USD Rebounds and Nymex Crude Moves Above $96

- Summary of trade between 17:00 ET and 23:00 ET: Most analysts agree that today's FOMC statement suggests the Fed will remain on hold for the near term. But forex and equity markets took a different view during the U.S. session, as investors sold the USD on eroding yield support and stocks rallied on renewed risk appetite. Asian stocks echoed Wall Street's optimism, but currency markets showed a slight reversal of opinion during Asian hours. The USD and JPY rebounded, while the high-yielding AUD and NZD were sold aggressively as risk appetite was re-assessed (S&P futures contract stayed in negative territory for the entire Asian session). The Fed rate cut and inventory data continue to provide upward momentum to crude oil prices in Asia, with the Nymex contract currently trading above $96/bbl.

- Aussie consumers brush off recent RBA rate hikes: (AU SEPT RETAIL SALES: 0.8% V 0.5% expected, 0.8% prior; Q3 RETAIL SALES EX-INFLATION QOQ: 1.9% V 1.6% expected, -0.2% prior) Analysts agree that the data won't change the near-term outlook for the Reserve Bank of Australia, with a rate hike already locked in for next week. Australia's nominal retail sales quarter on quarter are at the sort of levels we saw at the end of the housing boom in 2003, and real retail sales are as well. Why is this important? Because that was the last time the RBA hiked rates twice in a row.

- Investors not surprised by Australia's wider than expected Sept trade deficit: (AU SEPT TRADE BALANCE: -1.86B V -1.0B expected, Prior revised to -1.67B from -1.61B) Bottlenecks at Australian ports continue to weigh on exports, raising the possibility that exports may once again detract from this quarter's growth despite record high commodity prices.

- Speculators continue to attack the USD/HKD peg: The Hong Kong Monetary Authority's Yam said that they have seen signs of speculation on the USD peg in the past 3 days, adding that the Hong Kong government is committed to maintaining the USD peg. An analyst at JP Morgan has a model for futures contracts that indicates that the market sees a 57% probability of a re-peg within 3 months. The HKMA cut its discount window base rate by 25bps, tracking today's Fed cut.

- Equities: At 22:54 ET, the Nikkei is +0.75%, Australia's ASX is +0.89% and South Korea's Kospi is -0.33% after falling from a new record high. Higher oil prices boosted Japanese energy companies, while the weaker JPY lifted exporters. Investors were hesitant to buy Japanese financials after a profit warning from Mitsubishi UFJ, limiting further upside for the Nikkei. Chinese equities are lower by -0.15%, while the Hang Seng is higher by more than 0.50%.

- Commodities: NYMEX crude oil rose to a record high in Asian trading (above $96.00/bbl) on an unexpected drop in U.S. weekly crude inventories. Between 18:00 ET and 23:00 ET crude gained 1.66%, while spot gold gained 0.50%. Shanghai copper is lower by more than 0.50% on concerns that demand for cheaper copper substitutes may rise.

(by Eben Esterhuizen and Gavin Pierce)