Gold range-bound on firm dollar, Fed rate hike jitters

Sept 23 (Reuters) – Gold prices held a narrow range on Friday as the dollar steadied near a 20-year peak, while the likelihood of more aggressive interest rate hikes by the US Federal Reserve going forward also weighed on the non-yielding bullion’s appeal.

Spot gold was flat USD 1,670.19 per ounce by 0658 GMT, while US gold futures fell 0.2% to USD 1,678.20.

“I expect prices to remain choppy in the near-term, as the market has already discounted the (75 bps) rate hike, that is why we are not seeing a big fall in the prices,” said Ajay Kedia, director at Kedia Commodities, Mumbai.

“We see USD 1,650 as support and USD 1,720 as resistance… The expectations of further rate hike is capping gold’s upsides.”

A number of central banks, from Indonesia to Norway, raised their interest rates on Thursday, following the US central bank’s third straight 75-basis-point hike.

The actions by major central banks have stoked concerns of a global recession.

Though gold is seen as a hedge against inflation and economic uncertainties, rising rates dull bullion’s appeal since it yields no interest.

Gold prices have fallen nearly 20% since scaling above the key USD 2,000 per ounce mark in March.

“The dominant drift in the minds of global investors is currently toward the realisation that the economies of Europe and the US are in serious trouble,” said Clifford Bennett, chief economist at ACY Securities.

“Should the situation begin to look more like economic collapse, gold will be catapulted to surprising levels.”

The dollar index was around its highest level since 2002 touched on Thursday and benchmark 10-year US Treasury yield hit a 11-year peak buoyed by the Fed’s hawkish outlook.

Spot silver fell 0.3% to USD 19.60 per ounce and palladium was down 1% at USD 2,148.01.

Platinum shed 0.7% to USD 894.27 and was down 1.8% for the week, its first weekly decline in three.

Oil prices edge down, recession fears back in focus

SINGAPORE, Sept 23 (Reuters) – Oil prices fell on Friday amid recession fears and a stronger US dollar, though losses were capped by supply concerns after Moscow’s new mobilisation campaign in its war with Ukraine and an apparent deadlock in talks on reviving the Iran nuclear deal.

Brent crude futures fell 46 cents, or 0.5%, to USD 90.00 per barrel at 0630 GMT, while US West Texas Intermediate (WTI) crude futures were also down 46 cents, or 0.55%, to USD 83.03.

Front-month Brent and WTI contracts were down 1.4% and 2.4%, respectively, for the week so far.

“In the wake of accelerating rate hikes by the major central banks, the risk of a global economic recession overshadows supply issues in the oil markets, despite the recent escalation in the Russia-Ukraine war,” said CMC Markets analyst Tina Teng.

“However, a sharp fall in the US SPR and drawdown in inventories may still keep oil prices supported at some point as there is still an inevitable undersupply issues in the physical markets, while Iran’s nuclear deal is in stalemate,” she said, referring to crude oil in the US Strategic Petroleum Reserve which dropped last week to its lowest since 1984.

Following the US Federal Reserve’s hefty 75-basis-point increase on Wednesday for a third time, central banks around the world also followed suit in hiking interest rates, raising the risk of economic slowdowns.

“Crude prices remain volatile as energy traders grapple with a deteriorating demand outlook that is still vulnerable to shortages,” said Edward Moya, senior market analysts at OANDA, in a note.

“Supply risks and tight market conditions should give oil some support above the $80 level, but a quicker tumble to a global recession will keep prices heavy.”

A senior US State Department official said that efforts to revive the 2015 Iran nuclear deal have stalled due to Tehran’s insistence on the closure of the UN nuclear watchdog’s investigations, easing expectations of a resurgence of Iranian crude oil.

(Reporting by Laila Kearney in New York and Emily Chow in Singapore; Editing by Leslie Adler, Kim Coghill and Ana Nicolaci da Costa)

Oil plunges to eight-month low on strong dollar, recession fears

NEW YORK, Sept 23 (Reuters) – Oil prices plunged about 5% to an eight-month low on Friday as the US dollar hit its strongest level in more than two decades and on fears rising interest rates will tip major economies into recession, cutting demand for oil.

Brent futures fell USD 4.31, or 4.8%, to settle at USD 86.15 a barrel, down about 6% for the week. US West Texas Intermediate (WTI) crude fell USD 4.75, or 5.7%, to settle at USD 78.74, down about 7% for the week.

It was the fourth straight week of declines for both benchmarks, the first time this has happened since December. Both were in technically oversold territory, with WTI on track for its lowest settlement since Jan. 10 and Brent for its lowest since Jan. 14.

US gasoline RBc1 and diesel futures were also down more than 5%.

The US Federal Reserve raised interest rates by a hefty 75 basis points on Wednesday. Central banks around the world followed suit with their own hikes, raising the risk of economic slowdowns.

“Oil tanks as global growth concerns hit panic mode given a chorus of central bank commitments to fight inflation. It seems central banks are poised to remain aggressive with rate hikes and that will weaken both economic activity and the short-term crude demand outlook,” aid Edward Moya, senior market analyst at data and analytics firm OANDA.

The US dollar was on track for its highest close against a basket of other currencies since May 2002. A strong dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.

“We had the dollar exploding higher and pushing down dollar-denominated commodities like oil and growing fears over the looming global recession that is coming as the central banks raise interest rates,” said John Kilduff, partner at Again Capital LLC in New York.

The euro zone’s downturn in business activity deepened in September, a survey showed, suggesting a recession looms as consumers rein in spending and as governments urge energy conservation following Russia’s moves to cut off European supply.

Wall Street’s main indexes slid more than 2% on Friday as investors feared the US Federal Reserve’s hawkish policy actions to quell inflation could trigger a recession and dent corporate earnings. The dollar index reached its highest in over two decades, pressuring oil prices.

Russia launched referendums aimed at annexing four occupied regions of Ukraine, raising stakes of the war in what Kyiv called a sham.

On the supply side, efforts to revive the 2015 Iran nuclear deal have stalled as Tehran insists on closure of the U.N. nuclear watchdog’s investigations, a senior US State Department official said, easing expectations of a resurgence of Iranian crude oil exports.

(Additional reporting by Emily Chow in Singapore and Julia Payne in London; Editing by Louise Heavens, Paul Simao, David Gregorio and Chizu Nomiyama)

Peaks, valleys and milestones

Sept 23 (Reuters) – A feverish week of central bank activity around the globe has left markets at extremes.

Currency prices were rattled after Japan intervened in the foreign exchange market to buy yen for the first time since 1998.

The yen surged against the dollar after the intervention. Some analysts were skeptical the battered currency would stay strong given the loose monetary policy by the Bank of Japan contrasted with hawkish moves this week by the Federal Reserve and other central banks. The dollar index, which measures the greenback against a basket of currencies, weakened modestly on Thursday, but was not far from its 20-year high.

Wednesday’s actions by the Fed continued to reverberate. The US central bank raised rates by 75 basis points for a third straight meeting and Chair Jerome Powell was blunt about the “pain” to come as policymakers commit to taming four-decade-high inflation.

Yields on US government debt ascended new peaks on Thursday. Yields on the two-year US Treasury note hit their highest since 2007 and those on the benchmark 10-year reached their highest since 2011. The curve between those two maturities inverted to their most inverted level since at least 2000, indicating rising concerns about an impending recession.

The prospect of a downturn weighed on equities. MSCI’s gauge of stocks across the globe touched its lowest point since November 2020 during the session.

Investors might be excused for wanting to take a breath on Friday, but further digestion of the week’s central bank action along with inflation data in Asia and economic readings in Europe could beget more volatility.

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

Malaysia, Singapore CPI data

Taiwan industrial production

Euro zone PMIs

Fed Chair Powell gives remarks before “Fed Listens: Transitioning to the Post-pandemic Economy” event

(Reporting by Lewis Krauskopf in New York; editing by Jonathan Oatis)

US recap: Dollar claws back chunk of intervention losses

Sept 22 (Reuters) – The dollar index fell 0.26% on Thursday, led lower by USD/JPY weakness after the BoJ intervened to stop the yen weakening near 146 in European trading, though it took back the worst of its losses.

USD/JPY fell near 5-1/2 big-figures in 1-1/2 hours amid broad dollar selling that lifted other major currencies.

During its subsequent recovery, the dollar index rose from Thursday’s low of 110.46 to 111.21 in late US trade.

Japan’s intervention followed the BoJ’s decision to maintain its accommodative stance.

Without a change in monetary policy by the BoJ, or a pivot lower by the Fed in the near-term, intervention is not likely to have a lasting effect on USD/JPY as US-Japan rates continue to diverge into 2023.

Though severely bruised, the 50% Fib of the 137.61-145.90 rise at 141.76 remains supportive. A close below there would put Thursday’s low of 140.31 and 55-DMA support at 139.86 in focus.

Sterling suffered tumult of its own, though it was ending NorAm -0.03% at 1.1266.

The pound had rallied to 1.1365 ahead of the BoE rate announcement. Traders’ hopes for a 75bp hike, which would keep pace with Wednesday’s Fed hike, were dashed when the BoE hiked by 50bp, pushing the pound to lows by 1.1242.

The BoE vote was 5-4 with 3 dissenters voting for +75bp, while new MPC member Swati Dhingra voted for +25bp.

Sterling traders’ attention now turns to Friday’s fiscal statement from finance minister Kwasi Kwarteng for hints at the degree of stimulus Prime Minister Liz Truss is willing to provide to arrest the effects of high inflation and recession.

EUR/USD is ending NorAm near flat at 0.9840, trading in a relatively slight 1 big-figure range.

EUR/JPY’s recovery above 140 bodes well for further EUR gains. On the margins, the BoJ’s intervention, as yet to be backed up by higher rates, may signal developed market central banks may be willing to act to stall the dollar’s rise.

Rising global rates may stir EUR/USD buying off current lows. European Central Bank board member Isabel Schnabel said that inflation may be more persistent than thought, which may hint at a more hawkish stance to come. EURIBOR rates were also moving higher, the peak in ECB rates now at 3.13% in September 2023.

US Treasury yields moved higher with the 2-year note ending NorAm at 4.12%, the 10-yr at 3.69%. The key 2-10 spread was at -42bp up from -57.8bp overnight.

Cryptocurrencies shrugged off higher rates, with bitcoin up 3% at USD 19k, while ETH up 3% at USD 1,283.

Equities continued their move lower, with the S&P 500 down 0.82% at 3,761, eyeing support at the June 15 low at 3,721 and the June 17 low at 3,637.

(Editing by Burton Frierson; Paul Spirgel and Christopher Romano are Reuters market analysts. The views expressed are their own.)

Biden, Philippines’ Marcos discuss tensions in South China Sea

NEW YORK, Sept 22 (Reuters) – US President Joe Biden and his Philippine counterpart, Ferdinand Marcos, underscored their support for freedom of navigation and overflight in the South China Sea on Thursday, in response to China’s efforts to exert its influence there.

Biden and Marcos held their first face-to-face talks on the sidelines of the United Nations General Assembly. Marcos, son of the late Philippine President Ferdinand Marcos, took power in June.

“The leaders discussed the situation in the South China Sea and underscored their support for freedom of navigation and overflight and the peaceful resolution of disputes,” the White House said in a statement after the talks.

Biden said as the two men began their talks that he wanted to talk about the South China Sea, COVID-19 and renewable energy. He thanked Marcos for opposing Russia’s war in Ukraine.

The United States has accused China of increased “provocations” against rival claimants to territory in the South China Sea and other countries operating there.

“The role of the United States in maintaining the peace in our region is something that is much appreciated by all the countries in the region and the Philippines especially,” Marcos said.

The Philippines is a key ally in of the United States and vital strategically in case of any US need to defend Taiwan militarily from Chinese attack, given its geographical position.

The United States is keen to arrange greater access to bases in the Philippines given the need to prepare for that contingency.

“The leaders reflected on the importance of the US-Philippines alliance. President Biden reaffirmed the United States’ ironclad commitment to the defense of the Philippines,” the White House said.

Manila’s ambassador to the United States, a relative of Marcos, told Japan’s Nikkei newspaper this month the Philippines would let US forces use the Southeast Asian nation’s military bases in the event of a Taiwan conflict only “if it is important for us, for our own security.”

The meeting with Biden underlines the stunning turnaround in fortunes for the disgraced former first family of the Philippines, 36 years after Marcos’s father was driven into exile by a “people power” uprising.

The new president is on his first trip to the United States in 15 years. He is the subject of a US contempt-of-court order for refusing to cooperate with a Hawaii court that ruled the Marcos family must pay USD 2 billion of plundered wealth to victims of abuses during his father’s martial law era.

He has rejected allegations his family stole from the treasury and has diplomatic immunity as head of state.

(Reporting by Steve Holland in New York and David Brunnstrom in Washington; Writing by Doina Chiacu; Editing by Jonathan Oatis)

Gold subdued on strong dollar, yields; hawkish Fed clouds outlook

Sept 22 (Reuters) – Gold prices edged lower in choppy trading on Thursday, pressured by a stronger dollar and higher Treasury yields, while the US Federal Reserve’s hawkish policy stance clouded the outlook for the non-yielding bullion.

Spot gold was down 0.2% at USD 1,671.20 per ounce by 1:46 p.m. EDT (1746 GMT), after shedding more than 1% earlier in the session.

US gold futures settled 0.3% higher at USD 1,681.10.

“(Gold’s) weakness is coming because the dollar’s stronger (and) yields are a little higher… the overall outlook for the Fed is more rate hikes, which is going to put a limit on gold,” said Bob Haberkorn, senior market strategist at RJO Futures.

The dollar gained 0.5%, making greenback-priced bullion more expensive for overseas buyers. Benchmark 10-year US Treasury yields hit an 11-year high.

“Overall, the trend will continue to be negative for gold as the Federal Reserve told us yesterday that they’re quite determined to increase rates,” said Bart Melek, head of commodity strategy at TD Securities.

The US central bank, as widely expected, hiked its benchmark overnight interest rate by 75 basis points on Wednesday, and projected the policy rate would rise to the 4.25%-4.50% range by the end of 2022, and to a range of 4.50%-4.75% by the end of 2023.

Interest rate hikes to fight soaring inflation tend to raise the opportunity cost of holding zero-yield bullion.

“That, ultimately, gets gold below USD 1,600 – probably in the not too distant future,” Melek added.

Investors also took stock of US data showing initial claims for state unemployment benefits rose to 213,000 versus expectations for 218,000 applications for the latest week.

In other metals, spot silver was unchanged at USD 19.58 per ounce, platinum lost 0.8% to USD 900.68, while palladium added 0.6% to USD 2,166.82.

(Reporting by Kavya Guduru in Bengaluru; Editing by Paul Simao and Shailesh Kuber)

Philippines central bank to ensure monetary policy consistent with targets

MANILA, Sept 22 (Reuters) – The Philippines’ central bank is determined to make sure its monetary policy is consistent with its targets and inflation falls to within target by the second half of next year, its governor said on Thursday.

Though it is missing its inflation targets at the moment, the central bank is doing everything it can to combat high consumer prices, Bangko Sentral ng Pilipinas Governor Felipe Medalla told a briefing of some of the country’s cabinet ministers currently gathered in New York.

The Bangko Sentral ng Pilipinas earlier in the day raised its benchmark interest rates by half a percentage point, as expected, to combat elevated inflation and support a sagging peso.

(Reporting by Neil Jerome Morales; Editing by Hugh Lawson)

Philippine central bank hikes rates again, raises inflation forecast

MANILA, Sept 22 (Reuters) – The Philippine central bank hiked its benchmark interest rates by half a percentage point on Thursday, and said it was ready to take further action as it raised its inflation forecasts for this year and next, and as the peso sank to a record low.

The Bangko Sentral ng Pilipinas (BSP) raised the overnight reverse repurchase facility rate to 4.25%, as predicted by most economists in a Reuters poll. It was the fifth rate hike this year, bringing the total increase to 225 basis points (bps).

The interest rates on the overnight deposit and lending facilities were hiked to 3.75% and 4.75%, respectively.

The BSP said it was ready to make adjustments as the situation evolves and said inflation would breach its target range for this year and next. It said it had no contemplated off-cycle meetings ahead.

“The monetary board noted that price pressures continue to broaden. The rise in core inflation indicates emerging demand-side pressures on inflation,” the BSP said in a statement.

“Given elevated uncertainty and the predominance of upside risks to the inflation environment, the monetary board recognised the need for follow-through action to anchor inflation expectations and prevent price pressures from becoming further entrenched.”

The BSP is likely to raise rates by another 75 bps this year, said Gareth Leather, senior Asia economist at Capital Economics.

“But we think the tightening cycle will come to a finish before the end of 2022,” he said, while noting most other analysts expect the BSP to continue tightening policy in 2023.

Earlier on Thursday, the Philippine peso sank to a record low against the surging US dollar, taking its losses to more than 12% this year, the worst performer among currencies of Southeast Asia’s five major economies. It was largely unchanged after the BSP announcement.

The BSP said Thursday’s adjustment would help alleviate pressure on the peso, and said it stood ready to participate in the forex market to reduce volatility but had no intention of targeting a particular exchange rate level.

The central bank’s move followed the US Federal Reserve’s hefty rate hike of 75 bps announced hours earlier.

The BSP raised its average inflation forecast to 5.6% from 5.4% for 2022, still above the full-year target range of 2% to 4%, and said it expected to see inflation start to decelerate by the fourth quarter of this year.

It raised the forecast for next year to 4.1% from 4.0%. For 2024, average inflation was seen at 3.0%, lower than the previously projected 3.2%.

(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Martin Petty and Kim Coghill)

Dollar hits new 24-year peak to yen as BOJ stays dovish; BOE looms

TOKYO, Sept 22 (Reuters) – The US dollar surged to a new 24-year high against the yen after the Bank of Japan stuck to ultra-easing stimulus on Thursday, just hours after the Federal Reserve surprised markets with hawkish interest-rate projections.

The greenback had already pushed to a new 37-year peak to sterling ahead of the Bank of England’s policy announcement later in the day, and to a two-decade top versus the euro.

It also notched new highs against regional currencies from the Australian and New Zealand dollars to the offshore Chinese yuan and the Korean won, as well as the Singapore dollar and Thai baht.

The yen went for a wild ride in the immediate aftermath of the BOJ’s decision to keep short-term rates negative and continue to pin the 10-year government bond yield near zero, reinforcing market expectations that Japan’s central bank will continue to swim against a global tide of monetary tightening, despite a weaker currency.

The dollar leapt as high as 145.405 yen for the first time since August 1998, but then swung sharply back to as low as 143.50, before last trading 0.45% higher than Wednesday at 144.75.

“There could be concern about intervention, or even a rate check by the BOJ,” said Tohru Sasaki, head of Japan market research at J.P. Morgan in Tokyo. “It could also just be the result of market illiquidity.”

“The market will be nervous, there will be some volatility for a while, but eventually, over the medium term, the weak yen trend will continue,” Sasaki said. “The 1998 peak was at 147.60, so the market will be looking at that level.”

Japan’s top currency diplomat said later that officials had not intervened in the market.

The dollar index – which measures the greenback against a basket of six counterparts including the yen, euro and sterling – had earlier risen as high as 111.79 for the first time since mid-2002.

On Wednesday, the Fed issued new projections showing rates peaking at 4.6% next year with no cuts until 2024. It raised its target interest rate range by another 75 basis points (bps) overnight to 3.00%-3.25%, as was widely expected.

The dollar was already supported by demand for safe-haven assets after Putin announced he would call up reservists to fight in Ukraine and said Moscow would respond with the might of all its vast arsenal if the West pursued what he called its “nuclear blackmail” over the conflict there.

“Both the Fed projections and the Russia headlines contributed to the dollar’s strength, which was particularly acute against the euro and other European currencies,” said Shinichiro Kadota, a senior FX strategist at Barclays in Tokyo.

“Commodity currencies also took a big hit due to the deterioration in risk sentiment.”

The euro EUR=EBS weakened to a new 20-year trough of USD 0.9807, before trading 0.11% down on Wednesday at USD 0.98265.

Sterling GBP=D3 fell to a fresh 37-year low of USD 1.1221, and last changed hands at USD 1.12425, a 0.24% decline from the previous session.

The market currently sees 80% odds for a 75 bps rate hike by the BOE, and 20% probably of a half point increase.

The Aussie dropped 0.47% to USD 0.6602 after having touched USD 0.6583, its lowest since mid-2020. Liquidity in the currency may be thin with Australia observing a public holiday.

(Reporting by Kevin Buckland; Editing by Edwina Gibbs, Ana Nicolaci da Costa and Kim Coghill)

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