Tuesday, April 24, 2007

 

A Harsh Reality Check For The US$

MarketWatch reports on currencies. "The dollar approached an all-time low against the euro Tuesday after reports showed sales of existing homes plunged at the fastest pace in 18 years last month while consumer confidence dropped more than forecast in April, fueling worries that the U.S. economy is decelerating. The dollar has come under heavy pressure, hitting multiyear lows last week on the prospect of the Fed remaining sidelined or cutting rates, even as central banks elsewhere continue to lift borrowing costs."

"'To the surprise of the market, this morning's U.S. data was extremely ugly,' said Kathy Lien, chief strategist at DailyFX. 'Today's reports only reinforce the Federal Reserve's need to keep interest rates unchanged. The problems that the U.S. economy is facing are not going away, and today's numbers provide a harsh reality check,' she said."

"In New York trading, the euro stood at $1.3617, compared with $1.3571 late Monday. In intraday trading, the euro had climbed to a high of $1.3635, just a third of a cent below its all-time high of $1.3666. The dollar was last quoted at 118.54 yen, compared with 118.59 yen."

"The British pound traded at $2.0009 vs. $2.0006. The pound had climbed as high as $2.0133 last Wednesday, sterling's loftiest level since 1981. The dollar changed hands at 1.2032 Swiss francs, compared with 1.2095 francs."

"In other trading, the Australian dollar was the biggest decliner among major currencies, slumping 0.7% versus the greenback, after a report showed consumer prices rose less than expected in the first-quarter, denting any hopes for an imminent rise in interest rates."

"The below-expected CPI 'killed off any chance' of a rate hike by the Reserve Bank of Australia next week, said David Watt, senior currency strategist at RBC Capital Markets. 'The weakness spilled over into New Zealand and other high yielding currencies, on a moderate unwind of carry trades.'"

From Bloomberg. "Gold and silver fell the most this month in New York as a drop in prices for oil and other commodities reduced the appeal of precious metals as a hedge against inflation."

"Oil fell as much as 2.7 percent and the Reuters/Jefferies CRB Index of 19 commodities lost the most in more than six weeks after a drop in home sales sparked speculation an economic slowdown in the U.S. will curb demand for raw materials."

"'There's some selling around the oil drop and the housing numbers,' said Marty McNeill, a trader at R.F. Lafferty Inc.. 'If there's an economic slowdown, it's going to hurt commodities and gold, too.'"

"Gold futures for June delivery fell $6.50, or 0.9 percent, to $687.70 an ounce on the Comex division of the New York Mercantile Exchange, the biggest drop since March 23. The price failed for a second day to challenge last week's peak of $698."

"'Gold is facing stiff resistance as it heads toward the big number of $700,' said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc."

"Losses accelerated after gold dropped below $691, said Steve Phillips, a trader at Eagle Futures Inc. 'Everybody knew gold was too high,' he said. 'There are a lot more sellers than buyers at these prices.'"

"Hedge-fund managers and other large speculators increased their net-long position in New York gold futures in the week ended April 17, according to U.S. Commodity Futures Trading Commission data."

" Silver, a precious metal with industrial applications in medical devices and batteries, fell the most since March 2 as copper used in pipes and wiring slumped as much as 3 percent. 'Silver came off on copper,' said Frank McGhee, head metals trader at Integrated Brokerage LLC."

"Silver for May delivery fell 26.8 cents, or 1.9 percent, to $13.782 an ounce on the Comex. Before today, the price had gained 8.6 percent this year."

Comments:
A down day for both gold and the dollar; a win for the deflationists, it appears.
 
A "Federal Reserve Note" is not a U.S.A. dollar. In 1973, Public Law 93-110 defined the U.S.A. dollar as consisting of 1/42.2222 fine troy ounces of gold.
 
Short term trading noise of no consequence. Nothing has changed, the trends remain in place.
 
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