Daily Market Brief 22-11-22

Gold Retreats as Dollar Gains Ahead of Fed Decision

Gold prices are on track for their third straight monthly gain, even as bullion prices slipped on Tuesday as the dollar strengthened ahead of the Federal Reserve’s monetary policy meeting that begins later today.

Gold and the Dollar Now

Gold futures are now down 1.32% to $2326 an ounce. Spot gold is down about 0.85% to $2315 an ounce. On the other hand, the dollar index is up 0.27% to 105.740 points.

Other Metals

“Depleted silver inventories continue to encourage silver restocking in 2024. We expect annual imports to exceed 10,000 tonnes this year.” Silver spot prices fell 1.5% to $26.72 an ounce, while platinum spot prices fell 0.4% to $943.52. However, both metals are on track for monthly gains.

Oil Drops by More Than a Dollar a Barrel Amid Middle East Peace Talks

Oil prices fell by more than a dollar a barrel on Monday as ceasefire talks in Cairo by Israel eased concerns of a wider conflict in the Middle East, while U.S. inflation data reduced the chances of a near-term rate cut.

Brent June crude futures fell $1.10 or 1.2% to settle at $88.40 a barrel. July futures, the most actively traded, fell $1.01 to settle at $87.20 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $1.22 or 1.5% to $82.63 a barrel.

Israeli airstrikes killed at least 25 Palestinians and wounded many others on Monday, as Hamas leaders arrived in Cairo for a new round of talks with Egyptian and Qatari mediators.

Markets are also watching the Federal Reserve’s monetary policy review on May 1, which could signal the direction of the Fed’s decisions on interest rates. A stronger dollar makes oil more expensive for holders of other currencies. Monthly U.S. inflation rose slightly in March, reducing expectations of a rate cut in the near future.

Yen Resumes Losses Under Japanese Authorities’ Watch!

The Japanese yen resumed its losses in the Asian market on Tuesday against a basket of major and minor currencies, resuming its losses that were temporarily halted yesterday against the US dollar. This decline comes under the scrutiny of Japanese authorities amid strong speculation that Tokyo has already intervened in the foreign exchange market to protect the yen from excessive weakness.

The Japanese yen traded below the 160 yen per US dollar barrier for the first time since 1990 on Monday, before quickly making strong gains, which traders said were due to possible intervention by the Japanese government to support the local currency. The Japanese currency is on the verge of its fourth straight monthly loss in April, due to rising fears of the continued wide gap in interest rates between Japan and developed economies.

Japanese Authorities

Japanese authorities have not confirmed that they have intervened in the currency market to support the yen, but markets remain on high alert for intervention, ahead of the Federal Reserve’s monetary policy review this week.

“Masato Kanda,” Japan’s top currency diplomat, said on Tuesday that the authorities are ready to deal with foreign exchange issues around the clock. But he declined to comment on whether the Ministry of Finance had intervened to support the yen the previous day.

Japanese Prime Minister Fumio Kishida later on Tuesday told reporters that the government said it would not comment on foreign exchange movements and interventions when asked if the authorities had intervened in the currency market on Monday.

International Moves

G7 finance leaders earlier this month agreed to a Japanese proposal to reaffirm their commitment that excessive volatility and disorderly movements in the currency market are undesirable.

In the first trilateral financial dialogue since the three-way leaders’ summit at Camp David last year, the United States, Japan and South Korea agreed to consult on currency markets, acknowledging the concerns of Tokyo and Seoul about their depreciating currencies. The meetings were widely seen as a green light for Tokyo to intervene in the foreign exchange market to halt the sharp declines in its currency. The interest rate differential between the United States and Japan is currently stable around 540 basis points in favor of US interest rates. This spread is expected to continue to support the US dollar against the Japanese yen.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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