Money and Metals

Some currency news to start the week. "The Canadian dollar fell versus the U.S. dollar on Monday, slipping below 90 U.S. cents, as weaker-than-expected domestic housing starts for April and lower crude prices ate away some of the loonie's recent gains. The Canadian dollar was at C$1.1114 to the U.S. dollar, or 89.97 U.S. cents, compared with C$1.1070 to the U.S. dollar, or 90.33 U.S. cents, at Friday's close. Canadian housing starts in April fell 13 percent."

"U.S. crude futures fell $1 after Iran's president sent an unprecedented letter to President Bush, which raised hopes for a resolution of the row over Tehran's restarted nuclear program."

"Looking ahead, much of the dollar's movement this week is expected to be tied to the Fed's meeting on Wednesday, which is widely expected to result in a boost to interest rates and a signal for a pause in further rate increases. 'It's still running at very elevated levels and I think the Canadian dollar's fate this week to some extent is really going to depend on not anything that comes out of Canada but on what the Fed is going to do and more importantly on what the Fed is going to say,' said strategist Marc Levesque."

"'The eyes are on the Fed, that is the big event of the week, and most importantly the statement...there is very heavy focus on that,' said Levesque."

"Federal Reserve Chairman Ben S. Bernanke is trying to do something the central bank has never accomplished: engineer a perfect three-point landing for the high-flying U.S. economy."

"Bernanke has signaled the Fed may take a break from credit tightening after what economists expect will be a May 10 increase in its benchmark interest rate to 5 percent from 4.75 percent, the 16th gain in 22 months. He's trying to avoid a mistake the Fed has made in the past: increasing rates too far and triggering a financial crisis or pushing the economy into a tailspin."

"'If he pulls it off, it will be a first for the Fed,' says David Jones, a former New York Fed economist, author of four books on the central bank and chairman of Investors' Security Trust Co. in Fort Myers, Florida."

"There's reason for skepticism. Even under Chairman Alan Greenspan, who came the closest to avoiding the mistake of over- tightening, the Fed almost brought the economy to a standstill in 1995. The bank's rate increases helped set the stage for the 1994-95 Mexican currency crisis, followed by a slowdown in U.S. growth to 0.7 percent in the second quarter of 1995."