In a stunning move, Russian President Vladimir Putin has endorsed the Chinese yuan as the currency of choice for global trade for Russian businesses, as part of 14 economic agreements signed during Chinese President Xi Jinping's visit to Moscow. The move is aimed at countering the dominance of the US dollar in global trade, and both leaders called for the acceleration of establishing a multipolar world order. As China aims to enshrine the yuan as a worldwide currency and become more involved in global economic and political affairs, the west struggles to convince China to reconsider its relationship with Russia to limit Russian ability to exert influence in international affairs amid escalating aggression in the Russia-Ukraine war. The move could threaten the long-standing status of the dollar as a reserve currency.
Wall Street saw a sharp rise on Tuesday as fears surrounding a liquidity crunch in the banking sector subsided. The market is focused on the Federal Reserve's meeting on Wednesday, where there is an 85% chance of a hike. Economic data showed a 14.5% increase in existing home sales, further ensuring stability in the banking sector.
Gold suffered the largest losses in a single day since early February as the market re-entered equity and abandoned safe haven commodities. The market expects a higher dollar after confidence in the banking sector is restored and a rate hike on Wednesday.
Oil prices fell in Asian trading on Wednesday due to an unexpected rise in U.S. API crude inventories, although they recovered strongly after last week's selloff. However, the market remains optimistic as EIA crude oil inventories expect a 1.55 million drawdown.
Asian currencies were cautious on Wednesday ahead of an expected interest rate hike by the Federal Reserve, with markets predicting an over 85% chance of a 25 basis point increase. The dollar index and futures fell slightly, sowing doubts, while Treasury yields rose but remained below earlier highs.