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«  February 2011  »

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Main » 2011 » February » 11 » Interest rate hike by China do affects commodities ?
11:46 AM
Interest rate hike by China do affects commodities ?
China increased its interest rates on Tuesday, for the third time since October, to curb the soaring inflation. The People’s Bank of China decided to raise the benchmark rates by 25 basis points. Now the one-year borrowing and lending rates has been increased by 25 basis points, which would come into effect from 10th February. China is experiencing fastest growth rate in 30 months. Following China, other Asian countries like India, Indonesia, Thailand and South Korea also raised the rates to curb the rising inflation.
The investors had major concern about the inflationary boom in the world and prompted them to mobilize their fund on precious metals. As a result, demand for precious metal increased, as precious metal is regarded as the safe heaven currencies.
Contrary to precious metals, the hike in benchmark rates in China declined the demand for energy and industrial metal copper. The crude oil and copper price rallied down as increase in the rates would increase the investment cost and investors shifted their on safe heaven commodities. However, in long run, as the outlook for the global economic growth remained positive, so demand for the copper would rebound. However, the rise in the energy supplies as reported by the energy agencies, would further decline the price of the crude oil.
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