Yen slips to 149 as strong dollar, tariff worries weigh
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Economic Times
24 minutes ago
- Economic Times
Buy the dip in gold? Rupee range & Fed impact explained
Silver may outperform gold, supported by strong base metal fundamentals,' says Anindya Banerjee, Senior VP & Head of Research – Currency, Commodity & Interest Rate at Kotak Securities. He breaks down what's driving the correction in gold and silver, the rebound in the dollar index, and the outlook for USD-INR. Excerpts: ADVERTISEMENT Q. Last week, both metals experienced heavy profit taking. How much of this correction can be attributed to the rebound in the dollar index and the US-Japan trade development? Anindya Banerjee: The relationship between bullion and the dollar index is strong. In addition, interest rate expectations from the Federal Reserve play an important role. Regarding the trade deals, the US recently signed important agreements with Japan and the European Union, and there has been a 90-day extension in the de-escalation between China and the US. These developments create a more stable policy environment, which has supported the dollar index and put downward pressure on gold and silver prices. This is the primary impact of the trade deals on the market as reflected in the dollar index movement. Q. With the Fed's upcoming policy decision and the August 1st US tariff deadline, what is the near-term outlook for precious metals? Could we see a sharp reversal? Anindya Banerjee: Since the crash in April and the unfolding of the Trump tariff drama, the market's expectation for Fed rate cuts has changed significantly. In April, market participants anticipated a reduction of 75 to 100 basis points, but that has now been revised to just a 25-basis-point cut by year-end. This change has supported the dollar index. In the current meeting, no rate cut is expected for July, though pressure may build on the Fed from August onward, particularly as the Trump administration continues to push for more aggressive cuts. However, given the high fiscal deficit and robust asset markets across various asset classes—even with looming tariff-induced inflation, it appears unlikely for the Fed to initiate significant cuts gold, currently in a sideways correction since September, the price range is roughly $3,250 to $3,450 per ounce. On MCX, a key support level is around ₹97,000–₹97,300. Should this support break, gold prices could fall toward $3,250 (or approximately ₹95,000 on MCX). Positional traders should be patient and ready for potential erosion in price toward the lower bound. Silver, meanwhile, might outperform gold in this environment, partly due to its alignment with a strong base metals market.Q. With the dollar index rebounding from three-week lows and showing high volatility, do you expect further strength? How might that affect gold prices and emerging market currencies like the rupee? ADVERTISEMENT Anindya Banerjee: The US dollar index looks poised for a significant rebound, potentially pushing above 102. The decline of earlier expectations that the Fed would implement significant rate cuts, which once drove the dollar index down from nearly 109 to 97, has now reversed. Moreover, the market currently exhibits heavy short positions, suggesting the potential for a short squeeze if a triggering event occurs. Under these conditions, unless a major global risk-off episode further accelerates the dollar's strength, we expect the index to remain largely sideways. This environment supports the notion of a sideways correction in gold prices.Q. The rupee has been weak lately, partly due to a domestic equity sell-off and stalled US-India trade talks. What is your view on the USD-INR for the coming week, especially in light of Fed policy risks? Anindya Banerjee: The uncertainty around trade negotiations between India and the US is weighing on the rupee, compounded by limited capital inflows. While there have been some debt inflows, equity markets are still facing outflows, and FDI figures have declined. Furthermore, the RBI's intervention by buying dollars helps support the lower side of the rupee. Presently, the technical range for the rupee is about 85–87 per USD. A breakout above 87 would be significant and could trigger an all-time high above 88. However, given that a trade deal with the US appears likely—reinforced by additional agreements such as the recent India-UK FTA, the rupee may find further support, keeping it within the current range. ADVERTISEMENT Q. There is significant tension between Thailand and Cambodia right now, along with other unresolved global trade issues. Could geopolitical concerns lend new support to gold and silver despite the recent corrections? Anindya Banerjee: Geopolitical tensions could impact gold and silver prices, but only if they reach a significant magnitude, similar to conflicts involving Israel and Iran or Ukraine and Russia. In the case of Cambodia and Thailand, while the situation is unfortunate, it does not currently have a global impact strong enough to influence bullion prices significantly. Moreover, even when geopolitics play a role, such impacts tend to be short-lived, lasting one to two days before fading. ADVERTISEMENT Q. What can we expect this week for bullion and other commodities? Anindya Banerjee: For bullion, silver appears attractive at its current levels (around ₹1,13,000–₹1,14,000) as medium-term players might consider accumulating longs. Gold should be viewed as a buy on dips, provided buyers are prepared for potential price drops to around ₹95,000 on MCX if key support breaks. On the broader commodity front, copper and aluminum seem promising, while oil is expected to remain range bound. Disclaimer: Recommendations, suggestions, views and opinions given by the experts/brokerages do not represent the views of Economic Times. (You can now subscribe to our ETMarkets WhatsApp channel)
Time of India
26 minutes ago
- Time of India
Japan's Nikkei flat as markets await key central bank decisions and looming tariff deadline
Japan's Nikkei share average ended flat on Wednesday as investors braced for a three-day period that will see policy decisions from the Federal Reserve and Bank of Japan, followed by U.S. President Donald Trump's deadline for trade deals. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Japan's Nikkei share average ended flat on Wednesday as investors braced for a three-day period that will see policy decisions from the Federal Reserve and Bank of Japan, followed by U.S. President Donald Trump's deadline for trade deals The Nikkei finished the day little changed at 40,654.70. Of the index's 225 components, 155 rose, 67 fell and three were broader Topix rose 0.4%.The Fed sets rates on Wednesday, and while policymakers are widely expected to stand pat, investors will be watching closely for signs that an interest rate cut may be on the way later this the BOJ is seen keeping policy steady on Thursday, but markets will search for clues on when the central bank is likely to resume rate Friday, most U.S. trade partners that have not agreed deals with Washington will receive higher tariff rates."There are still a lot of uncertainties over tariffs, and that's going to limit the upside for stocks," said Maki Sawada, an equities strategist at Nomura a result, "there's no particular sense of direction" in Japanese stock trading currently, she made up the worst performing Topix sub-index among the 33 industry groupings, led lower by a more than 4% drop for ANA Holdings following its earnings also weighed on chip-testing equipment maker Advantest, which slipped 1.1%. Sumitomo Pharma surged more than 16% to be the biggest percentage gainer.
Time of India
29 minutes ago
- Time of India
Fed to avoid clear signal on rate-cut timing
Policymakers are largely expected to hold interest rates steady for a fifth consecutive meeting at the conclusion of their July 29-30 gathering. Dissents from one or more officials could send the message that some members of the rate-setting Federal Open Market Committee prefer to reduce borrowing costs sooner rather than later. Bloomberg Explore courses from Top Institutes in Please select course: Select a Course Category Public Policy Digital Marketing Others CXO Artificial Intelligence Healthcare Leadership Management PGDM healthcare Cybersecurity MBA MCA Data Analytics Data Science Product Management Finance Design Thinking Technology Project Management Degree others Operations Management Data Science Skills you'll gain: Economics for Public Policy Making Quantitative Techniques Public & Project Finance Law, Health & Urban Development Policy Duration: 12 Months IIM Kozhikode Professional Certificate Programme in Public Policy Management Starts on Mar 3, 2024 Get Details Skills you'll gain: Duration: 12 Months IIM Calcutta Executive Programme in Public Policy and Management Starts on undefined Get Details But with an onslaught of economic data due before their next meeting in September, the Fed chair may opt to leave his options open until there's more clarity about the direction of the economy and the right path for policy. 'There is no doubt that the FOMC will leave interest rates unchanged,' Bill Nelson, chief economist for the Bank Policy Institute, said Tuesday in a note. 'The question is whether they will convey a greater openness to cutting rates at their September meeting,' Nelson, formerly a top economist at the central bank, said. President Donald Trump has not ceased his calls for rate cuts . And Powell will surely field questions about the central bank's $2.5 billion building renovation, which has become a target for Republicans attacking the Fed. Live Events The Fed's rate decision will be released at 2 p.m. in Washington on Wednesday, and Powell will hold a post-meeting press conference 30 minutes later. September Outlook After this week, the Fed will hold only three more policy meetings this year. In June, Fed officials signaled their intention to deliver two quarter-point rate cuts in 2025, based on their median projection. That makes a reduction in September seem likely, said Veronica Clark, an economist at Citigroup. 'The average official is still in this wait-and-see mode, but September is very reasonable,' said Clark. But it's still an open question how much Powell will move expectations in that direction, said BPI's Nelson. Investors are already putting the probability of a rate cut in September at more than 60%, according to pricing in federal funds futures contracts. Fed officials might not want those odds to move higher before they've had a chance to review the economic data coming before the meeting, Nelson said. Policymakers will see two more jobs reports, including the July report due on Friday, before they gather on September 16-17. They'll also get additional data on inflation, spending and housing. 'If the committee wants to keep its options open, it will have to be studiously neutral and continue to emphasize data-dependence,' Nelson said. Dissenting Votes If the Fed chooses to maintain its characterization of the labor market as 'solid' in its post-meeting statement, it could elicit dissenting votes from officials who are worried that the US employment landscape is looking more fragile. Fed Governor Christopher Waller laid out his argument for a July rate cut in a detailed speech earlier this month, expressing concern about a labor market 'on the edge' that could deteriorate rapidly if the Fed doesn't offer more support. Another governor, Fed Vice Chair for Supervision Michelle Bowman, has also expressed a readiness to lower rates as soon as this meeting. If both Waller and Bowman dissent, it would be the first time since 1993 that two governors voted against a policy decision. While notable, some Fed watchers say it's normal to have disagreement among officials when policy is nearing a turning point. Tariff Impact Powell is likely to face questions about his reading of the latest inflation data. The Fed chief and other officials have expressed cautiousness about lowering rates until they better understand the impact of tariffs on prices. Trump's Aug. 1 deadline for trade deals could provide some additional clarity on where the average tariff rate will settle, and by extension, the economic outlook. Waller has said he expects tariffs to lead to a one-time price bump, while other officials are worried the hit to inflation could prove more persistent. Prices of some goods have risen, but many economists are puzzled as to why the effects haven't been more pronounced. The impact may be delayed by businesses front-loading imports of inventories, absorbing the blow through lower profit margins and, at least for now, sharing some of the burden of tariffs with others across the supply chain, said Gregory Daco, chief economist for EY-Parthenon. Political Pressure There's no shortage of additional topics that could come up in the press conference, including the Fed's renovation project, and the tour given to Trump and other Republicans last week. Powell may be peppered with questions about whether political pressure is affecting officials' ability to make policy decisions. Powell may also be asked to respond to a proposal from Treasury Secretary Scott Bessent that the central bank conduct a review of non-monetary policy functions to address what he called 'mission creep.' 'An internal review would be a good start,' Bessent said in a Bloomberg TV interview on July 23. 'And if the internal review didn't look like it was serious, then maybe there could be an external review.'
