Forex – Demand for the yen showed little signs of abating on Monday

Forex

Forex – Demand for the yen showed little signs of abating on Monday, with the currency reaching a fresh 17-month high, prompting the Japanese government to warn that it could take steps to weaken the exchange rate. Chief Cabinet Secretary Yoshihide Suga told a news conference the government was closely monitoring the foreign exchange market with a sense of urgency, noting the yen moves were one-sided and speculative. The dollar fell as far as surpassing last week's trough and extending last week's 3.3 percent drop.

The safe-haven Japanese yen slid from recent peaks against the greenback on Wednesday as solid gains in oil prices helped underpin risk appetite. With hopes of a production cap agreed by top producers Russia and Saudi Arabia back in play, global oil prices climbed to four-month highs overnight. The Canadian dollar hovered just under a nine-month peak, having rallied along with other commodity currencies such as the Australian dollar on higher oil prices.

The dollar fell broadly on Friday as a slide in oil prices ahead of weekend talks among producers in Doha and a soft U.S. consumer sentiment report capped risk appetite and spurred investors to buy safe-haven currencies such as the yen. The dollar index, tracking the greenback's value against six major currencies, posted losses after two straight days of gains. The U.S. currency's fall versus the yen was the largest daily loss in more than a week. Oil producers led by top exporters Saudi Arabia and Russia will meet in Doha, Qatar on Sunday to discuss freezing output around current levels to contain an oil glut. It would be the first coordinated action by major OPEC and non-OPEC producers in 15 years.

 

INDICES

Indices – A strong rebound in Italian bank shares lifted European and world stocks on Monday, putting the brakes on risk-averse moves that had earlier lifted the yen to a 17-month high against the dollar and pushed German bond yields to a one-year low. Europe's FTS EuroFirst 300 index of leading shares rose 0.8 percent, Germany's DAX was up 1.3 percent, France's CAC 40 rose 0.8 percent and Britain's FTSE 100 was up 0.2 percent. All had been sharply lower earlier. U.S. stock futures pointed to a rise of around 0.4 percent at the open on Wall Street. As the U.S. first-quarter earnings season kicks off and G20 finance chiefs gear up for talks in Washington later this week on the sidelines of the IMF Spring meetings, investors initially chose to play safe on Monday.

Global stocks rose on Wednesday after surprisingly upbeat Chinese trade data offered hope Asia's biggest economy is finally stabilising, boosting risk appetite. A strong rise in European bank shares, led by renewed optimism surrounding Italy's fund to shore up weak lenders, and a positive reaction to JP Morgan's first quarter earnings also lifted broader indices. Europe's EuroFirst index of leading 300 shares posted its biggest gain in a month, rising 2.1 percent to a two-week high. Germany's DAX and France's CAC also rose more than 2 percent.

Reassuring Chinese GDP data helped stocks; commodity markets and the dollar consolidate strong weekly gains on Friday, as focus turned to a meeting of top oil producers about a potential output freeze. Moves in most markets were small in Europe but urges to lock in some profit was beginning to kick in after a 2.5 percent weekly rally in world shares, a strong run by the dollar and an 11 percent surge in oil prices this month. European shares edged down 0.4 percent as traders top-sliced some the 3.5 percent gains they have made this week with Wall Street's main markets expected to drop slightly from 4-month highs when they reopen later.

 

COMMODITIES

Commodities – Gold prices rose to their highest in almost three weeks on Monday, setting the market on course to higher price an ounce, drawing confidence from continued ultra-low interest rates. Weak economic data and uncertainty over U.S. monetary policy has contributed to risk aversion, boosting investor appetite for bullion and other assets perceived as safer stores of value, including the Japanese yen. The price of gold fell from the previous day's three-week peak on Wednesday as the dollar surged to a two-week high against the Euro and major stock markets rose after surprisingly upbeat trade data allayed concerns over China's economy. The U.S. dollar rose 0.9 percent against a currency basket having slid to its lowest in nearly eight months in the previous session, while major stocks climbed. Gold rose on Friday after three days of declines as the U.S. dollar and major stock markets weakened, but bullion was headed for its first weekly drop in three. Bullion had climbed to a three-week high on Tuesday, only to give up gains as world stocks rose on Thursday to their highest levels since late December, boosted by robust Chinese economic data and a surge in oil prices earlier this week.

Sugar on ICE fell more than 3 percent to a six-week low on Monday, after data released late Friday of the previous week, showed a smaller-than-expected cut in the net long position held by speculators and spurred heavy selling. Coffee futures turned slightly higher, as the Brazilian real firmed, while cocoa also rose along with the 19-market Thomson Reuters Core Commodity Index. Cocoa futures on ICE fell on Wednesday, weighed down by an unexpected drop in the European first-quarter grind, while May raw sugar's discount expanded to the biggest for the contract, indicating a lack of immediate demand. Sugar prices inched down to a six-week low while Coffee futures posted their biggest decline in two months after automatic sell orders were triggered. Sugar futures on ICE rallied four percent on Friday from over-sold positions in the biggest one-day rally in the benchmark contract since Feb. 29, supported by an upwardly revised global deficit forecast. Cocoa was firm but gains were capped by a lower than expected North American grind, while coffee futures edged up as the market's attention remained focused on recent dry weather in top grower Vietnam.

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ENERGY

Crude Oil – Crude prices touched a four-month high on Monday in a rally fuelled by strong markets across commodities, ahead of a meeting of oil producers in Doha next Sunday aimed at freezing current output levels. The market received a small boost ahead of the settlement as a U.S. government forecast released on Monday said U.S. shale oil production is expected to fall for a seventh month in a row in May.

Oil futures fell from fresh four-month highs in choppy trading on Wednesday as comments from Russia's energy minister added to doubts a producer meeting set for Sunday in Doha to discuss freezing output would yield a positive outcome. Prices fell after Reuters reported that Russian oil minister Alexander Novak told a closed-door briefing that a deal on an oil output freeze scheduled to be signed this month in Doha will be loosely framed with few detailed commitments. More importantly, the crude oil inventories have increased from forecast of 1 million to 6.6 million barrels. The prospect of a combined OPEC and non-OPEC deal to prop up prices has boosted oil in recent weeks but analysts said that even if a deal is struck, it will do little to restore supply/demand balance.

Oil prices fell on Friday in subdued trade as traders and analysts anticipate a weekend meeting of major oil exporters to do little to help to clear global oversupply quickly, even though it would provide a floor for the market. All eyes are on Doha as producers, led by top exporters Saudi Arabia and Russia, meet on Sunday to discuss freezing output around current levels in an effort to contain a glut exacerbated by production that exceeds demand by about 1.5 million barrels a day.

Natural Gas – U.S. natural gas futures on Monday fell nearly 4 percent on forecasts for warmer-than-normal temperatures through late April that are expected to put an end to late spring heating demand. After rising 10 percent over the last two weeks in a technically driven short-covering rally on cooler weather, U.S. gas futures for May delivery fell 3.9 percent per million British thermal units. Both U.S. and European weather models switched from forecasting cooler than normal temperatures through the end of April to warmer-than-normal during that time.

U.S. natural gas futures on Wednesday edged up to the highest level in nine weeks as the market focused more on declining production expectations rather than forecasts for weaker demand for heating and almost none for cooling through the end of April. Front-month gas futures for May delivery on the New York Mercantile Exchange rose 1.6 percent per million British thermal units, the highest close since Feb. 10.

U.S. natural gas futures fell more than 3 percent on Friday to the lowest level in two weeks on forecasts for heating demand to decline through the end of April. Front-month gas futures for May delivery on the New York Mercantile Exchange lost 3.5 percent per million British thermal units. That decline left the front-month down about 4 percent for the week after gaining 10 percent over the prior two weeks. The number of rigs drilling for gas held steady during the week ended April 15, according to a report by oil services company Baker Hughes.