Risk appetite waned on Tuesday after top oil producers disappointed markets by agreeing to a freeze in output instead of a cut. Oil prices tumbled after the decision but stabilized on Wednesday as markets became hopeful of further measures later in the year to support prices. WTI crude futures were down 0.7% in late Asian session at $28.83 a barrel.
The yen was back in favour on Wednesday as investors turned to safe haven assets. The dollar slipped back below 114 yen and was last trading around 113.50 yen. Comments from Boston Fed President Eric Rosengren further weighed on the dollar.
Speaking on Tuesday, Rosengren said that the Fed would likely need to lower its December economic forecasts given the current uncertainty in global markets. He added that monetary policy normalization should be “unhurried” if inflation is slower to return to target.
In China, the People’s Bank of China announced new measures to support the country’s industrial sector. This helped the stock market post gains of around 1% but the central bank set a lower midpoint for the yuan on Wednesday. Onshore yuan was trading 0.15% lower at 6.5251 per dollar in late Asian session.
Commodity currencies were unable to recover from yesterday’s losses following the slide in oil prices. The Australian dollar was trading just below 0.71 versus the greenback while the Canadian dollar was testing the 1.39 level.
The New Zealand dollar was the worst performer though as it tumbled to a low of 0.6544 against the US dollar after another fall in global dairy prices in yesterday’s auction. The kiwi rebounded slightly to 0.6582 in late Asian session.
In European currencies, the euro climbed to 1.1167 versus the dollar and was back above 0.78 against the pound.
Sterling came under pressure yesterday on muted inflation figures and heightened concerns about “Brexit”. British Prime Minister David Cameron is due to finalize renegotiation of the UK’s membership terms with the EU at a two-day summit starting on Thursday. The pound dipped below 1.43 dollars as a result and was last trading at 1.4266 dollars.
Looking ahead to the rest of the day, UK jobs data will be closely watched in the European session, while during US trading, housing data will be released ahead of the FOMC minutes of the Fed’s January meeting later in the session.
Risk Warning: Forex, Commodities, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you fully understand the risks involved and do not invest money you cannot afford to lose. Please refer to our full Risk Disclosure.