Source: Reuters

BENGALURU (Dec 27): The South Korean won hit a fresh 16-year low and the stock market tumbled on Friday amid increasing political turbulence, while other emerging Asian currencies fell against a strong dollar in thin year-end trade.

Stocks in Seoul fell as much as 1.7% in their third straight session of losses. The won shed up to 1.2% to hit 1,486.7 per US dollar, its lowest since March 2009, as a majority of South Korea's parliament voted to impeach acting President Han Duck-soo.

The impeachment threatens to further intensify the ongoing political crisis in the country, as the Constitutional Court met for its first hearing on suspended President Yoon Suk Yeol's short-lived martial law declared on Dec 3.

The won has lost nearly 13% this year and is the worst performing Asian currency.

Jeff Ng, head of Asia Macro Strategy at Sumitomo Mitsui Banking Corp, said he is bearish on the won over the near term, given the political uncertainty and weak economic data such as foreign equity investments and consumer confidence.

"Any reversal hinges on whether there is a swift resolution to the current risks, as well as a smooth political transition," Ng said.

Most other regional currencies also lost ground, with the Indonesian rupiah shedding 0.4%, on track for its fourth straight weekly decline. China's yuan was set to end the week near a 13-month low.

The Malaysian ringgit fell 0.2% on Friday, but remained the only Asian currency that was set to end the year higher.

The Indian rupee weakened to an all-time low. The currency has hit record lows in every trading session this week, pressured by broad strength in the dollar.

The US dollar held steady at a near two-year peak against major peers, after the Federal Reserve signalled slower-than-expected rate cuts in 2025.

"If the Fed does not cut in 2025, or turns more hawkish in an extreme case, this may cause more dollar strength against Asia currencies," Ng said.

Higher US rates and the dollar's yield advantage could drive capital out of emerging markets while weakening their currencies.

The Fed's rate trajectory will also influence regional central banks' rate outlook. Last week, the Bangko Sentral ng Pilipinas cut rates, while the central banks in Indonesia, Thailand, and Taiwan kept rates steady.

On Friday, equities in Kuala Lumpur rose 1% to their highest since early November, while those in Bangkok rose 0.4%.

Source: Theedgemarkets

Those glued to their screens, hoping for Santa’s arrival, were left disappointed. The major US indices weren’t in good shape yesterday even after a mixed bag of US jobs data showed that the continuing jobless claims in the US advanced to the highest levels in more than 3 years – a sign that it takes longer for people in the US to find a new job. But alas, the bad news did little to boost the Federal Reserve (Fed) doves and support the equity rally. The US 2-year yield fluctuated between 4.30-4.35% range, the S&P500 was slightly down on Thursday, Nasdaq 100 retreated 0.13% and even Bitcoin gave back the Xmas day gains and is settling near the $96K level this morning. But the Dow Jones – which has been going against its tech-heavy major peers lately was very slightly up – by 0.07%, and the mid and small caps eked out better performances. The Russell 2000 gained up to 90% – as a sign of rotation toward smaller and less technology heavy pockets of the market.

In China, equities are better bid since Chinese authorities pledge on Tuesday to sell a record amount of 3 trillion yuan worth of special treasury bonds next year to give support to the economy. The money would be used to boost consumption and investment. But China’s path to recovery will be bumpy. The data released a few hours earlier showed that the industrial profits continue to plunge. They have been almost 5% lower y-o-y last month. And the workforce in finance and property shrank over the past years for the first time on record; the number of people working for developers dived by 27% since the end of 2023.Santa is in Japan this Xmas.

The Nikkei index surged past the 40’000 mark on the back of a weakening yen as the bears are out and selling the yen since the Bank of Japan (BoJ) bypassed a rate hike earlier this month, and more importantly, said that they would wait until next March/April to have more clarity on how the Trump policies will play out. As such, the USDJPY spent Xmas bumping its head against the 158 offers. Today, the yen looks stronger on the back of a freshly released set of stronger-than-expected economic data showing that inflation in Tokyo rose to 3% in December, while retail sales in the country jumped to 2.8% in November, and the contraction in industrial production unexpectedly slowed during the same month. But the BoJ hawks are hard to convince. As it has been the case for most of 2024, the only thing that cools down the yen selloff is the threat from the Japanese officials to intervene and buy the yen. Therefore, buying the dips in the USDJPY is still interesting, and buying the Japanese stocks remains a popular thing to do.

Elsewhere, in the FX, the US dollar index was mostly steady this week – as most traders in major economies were busy dining and wining in Xmas parties. But the latter didn’t prevent the EURUSD from gently pushing lower on rising – and funded – worries that the newly formed French government will face the same faith than the previous one: a divided government that will unlikely approve a reasonable budget proposal to bring the ballooning deficit toward 5%. And the deficits that spiral higher is generally not great news for the euro as the French-German 10-year spread is preparing to close the year near 80bp – the highest since the European sovereign debt crisis a decade ago.

Across the Channel, hope that 2025 will bring good health to the UK economy – ideally with improved relations with once-loved and cherished ones – persists, but the path remains shaky. Cable has been testing the 1.25 support with a greater chance to break the latter to the downside than otherwise. Elsewhere, the AUDUSD is testing the 62 cents support while the USDCAD is trying to find support near the 1.44 this morning – it looks like Trump’s proposal to make Canada the 51st state of the United States didn’t improve sentiment… The rising political risks in Canada, combined to unsupportive oil prices continue to back a further advance in the USDCAD.

Speaking of oil, it’s the same, old narrative. The barrel makes an attempt above the 50-DMA, but remains topped by offers before reaching the 100-DMA – which currently stands near the $71.30pb level. Yesterday’s API data showed a more than 3-mio barrel retreat in US oil inventories. But the drawback barely vacuumed the bulls in, and the weekly data has little power to reverse the bearish trend that will stay intact below the $72.85pb level, which is the major 38.2% Fibonacci retracement on the latest selloff. Crude is set to close the year in the bearish consolidation zone, still waiting for China to get better and to narrow the global supply glut that’s expected to average near 1mbpd in 2025, according to the IEA.

Source: Euronews

Crude oil prices were heading towards a weekly gain earlier today following an update from the World Bank on the growth prospects of the Chinese economy next year.

Brent crude was trading at $73.18 per barrel at the time of writing, with West Texas Intermediate at $69.58 per barrel, after the World Bank revised upwards its GDP forecast for China for both this year and next. China itself issued an upward revision of its 2023 GDP growth, and it was a sizable revision, at 2.7%, which may have also helped fuel optimism about demand.

Separately, the American Petroleum Institute’s latest weekly oil inventory estimate suggested a solid draw at 3.2 million barrels, a further sign of strong demand for the commodity in its biggest market. The Energy Information Administration’s estimate of weekly crude oil inventory changes is due out today, with a two-day delay due to the Christmas holidays.

The benchmarks are set for a modest loss on an annual basis, however, largely due to the oversized focus on Chinese demand and persistent though unjustified expectations that OEPC+ would start bringing oil back to the market whatever the price level. OPEC+ did not start bringing oil back, acutely aware of prices, but this did not prevent traders from making bearish bets on expectations to that effect.

The annual decline in prices could also partially be attributed to the fact that the war in the Middle East failed to cause any disruption in oil supply despite several escalation events that could have resulted in just that. Yet when an exchange of missile strikes between Iran and Israel failed to ignite the region, traders rightly concluded no one in the Middle East wanted an oil supply disruption. This effectively put a cap on prices.

“The oil market is set to see fairly modest demand growth once again in 2025, which is partly cyclical and partly structural,” ING commodity analysts Warren Patterson and Ewa Manthey said in a new 2025 outlook. “In addition, we see another year of strong non-OPEC supply growth while OPEC still sits on a significant amount of spare production capacity, which should continue to provide comfort to the market.”

Source: OILPRICE