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    Asian Session – Equities and commodities extend rally as dollar retreats

    Asian equities rose sharply on Monday as energy and commodity linked shares were boosted by the recovery in oil and commodity prices. Shares in China were 3.5% higher after the People’s Bank of China expanded a pilot scheme to inject liquidity into the banking system. Market sentiment was also lifted on reports that the PBOC’s deputy governor was quoted as saying that the stock market correction is “almost over”.

    In the currency markets, the dollar extended Friday’s losses on fading expectations that the US Federal Reserve would raise interest rates this year. Speaking in Peru, Fed Vice Chairman Stanley Fischer said that a 2015 rate hike was an “expectation, and not a commitment”. He noted “considerable uncertainties” on the future outlook for the US economy due to its exposure to global developments, particularly on exports and lower investment in the energy industry.

    The dollar retreated from Friday’s highs against the yen, dropping to 120.16 yen in today’s Asian trading. The euro maintained its gains after jumping above the 1.13 level on Friday and was trading at 1.1370 dollars in late Asian session. Against the pound, the single currency fell back slightly to 0.7410 after hitting a one-week high of 0.7429 on Friday. The pound rose slightly against the dollar to climb to 1.5341 dollars.

    US oil futures rose by 0.7% on Monday to $49.96, to add to last week’s 9% surge. Oil prices were boosted today on reports that the US oil rig count fell for the sixth week in-a-row to the lowest level since July 2010.

    Commodity currencies benefited from oil’s rally and dollar weakness with the Australian and New Zealand dollars both jumping by around 4% against the greenback last week. The aussie climbed to a 7-week high of 0.7339 against the dollar in today’s Asian trading, while the kiwi was up at 0.6708.

    The rest of the day is expected to be notably quiet as US, Canadian and Japanese markets are closed for national holidays. With no major data scheduled for release today, attention will turn to tomorrow’s Chinese trade data and UK inflation figures for September.

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