US dollar holds gains as Fed, BOJ week begins with rebound in oil

[WELLINGTON] The US dollar maintained gains as trading got under way for the week, with investors digesting stronger-than-expected US inflation data ahead of policy reviews by the Federal Reserve and the Bank of Japan. American equity index futures advanced as oil rebounded.

The Bloomberg Dollar Spot Index held near its highest close since July, while South Korea's won weakened. US crude rose from a one-month low as fighting disrupted supplies from Libya and on prospects major producers will reach an agreement to help stabilise prices.

Equity index futures foreshadowed gains in Hong Kong and Taiwan, while S&P 500 Index contracts also climbed. Stocks edged higher in New Zealand as trading was delayed in Australia owing to a technical fault. Japanese markets are shut for a holiday.

Uncertainty over the way forward for the world's central banks has helped reignite volatility in global markets, with traders split over what, if any, action the BOJ will undertake in its monetary policy review Wednesday.

While bets on an interest-rate hike from the Fed this week remain around 20 per cent, a steeper-than-projected increase in US consumer prices boosted the US dollar on Friday.

"There are growing concerns about the limits of monetary policy's impact on growth," Bernard Aw, a markets strategist in Singapore at IG Ltd, said in an e-mail to clients.

"Unlike the Fed, where investors have a binary view - hike or no hike - of US monetary policy, the BOJ presents a complicated situation. Governor Kuroda has repeatedly stressed that they still have many policy tools at their disposal."

Markets in South Korea return after a three-day break, while those in mainland China and Taiwan were shut on Thursday and Friday. Hong Kong and Malaysia were closed on Friday. A report on Chinese property prices is due Monday.

Currencies

The Bloomberg Dollar Spot Index was down less than 0.1 per cent following a 0.7 per cent gain on Friday. The won fell 0.4 per cent from its Sept 13 close and China's yuan was down 0.1 per cent in Hong Kong's offshore market. The yen was little changed, after strengthening 0.4 per cent last week.

"Monetary policy continued to dominate overall market direction" last week, Matthew Sherwood, head of investment strategy in Sydney at Perpetual Ltd, which manages about US$21 billion, said in an e-mail.

"Improved risk sentiment was checked by heightened uncertainty about what the Bank of Japan will do this week."

Stocks

New Zealand's S&P/NZX 50 Indexadded 0.3 per cent as of 8:32am Hong Kong time and South Korea's Kospi index gained 0.2 per cent. ASX Ltd delayed the open of Australia's main equity market on Monday while it investigated a technical problem.

Futures for Hong Kong's Hang Seng Index were up 0.8 per cent and those on the MSCI Taiwan added 0.6 per cent, latest prices show.

Futures on the S&P 500 Index rose 0.3 per cent after the underlying benchmark slipped 0.4 per cent last session, led lower by banks and energy shares. Contracts on the UK's FTSE 100 Index climbed 0.8 per cent.

Commodities

West Texas Intermediate crude rose 1.4 per cent to US$43.63 a barrel, following a 6.2 per cent slide last week. Clashes at Libya's Ras Lanuf port are supporting prices, after they halted what would have been the first overseas crude shipment from that site since 2014.

Mohammed Barkindo, secretary general of the Organization of Petroleum Exporting Countries, said the bloc may convene an extraordinary meeting if ministers reach a consensus on oil markets at an informal gathering in Algiers later this month, according to Algeria's official news agency.

BLOOMBERG