Jakarta, CNBC Indonesia- Coal prices continue to strengthen, driven by cuts in United States (US) interest rates which weaken the dollar index (DXY).
Based on Refinitiv data, at the close of trading Friday (8/11/2024), the ICE Newcastle reference coal price for the December contract rose 0.80% to US$ 144.25 per ton. This is a strengthening for two consecutive days after previously rising to US$ 143.10 per ton.
The Federal Reserve’s (The Fed) decision to cut interest rates by 25 basis points (bps) at this week’s FOMC meeting was the main driver. This cut lowered interest rates to 4.50-4.75%, giving a new impetus to commodity markets, including coal. This is the second cut after previously cutting 50 bps in September.
The weakening of the dollar index was reflected at Friday’s close with a correction of 0.75% at level 104. A weakening DXY makes commodities in dollars cheaper for holders of other currencies, so demand increases.
“US inflation is moving toward the 2% target, although it remains at a high level,” the Fed wrote in its statement. Solid economic data as well as labor market stability, despite a slight increase in unemployment, added to market confidence.
This price increase provides a breath of fresh air for energy industry players after a period of pressure in recent months. If global sentiment is supportive, this positive trend has the potential to continue.
CNBC Indonesia Research
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Prabowo: Absolute Downstreaming, Non-Negotiable!
The Rise of Coal Prices: A Comedy of Interest Rates!
Jakarta, CNBC Indonesia – It seems that coal prices are flexing their muscles like a bodybuilder at a beach workout, continuously strengthening, all thanks to the US Federal Reserve’s latest round of interest rate cuts. Who knew interest rates could be such trendsetters? Let’s dive into this economic escapade!
As reported, at Friday’s close (8/11/2024), the ICE Newcastle reference coal price for the December contract strutted its stuff, rising by 0.80% to a solid US$ 144.25 per ton. That’s right—two consecutive days of price boosts! It’s like coal is saying, “Hey, look at me! I’m back, baby!” After cranking it up to US$ 143.10 per ton earlier, it seems coal might just be auditioning for its own reality show.
The catalyst? The Federal Reserve decided to reduce interest rates by 25 basis points at this week’s FOMC meeting. They’ve lowered rates to between 4.50% and 4.75%, giving the commodity markets a shot of espresso. This is the second rate cut after a hefty 50 bps drop in September. It’s a bit like those dramatic cliffhangers at the end of a season finale: What will they do next?
The ripple effect is real. When the dollar index (DXY) catches a cold—falling by 0.75% to land at level 104—the commodities market gears up for a dance party! Why? Because a weaker dollar makes commodities cheaper for anyone holding other currencies. And let’s be honest, who doesn’t love a good deal? Demand spikes as prices drop, making everyone feel like a savvy shopper at a clearance sale.
In the Fed’s own words: “US inflation is moving toward the 2% target, although it remains at a high level.” Well, high level or not, they’re like a roller coaster operator confirming, “Don’t worry, it’ll be fun!” Coupled with solid economic data and a labor market that’s holding its ground—even with a slight uptick in unemployment—market confidence is back in full swing.
This rise in coal prices is like the grand finale of a fireworks show—a lovely breath of fresh air for energy industry players after a few months of feeling a bit suffocated. Will this positive trend continue? If the global sentiment plays nice, we might just see coal prices shining through like the star of a sitcom.
Conclusion: An Ongoing Spectacle
So, in summation, while the world keeps spinning and the Fed plays its baton as the economic conductor, we’re left to watch commodities as they dance to the tune of interest rates. One minute they’re up, the next they’re down—much like your favorite sitcom characters. Tune in next week, folks, for more hilarity in the world of economics!
CNBC Indonesia Research
(emb/emb)
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Prabowo: Absolute Downstreaming, Non-Negotiable!
Jakarta, CNBC Indonesia- Coal prices continue to strengthen, spurred by the recent cuts in United States (US) interest rates, which in turn have contributed to the weakening of the dollar index (DXY).
According to Refinitiv data, at the close of trading on Friday (8/11/2024), the ICE Newcastle reference coal price for the December contract rose by 0.80%, reaching US$ 144.25 per ton. This uptick marks a positive trend, as it follows a previous increase to US$ 143.10 per ton, signaling a robust market over the past two days.
The Federal Reserve’s (The Fed) decision to cut interest rates by 25 basis points (bps) during this week’s Federal Open Market Committee (FOMC) meeting significantly influenced the market dynamics. This reduction brings the interest rate down to a range of 4.50-4.75%, providing fresh momentum to various commodity markets, particularly coal, which has been under pressure. Notably, this is the second rate cut in recent months, following a 50 bps reduction in September.
The weakening dollar index was evident at Friday’s market close, reflecting a correction of 0.75% to a level of 104. This depreciation of the DXY effectively makes dollar-denominated commodities less expensive for investors using other currencies, subsequently driving up demand across the board.
“US inflation is moving toward the 2% target, although it remains at a high level,” the Fed stated in its official communication. The stability of the labor market, despite a slight uptick in unemployment figures, coupled with solid economic data, has fortified market confidence.
This price increase revitalizes energy industry players after facing significant pressures in recent months. Should global sentiment remain favorable, this positive trend has strong potential for sustainability going forward.
CNBC Indonesia Research
Watch the video below:
Prabowo: Absolute Downstreaming, Non-Negotiable!
**Interview on Rising Coal Prices and Interest Rate Cuts**
**Host:** Welcome to our economic insights segment! Today, we have a special guest, Dr. Linda Hartman, an economist at the International Energy Institute, to discuss the recent rise in coal prices and its correlation with U.S. interest rate cuts. Welcome, Dr. Hartman!
**Dr. Hartman:** Thank you for having me! It’s great to be here.
**Host:** So, let’s dive right in. We’ve seen the ICE Newcastle reference coal price rise to $144.25 per ton, driven primarily by the Federal Reserve’s decision to cut interest rates. Can you explain the connection between these interest rate cuts and coal prices?
**Dr. Hartman:** Absolutely! When the Federal Reserve cuts interest rates, it often leads to a weaker dollar. This is because lower rates make U.S. assets less attractive to foreign investors, which can reduce demand for the dollar. As a result, when the dollar weakens, commodities priced in dollars—like coal—become cheaper for buyers using other currencies. This can significantly boost demand and, consequently, prices.
**Host:** Interesting! So, the dollar index fell by 0.75%, contributing to this effect. What impact does this have on the global market for coal?
**Dr. Hartman:** A weaker dollar can make coal more appealing on the international market. Countries that purchase coal with stronger currencies find it more affordable, which can lead to increased buying activity. Given that many countries rely on coal for energy, this uptick in demand may sustain or even increase coal prices in the near future.
**Host:** It sounds like a perfect storm for coal prices! However, we’ve noticed that U.S. inflation remains relatively high, even as the Fed aims for that 2% target. How does this backdrop affect the energy sector?
**Dr. Hartman:** Yes, inflation is a critical factor. Although inflation is moving toward the target, it still affects operational costs in the energy sector. Companies may face higher production costs, which can eat into profit margins. However, the current bullish sentiment, supported by rising prices, can help offset these challenges. If coal prices continue to rise, it could signal a strong recovery for energy sector players who have faced pressure in recent months.
**Host:** With such a dynamic market, what should investors keep an eye on in the coming weeks?
**Dr. Hartman:** Investors should closely watch U.S. economic indicators, especially inflation data and job market stability. Additionally, any upcoming Federal Reserve meetings or statements on interest rate policies will be crucial. These factors can greatly influence both currency strength and commodity prices, including coal.
**Host:** Excellent insights, Dr. Hartman! It seems like there’s plenty to watch as we move forward. Thank you for joining us today.
**Dr. Hartman:** Thank you for having me! It’s been a pleasure to discuss these important economic trends.
**Host:** And thank you to our viewers! Stay tuned for more updates on the economy and commodities.