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- Gold prices surged on Wednesday amid a weakening dollar, as the People’s Bank of China took initial steps to stabilize fluctuations in the yuan one day after devaluing its currency by the highest amount in more than two decades. In Beijing, the People’s Bank of China (PBOC) intervened to prop up its tumbling currency after the yuan fell to a fresh three-year low midway through Wednesday’s Asian session. One day after the Chinese central bank rattled global markets by unexpectedly devaluing its currency by 1.9%, the bank lowered the daily fix even further on Wednesday morning. Hours later, the renminbi slid to an intraday low of 6.4460 against the dollar around 3 a.m. EST, as currency traders continued to unload their long positions in the currency. The sell-off forced the PBOC into action, as it intervened late in the session to help the yuan pare some of its earlier losses. At the close of Asian trading, USD/CNY settled at 6.3877, up 0.0622 or 0.98% on the day. A rash of disappointing economic data in recent weeks has forced the PBOC to institute a wide range of stimulus measures aimed at boosting its flagging economy. Last weekend, the PBOC reported that Chinese exports plummeted by 8.3% in July marking its largest monthly decline since May. By devaluing the yuan, the PBOC hopes to make exports more competitive by making them relatively less expensive for foreign purchasers.
- Federal Reserve Bank of Atlanta supported dovish arguments for a delayed interest rate hike on Wednesday with soft inflation projections for the month of August. In its monthly Business Inflation Expectations report, the Atlanta Fed said twelve month inflation expectations inched down to 1.8% from a 2015 yearly high of 2.0% in July. Current costs also fell mildly for August, declining 0.2% from the previous month 1.3%. The Fed would like to see inflation move toward its targeted goal of 2% before it raises short-term interest rates for the first time in nearly a decade. Earlier this week, Fed governor Stanley Fischer indicated that it could be difficult to justify an imminent rate hike unless inflation moves significantly higher over the next several weeks.
- Crude oil prices inched higher in early Asia on Thursday as investors look for any cracks in the ongoing supply surplus for the global market, including attempts to trim output or stimulate demand through aggressive pricing. Overnight, U.S. crude futures rallied from six-year lows a session earlier amid a weaker dollar, as a continuing draw in weekly stockpiles helped temporarily halt one of the worst routs in more than a decade. In its Weekly Petroleum Status Report on Wednesday, the U.S. Energy Information Administration (EIA) said U.S. crude inventories for the week ending August 7 fell by 1.7 million barrels, in line with forecasts for a 1.6 million decline. The moderate draw extends sharp declines from a week earlier when U.S. crude stockpiles plunged by 4.4 million barrels in the final week of July. At 453.6 million, crude inventories nationwide remain near its highest level at this time of year in at least 80 years. The announcement of the latest supply draw occurred one day after the EIA downgraded its latest projections for oil production growth for the remainder of 2015, as well as next year. For the rest of the year, the Energy Department expects crude output to rise by 650,000 barrels per day below previous forecasts of 750,000. In 2016, the EIA anticipates slower production growth of 130,000 bpd in comparison with prior estimates of 190,000. Last week, U.S. crude output declined by 70,000 bpd to 9.395 million bpd, its lowest level since early-May.