US wheat futures rose by more than one percent in European and Asian trade on Wednesday, buoyed by a weaker dollar as well as a fresh tender by Egypt, the world's largest wheat importer. The US Federal Reserve's determination to prevent deflation, revealed on Tuesday, also lent support, given that investors often buy commodities as a hedge against inflation.
"The US dollar weakness is the main driver across all the commodities," said Brett Cooper, senior manager markets, at FCStone Australia. Markets were also supported by fresh export demand, with Egypt tendering for hard wheat, with the US seen as having a good chance of winning.
"The US will probably be pretty competitive for that business," said Cooper. Chicago's December wheat contract rose 1.3 percent to $7.27-3/4 per bushel by 1149 GMT after falling nearly two percent in the previous trading session on concern over US wheat stockpiles. But the weaker dollar was seen as punishing for European Union wheat exports at a time of intense competition with the US.
"The euro is spoiling the export outlook," one French dealer said. Paris November milling wheat was down 2.00 euros or 0.8 percent at 229.25 euros a tonne by 1149 GMT as it continued to move away from a contract high of 238 euros seen in the past week. The drop in Paris was limited by continuing strong export activity in France, traders said.
Grain shipments from French ports remained brisk, although there were concerns about bottlenecks with rail transport due to be disrupted by a strike on Thursday over pensions reform. Wheat and corn prices, already riding high because of tight markets for both commodities, stand to benefit further from the Fed's efforts to rekindle a healthy level of inflation in the US economy, said Scott Briggs of ANZ bank. "We know the last six to eight weeks has seen a big push by funds into the (agricultural commodities) space, more off the back of fundamentals than anything," Briggs, ANZ's London-based director for commodities, said in a note.
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