Friday, June 22, 2007

 

A Dollar And Bond Yield Vigil

The Associated Press reports on currencies. "The dollar fell against the euro and British pound Friday ahead of a week loaded with economic data, while the U.S. currency hit a 4 1/2-year high against the yen. The 13-nation euro bought $1.3466 in afternoon New York trading, up from $1.3387 late Thursday."

"Meanwhile, the British pound moved closer to the $2 mark, rising to $1.9994 from $1.9922. The pound broke through $2 in April for the first time since the early 1980s."

"The dollar climbed as high as 124.12 yen before backing down to 123.87 yen in afternoon trading. The yen also plunged to a record low against the euro, with traders borrowing the Japanese currency at its lower interest rate to invest in better yielding assets overseas. Returning those funds to Japan would lift the yen."

"'It was a light week on economic data in the States. So, there was some trepidation in buying the dollar going into next week, which is heavy on data,' said Michael Woolfolk, a senior currency analyst at the Bank of New York."

"The Federal Reserve meets Wednesday and Thursday to discuss interest rates. Most analysts expect the central bank to keep rates unchanged at 5.25 percent as it has for the past year. At the same time, analysts expect the European Central Bank and other foreign central banks to hike their interest rates during the third quarter, which would weigh heavily on the dollar."

"In other trading, the dollar bought 1.2287 Swiss francs, down from 1.2418 late Thursday, and 1.0690 Canadian dollars, down from 1.0759."

MarketWatch reports on the metals. "Gold futures closed higher Friday, but after losing more than $10 an ounce during a two-session losing streak, they finished the week with a modest loss. 'Traders remained on a dollar and bond yield vigil, as bullion market conditions remain on the fragile side,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Gold for August delivery closed up $2.80 at $657 an ounce on the New York Mercantile Exchange. The contract lost $10.50 between Tuesday and Thursday, so it fell $1.70, or 0.3%, from last Friday's closing price of $658.70."

"Gold feels 'very listless,' said Zachary Oxman, a senior trader at Wisdom Financial. 'The trade seems to be bouncing a bit off of yesterday's strong sell off [on] the back of a stronger dollar, rising yields and a stronger-than-expected Philly Fed number,' he said." The metals market saw 'a good amount of buyers looking to pick up gold around $654.50 or so,' he said."

"'Market attention is now also shifting towards next week's FOMC meeting and the expectation that participants will be able to read the tea leaves within the Fed' statements,'" said Nadler. The Federal Open Market Committee, which sets interest rates, with meet on June 27 and 28."

"On the currency markets Friday, the dollar gave ground against the euro, which failed to benefit from weaker-than-forecast data on German business sentiment.
The Japanese yen fell to its weakest level against the greenback in more than 4 1/2 years, as reflected in so-called carry trades. Meanwhile, the euro touched another record high against the yen."

"Also on Nymex, July silver extended its losing streak to three sessions, losing 7 cents Friday to close at $13.02 an ounce. It lost 1.8% for the week.
July copper edged 2.1 cent lower to finish at $3.382 a pound. That was 1.1% below last Friday's closing level."

"July platinum rose $9 to close at $1,308 an ounce, finishing $22 higher for the week, while September palladium reached $381.85 an ounce, closing $2.60 higher for the session, 2.3% above last week's close of $373.50."

"'What hasn't restarted are the negotiations between the platinum producers and mining unions in South Africa,' Neal Ryan, director of economic research at Blanchard, said. 'Complaints have been lodged in that industry and the unions are moving closer to strikes versus individual companies in the coming week.'"

"So, 'while the gold sector has gotten a brief reprieve in the next week, the platinum industry in South Africa has not,' he said. 'A strike in the [platinum group metals] market could have major implications on supply within the market as 75%-80% of platinum supply is mined in South Africa.'"

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