May 23, 2022: The dollar began the week on the back foot, following its first weekly loss in nearly two months, as investors cut bets on further dollar gains from rising U.S. rates and turned hopeful that loosening lockdowns in China can help global growth.
U.S stock market futures bounced sharply in early Asia trade and pulled the risk-sensitive Australian and New Zealand dollars along for the ride.
The Aussie was last up 0.4% at $0.7080 and has lifted 3.8% in a week and a half. The kiwi rose 0.6% to $0.6450, a three-week high.
"It's a reasonably positive start to the week," said National Australia Bank's head of foreign exchange strategy, Ray Attrill.
"We did have a sharp reversal of U.S. equity market weakness in the last hour or so on Friday, so maybe there's some momentum there," he added. "The U.S. dollar looks, for the time being, to be losing upside momentum."
The euro and yen rose, with the yen up 0.1% to 127.83 per dollar and the euro up 0.2% at $1.0586 following last week's 1.5% gain on the dollar.
The U.S. dollar index fell 0.1% to 102.790, about 2% beneath a two-decade high of 105.010 made earlier in May.
"The dollar may be carving out a peak, given Europe’s resilience to the energy shock and potential easing of lockdowns in China," said Commonwealth Bank of Australia strategist Joe Capurso.
"Given the type of policy support, we expect investment to rebound faster than consumer spending," he said. "Investment is mining commodity-intensive (and therefore) very positive for commodity currencies such as the Australian dollar and Canadian dollar, in addition to the yuan."
Shanghai is edging out of lockdown and an unexpectedly big rate cut in China last week has been taken as a signal that authorities are going to provide support to the recovery.
The city of 25 million expects to lift its city-wide lockdown and return to more normal life from June 1.
The yuan had its best week since late 2020 last week and firmed to 6.6861 per dollar in offshore trade early on Monday.
The Canadian dollar rose for a third straight week last week and was a touch higher at C$1.2814 per dollar early on Monday.
Sterling leapt nearly 2% last week on the back of stronger-than-expected retail data and markets' broader re-think on whether global central banks are really lagging much behind the Federal Reserve. It was last up 0.3% at $1.2527.
Geopolitics is in focus in Asia this week as U.S. President Joe Biden tours the region, promoting greater U.S. economic engagement and seeking to push back against China's influence.
He meets Japan's Emperor on Monday ahead of talks with Prime Minister Fumio Kishida.
Australia elected a new government on Saturday, though the market reaction was muted as polls had predicted victory for the center-left Labor Party and it is not expected to shift the direction or pace of interest rate rises.
The Reserve Bank of New Zealand is expected to lift its benchmark cash rate by 50 basis points on Wednesday. U.S. Federal Reserve meeting minutes are also due on Wednesday.
May 23, 2022: Asian stocks came under pressure on Monday as persistent worries about inflation and rising interest rates dogged the global economic outlook and fresh selling in technology stocks weighed on Chinese markets.
MSCI's broadest index of Asia-Pacific shares outside Japan was flat after U.S. stocks ended the previous session with negligible gains for the day. The index is down 3.6% so far this month.
A negative tone was evident as Hong Kong's Hang Seng Index slid 0.38% and the mainland's CSI300 Index dropped 0.37%, led by a 1.5% decline in technology firms.
Australian shares gained 0.42% while Japan's Nikkei stock index was 0.8% higher.
The yield on benchmark 10-year Treasury notes rose to 2.7883% from its U.S. close of 2.787% on Friday.
The two-year yield, which rises with traders' expectations of higher Fed fund rates, touched 2.5869%, up from 2.583%.
Uncertainty in market sentiment this week follows the S&P 500's meager gains on Friday of just 0.01%.
The Nasdaq declined 0.30% while the Dow Jones Industrial Average rose 0.03%.
Despite the marginal gains, the S&P 500 and the Nasdaq recorded their seventh straight week of losses, the longest losing streak since the end of the dotcom bubble in 2001.
The Dow suffered its eighth consecutive weekly decline, its longest since 1932 during the Great Depression.
Inflationary pressures remain top of mind for investors, given German wholesale inflation figures published on Friday showed a higher than expected jump indicating prices will remain elevated in the short term future.
Germany's producer price index for April rose 2.8% for the month, which meant annual growth was a persistently high 33.5%.
In Australia, the Labor Party ended a near 10 year rule of conservative government at a general election on the weekend
While Labor has promised climate, housing and enhanced social welfare reforms analysts do not believe the change in government will crate major implications for the nation's economy.
"In our view there was little proposed by the incoming government during the election campaign that at this stage requires us to revisit our economic forecasts," CBA economists wrote on Monday.
"Put another way, our economic forecasts and call on the RBA are unchanged despite the change of national leadership."
In early Asian trade, the dollar rose 0.04% against the yen to 127.9. It is still some distance from its high this year of 131.34 on 2022-05-09.
U.S. crude dipped 0.04% to $110.24 a barrel. Brent crude rose 0.23% to $112.68 per barrel.
The concerns over global economic growth have prompted renewed support for gold.
"Gold prices saw the first weekly gain since mid-April as safe-haven demand was boosted by concerns over economic growth amid high inflation," ANZ analysts said in a research note on Monday. "A weaker U.S. dollar has also boosted investor appetite."
Spot gold was 0.3% higher early Monday at $1847.0226 per ounce.
May 23, 2022: Gold prices touched a more than one-week high on Monday, as an easing dollar continued to support greenback-priced bullion, although higher U.S. Treasury yields capped gains.
Spot gold rose 0.2% to $1,848.96 per ounce, by 0201 GMT. Prices hit their highest since May 12 at $1,853.55 earlier in the session.
U.S. gold futures gained 0.4% to $1,847.90.
"The jury is still out as to whether gold has weathered the storm in the medium term, or is (it) merely rallying in response to a sustained pullback by the U.S. dollar," OANDA senior analyst Jeffrey Halley said.
The dollar index began the week on the back foot, following its first weekly loss in nearly two months, as investors cut bets on more dollar gains from rising U.S. rates and hoped that easing lockdowns in China can aid global growth.
A weaker dollar makes bullion more attractive to overseas buyers.
"Before turning structurally bullish, I would need to see gold hold onto its recent gains in the face of dollar strength, and not dollar weakness," Halley said.
Benchmark U.S. 10-year Treasury yields, however, firmed after a three-session losing streak, limiting demand for zero-yield gold.
St. Louis Federal Reserve Bank President James Bullard reiterated his view last week that the U.S. central bank ought to raise interest rates to 3.5% this year to get high inflation more quickly under control.
Bullion, seen as a safe store of value during times of economic crises, tends to become less attractive to investors when U.S. interest rates are raised because it yields no interest.
Reflecting sentiment, SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose 0.69% to 1,063.43 tonnes on Friday from 1,056.18 tonnes on Thursday.
Spot silver gained 0.4% to $21.84 per ounce, platinum firmed 0.3% to $958.10, and palladium climbed 0.7% to $1,978.45.
May 23, 2022: Oil prices rose in early trade on Monday with U.S. fuel demand, tight supply, and a slightly weaker U.S. dollar supporting the market, as Shanghai prepares to reopen after a two-month lockdown fuelled worries about a sharp slowdown in growth.
Brent crude futures rose 82 cents to $113.37 a barrel at 0126 GMT, while U.S. West Texas Intermediate (WTI) crude futures climbed 69 cents, or 0.6%, to $110.97 a barrel, adding to last week's small gains for both contracts.
"Oil prices are supported as gasoline markets remain tight amid solid demand heading into the peak U.S. driving season," said SPI Asset Management managing partner Stephen Innes.
"Refineries are typically in ramp-up mode to feed U.S. drivers' unquenching thirst at the pump."
The U.S. peak driving season traditionally begins on Memorial Day weekend at the end of May and ends on Labour Day in September.
Analysts said despite fears about soaring fuel prices potentially denting demand, mobility data from TomTom and Google had climbed in recent weeks, showing more people were on the roads in places like the United States.
"High-frequency data suggests demand continues to grow," ANZ analysts said in a note.
A weaker U.S. dollar also sent oil higher on Monday, as that makes crude cheaper for buyers holding other currencies.
Market gains have been capped, however, by concerns about China's efforts to crush COVID with lockdowns, even with Shanghai due to reopen on June 1.
Lockdowns in China, the world's top oil importer, have hammered industrial output and construction, prompting moves to prop up the economy, including a bigger-than-expected mortgage rate cut last Friday.
The European Union's inability to reach a final agreement on banning Russian oil for its invasion of Ukraine, which Moscow calls a "special operation", has also stopped oil prices from climbing much higher.
May 23, 2022: Malaysian palm oil futures gained on Monday as higher rival oil prices supported the market, with traders assessing the impact of Indonesia's move to reinstate a domestic sales policy.
The benchmark palm oil contract FCPOc3 for August delivery on the Bursa Malaysia Derivatives Exchange gained 58 ringgit, or 0.95%, to 6,167 ringgit ($1,405.10) a tonne during early trade.
Indonesia will reimpose a domestic sales requirement on palm oil, the government said last week after the world's biggest producer of the key edible oil reversed a ban on its exports.
Indonesia's resumption of exports will not blunt Malaysia's competitiveness in exporting the edible oil, the Malaysian commodities minister said on Sunday, pointing to the rival's loss of sales in India.
Exports from Malaysia during May 1-20 rose between 28% and 32.6% from the same week in April, cargo surveyors said last week.
Dalian's most-active soyoil contract DBYcv1 rose 1.2%, while its palm oil contract DCPcv1 gained 1.8%. Soyoil prices on the Chicago Board of Trade BOcv1 were up 0.2%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Palm oil may retest a resistance at 6,354 ringgit per tonne, as the bounce from the May 20 low of 5,925 ringgit looks incomplete, Reuters technical analyst Wang Tao said.
Asian stocks came under pressure as persistent worries about inflation and rising interest rates dogged the global economic outlook and fresh selling in technology stocks weighed on Chinese markets.