- Chinese Yuan Retreats from 12-Week Highs
The Chinese Yuan fell 0.00611 points or 0.1% to 6.42673 against the US Dollar on Tuesday after the onshore rate was set at 6.4254. The risk sensitive Yuan slipped from 12-week highs as market participants monitor rising inflation rates both domestically and abroad. China’s annual inflation rate jumped to 0.9% in April, the highest reading in seven months, while factory gate prices rose 6.8% in the month, the most in 42 months. Local 10-year bond yields were at 4-month lows of 3.138% while US 10-year rates were steady at 1.6%. In the US, median year-ahead inflation expectations increased to 3.4% in April 2021, the highest level since September 2013, while last week’s nonfarm payrolls increased by 266K, well below forecasts of nearly one million, with the unemployment rate rising to 6.1%.
Brent Crude Falls Below $68
Brent crude futures were trading below $68 a barrel on Tuesday, after the Colonial Pipeline said it aims to resume full operations by the end of this week, which led some US Gulf Coast refiners to cut output. The benchmark Brent crude is up more than 30% so far this year as the demand outlook improves with the rollout of Covid-19 vaccines. On the supply side, OPEC+ started this month a gradual easing of oil production curbs after introducing deep cuts since a pandemic-induced oil price collapse in 2020. Elsewhere, Tehran might see sanctions lifted if negotiations to revive the 2015 nuclear deal between Iran and the US are successful.
Iron Ore at New High
Prices for iron ore cargoes with a 63.5% iron content for delivery into Tianjin surged past $220 per tonne for the first time on record amid robust demand for the steel-making ingredient and lower supply. Despite the government’s environmental rules, Chinese steelmakers keep output rates above 1 billion a year on high-profit margins. Meantime, top iron ore producers Rio Tinto, BHP and Vale struggled to keep up with strong Chinese demand in the first quarter hit by operational challenges and weather disruptions.
Steel Hits Fresh Record High
Shanghai steel futures surged to a new record-high above 5,700 yuan a tonne buoyed by strong domestic demand as the peak constructions season starts. Also, production curbs aimed at reducing carbon emissions in China’s steel capital Tangshan have been boosting prices and profitability at mills. Global demand is also making a return as more economies reopen, with China’s finished steel exports surging 24.5% from a year earlier in the first four months of the year.