Havens in demand as fed rate-hike prospects fade

[WELLINGTON] Gold was near its highest price in more than two years and the yen extended its rally as anxiety over the impact of the Brexit decision damped the prospect of higher US interest rates this year. Asian index futures diverged, while oil climbed.

Precious metals have been rallying as an element of risk aversion returns to markets, with minutes of the Federal Reserve's last meeting, which took place before the UK referendum, signaling officials are losing confidence in the need to hike borrowing costs any time soon. That hit the dollar, which is near its weakest level this month versus the yen. Chicago-traded Nikkei 225 Stock Average futures fell as New Zealand stocks climbed. US crude advanced a second day amid the greenback's retreat. The pound held near a 31-year low.

Fed policy makers kept rates on hold at the June 14-15 meeting, as uncertainty over the labor market and financial stability threatened to derail their economic outlook, the minutes showed. Officials said they were also awaiting the outcome of the British vote, which roiled global markets in its immediate aftermath and continues to dog riskier assets. While services data on Wednesday signaled the US economy may have been gaining speed before Brexit, payrolls figures due Friday will be key to investors' perceptions of where the Fed stands on its original plan to potentially raise rates twice this year.

The Fed minutes "play into our core view that the Fed will now delay a further rate hike until December, at the earliest," Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand Ltd., said in an e-mail to clients. "The market is certainly pricing in 'gradual' rate hikes."

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