Money and Metals

MarketWatch reports on the US dollar. "The dollar fell against other major currencies Wednesday, after the United Arab Emirates said it's planning to diversify its foreign-exchange reserves away from the U.S. currency. But the greenback trimmed some of its losses after a U.S. government report showed sales of new homes rose more than forecast last month."

"'The better-than-expected new-home sales report will add some weight to notions that the housing market is stabilizing,' said Brian Dolan, director of research at Forex.com. However, 'with home builders offering large discounts and incentives to move unsold inventory, it's difficult to say with any conviction that the housing market has turned the corner.'"

"Late in New York, the dollar was quoted at 118.81 yen, compared with 119.11 yen late Tuesday. The euro changed hands at $1.3115, compared with $1.3098. The British pound traded at $1.9561, compared with $1.9538. The dollar changed hands at 1.2259 Swiss francs, compared with 1.2231 francs."

"Sultan Bin Nasser al-Suwaidi, UAE's central bank governor, said the bank plans to raise the share of euro holdings in its reserves to 10% from 2% over the next six to nine months. The bank also said it has started to do so in a "limited way" and will buy euros on pullbacks and sell dollars on periodic highs. UAE's reserves stand at about $25 billion."

"'This approach to reserve accumulation is consistent with that of many central banks planning to diversify their reserves without triggering rapid moves in the value of the dollar and the euro,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets in New York."

"Currency analysts at Brown Brothers Harriman, noted that while some observers cited the UAE news as a dollar negative, 'from a different angle, it illustrates how benign the developments really are,' they said, adding that the amount of reserves involved is roughly only $2 billion. 'UAE plans on holding roughly 90% of its reserves in dollars, well above the average above the U.S. dollar share in the world economy or financial assets,' they wrote."

"A number of countries, including Sweden, Qatar, Italy and Russia, have announced plans this year to diversify their reserves away from dollars. The Russian, Swiss and New Zealand central banks also said recently that they were increasing their holdings of yen."

"The yen found some support after Japan's Jiji news agency reported that the Bank of Japan will likely discuss a proposal to raise its key overnight call rate target by 0.25 percentage point to 0.5% at its next policy meeting in January. 'The story underpinned yen strength for the session despite retail sales which missed expectations and continued to signal broadly weak consumption in Japan,' said Terri Belkas, currency analyst at FXCM."

"'Yen's gains could be temporary as the BoJ is more likely to hold off until later in the first quarter of 2007 before tightening monetary policy for the first time since July,' Belkas said."

"A weaker dollar and concerns about Iran's nuclear strategy helped gold futures to make some headway, as the market got back into full gear with the return of European traders after their extended Christmas holiday."

"Gold for February delivery closed up $3.40 at $630.30 an ounce, adding to gains made on Tuesday when the contract added nearly $5 an ounce on the New York Mercantile Exchange."

"'Conditions are set to remain thin over the next few days, which could lead to some interesting movements, particularly if the war of words between Iran and the west intensifies,' said James Moore, analyst at TheBullionDesk.com in London. 'Good support continues to be found ahead of $620.'"

"However, Moore noted that from a technical standpoint, gold remains vulnerable to testing its 100-day moving average at $611.75 an ounce."

"Other metals traded mixed. Silver futures rose 20 cents to $12.925 an ounce. But front-month platinum and palladium contracts closed lower."