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(Jan 14): The United Arab Emirates is planning a US$6 billion (RM27.03 billion) mega solar and battery project to provide uninterrupted power supply as it targets a rapid boost in clean energy.

Abu Dhabi’s state-controlled Masdar will build 5.2GW of new solar capacity, chief operating officer Abdulaziz Alobaidli said. It will be linked to battery storage that would make the total project one of the world’s largest such facilities when completed by 2027.

The project is seeking to tackle a critical problem for renewable energy, where supply can be unreliable during periods of heavy demand because of its dependence on the sun shining and wind blowing. Companies have been trying to resolve the problem by using batteries to store the power that can be fed into power grids when required.

The facility will “transform renewable energy into baseload energy,” said Masdar Chairman Sultan Al Jaber, who is also CEO of Abu Dhabi National Oil Co. “It is a first step that could become a giant leap.”

The UAE, the first Gulf state to declare a target to reach net zero carbon emissions by 2050, is building solar facilities and is operating nuclear reactors to cut reliance on hydrocarbons for power. It is looking to add more solar facilities and battery storage sites as the oil-rich nation targets more carbon emissions-free electricity.

The project, which will be built over an area of 90 sq km in the Abu Dhabi desert, will be financed by a mix of debt and equity, Masdar’s Alobaidli said. State utility Emirates Water and Electricity Co will also be involved, Al Jaber said.

Masdar is targeting battery storage of 19GWh for the facility, the chairman said. Arevia Power and Quinbrook’s Gemini solar energy storage project in Nevada in the US, which has 1.4GWh of storage capacity, is currently the world’s biggest solar and battery project, according to BloombergNEF.

“This is an ambitious plan, and depending on when it is built, it may be the world’s largest solar and storage project at that time,” BNEF analyst Jenny Chase said.

Other countries in the Gulf are also following similar paths. Saudi Arabia, the world’s biggest oil exporter, is building solar and wind projects as it aims for a bigger share of renewables in its power grid. Still, crude oil remains the backbone of the economy of most of these nations.

Source: Theedgemarkets

AUD/JPY rises as the Australian Dollar receives support from strong commodity prices.

The ASX 200 Index rose by 0.48% to around 8,230 on Tuesday due to improved mining and energy stocks.

Traders speculate that the BoJ might postpone raising rates until April, as it seeks sustained wage growth before taking action.

AUD/JPY gains ground for the second successive day, trading around 97.60 during the European hours on Tuesday. The upside of the AUD/JPY cross is attributed to the improved Australian Dollar (AUD) amid strong commodity prices.

The S&P/ASX 200 Index also increased by 0.48% to around 8,230 on Tuesday, snapping a three-day losing streak. Mining and energy stocks led the recovery, while Australian shares followed overnight gains on Wall Street, where investors shifted focus from megacap tech stocks to other sectors.

Additionally, the AUD/JPY cross appreciates as the risk-sensitive AUD receives support from risk-on sentiment following reports about US President-elect Donald Trump's economic team considering a gradual increase in import tariffs boosted investor confidence.

According to Bloomberg, Trump's incoming administration is evaluating a phased approach to implementing tariffs, aiming to prevent a sharp rise in inflation while managing trade policy adjustments.

Moreover, the Japanese Yen (JPY) faces pressure amid uncertainty over the timing of the Bank of Japan's (BoJ) next rate hike. Market participants speculate that the BoJ may delay raising rates until April, awaiting confirmation of sustained wage growth during the spring negotiations.

Bank of Japan Deputy Governor Ryozo Himino stated on Tuesday that he would not directly link President Trump's inauguration address to the BoJ's decision on whether to raise rates in January. Himino emphasized that when the right time comes, the BoJ must adjust its policy without delay.

Regarding Trump's address, Himino expressed the intention to closely analyze the schedule and balance of the new US administration's policy measures and to see if any new information not previously communicated would emerge.

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

Source: FXSTREET