Markets fell sharply on Friday as world markets were rattled over China's decision to tighten capital requirements for banks. How is China’s move affecting the U.S. dollar, gold and commodities? Boris Schlossberg, director of currency research at GFT Forex, Jim Steel, chief commodities analyst at HSBC and Peter Beutel, president of Cameron Hanover shared their expertise.
“It looks like the dollar still stays strong,” Schlossberg told CNBC. “And I do think the euro is very oversold.” (Track the Dollar Index here.)
Schlossberg said the single risk trade left is in the Australian dollar, because it is the only place in the world where growth continues to surprise on the upside.
“So if you’re a believer in growth, if you’re still a bull in growth, Aussie’s your best bet going forward,” he recommended.
As a result of the moves in China, gold was down 1 percent as the dollar hit a seven-month high versus a basket of currencies.
“The longer-term outlook is still certainly positive, but gold has been hostage to the sovereign risk issue in Greece and tends to move in tandem with how those developments have panned out,” said Steel. (See Gold Futures Now)
“But I think the monetary tightening—the latest round in China—has been negative.”
“If you look at gold’s activity this year, every time we’ve had monetary tightening, or we’ve had comments from the Bank of China, or from commercial banks reducing loans, gold has tended to sell off with other commodities,” Steel added.
Meanwhile, crude oil fell by more than $2 on Friday after the outlook for energy demand was dented by China's monetary policy decision. Beutel said the demand numbers are “anemic” and are not getting any stronger. ()
“Even when we’ve got a cold winter, it looks like we’re going to end January [oil inventory] stocks the highest since 1983 and February is going to end at the highest since 1981,” he said. “Imports have dropped from a normal level of 10 million barrels a day down to about 8 million a day.”
Beutel attributed the collapse in imports to low refining rates.
“The refinery utilization numbers looks like we’re just out of a hurricane,” he said.
More Market Intelligence:
CNBC's Companies in the News:
Toyota to Expand Disclosure Amid Pressure on CEO
Motorola to Split in Two Next Year; Shares Rise
Bank of America
Berkshire Hathaway (A shares)
Berkshire Hathaway (B shares)
No immediate information was available for Beutel, Schlossberg or Steel.