Money and Metals

The Associated Press reports on currency markets. "The dollar fell to a new 20-month low against the euro Tuesday, as a spate of disappointing U.S. economic data further dimmed the prospect of higher interest rates. The 12-nation euro rose as high as $1.3203 - its highest point since March 2005, in midday New York trading, up from $1.3128 late Monday. In later afternoon trading, the euro traded at $1.3177."

"'We have a marketplace that has been somewhat concerned about a narrowing yield advantage,' said Lisa Finstrom, senior futures analyst at Smith Barney. She noted that Asia and Europe are anticipating ongoing economic recovery, 'which will likely be met with higher interest rates.'"

"By afternoon trading Tuesday, the British pound rose to $1.9500 from $1.9371 late Monday. The dollar was steady at 116.08 Japanese yen, the same as late Monday in New York. The euro, created in 1999, is about 5 cents away from its all-time high of $1.3667, reached in December 2004."

From Bloomberg. "'The economy in the euro zone will persistently outperform that in the U.S., which will give the euro more upside,' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto."

"The dollar briefly pared some of its losses versus the euro after Fed Chairman Ben S. Bernanke said inflation risks are 'to the upside.' He also said 'economic growth will be modestly below trend in the near term.' Federal Reserve Bank of Philadelphia President Charles Plosser said today interest rates may not be high enough to slow inflation to an acceptable level."

"'They are balanced with some slight hawkish overtones,' said Steven Butler, director of foreign exchange trading at Scotia Capital Inc. in Toronto. 'But the market knows the Fed is on hold. No matter what the overtones are, I think the next move from the Fed is a cut. The talk isn't enough to help the dollar alone.'"

From MarketWatch. "After a precipitous slide in the last week that caught many traders off guard, the dollar is vulnerable to further losses and may continue to weaken against major rivals heading into 2007, analysts said Tuesday. 'Sentiment for the dollar has been deteriorating steadily over recent weeks,' said Mitul Kotecha, head of global foreign-exchange strategy at French bank Calyon. The decline was not prompted by a particular piece of news or data release, 'but rather a general worsening in sentiment that saw long held technical levels breached,' he said."

"'We expect the dollar to weaken further into year end, and retain this tone in the early months of 2007,' he said."

"'The next major objective you have to look for is the record high in the euro versus the dollar' at above the $1.36 reached at the end of 2004, said David Gilmore, a partner at Foreign Exchange Analytics. 'It's reasonable to look for that in the next couple of quarters.'"

"The Chinese yuan fell against the U.S. dollar, and investors cashed in on recent gains. One dollar was trading for about 7.84 Chinese yuan Tuesday. The declines followed a sell-off on the Chinese markets, which analyst Yu Yang of Guotai Junan Securities earlier Tuesday attributed to profit taking."

"Gold fell more than one percent on Tuesday from 15-week highs scored the previous day as investors took profits ahead of the release of key U.S. data, dealers said. Platinum slipped to a three-week low before rebounding, while silver and palladium were little changed."

"'Unless the dollar starts to weaken significantly again, the market does seem to have done enough for the time being,' said Simon Weeks, director of precious metals at ScotiaMocatta. If gold failed to get back above $640-$642, prices might drop to around $630, the level in the middle of last week when U.S. traders left the market ahead of the Thanksgiving holiday, he said."

"Spot gold hit a high of $641.70 an ounce before falling to $632.80/633.45 by 1528 GMT, against $640.60/641.60 in New York late on Monday. Profit-taking might persist, but prices were unlikely to drop sharply in the coming days, dealers said."

"In other metals, platinum dropped as low as $1,130 an ounce before rising to $1,155/1,165, compared with $1,140/1,150 in the U.S. market. Prices have fallen 19 percent since touching a record high of $1,395 last week."

"Silver edged down to $13.42/13.49 an ounce from $13.46/13.53, while palladium was down $1 at $322/327."