Wednesday, February 14, 2007


US $ Falls On "Comfortable" Fed

The Associated Press reports on currencies. "The U.S. dollar hit a six-week low versus the euro and fell against other rivals Wednesday after the head of the Federal Reserve said inflation worries were easing. A combination of disappointing U.S. data and solid economic reports from abroad had put pressure on the dollar in Asian and European trading. When Fed Chairman Ben Bernanke's comments on Capitol Hill failed to live up to some investors' expectations, the dollar extended its earlier losses."

"Late Wednesday in New York trading, the euro stood at $1.3125, up from $1.3031 late Tuesday, while the dollar was changing hands at Y120.78 from Y121.22 Tuesday. The euro traded at Y158.55 from Y157.96 Tuesday. The dollar was at 1.2400 Swiss francs from 1.2478, while the U.K. pound was at $1.9618 from $1.9459 late Tuesday."

"In his semiannual testimony on Capitol Hill, Ben Bernanke told the Senate Banking Committee that incoming economic data suggests there will be a 'gradual ebbing of core inflation.' 'Based on Bernanke's testimony, the Fed appears comfortably on hold for now,' said Peter E. Kretzmer, senior economist at Bank of America."

"Brian Dolan, head of currency research at, said the market's knee-jerk reaction to sell the dollar on Bernanke's comments was partly attributable to market expectations that the Fed chairman would be hawkish on growth and inflation. '(Bernanke's remarks) were on the dovish side, while the market was expecting something more hawkish, perhaps about prospects for accelerating economic growth,' Dolan said."

"Meanwhile, sterling recovered Wednesday following the release of the Bank of England's Monetary Policy Committee Inflation report stating that consumer price inflation in the U.K. should fall below 2 percent by the end of the year."

"Yet with BOE Governor Mervyn King saying Wednesday that there are still 'substantial risks' around the 2007 inflation outlook, the report was not as dovish as some had feared, and therefore lifted sterling back above the $1.95 mark during the London session. It climbed above $1.96 in New York."

From MarketWatch. "Gold futures climbed Wednesday, sending their benchmark contract above $676 an ounce for the first time in six months and gaining momentum from Ben Bernanke's statement that inflation pressures were easing."

"Gold for April delivery rose $3.50 to close at $672 an ounce on the New York Mercantile Exchange. It climbed as high as $676.40 earlier, its strongest intraday level since Aug. 2, which saw a peak of $677.10."

"A close above the $675-$676 spot price target 'should give confirmation that $700, and then the $730 levels, are the next objectives,' said Peter Spina, chief investment strategist at"

"Yet along with general profit taking below the technical breakout level along with some Spina cited 'strong hands which appear to be working overtime to keep this rally from extending.' He added, 'it is unclear if they have the power to spook investors from taking this market higher at this time or require some more consolidation just below.'"

"'Gold's internal strength continues to shine on its march to $700,' said Peter Grandich, editor of the Grandich Letter. 'We could see a groundswell of momentum players join in above $675 that could lead to a major spike to $725-$735 faster than most would believe.'"

"Elsewhere on the commodity markets, crude-oil futures, which have provided most of the direction for gold recently, dropped Wednesday after U.S. dollar revealed that distillate supplies fell much less than expected last week, despite the severe winter weather in much of the nation."

"Other metals prices climbed, with March silver touching a two-month high of $14.13 an ounce before closing at $13.965 an ounce, up 5 cents. April platinum climbed 0.9%, or $11.10, to end at $1,217.10 an ounce and March palladium added $1.25 to close at $345.85 an ounce."

There is a great article in the Feb 15 issue of the Wall Street Jorunal, pg C1 talking about how China is going to diversify away from buying US government debt. That $20 billion/month in new Treasury debt to absorb.

My prediction = 1 euro = $1.45 before the end of 2007. Gold closes out the year above $750/ounce.
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