The US jobs data was one event, which was most awaited. We have seen risk aversion ease a bit since that number came in. The dollar index is also off its three-year highs, and we have seen it declining versus the Japanese yen and the euro as well.
If you look at the euro, it is trading at a one-week high at this point because there is a sentiment in the market that rate cuts from now on may ease off, meaning it would be a long time before we see another rate cut coming in from the ECB (European Central Bank).
In other currencies, the Asian currencies continue to be weak. The Asian currency index is still trading at four-year lows. The Korean won, Taiwanese dollar etc have all declined. There is also a change in stance from the Asian Central Bank. Their six-month campaign of defending their currencies seems to be easing off now, and they are reversing their course to cheapen exports. We are seeing very bad data in terms of export numbers from all the Asian countries.
The New Zealand dollar has seen some strength. It is off its six-year lows, but there is an expectation of a rate cut coming in from the New Zealand central bank and that is what is keeping that currency steady.
Commodities
In the case of commodities, the weak US dollar actually has helped other commodities. We have seen a wave of strength across the board. Gold or base metals or energy products have all seen strength in the markets today. The last week was also on the higher side, especially in the case of crude prices, the settlement for last week came above USD 46 per barrel. It gained 8% in the last week and even at this point it is trading at a three-week high.
There are lots of factors that are supportive and mostly it has do with OPEC’s statements. OPEC has been saying that they have cut 13% supplies since October and that supply cut is actually showing in the markets. Earlier the two-month spread used to be between USD 7-8 and it has now narrowed down to USD 1, which means there is supply tightness coming into the markets.
OPEC feels that USD 75 per barrel is a fair price. There are statements coming in from Venezuela, Algeria, and Qatar, which are asking for stricter cuts. So you really have to watch out for that event on March 15. That is when OPEC puts it together and assesses prices and policy as well. It is also saying that low oil prices would provide economic stimulus in the short-term, but at a cost of supply short fall in the future on low investments there. That also is supporting prices. Many people are talking about USD 50 per barrel and above either this week or next.
