in British bond yields, exposed vulnerabilities in the pensions sector — undermining the country’s financial stability.

Sterling, already hurt by a strong dollar, fell to record lows, creating another headache for the Bank of England which is has accelerated the pace of its interest rate increases in a bid to tackle an inflation rate running at nearly 10%.

The BoE was also forced to carry out a round of emergency bond-buying which ended on Friday, leaving many investors anxious about what might happen next week.

“These sudden changes of policy both from the government and the central bank raise uncertainty for market participants potentially stalling or deterring investment, which has been weakening since Brexit,” said Ken Egan, director of European sovereign credit at Kroll Bond Rating Agency.

“How it impacts liquidity on the gilt market going forward is something we are monitoring closely.”

Nomura said sterling’s decline was unlikely to slow until economic growth rebounds. It forecasts a fall in sterling to USD 0.975 by year-end. The pound was trading at around USD 1.1191 and is already down 17% against the dollar this year.

NatWest Markets also suggested Friday’s announcement would do little to tame gilt yields. A roughly 20 billion-pound reduction in funding needs over the next two years — Friday’s measures are expected to raise 18 billion pounds — would be worth only 30 bps off the 10-year gilt yield, which has already been more than priced in, its economists said.

Rabobank’s McGuire said pressure on UK assets could lead the BoE to re-intervene in the bond market or delay its quantitative tightening, bond-selling plans.

Investors may need more reassurance, especially given the scale of Britain’s six-month, 60 billion-pound energy support package, fund managers said.

“Thus far, the investment community has been underwhelmed by the move on corporation tax and is looking for a more substantive ‘U-Turn’ in order to restore fiscal credibility,” said Mark Dowding, chief investment officer at BlueBay Asset Management.

“A windfall tax to reduce the cost of the energy price cap will be required along with further steps,” he added.

(USD 1 = 0.8908 pounds)

(Reporting by Yoruk Bahceli, Dhara Ranasinghe, Nell Mackenzie, Harry Robertson, Editing by William Schomberg and Jane Merriman)

Gold heads for worst week in 2 months as dollar rises

Oct 14 (Reuters) – Gold prices fell more than 1% on Friday and were headed for their worst week since mid-August, dragged lower by a stronger US dollar and worries the Federal Reserve will persist with sharp rate hikes to curb inflation.

Spot gold had fallen 1.3% to USD 1,643.90 per ounce by 13:42 p.m. EDT (1742 GMT), down about 2.9% so far this week. US gold futures settled 1.6% lower at USD 1,649.50.

The US dollar rose over 0.6% against its rivals, making greenback-priced bullion more expensive for overseas buyers.

Gold prices are increasingly correlated with the moves in the dollar and could fall to as low as USD 1,600 an ounce, said Daniel Ghali, commodity strategist at TD Securities.

Data on Thursday showed US consumer prices increased more than expected in September, providing ammunition to the Fed to deliver another big rate hike, and consequently setting up what could be gold’s worst week in nearly two months.

Gold is highly sensitive to rising US rates, which boost bond yields, increasing the opportunity cost of holding non-yielding gold.

Bullion shed as much as 1.8% on Thursday before recovering to end the session 0.4% lower as the dollar lost ground after initially spiking following the inflation report.

“A rebound of that magnitude (for gold) after that inflation report was strange to say the least,” said Craig Erlam, senior market analyst at OANDA. “Gold moving lower again today is more in line with what we learned from the data.”

Benchmark US 10-year Treasury yields firmed, further weighing on gold.

Silver fell 3.5% to USD 18.22 per ounce, and was set for its biggest weekly drop since September 2020.

Platinum dipped 0.3% to USD 893.99 per ounce, while palladium fell 4.9% to USD 2,003.38. Both remain on course for weekly declines.

(Reporting by Bharat Govind Gautam and Brijesh Patel in Bengaluru; Editing by Tomasz Janowski and Vinay Dwivedi)

“60/40” portfolios are facing worst returns in 100 years: BofA

LONDON, Oct 14 (Reuters) – Investors with classic “60/40” portfolios are facing the worst returns this year for a century, BofA Global Research said in a note on Friday, noting that bond markets continue to see huge outflows.

“2022 (is) a simple tale of “inflation shock” causing “rates shock” which in turn threatening “recession shock” & “credit event”; inflation shock ain’t over,” BofA said in its weekly “Flows Show” report.

Soaring inflation, rising interest rates, war in Europe and an energy crunch have seen valuations plunge across asset classes in 2022.

The S&P 500 index of shares is down around 23% this year, having shed 15% since mid-August alone.

Hopes that inflation may be receding were dashed on Thursday after data showed U.S consumer prices increased faster than expected in September, reinforcing expectations that the Federal Reserve will deliver another 75-basis points interest rate hike next month.

Using data from EPFR, BofA said investors have sold bonds for eight consecutive weeks, while European equity funds have seen outflows for the 35th straight week.

So-called “60/40” portfolios typically have 60% of their holdings in stocks and the remaining 40% in fixed income.

BofA said annualised returns so far in 2022 on portfolios like these are the worst in the past 100 years, while those on “25/25/25/25” portfolios that hold equal portions of cash, commodities, stocks and bonds have dropped 11.9%, the worst sinced 2008.

Equity funds recorded USD 0.3 billion of inflows during the week to Wednesday while bonds saw massive outflows of USD 9.8 billion.

It was the sixth week in a row that investors sold financials, the first outflow from infrastructure in 11 weeks and the 18th week of outflows from bank loans, Bofa said.

Bofa’s bull & bear indicator remains at “max bearish” for the fourth consecutive week.

Anticipation that inflation will fall and the fact that in 2023 inflation will be expected rather than unanticipated is good news, Bofa said.

(Reporting by Lucy Raitano; Editing by Amanda Cooper)

Oil prices fall more than 3% on recession worries

NEW YORK, Oct 14 (Reuters) – Oil prices plummeted more than 3% on Friday as global recession fears and weak oil demand, especially in China, outweighed support from a large cut to the OPEC+ supply target.

Brent crude futures dropped USD 2.94, or 3.1%, to settle at USD 91.63 a barrel, while US West Texas Intermediate (WTI) crude futures fell USD 3.50, or 3.9%, to USD 85.61.

The Brent and WTI contracts both oscillated between positive and negative territory for much of Friday but fell for the week by 6.4% and 7.6%, respectively.

US core inflation recorded its biggest annual increase in 40 years, reinforcing views that interest rates would stay higher for longer with the risk of a global recession. The next US interest rate decision is due on Nov. 1-2.

US consumer sentiment continued to improve steadily in October, but households’ inflation expectations deteriorated a bit, a survey showed.

The improvement in consumer sentiment “is being viewed as a negative because it means the Fed needs to break the spirit of the consumers and slow the economy down more, and that’s caused an increase in the dollar and downward pressure on the oil market,” said Phil Flynn, analyst at Price Futures Group in Chicago.

The US dollar index rose around 0.8%. A stronger dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.

In US supply, energy firms this week added eight oil rigs to bring the total to 610, their highest since March 2020, energy services firm Baker Hughes Co said.

China, the world’s largest crude oil importer, has been fighting COVID-19 flare-ups after a week-long holiday. The country’s infection tally is small by global standards, but it adheres to a zero-COVID policy that is weighing heavily on economic activity and thus oil demand.

The International Energy Agency (IEA) on Thursday cut its oil demand forecast for this and next year, warning of a potential global recession.

The market is still digesting a decision last week from the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, when they announced a 2 million barrel per day (bpd) cut to oil production targets.

Underproduction among the group means this will probably translate to a 1 million bpd cut, the IEA estimates.

Saudi Arabia and the United States have clashed over the decision.

Meanwhile, money managers raised their net long US crude futures and options positions by 20,215 contracts to 194,780 in the week to Oct. 11, the US Commodity Futures Trading Commission (CFTC) said.

(Reporting by Stephanie Kelly in New York; additional reporting by Shadia Nasralla in London, Emily Chow in Singapore; Editing by David Evans, Will Dunham and Marguerita Choy)

Massive turnaround for stocks puts traders on alert for more volatility

NEW YORK, Oct 13 (Reuters) – An eye-popping turnaround in stocks may be less bullish than hoped for, with traders saying short-term hedging activity buoyed equities while leaving the market’s grim fundamentals unchanged.

Data showing consumer prices rose more than expected in September initially sent the S&P 500 tumbling to its lowest point since November 2020 on Thursday, only for the index to mount a furious rally towards midday. In total, the index swung 5.4 percentage points on the day to close up 2.6%.

One key reason for the move, market participants said, was an unwind of defensive positions investors had put in place to protect their portfolios against further stock declines ahead of the inflation data – which has been a catalyst for big equity drops all year.

Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, said many options traders that had bought defensive puts ahead of the move were rushing to close them out on Thursday, helping lift stocks.

“If you had a hedge on for this event and you start making money on that, you have to sell it to monetize or realize that money,” he said.

Despite Thursday’s meaty gain Murphy said the big reversal may be a sign of more volatility ahead.

However, “that doesn’t mean this bounce can’t last for a while,” he said.

Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets, said investors purchased some USD 13 billion in notional call options, which profit when stocks rise, targeting the 3,600 to 3,700 level on the S&P 500. The index traded as low as 3,491 on Thursday and closed at 3,669.

She cautioned that the effects of such options moves are “almost always” short-lived, with earnings season being one potential catalysts that could affect markets.

“As we head into reporting season, these dynamics can just as easily revert as we get new fundamental information,” she said.

“Generally when you see these big intraday moves it’s not a healthy sign for markets,” said Garrett DeSimone, head quant at OptionMetrics. The moves are usually followed by reversals, as dealers look to re-hedge, he said.

Others said algorithmic trading may have also played a role in driving markets higher.

“I think it was computer-driven and now you are seeing the FOMO, the fear of missing out trade, playing catch up to what we saw on this bounce,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

To be sure, more of the move in US stocks has been to the downside this year, with the S&P 500 clocking the most falls of at least 1% already this year since 2009, in its 23% year-to-date decline.

Indeed, despite the S&P 500’s wild ride on Thursday, the most recent inflation data does little to help the case for battered stock market bulls.

Traders are now pricing in a fourth straight jumbo 75 basis point increase from the Fed at its Nov. 1-2 meeting, while also factoring in about a 14% chance that the central bank will raise rates by 100 basis points – stark news for stock and bond markets that have been battered by 300 basis points of increases already delivered this year.

At the same time, turbulence in the UK bond market has shown little signs of stabilizing, potentially forcing the Bank of England to deliver more stimulus.

Warnings over potential market contagion and global financial instability have grown. The International Monetary Fund earlier this week flagged the risks of “disorderly asset repricings” as global central banks tighten monetary policy.

Still, some investors have been looking past the short-term gloom, citing discounted valuations on US stocks as one reason for cautious optimism.

The market’s focus will next turn to a pivotal third-quarter corporate earnings season to help support stock prices.

Meanwhile, with the Nov. 8 US midterm election nearing, one glimmer of hope cited by investors is that the S&P 500 has been higher the year after every one of the 19 midterm elections since World War Two, according to Deutsche Bank.

“For investors with a long-term horizon (of at least three years), there are clearly bargains emerging in several sectors,” said Peter Tuz, president of Chase Investment Counsel.

However, “for investors who are focused on the next six months, it is probably a toss-up whether we see a recovery in equity markets or not.”

(Reporting by Lewis Krauskopf; Additional reporting by Ira Iosebashvili; Editing by Ira Iosebashvili and Stephen Coates)

Xi bangs the drums

Oct 13 (Reuters) – After a wild day on world markets on Thursday – the long-awaited turnaround or yet another bear market rally? – the focus in Asia turns to China.

Beijing releases a raft of key economic data on Friday including the latest snapshots of inflation and trade, while the country gears up for the 20th Communist Party Congress which opens on Sunday.

Chinese President Xi Jinping is widely expected to clinch his third five-year stint in charge – a mandate that would secure his stature as the country’s most powerful ruler since founding leader Mao Zedong.

China’s economic and financial challenges are mounting. Growth is slowing significantly and the huge property sector is in crisis. The yuan last month hit its weakest level in almost 15 years, and the offshore yuan the weakest since it was launched in 2010.

Investors will be looking for signals from Xi on how he intends to tackle these issues, not to mention the domestic, social and international political problems he also faces.

Asian markets will open with a spring in their step on Friday after the huge ‘risk-on’ rally Thursday. That was despite punchy US inflation data that not only strengthened market expectations for another 75 basis point rate hike from the Fed, but opened the door to a 100 bps move.

They will be on FX intervention alert too, after the dollar’s spike to a 32-year high of 147.67 yen. The bullish whoosh across markets on Thursday pulled the dollar back a bit, but it remains above 147.00.

A G7 statement late on Thursday reaffirming policymakers’ commitment that excessive FX moves are undesirable seems to have barely registered among FX traders. If the dollar doesn’t come down further, the BOJ may have to act again.

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

IMF/World Bank meetings in Washington

India wholesale inflation (September)

Japan money supply (September)

South Korea import, export prices (September)

South Korea unemployment (September)

China producer price inflation (September)

China consumer price inflation (September)

China trade (September)

Singapore GDP (Q3, flash estimate)

Singapore interest rate decision

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

Gold eases as US inflation data fans fears of sharp rate hikes

Oct 14 (Reuters) – Gold prices fell on Thursday as a higher-than-expected rise in US September inflation cemented bets the Federal Reserve will persist with aggressive interest rate hikes.

Spot gold dropped 0.3% to USD 1,666.77 per ounce by 12:42 p.m. EDT (1642 GMT). US gold futures settled almost flat at USD 1,677.00.

The US consumer price index (CPI) rose 0.4% last month after gaining 0.1% in August, the Labor Department said. In the 12 months through September, the CPI rose 8.2% after gaining 8.3% in August.

The data signals the Fed will be more aggressive in fighting inflation by raising interest rates at a faster pace, pressuring gold, said David Meger, director of metals trading at High Ridge Futures.

Following the data, benchmark US 10-year Treasury yields climbed. Higher interest rates and bond yields lower the appeal of non-yielding gold.

“There was some optimism going into the report that we had seen consumer prices abate and with the news coming out that was not the case, we saw the obvious result of that,” Meger said.

Traders of US interest-rate futures had all but priced in a fourth straight 75-basis-point hike at the close of the Fed’s Nov. 1-2 meeting, after the inflation data they began pricing about a one-in-10 chance of a full percentage-point rate hike next month.

Fed officials reiterating their aggressively hawkish stance on monetary policy has kept the market uneasy due to fears of a “pending US and/or global recession,” Jim Wyckoff, senior analyst at Kitco Metals, said in a note.

“Today’s CPI report suggests the Fed is correct regarding its belief that inflation is still not under control.”

Spot silver dropped 0.9% to USD 18.87 per ounce, platinum firmed 1.9% to USD 897.00, and palladium dipped 1.3% to USD 2,107.78.

(Reporting by Bharat Govind Gautam in Bengaluru; editing by Barbara Lewis and Vinay Dwivedi)

Fragile yen tests 1998 low, sterling holds its breath

SINGAPORE, Oct 13 (Reuters) – The yen languished near a fresh 24-year low on Thursday, while sterling pared some overnight gains as investors nervously awaited an impending deadline for the end of the Bank of England’s emergency bond-buying programme.

Investors also were on edge in Asia trade ahead of a key inflation reading in the US later in the day for possible clues on how much higher the Federal Reserve will push interest rates.

The yen hit a trough of 146.98 per dollar overnight and last traded at 146.87.

It is a whisker away from its August 1998 low of 147.64 per dollar, and well past last month’s low of 145.90 per dollar which prompted Japanese authorities to intervene to buy the yen.

“It has lost its safe haven appeal,” said Rodrigo Catril, a senior currency strategist at National Australia Bank.

“There’s been this sense of cautiousness around that previous high (for dollar/yen) … now they’ve punched through it, and therefore it feels like you have a little bit more room to keep going, because there hasn’t been any intervention.”

Sterling eased 0.13% to USD 1.10845, following a 1.25% rebound in the previous session after the Financial Times reported that the BoE had signalled privately to lenders that it was prepared to extend its emergency bond-buying programme beyond Friday’s deadline if market conditions demanded it.

However, the central bank later reiterated that its programme of temporary gilt purchases will end on Oct. 14.

At the same time, Britain’s new government said on Wednesday that it would not reverse its vast tax cuts or reduce public spending – a plan which has wreaked havoc in the country’s financial markets.

UK pension schemes are racing to raise hundreds of billions of pounds to shore up derivatives positions before the BoE’s Friday deadline.

Elsewhere, the euro gained 0.02% to USD 0.97035, while the antipodean currencies were nursing losses after having fallen to fresh multi-year lows earlier in the week.

The Aussie was up 0.02% at USD 0.6279, after sliding to a 2-1/2-year low of USD 0.62355 in the previous session.

The kiwi gained 0.10% to USD 0.5613, not far from its trough of USD 0.5536 hit on Tuesday, the lowest level since March 2020.

Core inflation in the US is projected to rise 6.5% year-on-year in September. Overnight, data showed that US producer prices increased more than expected last month.

The US dollar index firmed to 113.29.

“In some ways, the US CPI is still looking back in the rearview mirror. You need to look at the component parts and see if there’s any interesting momentum that can be inferred,” said Saktiandi Supaat, regional head of FX research and strategy at Maybank.

Minutes from the Federal Reserve’s policy meeting last month showed that officials agreed they needed to raise interest rates to a more restrictive level – and then keep them there for some time – to meet their goal of lowering “broad-based and unacceptably high” inflation, even as the minutes contained a hint of a downshift in the pace of future monetary tightening.

(Reporting by Rae Wee; Editing by Ana Nicolaci da Costa and Kim Coghill)

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