Tuesday, April 10, 2007


A "New Selling Wave" For US$

The Associated Press reports on currencies. "The dollar fell against other major currencies Tuesday amid worries over trade troubles between the U.S. and China and persistent concern about the strength of the U.S. economy. The 13-nation euro traded at $1.3424 in late New York trading, up from $1.3360 late Monday. The British pound rose to $1.9716 from $1.9610, while the dollar slipped to 119.12 Japanese yen from 119.30 yen."

"The dollar bought 1.2181 Swiss francs, down from 1.2264 late Monday, and 1.1475 Canadian dollars, dropping from 1.1529."

"On Tuesday, the United States filed two new complaints against China at the World Trade Organization over copyright policy and restrictions on the sale of American movies, music and books. The Chinese Commerce Ministry expressed 'strong dissatisfaction.'"

"'The fear is that China will retaliate to U.S. action and sell U.S. treasuries or simply not buy more,'analysts at Brown Brothers Harriman said. But they also noted that such concerns are largely unfounded, because 'China gains nothing by retaliating by selling treasuries (bonds) and driving the dollar down.'"

From MarketWatch. "Gold futures climbed to a five-week high Tuesday, as renewed trade tensions between the U.S. and China and a slide in the U.S. dollar boosted demand for the precious metal. Gold for June delivery settled up $4.60, or 0.7%, at $681.50 an ounce on the New York Mercantile Exchange. It reached a high of $686.80 in intraday trading, the highest price seen for that contract since Feb. 28."

"'The U.S. currency took another hit this morning after overnight data showed a widening (actually a doubling) Chinese trade surplus,' said Jon Nadler, analyst at Kitco Bullion Dealers. 'Bullion was also bolstered by rising crude oil prices which showed strength after several sessions of significant weakness.'"

"'Many are expecting the dollar to come under some significant pressure in the near term with new rhetoric out of the U.S. government yesterday about another set of piracy and trade issues with China,' said Neal Ryan, director of economic research at Blanchard."

"'Again, this is a slippery slope and should the US ramp up the trade sanctions and protectionist trade policies, China will hit back,' he said. '[Since China is] one of the largest holders of our treasuries and dollar denominated assets, it doesn't take long to figure out how they could hurt the U.S. economy the most.'"

"The dollar 'enters a new selling wave' as the U.S. trade action 'is fuelling speculation of retaliatory acts from Beijing, which has already reported it will not attend this week's [Group of Seven] meeting in Washington, D.C.,' said Ashraf Laidi, chief foreign-exchange analyst at CMC Markets."

"James Moore, metals analyst at TheBullionDesk.com, said: 'Gold again looks well-placed to continue higher both short and long-term with negative dollar sentiment likely to be the main catalyst in the coming sessions.'"

"'Oil prices seem to have found some stability and may look to add additional momentum as we head towards peak summer demand period,' Moore said. 'Resistance in gold is now pegged at $684/89, but having spent some time consolidating the metal may now look to challenge $700.'"

"May silver settled up 12.0 cents at $13.930 an ounce on NYMEX. 'Silver is looking set for further gains short-term as the improved sentiment in gold and the phenomenal movements in the base metals seem set to draw further interest from investors and speculators,' Moore said."

"July platinum settled up $9.30 at $1,273.60 an ounce on NYMEX, while June palladium closed up $5.45 at $363.45 an ounce."

"'Platinum was in part aided this morning by a UBS AG report which raised its forecasts for platinum because of demand from automakers that use the metal in car parts to reduce harmful emissions,' Nadler said."

"Blame for the recent turmoil in global stocks should not be laid at China's feet, a new study released Tuesday found."

"Although stocks' sharp drop in late February began in Shanghai, 'the broad and global scope of the sell-off suggested the underlying causes lay elsewhere,' the International Monetary Fund said in its latest report about stability in financial markets."

"On Monday, IMF chief Rodrigo de Rato described global financial markets as a 'dry forest' in which sparks could set off unintended forest fires, and Tuesday's report served to flesh out his comments."

"The growth of carry trades is a sign that 'market participants do not view the cyclical factors contributing to the low-volatility environment, abundant low-cost liquidity, low leverage in the corporate sector, and high risk appetite, are likely to reverse in the near term,' the report said."

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