The 19-commodity Thomson Reuters/Core Commodity CRB Index, a global benchmark for commodities, fell 0.1% before turning up 0.55% with a rise in oil prices. Notwithstanding the disappointing earnings report of Alcoa stirring earnings worries ahead of the reporting season, the major averages ended higher on Friday, although the session was marred by volatility.
In a sign that the sentiment towards emerging markets may have turned a corner, the much-tracked Bank of America Merrill Lynch fund flow report showed that weekly outflows from emerging market funds were at their lowest since July.
NZD-AUD Exchange Rate Extending Gains on “Aussie” (AUD) BearishnessIn spite of being similarly exposed the weakness in the Chinese market, with the nation also being a key export destination for New Zealand produce, the “Kiwi” (NZD) has managed to escape relatively unscathed today. “All of sudden people are saying, well, China’s not so bad”.
Rennie argues we could yet see further Australian dollar upside from here: “In the short term, I can see AUD up to 0.7380 (38.2% retracement of the May high to August low), possibly 0.7410/20 (the top of the downtrend from the September high last year and May high this year)”.
China’s stocks rallied to the highest level in seven weeks and turnover jumped amid speculation the government will take more steps to bolster economic growth.
“Given the weakness in the economy, the expectations are quite strong about a cut in interest rates and reserve-requirement ratios”, said Zhang Haidong, chief strategist at Jinkuang Investment Management in Shanghai, who’s adding to his holdings.
Crude oil futures settled 5.1 percent lower after gaining nearly 9 percent last week, with Brent posting its largest daily drop in six weeks, down 5.3 percent.
On Wall Street, major indexes were little changed but utilities – often traded in lieu of bonds due to their perceived lower risk and high dividends – outperformed with a 1.1 per cent advance on the S&P 500 utilities index.
Ms Lien said the Australian dollar is also getting support from stronger copper prices and a rally on the Chinese stock market. Against the yen, the dollar was down about 0.3 per cent at 119.72 yen, while the euro rose to $1.14025, a three-week peak. Gold slipped 0.8 percent to $1,154.80 per ounce. “Right now, market expectations is that the Fed will be on hold in October”.
The greenback has been particularly weak against emerging currencies, which have staged a huge rally after the recent fall-off.
Higher US interest rates make the USA currency more attractive to investors seeking yield.
“In the global market, pressure on the United States dollar is still there and the rupiah is tending to strengthen against the USA dollar, mainly as a result of positive internal sentiment”, he said.
On Monday, Atlanta Federal Reserve President Dennis Lockhart said that while the central bank could have enough data to consider a rate hike at its meeting later this month, it will have a “lot more” data in December.