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Oil tumbles back below $30, yen bounces
The yen managed to recover losses made after dropping on disappointing Japanese machinery orders data. The figure for December showed a decline by 3.6 per cent year-on-year , which was the fastest pace of decline in a year.
The yen last traded at Y114.04 by mid-morning but had gained by as much as 0.2 per cent after the data. As the yen rose, Japanese stocks sold off since the two have a strong negative correlation, as Japan’s equity markets have a heightened sensitivity to a stronger currency.
Yields on Japanese government bonds moved higher. The yield on the benchmark Japanese government 10-year bond was up 2.3 basis points to 0.053 per cent.
The more bullish mode for Wall Street on Tuesday saw gold, a popular haven, weaken, but it had recovered 0.2 per cent to $1,203.06 an ounce in Asian trade today.
Brent crude, the international benchmark, was 1.9 per cent higher on Wednesday morning at $32.80 a barrel, having dropped 3.6 per cent on Tuesday. WTI oil, the US benchmark, was up 1.4 per cent today at $29.44 after easing 1.4 per cent through Tuesday’s session.
Oil prices jumped as much as 6 per cent on Tuesday after Saudi Arabia , Russia, Venezuela and Qatar announced an output freeze following a deal reached at a meeting in Doha. However the initial euphoria faded as markets realised that any potential freeze would still be locking in record levels of output. The move was seen as largely symbolic, and there were concerns other key producers might prove a stumbling block. Basically even if output from OPEC and Russia can be capped at January levels, this would still be exceptionally high. In other words, this deal would simply maintain the excess supply that is now in place, and would keep oil prices depressed.
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