NEW YORK/LONDON Gold rose more than 1 percent to a three-week high on Wednesday, bolstered by a weaker dollar on declining expectations that the U.S. Federal Reserve will raise interest rates any time soon. The dollar fell last week after a report showed employers added 38,000 new jobs in May, the lowest monthly reading in nearly six years.
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And while the unemployment rate fell to 4.7%, the lowest since November 2007, it was mainly because of people dropping out of the labor market rather than people getting jobs. “(Many companies are) forecasting earnings based on the yen being between 105 to 110 per dollar, so if the yen starts to strengthen and we go below 105, we’ll have to revise those forecasts again”.
After a brief dip yesterday, the U.S. dollar index was up 0.1 per cent today at 94.04, recouping its Monday move, while gold, which is sensitive to U.S. interest rate expectations, also reversed course to be down 0.1 per cent at $1,244.19 an ounce.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent while Japan’s Nikkei average firmed 0.2 percent.
The Federal Reserve increased interest rates for the the first time in almost a decade last December and two more rate hikes have been expected this year. While the U.K.’s FTSE 100 Index is up by 0.3 percent, the French CAC 40 Index is up by 1.3 percent and the German DAX Index is up by 1.7 percent. So far in 2016, gold prices gained 17 percent despite the pressure over expectations of an interest rate hike. “We had the knee jerk reaction on the non-farm payroll numbers, and now gold is hesitating over where to go”.
Yellen’s remarks on Monday followed Friday’s dismal monthly jobs report, which raised concerns over the ability of the economy to absorb a rate hike as early as June.
The ringgit was also traded mostly higher against a basket of other major currencies except for the British pound.
Energy Information Administration data showed US crude oil inventories fell for the third consecutive week but gasoline and distillate stockpiles rose as refiners ramped up output.
Global crude benchmark Brent futures (LCOc1) hit a seven-month high of $50.83 per barrel on Monday before easing to $50.46 early on Tuesday.
The 10-year U.S. Treasuries yield fell back to 1.713 percent US10YT=RR, testing strong support at around 1.70 percent.
A currency trader talks near screens showing the foreign exchange rates at the foreign exchange dealing room in Seoul, South Korea, Tuesday, June 7, 2016.
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In Europe, German bond yields hit a record low of 0.045 percent DE10YT=TWEB on Tuesday as investors sought a safe haven ahead of Britain’s referendum on European Union membership.
