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As China continues to push the commodity markets, the yen is plummeting

The return of Chinese traders following on from their weeklong Golden Week holiday has seen the commodity markets catch a bid. With supply constricted and demand rising the prices in key commodities including energy are fast approaching new year-to-date highs. The comments from the Japanese PM regarding new taxes has not been so good for the yen.

Market Wrap

After a week-long holiday in China, iron ore prices rose on Friday with market participants optimistic about demand prospects for the raw material in the world's top steel producer.

Due to China's electricity shortage, electric arc furnaces that use iron scraps to produce steel are at risk of being shut down, which means blast furnaces that use iron ore must produce more steel.

The most-traded January iron ore was 4.9% higher $118.24 a tonne Friday morning rising to $122 today, its strongest since September 6.

Also due to China’s power usage, coal is now being burned at 2014 levels.

The trading since China returned from their golden week may have some relationship to the moves in the Australian dollar today, which has taken advantage of a North American bank holiday that celebrates Columbus Day. Significant resistance is a lot higher towards 0.7600, with major support coming in just above 0.7030.

WTI and Brent's crude was up again today as the energy market enters into its 6th consecutive week of price rises. Brent hit a high in the $84 per barrel area before retreating a small margin.

As can be expected when the commodity prices are rising so do the Australian, New Zealand, and Canadian dollar prices too. The forex heatmap is indicating that today's reduced volume day is more risk-on and that the indices should remain bid for the rest of the US session.

The S&P500 (above), Dow Jones Industrial Average and Nasdaq 100 were all higher today by 0.50%, 0.54%, and 0.36% respectively. The UK 100 had risen by 0.76% by the end of the London session, with the Hang Seng and Nikkei 225 having the best results for the day coming I 1.96% and 1.60% respectively.

The yen continues to fall against all its peers though it has continued pushing to 113.40 while the US10 year yields have stalled with the bond markets being shut today. Chances are that the USDJPY may have to give back some of these gains today or maybe there will be a harder drop in the US treasuries tomorrow.


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