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Dollar Slip Pushes Oil Higher, Yen Surge Squeezes Exporters


04/07/2016


Dollar Slip Pushes Oil Higher, Yen Surge Squeezes Exporters
While a broadly soft dollar gave extra legs to a rally in oil prices, Japanese exporter stocks were trampled by the yen as it powered to 17-month peaks on Thursday.
 
Despite a big bounce in the energy and healthcare sectors, the profit-eroding rise in the yen kept the Nikkei to a slight 0.2 percent gain. While weighing on sentiment across Asia, the index has shed more than 7 percent in the past two weeks.
 
While MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.5 percent, markets in China and Taiwan were lower.
 
In Europe, spread betting firm IG expected opening gains of 0.1 to 0.2 percent for the FTSE 100, DAX  and CAC 40.
 
The ministry would take steps in the market as needed said a senior Japanese finance ministry official and warn that the move had been one-sided while referring to the higher lunge of the yen.
 
The central bank would ease policy further if needed, said the Bank of Japan Governor Haruhiko Kuroda.
 
The lowering of the dollar to 108.78 yen was a result of this. Dollar had not been so low compared to the yen since late October 2014. Heavy buying seen against the euro, Swiss franc and Australian dollar were seen as the yen's gains were seemed to be broad based.

The currency's surge was squeezing many investors out of their positions, say traders as being short of yen had been a hugely popular trade early in the year.
 
As minutes from the latest Federal Reserve meeting showed many participants wanted to move cautiously on rate hikes resulted in the softening of the dollar.
 
The dollar was pinned at 94.212 .DXY and near its lowest since October against a basket of currencies.
 
Not far from the recent 5-1/2-month peak of $1.1437, the euro held at $1.1420. Against the Swiss franc at 0.9537 franc, the dollar was likewise near a 5-1/2-month low.
 
Oil, which jumped 5 percent overnight as U.S. inventories unexpectedly fell and investors gauged the possibility of an output freeze, gained due to the drop in the dollar.
 
In a marked turnaround from a one-month low of $37.27 hit on Tuesday, Brent crude futures were up 30 cents at $40.14 on Thursday. U.S. crude rose 36 cents to $38.11.
 
Wall Street was given a lift as the gains for oil boosted energy stocks. While the S&P 500 gained 1.05 percent and the Nasdaq 1.59 percent, the Dow had ended Wednesday 0.64 percent higher.
 
The minutes of the Fed meeting showed many members reluctant to hike further in the face of global uncertainty which aided the risk sentiment.
 
"The take home from the March meeting is that, while the Fed remains happy with ongoing progress being made domestically, they are far less certain about the state of the world and its potential impact on the U.S. and the dollar. Until such time as confidence in global prospects increases, they are comfortable to hold fire," said Elliot Clarke, an economist at Westpac.
 
(Adapted from reuters.com) 


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