(MENAFN- Khaleej Times)Oil copper and gold retreated on Tuesday as the dollar strengthened after China devalued the yuan to boost its economy ending a brief rally in commodities that have wallowed near multi-year lows.
China's central bank made a "one-off depreciation" of nearly 2 per cent in the yuan after a run of poor economic data guiding the currency to its lowest point in almost three years. That buoyed the greenback making dollar-denominated commodities more costly for buyers using other currencies. Oil copper gold and grains fell after sharp gains on Monday. "It's a bit shocking" said Howie Lee analyst at Phillip Futures in Singapore on China's move. "I think it reeks of desperation and really signals that not all is well with China's economy." China's move came after weekend data showed a steep fall in exports and a slide in producer prices to a near six-year low in July. China's strong yuan policy partly designed to foster its use as an international currency has hurt low-end export manufacturers. Spot gold fell nearly 1 per cent to $1093.25 an ounce at one point reversing Monday's gain that gave bullion its first close above $1100 in 14 sessions. It was down 0.5 per cent at $1098.78 by 0709 GMT. Under pressure from an impending hike in US interest rates gold has struggled to recover above $1100 since a July 20 rout that pushed it down to $1077 on July 24 its cheapest since 2010. Three-month copper on the London Metal Exchange fell as much as 1.9 per cent to $5209 a tonne. Copper climbed nearly 3 per cent overnight the most in a month following a slide to its lowest since 2009. "I think the yuan devaluation will cause bonded premiums to fall because China can buy less copper given yuan is worth less - making it harder to import" said a Singapore-based trader. In oil global benchmark Brent crude briefly slipped to below $50 a barrel after rallying almost 4 per cent the day before and was last down 35 cents at $50.06. Brent had dropped to as low as $48.24 on Monday not far from this year's trough of $45.19 its cheapest since 2009 amid persistent worries over a global glut and slow demand. China is the world's No. 2 oil consumer. Chicago corn and soybean futures dropped more than 1 percent and wheat also slipped amid a stronger dollar and as US weather concerns eased. Some analysts say China may not be done with efforts to bolster a flagging economy. "The intention is to encourage exports and the government may figure out several solutions for that not just the exchange rate" said Wang Li a consultant at CRU Group in Beijing. Credit Suisse said "it would take much bigger action to ease the pain among exporters but in our view that is not on the high priority list of the decision makers.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.