Wednesday, November 22, 2006


US$ Falls On "General Pessimism"

Bloomberg reports on the US dollar. "The dollar fell to a five-month low versus the euro and tumbled against the yen as a report showing an increase in jobless claims suggested the economy is cooling. Dollar losses accelerated as a government report showed more workers filing for unemployment benefits during the past week."

"'There is a general pessimism on the dollar right now,' said Samarjit Shankar, director of global strategy for the foreign exchange group in Boston at Mellon Financial Corp. 'People are now concerned that the growth outlook heading into next year is on the down side.'"

"The dollar declined to $1.2929 per euro at 12:31 p.m. in New York, from $1.2844 yesterday. The U.S. currency reached an intraday low of $1.2957, the lowest since June 5 when it touched $1.2979. The dollar dropped to 116.63 yen, from 117.92."

"The yen gained against all 16 of the world's major currencies as investors bought back low-yielding currencies used to fund investments elsewhere, a practice known as the carry trade. The U.S. currency fell against 14 of 16 major currencies after economic advisers to President Bush yesterday cut their forecasts for growth next year."

"Popular carry trades this year have included selling the yen to finance investments in the Australian dollar, euro and British pound, and selling the Swiss franc to invest in the euro and the pound, Upadhyaya said. The yen and the franc are popular as so-called funding currencies because of the low interest rates in Japan and Switzerland."

The Daily FX. "The US dollar found itself defenseless ahead of the long holiday weekend, as traders pounced on the opportunity to send it significantly lower against its foreign counterparts. Experts cited a cascade of stop loss orders as the primary driver for the surprising move, with unchanged fundamentals providing little underlying cause for such a breathtaking dollar drop. Leading the barrage, the Swiss Franc was the top gainer with a 1.1 percent appreciation against the Greenback."

From MarketWatch. "Gold futures rose Wednesday but closed well below the day's peak, and silver prices retreated from their highest level in more than two months as the metals took their cue from platinum futures, which sank more than 5%. Speculation about the possible launch of a platinum-based exchange-traded fund continued to evaporate after Barclays, the bank behind the silver ETF, said it has no such plan."

"December gold futures rose 30 cents to close at $629 an ounce on the New York Mercantile Exchange. That was the contract's highest closing level since Nov. 10, but prices had traded as high as $635 earlier in the session. December silver shed 4.5 cents to close at $13.04 an ounce, but not before touching a high of $13.25, a level it hasn't seen since Sept. 6."

"Regular trading on the exchange will be closed on Thursday and Friday for the Thanksgiving holiday."

"Meanwhile, platinum for January delivery closed down $65.10 at $1,154 an ounce, after earlier falling to a low of $1,145. On Tuesday, the contract closed with a loss of more than $15 as doubts about an ETF began to surface. Platinum's sister metal palladium saw its December contract fall $2.35 to end at $326 an ounce."

"Spot prices had vaulted to an all-time high above $1,400 early in the session as the speculation hit its peak. 'The rumors about the platinum ETF have sparked interest in the ultra precious metal, but no definitive proof of such an ETF is apparent,' said Kevin Kerr, editor of a newsletter published by MarketWatch."

"'We have not filed for a platinum product and have no immediate plans to do so,' Christine Hudacko, a spokeswoman for Barclays Global Investors said Tuesday."

"Tim Murray, a general manager at metals consultancy Johnson Matthey attributes the 'unprecedented [platinum] volatility over the last 3 days' to 'a liquidity squeeze in Zurich.' 'It appears that a few inexperienced and uneducated speculators wrote ill-advised call options and had to scramble to cover their exposure when the market began to rally,' he said."

"Kerr is optimistic that, on an overall basis, metals are on a firmer footing. 'The metals in general seem to be heading for another run at record prices as central banks and individual investors may be getting ready to dip their toes back in,' he said."

Happy Thanksgiving, everyone!

BTW, starting tomorrow the CBOT starts trading gold, fully electronic and around the clock. Should be interesting given the obvious shenanigans occurring regularly at NYMEX.
Brimelow on Marketwatch regarding CBOT trading:
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