Monday, October 30, 2006

 

US$ Continues Downward Drift

The Associated Press reports on currencies. "The dollar fell against the yen in Asian trading Monday as figures showing weaker-than-expected U.S. economic growth continued to weigh on the American currency. The U.S. dollar was trading at 117.44 yen by mid-afternoon in Tokyo, down from 117.59 yen from late Friday in New York. The euro fell to US$1.2719, from US$1.2736."

"During the Asian session, Japanese exporters, as well as mutual and pension funds sold the dollar, sending the currency to as low as 117.20 yen, dealers said."

"'After many unsuccessful attempts to lift the dollar above 120 yen (over the past few weeks) and the weaker-than-expected U.S. economy, some players have given up challenging the dollar's upside for now,' said Jun Kato, at Shinkin Central Bank."

"Traders expect the dollar to remain weak this week as players may hold off buying the greenback, and are eager to check to see if the U.S. October non-farm payrolls, which economists on average expect a 125,000 gain, will come out weaker than the forecast. Kato said the dollar may fall to 116.00 yen this week if the data turn out to be weak."

"Also weighing on the dollar versus the yen is the possibility that Bank of Japan Governor Toshihiko Fukui may take a hawkish tone at his press conference Tuesday. 'Some players are speculating that the Fukui may sound hawkish to leave the door open for a possible rate hike in December,' said Kikuko Takeda, currency research manager at Bank of Tokyo Mitsubishi."

From Bloomberg. "Canada's dollar dropped, snapping a four-day winning streak, after a government report showed factory prices and raw-material costs fell by the most in almost two years in September. The decline was the biggest in almost three weeks."

"'Oil is trading below $60 a barrel, and that's also a factor, influencing the currency,' said Maria Jones, a currency strategist at TD Securities Canada Inc., in Toronto. Crude oil fell the most in more than three weeks as warm U.S. weather reduced demand for heating fuels, bolstering inventories. Crude oil for December delivery fell $1.88, or 3.1 percent, to $58.87 barrel"

"The currency has fallen more than 2 percent since reaching a 28-year high on May 31, as economic growth slowed and prices of commodities peaked. The yield on Canada's benchmark 10-year note was little changed at 4.07 percent."

From MarketWatch. "Gold futures climbed more than $6 an ounce Monday to mark their highest closing level in more than four weeks, supported by strong physical demand as the Christmas holiday season approaches. 'In recent weeks, gold has been a market in search of a direction,' said Brien Lundin, editor of Gold Newsletter. 'Now there's growing evidence that it has found a direction -- and it is up.'"

"Gold for December delivery closed up $6.40 at $607.40 an ounce on the New York Mercantile Exchange. That's its strongest closing level since Sept. 28. The contract climbed as high as $613.20 Monday, its loftiest intraday level since Sept. 8. Prices for the precious metal had gained Friday with a firmer oil price and declining dollar after a surprisingly weak U.S. third-quarter growth reading."

"The physical gold market has been 'experiencing enormous demand, particularly from India,' for more than a month, said Lundin."

"Against this backdrop, December silver futures closed up 17 cents at $12.25 an ounce. January platinum rose $13.50 to end at $1,093.20 an ounce and December palladium rose $5.75 to close at $328.75 an ounce."

Comments:
The biggest story of the past week has been the breakdown of the US$. There is always talk of physical buying and gold, but IMO what is moving the PM's is renewed dollar bearishness.
 
I wonder if there was a big buyer, like a CB or something.
 
The USD story was always the biggest question mark. Inflation and oil prices will have their day, but the USD decline will determine gold price.
 
"...but the USD decline will determine gold price."

Unless it doesn't decline, and actually increases due to deflation. Just food for thought.

Earl
 
Tuesday 11:50 a.m.
Check the spread on spot/Dec Futures today, zero to $1 backwardation! Silver too.

Earl-no way, stagflation maybe. Fiat will always depreciate until faith is lost, at which point they become worthless pieces of paper.
 
UAE said they were diversifying out of dollars, as are the swiss according to the same article. I think it's on prudent bear.
 
Here's that UAE article...

http://news.yahoo.com/s/ft/20061030/bs_ft/fto103020061724012882

.....deversifying out to 50%. Music is slowing ,and people eyeing the exits .
 
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