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The FOREX Dollar holds its ground as Middle East hostilities raise oil prices
The dollar held steady on Wednesday, as renewed hostilities?in the Middle East drove oil prices higher and revived concerns about inflation. Rising Treasury yields and growing expectations for a Federal Reserve rate hike have boosted the currency's appeal as a safe-haven, despite recent economic data coming in below predictions. The?U.S. The?U.S. Early trade on Wednesday saw oil prices rise by nearly 1%, continuing the previous session’s gains. Brent futures were up 0.92% to $95.52 per barrel, and U.S. West Texas Intermediate crude was 0.89% higher at $91.02. Kumiko Ishikawa is a senior FX Analyst at Sony Financial Group. She said that "continued vigilance" was needed in light of the current situation in the Middle East. The dollar index (which measures the greenback in relation to a basket of currencies, including the yen, the euro and others) was 99.67. The overnight release of the ISM August manufacturing index and July JOLTS jobs openings were both below market expectations, but following Fed Chair Kevin Warsh’s speech in Jackson Hole on last week, money markets are now expecting a Federal Reserve rate increase. According to CME Group’s FedWatch tool, the markets now price in a 67% probability of a Fed hike in September, up from?40% just a week ago. Ishikawa stated that if U.S. figures are low, the impact of the data could be negated by increased tensions in the Middle East. Both the August jobs report and the consumer price index are due to be released before September 15, 16, when Fed meets. The median estimate of the economists polled predicts that this Friday's "jobs report" will show employers added 56,000 jobs in August. Fed Governor Michael Barr stated on Tuesday that the U.S. Central Bank will have to raise interest rates if inflation doesn't cool down quickly. The yield on the benchmark U.S. 10 year notes increased to 4.8% on Wednesday morning. In Japan, however, the yield for its benchmark 10-year note was at 3% after it reached a 30-year milestone Tuesday. Higher yields encourage investors to purchase safe-haven currencies such as the U.S. Dollar, and undermine the case for riskier investments like equities. The kiwi was slightly lower at $0.5889?ahead of the Reserve Bank of New Zealand's policy decision, which is expected to be made later in the day. It is widely believed that the central bank will raise interest rates a quarter-point to 2.75%. The Australian dollar was unchanged at $0.7143 against the greenback, while the British pound fell 0.04% to £1.3509. Bitcoin fell 0.07% in value to $76,376.22. Ethereum fell 0.08% to $ 2,418.26. YEN UNDER SUBSTANCE The Japanese yen remained unchanged at 160.21 against the dollar, remaining above the psychologically significant 160-per-dollar mark despite widespread expectations that the Bank of Japan would raise rates in this month. Treasury Department reports that U.S. Treasury secretary Scott Bessent expressed strong support for "decisive monetary measures" to combat the yen's weakness during a meeting with BOJ governor Kazuo Ueda. Ueda said to reporters that he would like to discuss at the board meeting this month whether or not the economy was moving in line with their forecast and if inflation risks are increasing. Later on Wednesday, a BOJ board member who is hawkish will deliver a speech. The rare joint 'intervention' by the U.S., Japan and other countries at the end of July brought the yen back to its 40-year-low of 163,99, but it has since lost around half the gains made from this joint action. Tony Sycamore is a market analyst with IG. He said in a recent note that there was little chance of a second round of coordinated intervention until the Strait of Hormuz de-escalated and the price of oil began to drop.
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Oil prices up nearly 1% after US and Iran trade new strikes
Early trade on Wednesday saw oil prices rise by nearly 1%, continuing the previous session's increase, as fears of supply disruption increased?after the U.S. & Iran exchanged strikes, dimming hope for a rapid easing?of tensions?in the Middle East. Brent crude futures rose 87 cents or 0.92% to $95.52 a barge by 0008 GMT. U.S. West Texas Intermediate futures rose 80 cents or 0.89% to $91.02. Both contracts rose more than $4 Tuesday. Brent's biggest gain since July 24, and WTI's biggest since July 23. The United States announced that it launched a series of airstrikes overnight against Iranian targets, prompting a response from Iran, in what was the most serious escalation in the conflict between the two nations in recent weeks. The U.S. Central Command posted a message on X referring to Iran’s Islamic Revolutionary Guard Corps. The IRGC stated that the U.S. attack?would further limit traffic through the 'Strait of Hormuz. This is a crucial waterway which carried approximately one-fifth of global oil consumption before the conflict, and which Iran effectively closed for commercial shipping. In response to American strikes, the Iranian state media reported a massive drone attack against a U.S. based in Bahrain. Jordanian military officials claimed that their air defenses had intercepted ten of the 13 ballistics missiles which entered its airspace. Meanwhile, two U.S. officials stated that no American casualties have been reported to date. Kuwait also said that its armed forces responded to hostile drone activity. The latest exchange came after the weekend's first flare-up of hostilities since July. It also followed the?attacks against two tankers leaving the Strait of Hormuz, which caused further disruptions in oil supplies, forcing traders to seek alternative crude shipments. Market sources cited data from the American Petroleum Institute to report that crude oil inventories in the U.S. fell by 2.6 million barrels during the week ending August 28. Distillate stocks (which include heating oil and diesel) also declined by 265,000.
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Data shows that Venezuelan oil exports were almost the same at 1,17 million bpd during August.
Documents and vessel tracking data released on Tuesday show that Venezuela's oil exports were almost unchanged at 1.17 millions barrels per day in August. A larger flow into India and Europe compensated for a lower shipment to the U.S. Last month, the number of tankers lining to load increased and their average waiting time increased as the state-run PDVSA terminals were in poorer condition and crude quality issues led to longer delays. This was a roadblock to a U.S. strategy to boost the OPEC nation's 'oil exports' quickly. One document showed that a power blackout late in July, which affected all PDVSA's crude upgrading stations and blending station, also contributed to the loading delays of August. The data shows that global trading companies?including Vitol, Trafigura and others?managed to keep their export volumes at 597,000 barrels per day, as opposed to 604,000 in July. Meanwhile, the exports of Venezuelan oil by U.S. giant Chevron fell slightly, to 286,000 barrels per day, from 293,000 the previous month. Venezuelan oil exports to America averaged around 553,000 barrels per day (bpd), below the July record of 786,000 bpd. Exports to India increased by 66% compared to the previous month, to 297,000 barrels per day. Meanwhile, exports to Europe nearly tripled from?260,000 to?260,000. Last month, the country imported 166,000 bpd in fuel - mostly from the U.S. The data shows that the country imported more than twice as much naphtha in August to dilute its heavy crude production. Venezuela's oil exports will soon change after dozens of oil projects migrate to new contract terms. This allows new supply contracts to be made by PDVSA partners who can then commercialize their share of output independently. A recent announcement involved Caracas and Washington, as well as the United States. North American Blue Energy Partners, a producer in Venezuela, is also expected to increase the flow of Venezuelan crude oil to the United States.
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These power and cooling companies are also riding the data centre boom, which is worth trillions of dollars.
Nvidia may be synonymous with AI, but a group of lesser-known power and cooling equipment providers is also cashing in on the global data center construction boom as developers rush to avoid infrastructure bottlenecks. The energy-hungry data centers have created a surge of demand for equipment from transformers to advanced cooling systems. This has created winners throughout Asia's supply chains, though earlier stock price gains have moderated. McKinsey predicts that data centres will be worth $7 trillion by 2030. Nvidia said last week it expected AI spending to continue for many years. It is getting harder to build data centres quickly enough to meet the demand. According to Pivotale AI, hyperscalers want their facilities in six months. However, grid connection delays in emerging markets can be as long as eight years and as much as 24 months. Wing Kin Cheung is the CEO of digital service provider BodaData. He said, "Outside industry circles, people talk about (graphics processor units), but inside the circle people will most likely ask you about the lead times for generators and transformators." Transformers are used to convert grid electricity into a level suitable for cooling systems, power distribution units and servers. The AI Scrutiny Deepens The demand for transformers from leading suppliers, including South Korea's HD Hyundai Electric as well as China's Hainan Jinpan Smart Technology, is expected to increase in the first half 2026 due to AI infrastructure projects in North America. HD Hyundai Electric said recently that demand in Europe was increasing as U.S. Hyperscalers increased investments in markets such as Finland, Germany, and Britain. Middle East demand also remained strong. The order backlog increased by 23% from the previous six-month period to $8.5 billion. It predicted that data centres would account for 16%, up from 6,3% of new orders in its power business next year. In the first half of this year, Jinpan's new data centre orders more than quadrupled compared to a year ago, and its backlog almost tripled. Equipment makers also bet on technologies that improve efficiency and reduce environmental impacts. This is because AI chips are consuming more electricity. Bank of America, citing Nvidia’s roadmap, estimates that power consumption per AI rack will reach more than 1.5 megawatts at the end of 2030. This is nearly 100 times higher than a conventional rack. Solid-state transformers (SST) are a technology that is gaining more attention. They replace bulky copper and magnetic coils with semiconductors for the purpose of transforming and routing electricity. UBS believes SSTs can increase energy efficiency by 4%, and lower costs. The bank estimates that commercial adoption is still in its infancy, but they expect their penetration to reach 40% by 2030. They also predict that Chinese companies are likely to gain market share due to their technological expertise and lower costs. HD Hyundai Electric, Jinpan and Taiwan's Delta Electronics are all working to develop SSTs. Delta Chairman Ping Cheng stated in July that "it is fundamentally a gateway to energy, which requires an entirely different design and power architecture." "Adoption is going to take some time." COOLING RACE As operators struggle to control the heat generated by powerful AI chip, cooling systems are becoming a growing area. Matty Zhao is the Asia-Pacific director of?research in basic materials, oil, and gas at Bank of America. By 2030, liquid cooling is expected to account for 70% of all new AI data centres compared to air cooling. This represents a significant increase from the current 30%. McKinsey claims that liquid cooling can reduce energy use by over 27%. Developers also explore unconventional approaches such as floating facilities, undersea data centres, and servers in tunnels or caves. This opens up opportunities for a wider range of suppliers. HD Hyundai Electric stated that new opportunities for marine medium speed engines are opening up with the expansion of the data center self generation and floating data center markets. Delta, local competitors Asia Vital Components (Auras Technology) and Asia Vital Components (Auras Technology), as well as China's Shenzhen Envicool Technology are all benefiting from the strong demand for thermal management products. All three are part of Nvidia's ecosystem. Supply Chain Constraints Investors are questioning the high valuations of stocks amid increased competition, despite the surge in orders. Delta's shares have risen by more than 90% in the past year. HD Hyundai Electric, however, has been largely flat after a year of gains that exceeded 100%. China's Envicool and Jinpan have dropped by nearly 30% and 20 %, respectively, following gains of 118% and 244%. Delta's Cheng stated, "Even?if revenue increases I think gross margins will likely remain at this level." There are many factors in the market including new product platforms and deployment delays, as well as component shortages. These issues could become more serious by the second half this year. Zhao, a Bank of America spokesperson, said that investors need to be aware of possible risks. She said, "Not everyone wins." You have to cherry-pick the leaders that get the actual customers.
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Oil prices soar on renewed US-Iran strikes, global bonds continue to fall
On Tuesday, global bond yields increased, continuing a sell-off of government debt fueled by inflation fears. Meanwhile, oil prices surged to a five-week high after a fresh round of U.S. The strikes on Iran have refocused the attention of Middle Eastern?conflict. The yield of the benchmark 10-year Treasury bill in the United States rose by 3.4 basis points, to 4,792%. It had previously reached 4.798% at its highest level since January 2025. The 10-year yield is up for five consecutive sessions, the longest streak since March. Prior to this, Japan's benchmark 10-year yield reached 3% for first time since 1996. British and Euro zone yields also hit record highs. Prices and yields are inversely related. The expectation of interest rate increases has also risen. Jake Dollarhide is the chief executive officer at Longbow Asset Management in Tulsa. "Potentially it could be rate increases across the board." "That's bad for all companies, including tech," said he. Rates that are higher increase borrowing costs, both for consumers and businesses. The inflation fears are exacerbated by higher?oil costs. The new air strikes against Iranian targets have sparked fears of an expansion of hostilities during the six-month conflict. The world's oil reserves have been depleted since the joint U.S. and Israeli strikes on Iran in February. This is due to the closing of the Strait of Hormuz. Oil reached a five-week high. Brent futures increased $4.16 or 4.6% to $94.65 per barrel. U.S. West Texas Intermediate crude (WTI), which is the U.S. equivalent of WTI, rose by $4.46 or 5.2% to $90.22. Brent closed at its highest level since July 24, and U.S. crude reached its highest level since July 23. Since July 23, crude oil has been at its highest level since Brent. The European Central Bank is expected to raise rates in September after the euro zone inflation rate rose to?over 3% due higher energy prices. Investors also believe that the U.S. Federal Reserve will raise interest rates during its meeting in just two weeks. Fed Governor Michael Barr, who spoke on Tuesday after Warsh's hawkish remarks on the outlook for inflation, said that if the inflation rate does not drop quickly, the Fed will have to increase rates. According to CME Group’s FedWatch Tool (formerly known as FedWatch), the expectation of a Fed hike of 25 basis points or more at their September 15-16?meeting is now 66.2%. This is up from 39.6% one week ago. Wall Street's main stock indexes and a global equity indicator both fell. The Dow Jones Industrial Average dropped 419.02 or 0.8% to 52,766.88. The S&P 500?fell 54.67 or 0.7% to 7,631.47. And the Nasdaq Composite declined 271.11 or 1% to 26,099.77. Investor?sentiment could be affected by seasonal weakness. Fisher Investments, citing Finaeon data, says that September is the only one of 1926's months to have a negative return on average. The MSCI index of global stocks fell by 6.49 points or 0.56% to 1,142.73. The pan-European STOXX 600 fell by 0.56%. The dollar has strengthened against major currencies. Investors are attracted to safe haven currencies such as the U.S. Dollar by higher yields. The dollar index (which measures the greenback versus a basket of currencies, including the yen, and the euro) rose by 0.27%, to 99.68. Meanwhile, the euro fell 0.23%, to $1.1589. The Japanese yen dropped 0.3%, to 160.19 dollars. The Fed may be more likely to raise rates next month if it receives the August U.S. jobs data and the consumer price inflation figures, both of which are due before its next meeting. According to economists polled, the median estimate for Friday's employment report is that employers added 56,000 new jobs in January. The gold price fell to its lowest level in two weeks amid rising Treasury yields and a stronger dollar. Spot gold dropped 2.69%, to $4328.60 per ounce.
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FOREX Dollar gains as rising bond yields and oil prices fuel inflation fears
The dollar gained on Tuesday, as renewed U.S. - Iran hostilities?sent the oil prices higher and fueled inflation fears?and sparked a global bond saleoff. Tuesday, the U.S. launched a 'new air strike on Iranian targets' which pushed oil prices over 4% higher. The dollar index (which measures the greenback versus a basket including the yen, the euro and other currencies) rose by 0.27%, to 99.68. Meanwhile, the euro fell 0.23%, to $1.1589. The yield on the 10-year Treasury note reached its highest level since January 2025. Investors are urged to buy safer assets such as the U.S. Dollar by higher yields, while riskier assets such as equities are undermined. Karl Schamotta is the chief market strategist for Corpay. He said that the rout on global bond markets was intensifying, while the dollar is rising. The outbreak of hostilities in the U.S.-Iran conflict has rekindled inflation fears, increased the likelihood of rate hikes and made safe havens even more attractive. Fed funds futures traders now price in 68% odds that a rate hike will occur in September, up from 35% prior to Federal Reserve Chairman Kevin Warsh’s hawkish remarks on monetary policies at the Jackson Hole Symposium on Friday. He stated that the Fed would "have to work" if inflation did not cool down, which was his strongest hint to date that additional rate increases could be required to control price pressures. The Fed's decision to hike rates next month may hinge on the August jobs and inflation data. According to economists polled, the median estimate for Friday's employment report is that employers added 56,000 new jobs in January. Fed Governor Michael Barr stated on Tuesday that it is time to raise interest rates if inflation doesn't cool down quickly. U.S. Treasury secretary Scott Bessent said that U.S. Bond yields show that inflation expectations have slowed down and are now "flat or even lower". The dollar fell 0.26%, to $1.3511. The Yen WEAKENS The Japanese yen dropped 0.3% to 160.19 dollars. On Monday, the Japanese yen was'supported' after Besent said that he thought Japan's central bank and government would take actions to strengthen it. Treasury Department reported on Tuesday that Bessent had urged Bank of Japan governor Kazuo Ueda, to use monetary policies to anchor inflation expectations and avoid excessive volatility of the yen. The dollar is currently favored by the large gap between rates in the U.S. Joel Kruger is a market strategist at LMAX Group, London. He said that investors are still focused on Japan's unfavorable interest rate differential with the United States. They also have doubts about how aggressively Bank of Japan will tighten its policy. The rare joint intervention by the U.S., Japan and other countries at the end July brought the yen back from its 40-year-low of 163,99, but it has since lost around half of what was gained.
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Mexican soldiers kill suspected leader of cartel as anti-crime campaigns escalate
The Mexican defense ministry announced a Tuesday that a suspected leader of the Los Reyes cartel was killed by Mexican soldiers in western Mexico. Mexico is continuing to intensify its war against organized crime and cartels. The U.S. offered a reward of $3 million for information that led to the arrest of Luis Enrique Barragan Chavez. U.S. authorities had identified him as a top hitman of a faction within the Carteles Unidos criminal group, known as "the Los Reyes" cartel. A statement from Mexico's Defense Ministry claims that soldiers shot and killed Barragan in Tocumbo, Michoacan state during a conflict in which the authorities claim the soldiers were under fire. In addition to Barragan and another suspected cartel member, another person was also killed during the operation. Barragan was also indicted on charges of drug conspiracy and firearms in the United States. Michoacan is a region that has been plagued for years by cartel violence and extortion, which targets avocado producers who supply the United States as its main market.
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Stocks fall as bond yields increase due to inflation fears fueled by oil prices
The global bond yields rose again on Tuesday, as oil prices surged and fueled fears about inflation. The 10-year Japanese benchmark yield has risen to 3%, the highest since 1996. This is pushing up government borrowing costs. The yields on U.S. Treasury notes have fallen from their previous highs following the release of U.S. Economic data. The yield on the 10-year Treasury note was up 1.2 basis point at 4.77%, after climbing to 4,798%. Its highest level since Jan 14, 2025. Prices and yields are inversely related. Jake Dollarhide is the chief executive officer at Longbow Asset Management, located in Tulsa. "Potentially, it's rate increases across the board." He said that this is bad for all companies, including tech. Rates increase the cost of borrowing for both businesses and consumers. The oil prices have risen by more than 2% since the U.S.-Iran conflict resumed and fears about supply disruptions in the Middle East were renewed. ?U.S. Last week, crude rose 2.8% to $88.16 per barrel. Brent was up 2.32% at $92.59 a barrel. Scott Bessent, U.S. Treasury secretary, said that Washington would likely announce bank sanctions this week against Iran. This will be a step up in an effort to "economically suffocate" Iran's leaders after six months of conflict. Tehran was defiant and warned that it would stop oil from being exported out of the Gulf. The European Central Bank is expected to raise rates in September, according to data released on Tuesday. This was due to the fact that energy prices rose. Federal Reserve Chair Kevin Warsh delivered a speech that led traders to bet on rate increases in the United States this year. Fed Governor Michael Barr stated on Tuesday that, if inflation doesn't cool down quickly, then it is time for U.S. Central Bank to increase interest rates. Fed funds?futures trader now price in 68% odds that a rate hike will occur in September, up from 35% prior to Warsh's Friday comments. Wall Street's main stock indexes and a global index both fell. The Dow Jones Industrial Average fell 208.81 pts, or 0.39% to 52,977.92. The S&P 500 dropped 28.96 pts, or 0.38% to 7,657.18. And the Nasdaq Composite declined 161.21 pts, or 0.61% to 26,210.06. The MSCI index of global stocks fell 4,07 points or 0.35% to 1,145.15. The pan-European STOXX 600 fell by 0.62%. Hong Kong's Hang Seng dropped 1%. The dollar has strengthened in the face of inflation concerns. The dollar index (which measures the greenback in relation to a basket of currencies, including the yen, the euro and the yen) rose by 0.23%, while the euro fell by 0.22%, at $1.1591. The dollar gained 0.21% against the Japanese yen to 160.07. The Fed's meeting on September 15-16 will be largely determined by the U.S. jobs and inflation data for August. According to economists polled, the median estimate for Friday's employment report is that employers added 56,000 new jobs in January. Spot gold dropped 1.86%, to $4365.37 per ounce.
Asian markets fall as US-Iran conflict lifts oil and bonds yields
The stock market fell at the beginning of Wednesday's Asian trading session as the panic caused by the bond markets on global markets spread to the region. This was after the renewed U.S. attacks on Iran pushed up oil prices.
MSCI's broadest index of Asia-Pacific stocks outside Japan fell 0.8% at the opening, as South Korea's KOSPI plunged 3% and Japan's Nikkei225 dropped 2.2%. S&P 500 futures are flat.
Brent crude futures continued to rise as trading resumed on Wednesday in Asia. They rose 0.7% to $95.34 per barrel, after U.S. airstrikes against?Iran, on Tuesday, had pushed the oil price to a five week high.
Westpac analysts reported that "the threat of further disruptions to the Strait of Hormuz" has sparked renewed inflation fears, causing a selloff of stocks in most major markets and a crash in global bond market.
The yield on the U.S. Treasury bond of 10 years was up 0.4 basis points at 4.798%. Meanwhile, the U.S. Dollar Index, which measures greenback strength in relation to a basket six currencies, remained near its highest level of the last two weeks, at 99.67.
Overnight, Wall Street saw the S&P 500 fall 0.7% while the Nasdaq Composite dropped?1% due to a rise in government bond yields.
Data from the Institute for Supply Management, released on Tuesday, showed that U.S. Manufacturing activity moderated during August due to a?slowdown in new orders but remained in an expansionary zone.
The Federal Reserve will likely raise interest rates in two weeks at its next meeting, according to traders. However, a rate hike isn't certain.
Fed funds 'futures' are currently pricing a 67% implied probability that benchmark borrowing costs will increase by 25 basis points at the U.S. Central 'bank's 2-day meeting which ends on September 16, compared with a 39.6% likelihood a week earlier, according to CME Group's FedWatch.
Gold was unchanged at $4,328.59 per ounce. Bitcoin fell 0.2% to $72,246.57, and ether dropped 0.3% to $2,412.60.
(source: Reuters)