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US-Korea developments impact dollar, oil, risk appetite

The dollar’s weakness and a surge in safe havens were the central themes in the markets last week, reveals Hussein Sayed, Chief Market Strategist at FXTM.

He says the dollar index fell 1.4 per cent, taking the overall losses to 10.8 per cent for the year so far. With market expectations of a US rate hike in December falling below 40 per cent, according to CME’s FedWatch, it appears that investors believe the tightening course for 2017 is over.

Dollar doldrums

Despite the extension of the debt ceiling for three months and Fed officials being optimistic about the economy, the greenback still failed to rally, Sayed notes.

The resignation of the Fed Vice-Chair, Stanley Fischer, is likely to be playing a significant role in keeping the dollar under pressure. Fischer’s resignation will remain a negative factor for the dollar in the weeks and months to come.

“North Korea’s decision to hold a celebration instead of launching another nuclear bomb helped risk assets and the dollar to recover slightly early Monday, with safe havens such as the gold, yen, and the Swiss franc feeling most of the pressure,” notes Sayed.

Higher risk appetite

For his part, Mihir Kapadia – CEO and Founder of Sun Global Investments, commented on markets moving onwards as risk appetite rises, saying:

“Markets are in a risk-on mood, as the much feared North Korean missile test did not occur over the weekend. Risk appetite is higher, pushing markets across the globe forward and away from safe haven assets.”

Oil rebounds

He also reported that Brent crude oil futures for November delivery LCOc1 were up $0.05 at $53.73 a barrel, while benchmark U.S. West Texas Intermediate crude CLc1 advanced by $0.32 to $47.80.

In the precious metals section, gold has retreated early Monday, after hitting its highest in more than a year in the previous session. This comes as the dollar recovered a little from last week’s lows and as the subdued geopolitical tensions dented safe-haven appeal.

Fools’ gold

Kapadia says: “Gold is retreating as the safe-haven demand fades. Spot gold is down by 0.8 per cent at $1,335.10 an ounce, while US gold futures for December delivery are down by 0.9 per cent at $1,339.40 an ounce.”