Money and Metals

MarketWatch reports on the US dollar. "The dollar rose against other major currencies Tuesday, touching a two-month high versus the yen, as the foreign-exchange market read economic data as reducing expectations the Bank of Japan will raise rates soon. Meanwhile, traders await U.S. economic releases on housing and consumer confidence due later in the week for more clues as to the outlook for the world's largest economy and interest rates."

"'The importance of the housing figures combined with relatively thin trading could produce sharp price swings, in case of unexpectedly strong or weak data,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York. 'We expect further prolonged pressure on the euro as long as the U.S. figures on new home sales and existing home sales continue to diverge from one another on a monthly basis,' he said, in a note."

"Late in New York, the dollar was quoted at 119.11 yen, compared with 118.78 yen late Friday, after rising to 119.22 yen, the highest level since Oct. 25. The euro changed hands at $1.3098, compared with $1.3131. The British pound traded at $1.9538, compared with $1.9620. The dollar changed hands at 1.2231 Swiss francs, compared with 1.2169 francs."

"The yen fell after Japanese government reports released Tuesday showed soft price pressures and consumer spending, denting hopes that the central bank overseeing the world's second-largest economy would raise interest rates next month. Japan's nationwide consumer price index rose 0.3% on a year-on-year basis in November, down from 0.4% in October. The core rate was up 0.2% from a year ago. The readings were largely in line with expectations."

"'CPI remained tepid,' said Terri Belkas, currency analyst at FXCM. In light of what Belkas called 'the double-edged sword of broadly weak consumption and prices,' the Bank of Japan 'may find it far more prudent to hold off on monetary policy tightening until at least March 2007.'"

"Bank of Japan governor Toshihiko Fukui reiterated Monday that he has no preset idea on the timing of future interest-rate hikes and that the central bank would watch economic indicators to decide. Elsewhere, the People's Bank of China said it would keep the value of the yuan stable and would act to curb the growth of investments, according to the Associated Press."

From Bloomberg. "Gold in New York rose the most in a week after Iran rejected a United Nations resolution imposing sanctions and said the country will continue its nuclear program, boosting the appeal of the metal as a haven."

"'Gold is reacting to the Iranian sanctions,' said Frank McGhee, head metals trader at Integrated Brokerage Services Inc. in Chicago. 'It could continue to roar through here if the tension heats up.'"

"Gold futures for February delivery rose $4.60, or 0.7 percent, to $626.90 an ounce on the Comex division of the New York Mercantile Exchange, the biggest percentage gain since Dec. 19."

"The prospect of heightened turmoil in the Middle East may underpin gold in 2007, said Jeffrey Christian, managing director at CPM Group, a metals research firm in New York. 'Politics could hit oil prices and lead to economic problems,' Christian said. 'If that happens, gold could go higher.'"

"Oil prices rose as high as $63.20 a barrel today before erasing gains on speculation mild U.S. weather will curb demand for heating fuel."

"An increase in the equities market may limit gold's gains in the first quarter, McGhee said. Before today, the Standard & Poor's 500 Index was up 0.7 percent in December while gold futures fell 4.2 percent, the first decline in three months. The S&P 500 is up 13 percent this year, which would be the biggest annual gain since 2003. 'If the equities rally continues, it's going to give the metals some problems,' McGhee said.

"Silver futures for March delivery climbed 9 cents, or 0.7 percent, to $12.725 an ounce on Comex. Prices have gained 43 percent this year."