AFP

The dollar lost a little of its strength Tuesday after starting the week by surging against major peers, including a record high versus the pound, but while equity markets stabilised, sentiment remained dampened by recession fears.

While central banks around the world are ramping up interest rates to fight inflation, the main focus is on the US Federal Reserve’s increasingly hawkish tone that has seen it unveil three successive bumper hikes with a warning of more to come.

That has seen investors pile into the dollar, sending it to record or multi-decade peaks, which has rattled governments from Tokyo to Beijing and London.

On Monday, it hit its highest-ever level against the pound — touching $1.0350 after traders were spooked by a massive tax giveaway mini-budget by new UK finance minister Kwasi Kwarteng.

Sterling staged a small recovery but fell back again after traders were left disappointed by a lack of solid action from the Bank of England, with Governor Andrew Bailey saying only it would not hesitate to increase rates by as much as needed.

However, speculation is rife that officials will announce a huge 1.5 percentage point hike at their next meeting in November.

The dollar’s rally against the pound was matched by advances across forex markets, with the euro hitting a new 20-year low and the yen pushing back to the level it hit when the government intervened to support the currency last week.

But the greenback surge ran out of steam Tuesday as a little stability returned to markets, though analysts warned that volatility would remain high as more global rate hikes were in the pipeline and geopolitical crises remained unresolved.

Added to that were concerns that inflation remained stubbornly high.

“The market is pricing in some Fed increases, but we’re a bit worried that it might not be pricing in everything,” Laila Pence, of Pence Wealth Management, told Bloomberg Television.

“We got whipsawed in August when inflation was up not down — everyone is nervous.”

– ‘Wrecking ball’ –

Another selloff in Wall Street stocks saw the S&P 500 suffer its lowest close since December 2020, though Asia was mixed.

Tokyo, Shanghai, Sydney, Seoul, Taipei and Mumbai all rose while Hong Kong eked out marginal gains but Singapore, Wellington, Bangkok, Manila and Jakarta were in the red.

London, Paris and Frankfurt were in positive territory in early business.

“Dollar strength remains the driving force — or wrecking ball — in financial markets at the moment,” said Markets.com analyst Neil Wilson. “It’s not only wrecking relative currency stability but is a major factor in the weakness for equities.”

And OANDA’s Edward Moya added: “Right now, financial markets are a mess.

“Wall Street is realising that we won’t be seeing a significant sign that inflation is easing fast enough in the next couple of months and that should make it tough to buy the dip just yet.”

Oil prices rallied around two percent as news filtered through that the two leaks have been identified on the Nord Stream 1 Russia-Europe gas pipeline in the Baltic Sea, hours after a similar incident on its twin pipeline.

However, both contracts remain wedged around their lowest levels since January owing to the stronger dollar and worries about demand caused by the expected recession.

And Moya added there appeared little chance the commodity will stage a near-term recovery, despite speculation that major producers could announce a fresh output cut.

“Chaos in the forex markets could keep crude prices heavy no matter what OPEC+ does over the short-term,” he wrote. “Forex volatility won’t let up anytime soon and that will send oil on a very long roller-coaster ride.”

– Key figures at around 0810 GMT –

Tokyo – Nikkei 225: UP 0.5 percent at 26,571.87 (close)

Hong Kong – Hang Seng Index: FLAT at 17,860.31 (close)

Shanghai – Composite: UP 1.4 percent at 3,093.86 (close)

London – FTSE 100: UP 0.7 percent at 7,069.40

Pound/dollar: UP at $1.0809 from $1.0689 on Monday

Euro/dollar: UP at $0.9647 from $0.9611

Euro/pound: DOWN at 89.26 pence from 89.87 pence 

Dollar/yen: DOWN at 144.30 yen from 144.72 yen

West Texas Intermediate: UP 2.0 percent at $78.23 per barrel

Brent North Sea crude: UP 1.9 percent at $85.67 per barrel

New York – Dow: DOWN 1.1 percent at 29,260.81 (close)

Japanese and foreign dignitaries paid tribute to assassinated former prime minister Shinzo Abe at a controversial state funeral on Tuesday, as long lines of people gathered to offer flowers and prayers.

Abe’s ashes, carried by his widow Akie, arrived at the storied Budokan venue in Tokyo, where a 19-gun salute sounded in honour of the slain former leader.

In a eulogy, Prime Minister Fumio Kishida described the politician as a “person of courage”, listing his achievements, including efforts to strengthen Japan’s diplomatic ties.

“I feel heart-breaking grief,” Kishida said as he faced a photograph of Abe that was hung above a grand floral structure used to display his ashes, medals and the Japanese flag.

Abe was Japan’s longest-serving prime minister and one of the country’s most recognisable political figures, known for cultivating international alliances and his “Abenomics” economic strategy.

He resigned in 2020 over recurring health problems, but remained a key political voice and was campaigning for his ruling party when a lone gunman killed him with a homemade weapon on July 8.

The shooting sent shock waves through a country with famously low gun crime and prompted international condemnation.

But the decision to give him a state funeral — only the second for a former premier in the post-war period — has provoked opposition, with around 60 percent of Japanese against the event in recent polls.

– ‘So much opposition’ –

US Vice-President Kamala Harris and world leaders including Indian Prime Minister Narendra Modi and Australian premier Anthony Albanese were among those in attendance at the Budokan.

Outside, thousands of people stood in line as the ashes arrived, waiting to deliver flowers and say a prayer in two mourning tents.

Koji Takamori came all the way from northern Hokkaido with his nine-year-old son. “I wanted to thank him. He has done so much for Japan,” the 46-year-old told AFP.

“The way he died was so shocking. To be honest, I also came because there has been so much opposition. It’s almost like I’m here to oppose those who are opposing this (funeral),” he added.

Those opponents were also out, marching near the tents before a demonstration in front of the parliament.

– Discontent over state funeral –

Abe’s accused killer targeted the former leader believing he had ties to the Unification Church, which the attacker resented over massive donations his mother had made to the sect.

The assassination prompted fresh scrutiny of the church and its fundraising, and uncomfortable questions for Japan’s political establishment, with the ruling party admitting around half its lawmakers had links to the religious organisation.

Kishida has pledged the party will sever all ties with the church, but the scandal helped fuel discontent over the state funeral.

Thousands have protested the ceremony and a man set himself on fire last week near the prime minister’s office, leaving notes reportedly expressing his objection to the event.

Some lawmakers from opposition parties are also boycotting the funeral.

The controversy has several causes, with some accusing Kishida of unilaterally approving the funeral instead of consulting parliament, and others resentful of a nearly $12 million price tag.

It is also the legacy of Abe’s divisive tenure, marked by persistent allegations of cronyism, and opposition to his nationalism and plans to reform the pacifist constitution.

Kishida’s government may be hoping the solemnity of the event, attended by an estimated 4,300 people including 700 foreign invitees, will drown out the controversy.

Abe worked to cultivate close ties with Washington to bolster the key US-Japan alliance, and also courted a stronger “Quad” grouping of Japan, the United States, India and Australia.

Japan’s emperor and empress are not attending, as neutral national figures, but Crown Prince Akishino and his wife led mourners in offering flowers at the end of the 90-minute service.

The dollar lost a little of its strength Tuesday after starting the week by surging against major peers, including a record high versus the pound, though equity traders struggled to claw back recent losses owing to recession fears.

While central banks around the world are ramping up interest rates to fight inflation, the main focus is on the US Federal Reserve’s increasingly hawkish tone that has seen it unveil three successive bumper hikes with a warning of more to come.

That has seen investors pile into the dollar, sending it to record or multi-decade peaks, which has rattled governments from Tokyo to Beijing and London.

On Monday it hit its highest-ever level against the pound — touching $1.0350 after traders were spooked by a massive tax giveaway mini-budget by new UK finance minister Kwasi Kwarteng.

Sterling staged a small recovery but fell back again after traders were left disappointed by a lack of solid action from the Bank of England, with governor Andrew Bailey saying only it would not hesitate to increase rates by as much as needed.

The dollar’s rally against the pound was matched by advances across forex markets, with the euro hitting a new 20-year low and the yen pushing back to the level it hit when the government intervened to support the currency last week.

But the greenback surge ran out of steam Tuesday as a little stability returned to markets, though analysts warned that volatility would remain high as more global rate hikes were in the pipeline and geopolitical crises remained unresolved.

Added to that were concerns that inflation remained stubbornly high.

“The market is pricing in some Fed increases, but we’re a bit worried that it might not be pricing in everything,” Laila Pence, of Pence Wealth Management, told Bloomberg Television.

“We got whipsawed in August when inflation was up not down — everyone is nervous.”

Another selloff in Wall Street stocks saw the S&P 500 suffer its lowest close since December 2020, and Asia also struggled.

Tokyo, Shanghai and Sydney all rose but red was flashing up on screens in Hong Kong, Singapore, Seoul, Wellington, Taipei, Manila and Jakarta.

“Right now financial markets are a mess,” said OANDA’s Edward Moya.

“Wall Street is realising that we won’t be seeing a significant sign that inflation is easing fast enough in the next couple of months and that should make it tough to buy the dip just yet.”

Oil prices edged slightly higher, though both contracts remain wedged at their lowest levels since January owing to the stronger dollar and worries about demand caused by the expected recession.

And Moya added there appeared little chance the commodity will stage a near-term recovery, despite speculation that major producers could announce a fresh output cut.

“Chaos in the forex markets could keep crude prices heavy no matter what OPEC+ does over the short-term,” he wrote. “Forex volatility won’t let up anytime soon and that will send oil on a very long roller-coaster ride.”

– Key figures at around 0230 GMT –

Tokyo – Nikkei 225: Up 0.8 percent at 26,651.60 (break)

Hong Kong – Hang Seng Index: DOWN 0.6 percent at 17,755.57

Shanghai – Composite: UP 0.1 percent at 3,053.60

Pound/dollar: UP at $1.0761 from $1.0689 on Monday

Euro/dollar: UP at $0.9629 from $0.9611

Euro/pound: DOWN at 89.49 pence from 89.87 pence 

Dollar/yen: DOWN at 144.52 yen from 144.72 yen

West Texas Intermediate: UP 0.4 percent at $77.02 per barrel

Brent North Sea crude: UP 0.4 percent at $84.38 per barrel

New York – Dow: DOWN 1.1 percent at 29,260.81 (close)

London – FTSE 100: FLAT at 7,020.95 (close)

The dollar lost a little of its strength Tuesday after starting the week by surging against major peers, including a record high versus the pound, though equity traders struggled to claw back recent losses owing to recession fears.

While central banks around the world are ramping up interest rates to fight inflation, the main focus is on the US Federal Reserve’s increasingly hawkish tone that has seen it unveil three successive bumper hikes with a warning of more to come.

That has seen investors pile into the dollar, sending it to record or multi-decade peaks, which has rattled governments from Tokyo to Beijing and London.

On Monday it hit its highest-ever level against the pound — touching $1.0350 after traders were spooked by a massive tax giveaway mini-budget by new UK finance minister Kwasi Kwarteng.

Sterling staged a small recovery but fell back again after traders were left disappointed by a lack of solid action from the Bank of England, with governor Andrew Bailey saying only it would not hesitate to increase rates by as much as needed.

The dollar’s rally against the pound was matched by advances across forex markets, with the euro hitting a new 20-year low and the yen pushing back to the level it hit when the government intervened to support the currency last week.

But the greenback surge ran out of steam Tuesday as a little stability returned to markets, though analysts warned that volatility would remain high as more global rate hikes were in the pipeline and geopolitical crises remained unresolved.

Added to that were concerns that inflation remained stubbornly high.

“The market is pricing in some Fed increases, but we’re a bit worried that it might not be pricing in everything,” Laila Pence, of Pence Wealth Management, told Bloomberg Television.

“We got whipsawed in August when inflation was up not down — everyone is nervous.”

Another selloff in Wall Street stocks saw the S&P 500 suffer its lowest close since December 2020, and Asia also struggled.

Tokyo, Shanghai and Sydney all rose but red was flashing up on screens in Hong Kong, Singapore, Seoul, Wellington, Taipei, Manila and Jakarta.

“Right now financial markets are a mess,” said OANDA’s Edward Moya.

“Wall Street is realising that we won’t be seeing a significant sign that inflation is easing fast enough in the next couple of months and that should make it tough to buy the dip just yet.”

Oil prices edged slightly higher, though both contracts remain wedged at their lowest levels since January owing to the stronger dollar and worries about demand caused by the expected recession.

And Moya added there appeared little chance the commodity will stage a near-term recovery, despite speculation that major producers could announce a fresh output cut.

“Chaos in the forex markets could keep crude prices heavy no matter what OPEC+ does over the short-term,” he wrote. “Forex volatility won’t let up anytime soon and that will send oil on a very long roller-coaster ride.”

– Key figures at around 0230 GMT –

Tokyo – Nikkei 225: Up 0.8 percent at 26,651.60 (break)

Hong Kong – Hang Seng Index: DOWN 0.6 percent at 17,755.57

Shanghai – Composite: UP 0.1 percent at 3,053.60

Pound/dollar: UP at $1.0761 from $1.0689 on Monday

Euro/dollar: UP at $0.9629 from $0.9611

Euro/pound: DOWN at 89.49 pence from 89.87 pence 

Dollar/yen: DOWN at 144.52 yen from 144.72 yen

West Texas Intermediate: UP 0.4 percent at $77.02 per barrel

Brent North Sea crude: UP 0.4 percent at $84.38 per barrel

New York – Dow: DOWN 1.1 percent at 29,260.81 (close)

London – FTSE 100: FLAT at 7,020.95 (close)