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Reuters: The U.S. dollar drifted on Tuesday on the back foot as investors took stock of developments in the Middle East and braced for a slew of speeches by central bank officials this week headlined by Fed Chair Powell to gauge the monetary policy outlook. U.S. Dollar drifted The yen was pinned close to the key 150 per dollar level, keeping traders on edge for any signs of intervention by the Japanese authorities. The yen last fetched 149.62 per dollar, having slipped to 150.17 on Oct. 3, the weakest in a year, before getting some relief in a brief rally. Japan’s top financial diplomat Masato Kanda said the yen was still perceived as a safe haven asset like the dollar and the Swiss franc despite its recent weakness, and was benefiting from demand due to the conflict in the Middle East. Israel’s shekel on Monday breached the key level of four per U.S. dollar for the first time since 2015 on jitters over Israel’s war with the Palestinian militant group Hamas. It was last down 1% at 4.0199 per dollar in early Asian hours. “Geopolitics will continue to be a key driver for markets in the week ahead as investors continue to weigh the risks of an escalation with the approach of the U.S. authorities to prevent the conflict spreading to rest of the Middle East region,” said Charu Chanana, market strategist at Saxo in Singapore. The dollar index, which measures the U.S. currency against six rivals, eased 0.038% to 106.20, after dropping 0.36% on Monday. ALSO READ: Fuel price UPDATE: Mid-month petrol, diesel numbers look GOOD for November Investor attention will firmly be on Fed Chairman Jerome Powell, who is due to speak on Thursday, during a busy week of speeches by regional bank heads. Fed officials will enter into a blackout period on Oct. 21 before the Fed’s Oct. 31–Nov. 1 meeting. Federal Reserve Bank of Philadelphia President Patrick Harker said on Monday the central bank should not create new pressures in the economy by increasing the cost of borrowing. “We should not at this point be thinking about any increases” in the Fed’s rate target, Harker said. Christopher Wong, currency strategist at OCBC, said the dollar is likely caught in a range for now. “Higher for longer rates, relative U.S. growth resilience and fears of broadening conflict are some of the factors that may underpin support for the dollar,” Wong said. “But less-hawkish Fed speaks suggests the Fed maybe setting the stage for an extended pause. This may mitigate dollar upside.” In other currencies, the euro was down 0.01% at $1.0557, while sterling was last at $1.2214, down 0.02% on the day. The Australian dollar rose 0.27% to $0.636. Australia’s central bank considered raising rates at its recent policy meeting but judged there was not enough new information to warrant a move, minutes of the Reserve Bank of Australia’s Oct. 3 policy meeting showed. The News Zealand dollar eased 0.30% to $0.591 after data on Tuesday showed the nation’s consumer inflation hit a two-year low in the second quarter, reducing expectations the central bank will hike the cash rate further in November. ALSO READ: Durban woman’s pandemic venture empowers rural women British Pound Reuters: The pound sat within its recent ranges against the euro and dollar on Monday, and rebounded against the Swiss franc, at the start of a week with always-important inflation data that will further guide the Bank of England’s interest rate path. Sterling was up 0.07% against the dollar at $1.2154, keeping a little off early October’s six-month low of 1.20535. It was a touch softer against the euro, which was up 0.1% at 86.71 pence. Swings have been more dramatic against the Swiss franc, a traditional global safe haven. The British currency rose 0.23% against the franc on Monday having tumbled nearly 1% on Friday, when investors moved to the safe haven for fear of further developments in the war in the Middle East over the weekend when markets were closed. The main macro-economic release this week is Britain’s consumer price index due Wednesday, as well as employment data the day before. Investors will be watching the numbers closely as sterling was supported in the first half of this year by sticky inflation driving expectations that the Bank of England would keep raising rates for longer than other central banks. ALSO READ: Who is the richest person in the world today? Top 10 list – 17 October 2023 The pound has weakened in recent months as markets pared back these expectations, though market pricing still indicates about a 50% chance of one further 25 basis point rate hike this cycle. The CPI release will be “important for the November BoE meeting, although we expect it to remain soft enough that no further tightening will be required,” said Paul Robson, NatWest markets head of G10 FX strategy, in a note to clients. “Expectations of high, for longer UK rates is supportive of sterling. But we continue to be on guard for a shift from rates to relative growth as a driver,” Robson added.Around the world markets are exceptionally data-dependent, reacting sharply to economic or inflation numbers that do not come in line with expectations. However, BoE Chief Economist Huw Pill told an event on Monday he thought markets had become a bit too short term in looking at data impact on BoE rates. Pill also said that the BoE must not consider the fight against high inflation to be over simply because the pace of price growth has slowed. “We still have some work to do in order to get back to 2%, the BoE’s target. And we probably have some work to do to ensure that when we get it back to 2%, we do so in a way that is sustainable.” ALSO READ: Newspaper front pages from around the world, 17 October 2023 South African Rand Reuters: The South African rand jumped on Monday against a weaker dollar as market sentiment improved, despite ongoing tensions in the Middle East, analysts said. At 1506 GMT, the rand traded at 18.7975 against the dollar, about 1.2% stronger than its previous close. The dollar eased about 0.23% against a basket of other major currencies. The rand’s gains are pointing at some improvement in market sentiment into the new week, but concerns that the Israeli-Hamas conflict could escalate into a regional matter remains, said Danny Greeff, co-head of Africa at ETM Analytics. The rand, like most emerging market currencies, is highly susceptible to global drivers such as dollar movement and geopolitical tensions elsewhere in addition to local economic data points. Local investors will this week turn their attention to consumer inflation and retail sales data for hints on the South African Reserve Bank’s potential interest rate path when it meets in November. On the Johannesburg Stock Exchange, the blue-chip Top-40 index closed over 0.3% higher. South Africa’s benchmark 2030 government bond was little changed, the yield up 0.5 basis point to 10.735%. ALSO READ: Who are the richest South Africans in the world today? – 17 October 2023 Global Markets Reuters: Asian stocks rose in cautious trade on Tuesday, with investors choosing to focus on corporate earnings prospects and the resilience of the U.S. economy ahead of tensions in the Middle East. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.4%. Tokyo’s Nikkei rose 1%. Overnight the S&P 500 had climbed 1%, while oil prices and the U.S. dollar had fallen. A host of “favorable” signs from the strength of the U.S. consumer, economic growth, and interest rates supporting bank profits, gave reasons for hope, said Kerry Craig, a global market strategist at J.P. Morgan Asset Management. Quarterly results from Goldman Sachs and Bank of America are due on Tuesday, with Morgan Stanley, pharmaceutical giant Johnson & Johnson, Tesla and Netflix due later in the week. A recent shift in tone from Federal Reserve officials – hinting that interest rate hikes might be over – has also cheered investors and bond markets lately. Benchmark 10-year Treasury yields are about 15 basis points off 16-year highs, though they crept higher in Asia trade Tuesday to 4.7331%. Investors are also trying to assess risks that a wider conflict breaks out in the Middle East which remains a “very fluid situation”, Craig said. U.S. President Joe Biden will visit Israel on Wednesday as the country prepares to escalate an offensive against Hamas militants that has set off a humanitarian crisis in Gaza and raised fears of a broader conflict with Iran. Iran’s Foreign Minister said Israel would not be allowed to act in Gaza without consequences, warning of “preemptive action” by the “resistance front” in the coming hours. Israel’s shekel weakened beyond 4-to-the-dollar for the first time since 2015 on Monday, as it bears some of the brunt of worry and uncertainty about the Gaza situation. ALSO READ: Shoprite: How Government can reduce food insecurity In currency markets the Australian dollar ticked up a little to $0.6354 as minutes from the most recent central bank meeting struck a surprisingly hawkish tone, while the U.S. dollar steadied elsewhere. A slowdown in New Zealand inflation to a two-year low dented bets on any further interest rate hikes and the kiwi, which slipped 0.4% to $0.5906. The euro traded at $1.0549 and the yen hovered just short of the 150-per-dollar mark at 149.53. China’s property sector, meanwhile, edged toward deeper trouble with Tuesday marking the end of a 30-day grace period on a late payment from developer Country Garden. If investors don’t receive the coupon payment, all of Country Garden’s offshore debts will be deemed in default. The property sector was flat while the Hang Seng rose 0.8% on Tuesday. A mainland real estate index fell 0.6%. Gold edged away from Friday’s three-week high and was last at $1,915 an ounce. Brent crude futures had dropped more than $1 a barrel on Monday on hopes for an agreement that the U.S. will ease sanctions on Venezuelan oil. Brent futures were last down 23 cents or 0.25% to $89.43 a barrel. Bitcoin had leapt on Monday before giving up gains after BlackRock denied a report that it had won approval for a bitcoin exchange traded fund. It was last at $28,353 after trading as high as $29.900 on Monday. ALSO READ: SA launches agro energy fund to combat load shedding impact Published by the Mercury Team on 17 October 2023 For more news on global and local market performance, follow our business and finance page.
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