Gold bounces over 1% as yields retreat post Fed verdict

Sept 21 (Reuters) – Gold prices rebounded on Wednesday as Treasury yields retreated after the US Federal Reserve hiked interest rates by an expected 75 basis points.

Spot gold was 0.7% higher at USD 1,673.86 per ounce by 4:12 p.m. EDT (2011 GMT), rising over 1% earlier.

US gold futures settled up 0.3% at USD 1,675.70.

The Federal Reserve raised its target interest rate by three-quarters of a percentage point, and signaled more increases.

“The (gold) market quickly realized that the rate hikes and more importantly, the expected path of rate hikes was well-factored into market prices… we subsequently have seen a significant bounce back off those lows,” said David Meger, director of metals trading at High Ridge Futures.

Prices, which were hovering near their lowest in over two years, initially moved lower after the statement but swiftly reversed course to climb over 1%.

Bullion’s gains came despite a stronger dollar, while benchmark 10-year US Treasury yields retraced from their highs.

“The move lower in yields has supported the bounce in gold post FOMC meeting,” Standard Chartered analyst Suki Cooper said.

“It is possible we could see some short covering activity amid a relief rally, but the hawkish commentary is set to keep gold prices on their longer-term downtrend,” Cooper added.

The Fed’s new projections showed policy rate rising to 4.4% by the end of this year, and to 4.6% in 2023.

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

“While price action could indicate that gold may have established a short-term bottom at USD 1,655, the upside will remain a challenge given a clear message from the Fed that rate hikes are emphatically not done,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

Latching on to gold’s run, spot silver gained 1.4% to USD 19.57 per ounce.

Platinum lost 1.6% to USD 907.79 and palladium fell 1.1% to USD 2,143.82.

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

Gold regains some momentum on latest Russia jitters; focus on Fed

Sept 21 (Reuters) – Gold rose on Wednesday after Russian President Vladimir Putin’s partial mobilisation announcement re-ignited some safe-haven interest in bullion, although a strong dollar and expected US rate hikes capped gains.

Spot gold was up 0.5% at USD 1,670.57 per ounce as of 0803 GMT. US gold futures rose 0.6% to USD 1,680.40.

Putin said he had signed a decree on partial mobilisation beginning on Wednesday, saying he was defending Russian territories and that the West wanted to destroy the country.

“The increased mobilisation, the escalation in that region and fears of escalation in terms of the weapons that are used will be driving a fair factor behind gold to some extent,” said independent analyst Ross Norman.

“However, obviously we’ve got dollar strength… and a widely predicted 75 basis points increase in the Fed funds rate which hasn’t helped gold particularly in recent times.”

But gold’s gains were kept in check as investors also sought refuge in the dollar, which scaled a fresh two-decade high versus a basket of other currencies, making bullion more expensive for overseas buyers.

Focus remained on the Fed’s policy decision due at 1800 GMT, with traders pricing in an 81% chance of another 75 basis-point rate hike and a 19% probability of a 100 bps increase.

While gold is considered a safe investment during political and financial uncertainties, rising rates dull its appeal since it yields no interest.

Reflecting sentiment, holdings of the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, on Tuesday registered their biggest one-day outflow since July 18.

“It seems unlikely that gold ETF inflows will sustainably rebound until traders crystalise a turn in the Fed tightening cycle and/or there is consensus on a US/global recession,” Citi Research said in a note.

Spot silver edged 0.2% higher to USD 19.34 per ounce, platinum gained 0.3% to USD 924.56, while palladium eased 0.2% to USD 2,163.75.

(Reporting by Brijesh Patel in Bengaluru; editing by Jason Neely)

Japan’s Nikkei ends at 2-month low with Fed, BOJ meetings in focus

By Sam Byford

TOKYO, Sept 21 (Reuters) – Japanese stocks notched their lowest close in more than two months on Wednesday, tracking declines on Wall Street and amid broader Asian peers, as investors braced for key policy meetings this week from the U.S. Federal Reserve and the Bank of Japan.

The Nikkei share average .N225 settled 1.36% lower at 27,313.13, its lowest closing level since July 19.

The broader Topix .TOPX fell 1.36%, marking its weakest close since Sept. 7.

“If the Fed implements a 75-basis-point rate hike, as most people expect, the market should avoid upheaval,” said Yasushi Yokoyama of Aizawa Securities, adding that investors are already looking towards the next hike. FEDWATCH

The Bank of Japan, however, is considered unlikely to stray from its dovish path. It is the only major central bank not to have hiked interest rates this year, even though inflation has stayed above the bank’s 2% target for five months straight.

“The upward price pressures are heavily biased toward food so far, and we thus believe that this August acceleration will not prompt a BoJ policy change,” JP Morgan economist Yuka Mera wrote in a research note.

“For monetary policy adjustment, the BoJ will need to see a broadening of price pressures, especially in services and wage inflation.”

Japanese government bond yields rose ahead of the central bank meetings, with the 5-year note JP5YTN=JBTC adding 1 basis point to reach 0.060%. Earlier in the day, the yield rose to 0.065%, its highest since June.

The BOJ made unscheduled offers to buy various JGBs in the morning, but the response was muted and the benchmark 10-year note JP10YTN=JBTC remained untraded with the yield last at 0.25%, the BOJ’s implicit policy cap.

The yen JPY=EBS was trading slightly lower at just below 144 to the U.S. dollar, within range of a 24-year historical low.

The Nikkei index saw 187 of its 225 constituents drop in the morning session, while 37 gained and one traded flat.

Air conditioner manufacturer Daikin Industries Ltd 6367.T weighed on the index the most with a 3.94% slump.

Japan Steel Works Ltd 5631.T was the best performer, rising 4.11% despite the company lowering its profit forecast for the current fiscal year.

Energy and financials were the only sectors to gain overall.

(Reporting by Sam Byford and Tokyo markets team; Editing by Devika Syamnath)

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

What’s inside China’s toolbox to rein in excess yuan weakness?

SHANGHAI, Sept 21 (Reuters) – China’s yuan is facing renewed downward pressure, dragged lower by a surging US dollar, a hawkish Federal Reserve and widening monetary policy divergence between the world’s two largest economies.

The yuan has lost about 4% to the dollar since mid-August to weaken past the psychologically important 7 per dollar level. The local currency also looks set for the biggest annual loss since 1994, when China unified official and market exchange rates.

The rapid yuan declines prompted the People’s Bank of China (PBOC) to lower the amount of foreign exchange financial institutions must hold as reserves to rein in weakness.

WHAT ELSE HAS PBOC DONE SO FAR TO SLOW THE YUAN’S DECLINE?

The PBOC has been setting firmer-than-expected daily yuan midpoint fixings since late August to prevent excess yuan weakness, as the onshore spot yuan can only trade in a 2% narrow range around the midpoint.

Market participants take any significant discrepancy between market projections of what the fix might be and where the PBOC actually sets it as an indication of which way the central bank wants to tug the market.

Senior officials from the central bank and FX regulator have also ramped up efforts warning the market of strong one-way bets against the local currency through verbal messages.

Wang Chunying, spokesperson of the State Administration of Foreign Exchange (SAFE), was quoted by the state broadcaster CCTV last week urging companies not to speculate on the currency.

WHAT OTHER OPTIONS DOES PBOC HAVE, OTHER THAN OUTRIGHT INTERVENTION?

HIGHER TRADING COST

The PBOC could make it more expensive for financial institutions to short the yuan in derivatives markets, by raising their foreign exchange risk reserve ratio when purchasing dollars through forwards.

The central bank has adjusted the risk reserve requirements multiple times over the past few years before it scrapped it in October 2020, when the yuan rose sharply.

TIGHTER OFFSHORE LIQUIDITY

The central bank could issue yuan-denominated bills in Hong Kong to withdraw yuan from the offshore market and raise the cost of betting against the Chinese unit.

“The Chinese authorities are leaving no doubt about their resolve to dampen depreciation pressure on the yuan,” said Khoon Goh, head of Asia research at ANZ.

“If depreciation pressure remains, the PBOC could raise the reserve requirement for forwards to 20%, or increase yuan bill issuance in Hong Kong to make it more expensive to short the offshore yuan.”

COUNTER-CYCLICAL FACTOR IN YUAN’S DAILY GUIDANCE FIX

The PBOC first introduced the counter-cyclical factor to its daily midpoint fixing formula for the yuan-dollar exchange rate in 2017.

The regulators said the factor was an effort to better reflect market supply and demand, lessen possible “herd effects” in the market and help the market focus more on macroeconomic fundamentals. The central bank adjusted the methodology a few times before suspending it in October 2020.

“We do not expect an official restoration of the counter-cyclical adjustment factor in its daily fixing until the valuation of the CNY become much cheaper,” Becky Liu, head of China macro strategy at Standard Chartered, said in an note published earlier this month.

Liu expects the PBOC to further lower the FX reserve requirement ratio by another 200 basis points.

The yuan has weakened nearly 10% against the dollar so far this year, but its value against major trading partners .CFSCNYI only fell about 0.7% year-to-date.

HIGHER CROSS-BORDER INFLOWS

Regulators could adjust a parameter on cross-border corporate financing under its macroprudential assessments to limit domestic firms’ ability to seek overseas funding.

“The yuan exchange rate level itself is not the most important, the nature of the issue is whether China’s cross-border capital flows remain stable,” said Zhong Zhengsheng, chief economist at Ping An Securities.

(Reporting by the Shanghai Newsroom; Editing by Vidya Ranganathan and Sam Holmes)

Oil prices surge more than 2% as Putin mobilises more troops

SINGAPORE, Sept 21 (Reuters) – Oil jumped more than 2% on Wednesday after Russian President Vladimir Putin announced a partial military mobilisation, escalating the war in Ukraine and raising concerns of tighter oil and gas supply.

Brent crude futures rose USD 2.28, or 2.5%, to USD 92.90 a barrel by 0707 GMT after falling USD 1.38 the previous day.

US West Texas Intermediate crude was at USD 86.16 a barrel, up USD 2.22, or 2.6%.

Putin said he had signed a decree on partial mobilisation beginning on Wednesday, saying he was defending Russian territories and that the West wanted to destroy the country.

The escalation will lead to increased uncertainty over Russian energy supplies, said Warren Patterson, head of commodities research at ING.

“The move could possibly lead to calls for more aggressive action against Russia in terms of sanctions from the west,” he said.

Oil soared and touched a multi-year high in March after the Ukraine war broke out.

European Union sanctions banning seaborne imports of Russian crude will come into force on Dec. 5.

“It seems like a knee-jerk reaction to a sliver of news and would be liable to further recalibration in the coming hours,” said Vandana Hari, founder of Vanda Insights in Singapore.

Meanwhile, the United States said that it did not expect a breakthrough on reviving the 2015 Iran nuclear deal at this week’s U.N. General Assembly, reducing the prospects of a return of Iranian barrels to the international market.

The OPEC+ producer grouping – the Organization of the Petroleum Exporting Countries and associates including Russia – is now falling a record 3.58 million barrels per day short of its production targets, or about 3.5% of global demand. The shortfall highlights the underlying tightness of supply in the market.

Investors this week have been bracing for another aggressive interest rate hike from the US Federal Reserve that they fear could lead to recession and plunging fuel demand.

The Fed is widely expected to hike rates by 75 basis points for the third time in a row later on Wednesday in its drive to rein in inflation.

Meanwhile, U.S. crude and fuel stocks rose by about 1 million barrels for the week ended Sept. 16, according to market sources citing American Petroleum Institute figures on Tuesday.

US crude oil inventories were estimated to have risen last week by around 2.2 million barrels in the week to Sept. 16, according to an extended Reuters poll.

The head of Saudi state oil giant Aramco 2222.SE warned on Tuesday that the world’s spare oil production capacity may be quickly used up when the global economy recovers.

(Reporting by Yuka Obayashi, Isabel Kua and Florence Tan; Editing by Kenneth Maxwell, Ana Nicolaci da Costa and Kim Coghill)

Oil prices slide 1% after US Fed raises interest rates

NEW YORK, Sept 21 (Reuters) – Oil prices fell about 1% to a near two-week low in volatile trade on Wednesday after the US Federal Reserve delivered another hefty rate hike to quell inflation that could reduce economic activity and demand for oil.

The Fed raised its target interest rate by 75 basis points for the third time to a 3.00-3.25% range and signalled more large increases to come. Risk assets like stocks and oil fell on the news, while the dollar rallied.

Brent crude futures settled 79 cents, or 0.9%, lower at USD 89.83 a barrel, its lowest close since Sept. 8, while US West Texas Intermediate (WTI) crude fell USD 1.00, or 1.2%, to USD 82.94, its lowest close since Sept. 7.

Earlier in the session, oil gained over USD 2 a barrel on worries about a Russian troop mobilization before dropping over USD 1 on a strong US dollar and lower US gasoline demand.

US gasoline demand over the past four weeks fell to 8.5 million barrels per day (bpd), its lowest since February, according to the US Energy Information Administration (EIA).

“The stand-out data point is the continuing weakness in gasoline demand. It’s really what’s been haunting this market,” said John Kilduff, partner at Again Capital LLC in New York.

The US Energy Information Administration reported a 1.1 million barrel increase in crude stocks last week, half the build analysts forecast in a Reuters poll.

Russian President Vladimir Putin called up 300,000 reservists to fight in Ukraine and backed a plan to annex parts of the country, hinting he was prepared to use nuclear weapons.

US President Joe Biden accused Russia of making “reckless” and “irresponsible” threats to use nuclear weapons.

Oil prices soared to a multi-year high in March after the Ukraine war broke out. European Union sanctions banning seaborne imports of Russian crude will come into force on Dec. 5.

“Much of today’s downside appeared related to strength in the US dollar and we still view near-term US dollar direction as a critical component in assessing near-term oil price direction,” analysts at energy consulting firm Ritterbusch and Associates said.

The dollar was on track for its highest close in over 20 years against a basket of other currencies, making oil more expensive for buyers using other currencies.

Signs of a recovery in Chinese demand gave prices a lift early in the session.

In the United States, however, the economic news was not so good. Existing home sales dropped for the seventh straight month in August as affordability deteriorated further amid surging mortgage rates.

In Europe, “government are increasingly intervening in energy markets in an attempt to stave off economic crisis,” analysts at energy consulting firm EBW Analytics said in a note.

Germany agreed to nationalize natural gas company Uniper SE, while the British government said it would cap wholesale electricity and gas costs for businesses.

(Additional reporting by Ahmad Ghaddar in London, Yuka Obayashi in Tokyo, Isabel Kua and Florence Tan in Singapore and Laila Kearney in New York; Editing by David Gregorio, Kirsten Donovan and Marguerita Choy)

Japan unlikely to intervene to stem weak yen, half of economists say

TOKYO, Sept 21 (Reuters) – Japan will not intervene to stem the yen’s decline, said just over half of economists polled by Reuters, though a fifth said weakening beyond 150 per US dollar could trigger action.

With a widening gap between the Bank of Japan’s (BOJ) ultra-loose policy and rapid tightening of its global peers, the yen has lost nearly 20% against the greenback this year, hitting a 24-year low of 144.99 and prompting policymakers this month to flag a readiness to act in the face of volatile currency movement.

The market is bracing for further volatility and possible government action ahead of an upcoming series of major central bank meetings, including the BOJ, US Federal Reserve and Bank of England. The yen traded at around 143 on Wednesday.

Still, a slim majority of economists thought any direct action was a long shot. Twelve of 23 respondents, or 52%, said the government would not buy yen to stop the currency from further weakening, the Sept. 8-19 poll showed.

Any internationally coordinated action also is unlikely as the United States favours a strong dollar to curb inflation, said Akiyoshi Takumori, chief economist at Sumitomo Mitsui DS Asset Management.

“The ‘rate check’ surprised everyone, but intervention-signalling would be the last thing they could do,” Takumori said, referring to the BOJ last week asking currency traders for current rates – queries widely seen as a prelude to intervention.

Five respondents said 150 yen per dollar would prompt intervention.

Hiroshi Watanabe, senior economist at Sony Financial Group, said intervention “might be possible if the yen falls beyond the 150 line at very high speed, but in reality, it’s extremely unlikely given the ineffectiveness of currency intervention”.

Another three chose “155 yen per dollar” when asked for a trigger. Two selected 160 and one picked “weaker than 165 yen per dollar”.

Japan last carried out yen-buying intervention in 1998, when the Asian financial crisis triggered a yen sell-off and rapid capital outflow.

WEAKER GROWTH, FASTER INFLATION

Economists in the survey downgraded their growth outlook for Japan due to accelerating inflation, coronavirus resurgence and a global economic slowdown.

The economy will likely expand an annualised 1.4% in July-September, less than the 2.0% forecast in an August poll, showed the median estimate of 35 respondents. The projection for October-December was 1.9%, versus the previous poll’s 2.2%.

In the second quarter this year, the world’s third-largest economy grew 3.5%, helped by robust consumer and corporate spending.

The core consumer price index (CPI), which excludes volatile fresh food items, will likely rise 2.8% in the last three months of this year, the poll showed, more than the previously estimated 2.5%.

Economists expected core CPI to rise to 2.4% this fiscal year, before slowing to 1.2% in fiscal 2023, the poll showed.

Elsewhere in the poll, BOJ Deputy Governor Masayoshi Amamiya was economists’ top pick for the central bank’s next chief to succeed incumbent Haruhiko Kuroda in the spring.

(Reporting by Kantaro Komiya; Polling by Arsh Mogre and Devayani Sathyan; Editing by Jonathan Cable and Christopher Cushing)

Asian stocks sink, yields rise as markets brace for aggressive Fed

TOKYO, Sept 21 (Reuters) – Stocks in Asia sank and bond yields were elevated on Wednesday, as investors braced for another aggressive interest rate hike from the US Federal Reserve later in the day.

Japan’s Nikkei dropped 1.26% and touched a two-week low. Australia’s benchmark share index slid 1.35% and South Korea’s Kospi fell 0.9%.

Chinese blue chips CSI300 declined 0.82%, while Hong Kong’s Hang Seng lost 1.26%.

MSCI’s broadest index of Asia-Pacific shares lost 1%.

That follows a sell-off on Wall Street overnight that knocked 1.13% off the S&P 500, although futures EScv1 pointed to a slightly higher open on Wednesday.

The Fed headlines a week in which more than a dozen central banks announce policy decisions, including the Bank of Japan and Bank of England on Thursday.

Sweden’s Riksbank surprised markets overnight with a full percentage-point hike, and warned of more to come over the next six months.

Despite that, bets for Fed tightening stayed stable.

Markets are pricing in an 81% chance of another 75-basis-point increase, and see a 19% probability of a full percentage point rise.

Global yields rose amid expectations of further tightening.

The two-year US Treasury yield hit an almost 15-year high at 3.992% on Tuesday, and remained elevated at 3.9516% in Tokyo trading, while the 10-year Treasury yield touched its highest in over a decade.

It hit 3.604% for the first time since April 2011, and was last at 3.5473%.

Australia’s benchmark 10-year yield rose to an almost three-month high of 3.789%, and South Korea’s equivalent yield hit the highest since April 2012.

Markets are “seemingly well positioned for a 75bps hike alongside a hawkish update” from the Fed, Taylor Nugent, a markets economist at National Australia Bank in Sydney, wrote in a client note.

“The post meeting commentary and the updated dots will be key,” said Nugent, adding that the NAB was looking for a policy rate of “something like 4%” at the end of this year with no rate cuts expected until 2024.

The US dollar index, which measures the currency against six major peers, edged a little higher to 110.22, grinding back toward this month’s 20-year high of 110.79.

The greenback was little changed at 143.64 yen, after twice trying 145 this month, a level last seen 24 years ago.

This week, the BOJ is set to cement its position as the lone dove among the central banks of advanced economies by sticking to its ultra-accommodative policy that pins the 10-year Japanese government bond yield near 0%.

The Bank offered to buy 250 billion yen of bonds in an unscheduled operation on Wednesday to keep yields in check.

Sterling languished around USD 1.1372, sticking close to Friday’s 37-year low of USD 1.1351.

Markets are split on whether the BOE will opt for a 50- or a 75-basis-point hike on Thursday.

Meanwhile, crude oil continued its decline amid worries that aggressive tightening by the Fed and other central banks would crimp growth and curb demand.

Brent crude futures dropped 26 cents to USD 90.36 a barrel after falling USD 1.38 the previous day.

US West Texas Intermediate crude CLc1 was at USD 83.74 a barrel, down 20 cents. The October delivery contract expired down USD 1.28 on Tuesday while the more active November contract lost USD 1.42.

(Reporting by Kevin Buckland; Editing by Ana Nicolaci da Costa)

Dollar ascendant as investors gear up for Fed

SINGAPORE, Sept 21 (Reuters) – The dollar hovered near a two-decade peak against a basket of currencies on Wednesday, after yields on US Treasuries leaped ahead of an interest rate decision that is likely to set the tone in financial markets for months to come.

The US dollar , which measures the greenback against a basket of currencies, was steady at 110.17 after a 0.57% overnight gain, and remained not far below a 20-year high of 110.79 hit this month.

Yields on the two-year US Treasury notes, a rough gauge of interest rate expectations, hit 3.992% overnight, the highest since 2007, while yields on the benchmark 10-year Treasury rose to 3.604%, the highest since 2011.

Higher yields increase the attraction of owning Treasuries and the dollars with which to buy them.

At 1800 GMT the Federal Reserve announces policy settings, and markets have fully priced in a 75 basis point (bp) rate increase, with a 19% chance of a 100 bp increase and a forecast for rates to peak around 4.5% by March 2023.

Focus will also be on the updated economic projections and dot plot estimates for where Fed officials see interest rates heading themselves.

“The next level we see the (U.S. dollar index) getting to in the near-term would be 112 points,” said Kristina Clifton, a senior economist and senior currency strategist at Commonwealth Bank of Australia.

“If we do just get the 75 basis points from the Fed, it would take a fairly hawkish message to push the U.S. dollar up to that level.”

Overnight Sweden’s Riksbank surprised markets with a bigger-than-expected 100 bp increase, but it was little help to the currency SEK= – weighed by growth risks – which fell to a 20-year low after the decision.

Sterling last traded USD 1.1381, languishing near a 37-year low of USD 1.1351, while the euro was 0.02% lower at USD 0.9967, extending by a smidge its 0.56% fall overnight.

The Australian and New Zealand dollars were likewise nursing losses, with the Aussie up 0.16% to USD 0.6701 after a shedding 0.54% overnight.

The kiwi gained 0.14% to USD 0.5902, after falling 1% in the previous session and touching a more than two-year low of USD 0.5887. The Canadian dollar fell to a two-year low overnight after official data showed a surprise slowdown in inflation.

The Bank of England and the Bank of Japan will also announce policy decisions on Thursday, with markets split on the magnitude of a rate hike by the former while policymakers in Japan are expected to stand pat.

“Inflation has lifted, but I think that’s largely been because of food and energy, so I think they’re going to want to see inflation become a bit more broad-based before they change their policy stance,” said Clifton, referring to the Bank of Japan.

Japan’s core consumer inflation quickened to 2.8% in August, hitting its fastest annual pace in nearly eight years and exceeding the central bank’s 2% target for a fifth straight month, data released on Tuesday showed.

The yen, which has fallen about 20% against the U.S. dollar this year, was marginally up by 0.1% at 143.56 per dollar, but remained not far off its 24-year low of 144.99.

(Reporting by Rae Wee. Editing by Gerry Doyle)

Oil prices extend losses on fears aggressive Fed rate hike will curb demand

TOKYO, Sept 21 (Reuters) – Oil prices slid on Wednesday, extending the previous day’s losses, as investors braced for another aggressive interest rate hike from the US Federal Reserve that they fear could lead to recession and plunging fuel demand.

Brent crude futures dropped 26 cents, or 0.3%, to USD 90.36 a barrel by 0040 GMT after falling USD 1.38 the previous day.

US West Texas Intermediate crude CLc1 was at USD 83.74 a barrel, down 20 cents, or 0.2%. The October delivery contract expired down USD 1.28 on Tuesday while the more active November contract lost USD 1.42.

“The market tone remained bearish due to concerns that the aggressive monetary tightening in the US and Europe would boost the likelihood of a recession and a slump in fuel demand,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

“Since oil prices have been falling in the anticipation of the rate hikes, they may briefly rise after the announcements, but they will likely return to a downward trend again on fears over weakening demand,” he said.

The Fed is widely expected to hike rates by 75 basis points for the third time in a row later on Wednesday in its drive to rein in inflation. Those expectations are weighing on equities, which often move in tandem with oil prices.

Other central banks, including the Bank of England, meet this week as well.

Higher rates have bolstered the dollar, which neared a two-decade high on Tuesday, making oil more expensive for holders of other currencies.

Meanwhile, US crude and fuel stocks rose by about 1 million barrels for the week ended Sept. 16., according to market sources citing American Petroleum Institute figures on Tuesday. Gasoline inventories rose by about 3.2 million barrels, while distillate stocks rose by about 1.5 million barrels.

US crude oil and distillate stockpiles were expected to have risen last week, while gasoline inventories were seen lower, according to an extended Reuters poll.

On the supply side, the OPEC+ producer grouping – the Organization of the Petroleum Exporting Countries and associates including Russia – is now falling a record 3.58 million barrels per day short of its targets, or about 3.5% of global demand. The shortfall highlights underlying tightness of supply in the market, even as recession fears drag prices lower.

The head of Saudi state oil giant Aramco 2222.SE said on Tuesday Europe’s plans to cap energy bills for consumers and tax energy companies were not long-term or helpful solutions for the global energy crisis, spurred largely by under-investment in hydrocarbons.

(Reporting by Yuka Obayashi; Editing by Kenneth Maxwell)

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