Wednesday, May 02, 2007


US$ Rallies As Spreads Narrow

Bloomberg reports on currencies. "The dollar traded near a two-month high against the yen on speculation signs of growth in the U.S. manufacturing and services industries will alleviate concern over a slowdown in the world's largest economy. The U.S.currency has strengthened as evidence of economic resilience reduces expectations of a cut in borrowing costs by the Federal Reserve."

"'The dollar has some further upside to go,' said Samarjit Shankar, director of global strategy for the foreign exchange group in Boston at Mellon Financial Corp. 'You have basically had a one-way trade against the dollar over the past month. A string of positive data is going to introduce two-way risk.'"

"The dollar traded at 120.15 yen at 6:08 a.m. in Tokyo. It gained 0.24 percent yesterday and touched 120.28, the highest since Feb. 27, when equities tumbled in a global rout. The U.S. currency traded at $1.3591 per euro, up from the all-time low of $1.3681 set April 27."

"Investors aren't willing to place big bets involving the dollar before tomorrow's Labor Department payroll report forecast to show job growth slowed last month, said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York."

"'People don't want to short the dollar before the payroll,' he said. 'The dollar will sell off if we have a weak payroll number.'' A short position is a bet on a currency's decline.'"

"'A soft number will counter dollar bulls' notions that the job market still maintains its pace,' said Boris Schlossberg, senior currency strategist in New York at"

"New Zealand's dollar may fall a second day as its yield advantage over the U.S. narrowed after a report showed factory orders in the word's largest economy rose in March, reducing the chance of a cut to interest rates."

"The New Zealand and Australian dollars had the biggest fluctuation of any currency yesterday as their yield advantage declined. The spread between New Zealand and U.S. two-year bonds has contracted further to the narrowest in two-and-a-half weeks. U.S. factory orders rose 3.1 percent in March after a 1.4 percent gain in February, the Commerce Department said yesterday."

"'The shine's been taken off the kiwi as eyes turn to what's happening in the U.S. dollar and its recovery story,' Danica Hampton, currency strategist at Bank of New Zealand Ltd. in Wellington. 'It's led the market to think rates might not be cut as soon as we think and to a narrowing in the bond spread.'"

"The local dollar bought 73.77 U.S. cents at 9:11 a.m. in Wellington, after falling 0.7 percent to 73.76 cents in late Asian trading yesterday. It may fall to around 73.60 cents today, Hampton said."

"The yield premium, or spread, on New Zealand's two-year bonds over similar-maturity Treasuries was 2.48 percentage points, the narrowest since April 18."

From "Precious metals prices were falling again Wednesday in New York on the back of a rallying dollar. June-dated gold contracts were dipping $3.90 at $673.40 an ounce in recent action. Silver was dropping 7 cents at $13.30 an ounce."

"Helping boost the greenback was a Commerce Department report showing a 3.1% jump in factory orders for March. The consensus forecast was for 2.1% growth. In addition, the figure for February was upwardly revised."

"'This was very good news coming right on the heels of Tuesday's strong [Institute for Supply Management] report,' says Ellen Beeson Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ in New York. 'This pushes worries about the business sector aside, and now we can concentrate on the housing slump and its effect on the consumer.'"

"In the official sector, the European Central Bank says it sold 195 million euros of gold and receivables, or about 12 tons, last week, down from around 17 tons the week before."

"Platinum fell for the first session in three in New York on expectations that demand for the metal will weaken during holidays in Asia. Palladium rose."

"Markets in Japan shut this week for the 'Golden Week' holidays and China's market will be closed until May 7 for Labor Day. Japan was the biggest market for platinum jewelry and glass applications last year, accounting for 18 percent of demand, a report from London-based research company GFMS Ltd. showed."

"'This is the spring holiday season in Japan and China and the gift-giving season for them,' said Dan Vaught, a commodity analyst at A.G. Edwards & Sons Inc. 'They tend to buy a lot of jewelry before the holiday season, but once that holiday passes there's the tendency for them not buy as much.'"

"Platinum futures for July delivery dropped $1.80, or 0.1 percent, to $1,299.10 an ounce as of 1:21 p.m. on the New York Mercantile Exchange. Prices have gained 13.5 percent this year. Palladium for June delivery rose 80 cents, or 0.2 percent, to $374.95 an ounce."

'Stagflation light. Slowflation. A variety of terms are floating around to describe the current state of the economy: growth that's too slow and inflation that's too high for Federal Reserve comfort.'

'The footprint of the U.S. economy right now is a mild stagflation. … There's nothing like the episode of the '70s and early '80s, but this is a mini version of it,' says Allen Sinai, chief global economist and president of Decision Economics.'
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