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Gold Inches Higher On Dollar Weakness

China Keeps Benchmark Lending Rates Unchanged

China maintained its benchmark loan prime rates, as widely expected, on Friday.

The one-year loan prime rate was maintained at 3.85 percent and the five-year loan prime rate at 4.65 percent.

The one-year and five-year loan prime rates were last lowered in April 2020. The one-year loan prime rate was cut by 20 basis points and five-year rate by 10 basis points in April 2020.

Markets expected LPR rates to remain on hold as the People’s Bank of China had kept the rate on its medium-term lending facility unchanged early this month.

The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This lending rate replaced the central bank’s traditional benchmark lending rate in August 2019.

With the economy losing momentum, it won’t be long before the PBoC is guiding rates lower, Julian Evans-Pritchard, an economist at Capital Economics, said. Even so, another round of large-scale credit-led stimulus does not appear to be on the cards for now.

It is important to note that any rate declines are likely to be primarily aimed at reducing financial strains rather than supporting credit growth, the economist noted.

Rupee gains 13 paise against U.S. dollar in early trade

However, rising crude prices in the international market and foreign fund outflows capped the rupee gains, forex traders said

The rupee appreciated 13 paise to 74.26 against the U.S. dollar in opening trade on August 23, tracking a strong rally in the domestic equities and weak American currency overseas.

However, rising crude prices in the international market and foreign fund outflows capped the rupee gains, forex traders said.

At the interbank foreign exchange, the rupee opened strong at 74.27 against the dollar, then lost some ground to quote 74.26, registering a rise of 13 paise over its previous close.

On Friday, the rupee had settled at 74.39 against the U.S. dollar.

On the domestic equity market front, BSE Sensex was trading 245.07 points or 0.44% higher at 55,574.39, while the broader NSE Nifty rose 52.60 points or 0.32% to 16,503.10.

The U.S. dollar was struggling against its major rivals in the overseas market.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, slipped 0.20% to 93.30.

Global oil benchmark Brent crude futures surged 1.93% to $66.44 per barrel.

Meanwhile, foreign institutional investors were net sellers in the capital market on August 20 as they offloaded shares worth ₹2,287.03 crore, as per exchange data.

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Oil Rebounds From Seven-day Losing Streak

Oil prices rebounded from a seven-day losing streak on Monday despite a firmer dollar and lingering COVID-19 concerns.

Benchmark Brent crude futures for November delivery jumped as much as 3.3 percent to $66.89 a barrel, after hitting the lowest level since May 21 of $64.60 earlier in the session.

U.S. West Texas Intermediate (WTI) crude futures for October settlement were up 3.4 percent at $64.22 a barrel, recovering from $61.74, the lowest since May 21, touched earlier in Asian trade.

Brent plunged around 8 percent and WTI lost about 9 percent last week on concerns about weakening fuel demand worldwide due to the surge in the pandemic.

Risk appetite in global markets increased today despite persistent worries about the COVID-19 Delta variant hampering economic growth.

Investors await more clarity from the Fed on the tapering timeline as the Delta variant of the coronavirus continues to spread across the globe, forcing countries to impose nationwide as well as local lockdown.

Iran had last week tightened curbs to contain the spread of the virus.

New Zealand extended a national COVID-19 lockdown on August 23, while Australia imposed strict lockdown in two of its biggest cities Sydney and Melbourne.

China has taken a zero-tolerance approach towards containing new infections.

Gold Inches Higher On Dollar Weakness

Gold inched higher in cautious trade Monday as the dollar dipped for the first time in six sessions amid improved risk appetite.

Spot gold rose 0.4 percent to $1,788.31 per ounce, while U.S. gold futures were up 0.4 percent at $1,790.35.

Some of the recent weakness in commodities abated despite persistent worries about the COVID-19 Delta variant hampering economic growth.

Chinese technology stocks rebounded from a prolonged selloff and Euro-area purchasing managers’ indexes signaled a strong recovery, helping lift risk appetite in global markets.

The dollar’s dip comes after Dallas Fed President Robert Kaplan on Friday said he might reconsider the need for an early start to tapering if the virus harms the economy.

Investors look ahead to the Jackson Hole symposium Thursday for additional insights about the Fed’s taper talks.

There is growing support within the Fed to announce the tapering of bond purchases sometime between October and December in contrast to the European Central Bank which is under pressure to add more stimulus.

U.S. Treasury Secretary Janet Yellen endorsed Jerome Powell for a second term as Fed chair, a move that could reduce uncertainty about the path for monetary policy.