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    Asian Session – Dollar holds near 7-month highs; commodities rout continues

    The US dollar held on to its two-day gains despite reduced risk appetite following reports today of gunfire in north Paris and the diversion of two flights from the US to Paris due to bomb threats. The dollar index came close to breaking above 100 for the first time since April. Positive US data on Tuesday increased the odds of the Fed hiking interest rates at its December policy meeting.

    October CPI rose in the US to 0.2% year-on-year versus forecasts of 0.1%. While disappointing industrial production data was shrugged off as investors chose to look at the encouraging signs of recovery in the manufacturing sub-sector, which expanded by 0.4% month-on-month.

    The greenback came off yesterday’s high against the yen of 123.48 to decline to 123.28 yen in late Asian session on Wednesday.

    The euro attempted a modest rebound from yesterday’s lows to climb to 1.0653 against the dollar and 0.7008 against the pound in late Asian trading. The pound was unable to hold on to yesterday’s gains against the dollar after core CPI in the UK rose more than expected as it was later overshadowed by the strong US data. After peaking at 1.5238 dollars yesterday, sterling was struggling to hold on to the 1.52 level today and was last trading just above it.

    The Australian dollar was weaker on Wednesday as commodity prices continued their slide downwards. Weak wage growth also weighed on the aussie. Australian wages, excluding bonus were up 0.6% in the third quarter of the year from the previous quarter and 2.3% higher than a year earlier. The figures were in-line with estimates and the aussie was down at 0.7091 against the greenback in late Asian session.

    The New Zealand dollar managed to rebound after it fell yesterday on weaker dairy prices. But it had eased back down again in today’s Asian session at 0.6480 against the US dollar.

    Commodity prices were under ongoing pressure from the strong dollar and gold led the way, tumbling to 5½-year lows at $1065.38 before rebounding to 1070.94. Copper prices also continued to decline, hitting fresh 6-year lows of $2.0620 per pound. But crude oil prices attempted to halt the decline and US oil futures were flat at $41.07 today ahead of US oil inventory data later in the day.

    It will be a relatively quiet day in terms of data on Wednesday with no major release expected out of Europe. The US session should be more eventful though with October housing starts and building permits coming out later in the day. But investors are likely to focus on the publication of the FOMC minutes from the Fed’s October meeting at 19:00 GMT for any additional clues on the Fed’s intentions at the next meeting.

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