Oil and gold will lead the reaction to events in Ukraine today in commodity markets.
Iron ore and copper though will not be impacted much by these events, what happens in China will be of more immediate interest.
For that reason reaction to the decision by China to widen the daily trading bands for the yuan from 1% to 2% will make currency and commodity markets sit up and take notice.
It had been tipped to happen because of the way the Chinese central bank has engineered a sharp fall in the currency in the last three weeks.
But many analysts reckoned it wouldn’t happen for a few more months, so the decision by the government to widen the ban over the weekend came as a surprise.
It’s designed to introduce more risk and curtail speculative inflows of hot money via false invoicing by exporters betting on a rise in the currency.
Allied wit the tight credit conditions, fears following the default by two small companies in the past 10 days, and the slump in copper and iron ore prices, the Chinese government certainly has introduced a large amount of uncertainty into markets.
Starting March 17, Chinese banks will be able to exchange the yuan in the foreign exchange spot market at 2% above or below the central parity against the US dollar announced by the China Foreign Exchange Trading System each trading day, according to the statement from the People’s Bank of China (PBoC).
The move will improve the floating flexibility of the renminbi exchange rate and "improve the efficiency of capital allocation, facilitating economic restructuring and beefing up the decisive role of the market in allocating resource," the PBOC said in a statement on its website.
The previous 1% trading range was set in 2012.
Many speculators have used copper and iron ore imports as security for loans from banks or the so-called shadow financial companies to finance more speculation or for investment in property.
Now those speculations are being unwound and it’s no wonder iron ore and copper have been fallen in price in China and in other markets.
Iron ore prices fell 8.3% on Monday after a small Chinese steel mill reportedly defaulted, before recovering to finish the week down just 2% at around $US111 a tonne.
Copper lost more than 4% over the week on similar concerns.
Friday saw Comex May copper futures rise 3 US cents to $US2.95 a pound.
Copper is still down around 13% for the year so far.
Comex gold for April delivery rose $US6.60, or 0.5%, to settle at $US1,379 an ounce in New York, the highest settlement level since early September. For the week, prices rose 3%.
Comex May silver added nearly 22 cents, or 1%, to close at $US21.41 an ounce, up about 2.3% from a week ago.
On Nymex in New York, crude oil for April delivery rose 69 cents, or 0.7%, to settle at $US98.89 a barrel.
That was down around 3.6% for the week, a much steeper fall than for Brent crude in london which fell 0.4% to end at $US108.57 a barrel.
