Bond yields climbed as Evergrande debt crisis weighs

Dollar just edged higher on Friday, and most Asian currencies softened as investors worried about the fallout from China Evergrande's debts, while bond yields climbed. In the meantime, a survey at the Ifo Institute shows that German business morale has fallen for the third straight month, led down by supply chain problems.

The bond market gained overnight following a rate hike by the Norwegian central bank and remarks from the Bank of England that confirmed market expectations that the Fed will begin tapering by year's end. Ten-year Treasury yields rose marginally to 1.44%, their highest level since July 2.

Following the backdrop of escalating policy divergences between the Federal Reserve and the European Central Bank, the euro remained weak.

The pound also made no progress against the dollar, remaining flat at 1.3720 after its biggest gain on Thursday.

The pound is tussling with the prospect of severe food and energy shortages and higher inflation, which could push the Bank of England to raise interest rates.

Thursday's monetary policy committee meeting saw only a modest shift towards tightening monetary policy.

Concerns remain over the future of Evergrande, which has entered a grace period of 30 days after missing an interest payment deadline on Thursday.

Oil struggles a firm resistance

With US crude stocks falling and supply-side concerns on the rise, crude oil prices are marching higher. According to the US Energy Information Administration (EIA), US crude inventories dropped by 3.5 million barrels to 414 million last week, the lowest level since October 2018.

Also, oil companies in the United States could not fully restore production along the eastern seaboard due to two hurricanes that damaged facilities along the Gulf coast. Almost 16% of Gulf of Mexico oil production was lost because of the combined effects of these two storms.

With risk sentiment improving, the price is likely to target 75 areas for the foreseeable future. Buyers challenge the 78.6% Fibo level after rebounding from the 50% Fibonacci level. With the bullish trend persisting above 73.22, the price could rise toward a three-month peak at 76.37. A 61.8% retracement at 70.75 and a 50% retracement at 69 may support prices on the downside.

Events of the day

US Federal Reserve chair Jerome Powell and vice-chair Richard Clarida will speak at a conference beginning at 17:00 EEST.

New home sales data will come out at the same time.