Monday, May 08, 2006


Asian Currencies Gain On Devaluation Rumor

The Associated Press has todays numbers. "Gold prices dropped after hitting a new quarter-century high on Monday, following a potential ease in the tension between Iran and the United States. June gold on the New York Mercantile Exchange reached a new high of $688.20 an ounce, but cooled to close at $679.90 an ounce, down $4.40 on the day."

"Silver followed the same moves as gold Monday, with the July contract settling at $13.77 an ounce, down 12 cents on the day. Platinum rose to settle up $12.80 at $1,201.90 an ounce. Palladium settled lower at $375.25 an ounce, down $3.50."

"The June crude contract in New York ended at $69.77 a barrel, down 42 cents, after dropping as low as $68.25 a barrel."

"Gold, along with other commodities, have seen big surges in recent months. But analysts at MKS Finance said a consolidation is needed before gold can head to $700 an ounce. 'Buying on dips remains the main feature of the market and should provide some support along with the U.S. dollar, which remains under pressure hitting new lows against the yen and the European currency,' MKS said."

"The dollar slipped to a new seven-month low against the yen as the U.S. currency felt the aftershocks from Friday's employment report which showed sluggish job growth. The dollar had dropped to 111.44 yen earlier in the day, before rebounding to 111.69 in late New York trading. The dollar closed at 112.43 yen in New York late Friday."

"The dollar was marginally higher against the euro on Monday, but the 12-nation currency stayed well above the $1.27 mark that it broke through late last week. The euro bought $1.2704 in afternoon New York trading, down from $1.2735 in New York late Friday after heading as high as $1.2787 during Monday's session."

"The British pound also fell to $1.8569 from $1.8592. In other trading, the dollar bought 1.2280 Swiss francs, up from 1.2251 late Friday, and 1.1128 Canadian dollars, up from 1.1066."

"Li Yong, China's vice minister for finance, said he had heard a 'rumour' that the US dollar was headed for a 25 per cent drop. If the gossip was true, the consequences would be 'shocking,' he said. Li's comment, which he made at a discussion on global financial imbalances last week at the annual meeting of the Asian Development Bank, was aimed directly at fellow panelist Tim Adams, the US Treasury undersecretary of international affairs."

"The unspoken message was: 'Don't try to talk the US dollar down.' And Adams knew better than to ask, 'Well, what are you going to do about it?'"

"The answer to that question has already begun taking shape: Asia may be getting ready to fix its currencies to a local anchor, dumping the region's unofficial US dollar peg."

"Regional monetary units are a euphemism for a parallel Asian currency, an idea that has been around since the 1997-98 financial crisis and is now, for the first time, entering the realm of policy-making. Both Japan and China are extremely serious about it and are vying to take ownership of the project."

The Australian has this reminder. "Estimates of the growing pile of non-performing loans (NPLs) in China appear to have caught many by surprise, especially because Beijing's efforts to clean up its rickety state-owned banks were thought to have greatly reduced NPLs and the risk of a full-blown financial crisis."

"According to Ernst & Young, the accounting firm, bad loans in the Chinese financial system have reached a staggering $US911 billion ($1.18 trillion)."

Kitco's showing Dubai Gold Futures briefly topping at $701, spot at $699.80; any predictions?
A correction to 625...
let me qualify...this will happen if oil drops a few dollars/barrel
Ernst & Young recently retracted its report and admitted it was wrong. Ernst & Young actually said the Chinese banks' figures were accurate, not the ones E&Y previously disseminated. I kid you not.
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