Monday, February 19, 2007


US$ Weakness On Feds' "Wait And See"

Reuters reports on the markets. "Gold surged to a seven-month high today because of investor buying as the dollar weakened, and analysts expect the precious metal to push higher over coming days and weeks. In early trade spot gold was quoted at $670,90/$671,70 an ounce versus $669,00/669,70 an ounce late on Friday in New York. Earlier it hit an intraday peak of $673,20, the highest since July 17 2006 when it traded at a $676 high."

"'It’s largely dollar weakness,' said David Thurtell, analyst at BNP Paribas. 'We’re going to see more dollar weakness and if that’s the case the outlook for gold is good.'"

"The dollar fell to a six-week low against the euro and five-week low against the yen on speculation that the US Federal Reserve could cut interest rates in coming months after a run of weaker than expected US economic data. Analysts said violence in Iraq and bombs on a train going to Pakistan from India are also a plus for gold, seen as a safe-haven against rising security risks."

"Markets are also watching peace talks between the US, Israel and Palestine. 'Traders will be watching ... to see if the three-way summit between US/Palestinian and Israeli officials will ease existing middle-east tensions,' said in a note."

"Japanese buying in holiday-thinned trade was part of the reason behind today’s gold price rise, which was partly checked by a subdued oil prices, traders said."

"Crude oil prices slipped on expectations for warmer weather in the US, despite current cold weather that has raised heating oil demand in the world’s largest energy consumer. 'Everything except the oil market is lining up for gold,' Thurtell said. 'The production data is weak too.'"

"A strike at DRDGOLD’s Blyvooruitzicht mine where workers started a pay strike last Tuesday, has worried the market. The mine, which usually produces about 576 ounces of gold per day, has been able to maintain some production by processing stockpiled ore and surface material, DRDGOLD said."

"Platinum was at $1015/1220 an ounce, down from an earlier three-month high of $1219 late New York trade on Friday. Platinum prices slipped after miners at the world’s second biggest platinum producer, SA-listed Implats, ended a strike they started last Friday at the firm’s biggest mine over medical issues."

"Earlier news that miners returned to work today at the Modikwa mine in SA, after a strike that lasted more than three weeks also put downward pressure on platinum."

"Palladium was softer at $338/342 from $339/344 an ounce and silver $14.02/14.07 from $13.95/14.00."

The Daily FX. "With the US markets closed for Presidents’ Day and many Asian markets closed for the Lunar New Year, trading has been extremely quiet in the foreign exchange market. News from Japan, the UK and the Eurozone have been driving the dollar’s fluctuations and we expect this to continue for the remainder of the week since consumer prices is the only piece of notable US economic data on the calendar."

"The Federal Reserve’s wait and see attitude comes in stark contrast to the European Central Bank’s clear and vocal plans to raise interest rates next month. This dynamic has narrowed the spread between the December 2007 Eurodollar (US) and Euribor (Eurozone) interest rates by 9 basis points over the past week."

"The recent disappointments in US data including last week’s Philly Fed survey, jobless claims, housing starts, consumer confidence and producer prices have pushed out expectations for an interest rate hike by the Federal Reserve from the first quarter of this year to the second or third quarter at the earliest."

From Bloomberg. "The New Zealand dollar rose amid speculation Reserve Bank Governor Alan Bollard will increase the official cash rate to a record high next month, buoying demand for the currency."

"Thirteen of 14 economists surveyed by Bloomberg News anticipate Bollard will raise the benchmark rate a quarter-point to 7.5 percent on March 8. New Zealand's benchmark rate is second to Iceland's among countries with the top credit rating at Moody's Investors Service, helping the New Zealand dollar, known as the kiwi, rise 5.5 percent the past three months."

"'The yield differential is really high and the trend is very upbeat for the kiwi,' said Tony Allen, currency trader at ANZ National Bank Ltd. in Wellington. 'We're just a stand-out at the moment.'"

"New Zealand's dollar bought 70.23 U.S. cents at 9:49 a.m. in Wellington from 69.94 cents late in Asian trading yesterday. It reached 70.30 cents yesterday, the highest since Jan. 26, and could reach 70.50 cents today, Allen said."

"Bollard on Jan. 25 said unless he saw moderation in housing and demand, it was likely he would raise interest rates."

"Mexico's currency gained as expectations of slowing inflation boosted the allure of peso- denominated assets, attracting dollar flows. The peso, the second-worst performer against the dollar among Latin American currencies this year, rose on easing concerns soaring prices for tortillas, the mainstay of the Mexican diet, will accelerate inflation."

"'We're seeing calm return to the market after a bumpy start to the year,' said Luis Flores, an economist at IXE Grupo Financiero SA in Mexico City. 'Expectations inflation is easing may fuel additional gains in local assets.'"

"Mexico's peso increased 0.3 percent to 10.9688 per dollar at 2:48 p.m. New York time from 10.9970 on Feb. 16. The gain in the peso today pared this year's decline to 1.5 percent. The yield on the government's 8 percent peso bond due in December 2015, down 0.23 percentage point so far this month, today was unchanged at 7.7 percent, according to Santander Central Hispano SA."

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