HONG KONG: Asian markets fluctuated on Thursday following a slump in the oil price driven by fresh indications of oversupply.
The dollar rose against some Asia Pacific currencies but gains were capped as traders are still awaiting clearer signals on the timing of a possible US interest rate hike, with expectations that the Fed will move cautiously.
The New Zealand dollar bucked the trend, rising against the greenback after the country’s central bank slashed interest rates to a record low of 2.0 percent and said further easing might be necessary.
South Korea on Thursday opted to keep its key rate unchanged at 1.25 percent for August but the central bank governor held out the prospect of another reduction.
Japanese financial markets were closed for a national holiday.
“The biggest risk to the market at the moment is a huge drop in oil prices,” James Woods, a strategist at Rivkin Securities in Sydney, told Bloomberg news.
Oil prices have been fluctuating since entering a “bear” market last week, falling more than 20 percent from recent highs above the $50 a barrel seen in early June and closing below $40 a barrel for the first time since April.
Weekly figures released Wednesday by the US Energy Department showed that crude stocks remained high last week at 523.6 million barrels, up 0.2 percent from the prior week and still more than 15 percent above the same point last year.
At about 0830 GMT, West Texas Intermediate was trading at $41.25 while Brent was at $43.68.
“Oil is increasingly pulling back towards the US$40 a barrel level again and many in the markets are concerned that the shorts may even be looking for prices to drop down towards the $35 level,” Angus Nicholson, a strategist at IG Markets, said in a note.