U.S. Dollar Loses Ground to Lower-yielding, Safe-haven Currencies

The U.S. Dollar fell against a basket of currencies on Wednesday as increased tensions between the United States and North Korea sent investors into lower-yielding, lower-risk assets. Investors sought shelter in the Japanese Yen, a common safe haven during geopolitical turmoil.

 

The USD/JPY settled at 110.053, down 0.276 or -0.25%.

Traders also said Japan is the world’s biggest creditor nation and there is an assumption investors there will repatriate funds should a crisis eventuate.

U.S. Economic News

It was a light news day in the U.S. Preliminary Non-Farm Productivity rose 0.9%, which was disappointing. Investors were looking for a 0.7% read. The report measures production efficiency and a higher number is not good for the dollar. Preliminary Unit Labor Costs, the annualized change in the price businesses pay for labor, came in below expectations at 0.6%, below the 1.1% forecast. This also was disappointing for the dollar.

Crude Oil

U.S. West Texas Intermediate and international benchmark Brent crude oil futures moved higher on Wednesday, boosted by a U.S. government report that showed U.S. refineries processed record amounts of crude in the latest week. This depleted weekly inventories, which was bullish news. However, gains were limited by a surprise jump in gasoline stockpiles.

September WTI crude oil futures closed at $49.56, up $0.39 or +0.79%. October Brent crude oil settled at $52.70, up $0.56 or +1.07%.

According to the U.S. Energy Information Administration (EIA), crude inventories fell by 6.5 million barrels the week-ending August 4. This was steeper than the expected decrease of 2.7 million barrels.

The data also showed refiners processed nearly 17.6 million barrels of crude, surpassing a record set in May and the most for any week since the U.S. Department of Energy started keeping data in 1982.

Traders said the drop in crude inventories was primarily due to a decline in imports and another rise in refinery utilization.

Traders also expressed some concerns about the gasoline inventories number. They noted that demand for both gasoline and distillate fuels remains strong because it is driving season. However, we are drawing closer to the end of summer driving season.

According to the EIA, gasoline stocks rose by 3.4 million barrels. A Reuters poll of analysts called for a drop of 1.5 million barrels. Gasoline futures tumbled about 1 percent on the news.

Gold

Gold surged to nearly a two-month high on Wednesday as tensions rattled throughout global markets. This sent investors out of higher-risk assets and the safety of gold, the Japanese Yen, Swiss Franc and government debt.

December Comex Gold futures settled at $1279.30, up $16.70 or +1.32%.