Dubai: The dollar recovered from its lowest level in a month and a half on Monday on expectations of a Fed rate hike later this year.
After upbeat comments from the Federal Reserve vice-chairman Stanley Fischer on the US economy, investors will now turn their attention to the Fed chair Janet Yellen’s speech on Friday at Jackson Hole, Wyoming.
“The US dollar started the week broadly higher on increased speculation that Yellen would signal an increase in interest rates on Friday,” said Vaqar Zuberi, Portfolio Manager and Senior Analyst with Mirabaud Asset Management’s Hedge Fund team told Gulf News.
The dollar index, which tracks the greenback against a basket of six major currencies, was 0.11 per cent higher at 94.619, after hitting its lowest level in a month and a half last week. A stronger dollar weighed on commodities like oil and gold, along with stock markets.
Brent crude fell from its highest level in eight weeks, or the pre-Brexit levels and analysts expect more downside from the current levels.
“The supply glut persists warranting a cautious view on oil prices from Monday’s levels,” Norbert Ruecker, head of commodity research at Julius Baer said.
“Ample inventories show that the supply glut persists, while the rebound in US drilling activity suggests that the oil market’s rebalancing will be anything but swift,” Ruecker said.
Brent crude fell 2.77 per cent to be at $49.47 per barrel, while West Texas Intermediate was 2.93 per cent lower at $47.10 per barrel. Norbert expects oil prices to be $45 per barrel, another downside of roughly 10 per cent.
In the past couple of weeks, oil has gained over 22 per cent. The major boost was provided when Saudi Arabia’s oil minister Khalid Al Falih last week said that the country plans to talk to other oil producers in late September to stabilise the market.
“We maintain our view that the Opec meeting will ... disappoint. On top of this, there are reports that Iraq is looking to increase its production by another 5 per cent. So the demand and supply equation will be more out of whack,” said Naeem Aslam, chief market analyst with Think Forex.
Analysts have warned that any rally from the current levels in oil will be self-defeating as it would encourage the shale producers back in the market, impacting the already adverse supply-demand equation.
In other commodities, gold also fell 0.41 per cent to be at $1,335.93 per ounce.
