Money and Metals

MarketWatch reports on the US dollar. "The dollar rose a one-month high versus the yen and three-week high against the euro Friday, after fresh economic reports reinforced market expectations the U.S. economy is likely headed for a soft landing."

"The greenback had earlier dropped sharply after a government report showed lower-than-expected U.S. retail-level inflation for November, boosting hopes the Federal Reserve will be in a position to lower interest rates early next year. It reversed course after a separate report showed U.S. industrial production rose more than forecast last month."

"'The initial reaction [to the CPI report] was dollar negative,' said Ronald Simpson, currency strategist at research firm Action Economics. 'After the original major dollar reaction, more level heads have prevailed and perhaps [were] seeing this as a good opportunity to buy dollars into the modest weakness we saw earlier.'"

"In New York trading, the dollar was quoted at 119.01 yen, compared with 117.79 yen late Thursday, after rising as high as 118.31 yen, the loftiest level since Nov. 17. The euro changed hands at $1.3081 vs. $1.3144. The euro had earlier dropped to an intraday low at $1.3071, the lowest level since Nov. 24."

"The British pound traded at $1.9519, compared with $1.9602. The dollar changed hands at 1.2211 Swiss francs, compared with 1.2141 francs."

"The dollar also found support after the Treasury Department said capital flows to the U.S. climbed back in October as official institutions like central banks snapped up U.S. Treasury bonds and notes. Foreign investors bought a net $62.2 billion in securities, up from $57.8 billion in September. The inflows were sufficient to cover the previously reported trade deficit for the month, which narrowed to $58.9 billion."

From Bloomberg. "Gold fell the lowest in five weeks as a gain in the value of the dollar reduced the appeal of the precious metal. 'Gold's got this obsession with the dollar,' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. 'The dollar's going to end the week higher. The longs in gold are liquidating.'"

"Gold futures for February delivery fell $11.80, or 1.9 percent, to $619.10 an ounce on the Comex division of the New York Mercantile Exchange, the lowest since Nov. 8. Prices have dropped 5.2 percent this month."

"Speculation that central banks and investors would buy gold to diversify out of U.S. assets helped drive prices to a four- month high of $652.90 on Nov. 30."

"'Gold has been acting like a currency,' said Paul Sutherland, chief investment officer for Financial & Investment Management Group. 'We wonder if you should be taking bets that the dollar is going to be weaker. For people to think there's easy money to be made in the dollar is silly.'"

"Sutherland, who helps manages about $600 million, including the $160 million Utopia mutual funds, has reduced holdings in gold to 2 percent from 5 percent this year. The firm plans to buy back the metal should prices dip below $600, he said."

From Reuters." In other precious metals, platinum dropped to $1,104/1,109 an ounce from $1,108/1,118 late in New York, while silver fell to $13.57/13.64 from $13.76/13.83. Palladium was down $1 at $325/330 an ounce."

"The yen headed for its biggest weekly drop against the dollar in four months as government officials pressure the Bank of Japan to refrain from raising interest rates and local investors seek higher yields abroad."

"The Japanese yen slid against all 16 major currencies this week, extending its losses today after Economic and Fiscal Policy Minister Hiroko Ota said the government wants the BOJ to support growth. A report from the Ministry of Finance yesterday showed Japanese investors bought more foreign bonds than they sold for a third week as they seek higher yields abroad."

"'The yen is underperforming relative to other currencies due to lack of action by the BoJ,' said Marios Maratheftis, a currency strategist at Standard Chartered Plc in London. 'The BoJ, despite its hawkish rhetoric, is unlikely to hike rates this year. It's unable to do so because of political pressure.'"