Money and Metals

Bloomberg reports on currencies. "The dollar rose against the yen and euro as the Federal Reserve kept its benchmark interest rate at 5.25 percent and said inflation is a risk to the economy. The Fed's statement that inflation is the 'predominant' concern reduced speculation the central bank will cut borrowing costs later this year. The Fed has held rates unchanged for eight straight meetings, after raising its target to the current level a year ago."

"'The statement completely shut the door for a rate cut this year,' said Paresh Upadhyaya, who helps manage $29 billion in currency assets at Putnam Investments in Boston. 'The statement provides some support for a resilient dollar.'"

"The dollar rose to 123.20 yen at 4 p.m. in New York, from 122.83 yesterday. The U.S. currency reached 124.13 yen on June 22, the strongest since December 2002. The dollar advanced to $1.3436 per euro from $1.3453 yesterday, and has rebounded from an all-time low of $1.3681 per euro touched on April 27."

"'Readings on core inflation have improved modestly in recent months,' the Federal Open Market Committee said in a statement. 'However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated.'"

"'There is a tad of dollar optimism,' said Kathy Lien, chief currency strategist at DailyFX.com in New York. 'There is little sign that they will relax their guard on inflation. There is no chance the Fed will cut rates this year.'"

"Yields on benchmark 10-year Treasury notes climbed to the highest in five years this month, pushing the dollar to the strongest since March versus the euro, as traders added to bets policy makers would raise borrowing costs."

"Signs the U.S. housing market is still slumping then undermined the dollar's rally and fed demand for Treasuries."

"The yen's drop began earlier today as investors resumed their search for higher yields outside Japan through so-called carry trades. Japan's yen fell against all Group of 10 currencies as Bank of Japan Governor Toshihiko Fukui said the central bank aims to adjust interest rates gradually."

"The yen weakened after a report from the Ministry of Economy, Trade and Industry in Tokyo showed Japanese industrial production fell 0.4 percent in May. The median estimate of economists surveyed by Bloomberg News was for a 0.9 percent increase."

"Japan's consumer prices may have fallen 0.1 percent last month from a year earlier, after being unchanged in April, according to the median forecast of economists surveyed by Bloomberg News. The government releases the data tomorrow in Tokyo."

"'We have passed the worst of the market jitters and are starting to return to the normal pattern of people seeking higher returns in risky assets, and that will weaken the yen,' said Nicholas Bennenbroek, head of currency research in New York at Wells Fargo & Co."

From MarketWatch. "Gold futures closed with a nearly $6-an-ounce gain Thursday, with a weaker dollar and strong oil prices helping the market break a three-session losing streak that's driven prices lower by nearly 2%. Prices extended their gains into the electronic trading session late Thursday following a decision by the Federal Reserve to keep interest rates unchanged at 5.25%."

"Gold for August delivery gained $5.60 to close at $650.40 an ounce on the New York Mercantile Exchange. In electronic trading shortly after the Fed announcement, the contract moved a bit higher to stand at $651.20 an ounce. The contract closed at $644.80 on Wednesday, its lowest level since mid-January, after tallying a loss of $12.20 in three sessions."

"'Supported by a hefty surge in crude-oil prices...a stabilizing equity market, and a mild retrenchment in the U.S. dollar...gold was seen as a reasonable short-term play by a number bargain hunters brave enough to enter the market on the day of Fed speak and after several declining sessions of quite some significance,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Earlier Thursday, gold prices had climbed on 'bargain hunting and physical buying after the sell-off earlier in the week,' said analysts at Action Economics.
'Gold has traditionally been seen as a safe haven for investors, but more recently seems to have been put in the same category as other commodities and risky investments,' they said in a research note."

"Lately, traders, jittery over conditions in the U.S. and other economies, have been selling commodities in favor of safer assets such as Treasurys."

""Zachary Oxman, a senior trader at Wisdom Financial, said he believes that gold has, overall, been following the commodities markets as a whole, which has been seeing downside moves off the collateralized debt obligations securities, or CDOs, and overall market weakness."

"The largest liquidation for commodities 'has come off the back of a descent size unwinding of the carry trade as the [yen] and [Australian dollar] moved significantly higher yesterday off the [Bank of Japan] jawboning their currency higher,' he said."

"Other metals prices posted gains along with gold Thursday. September silver rose 16.9 cents, or 1.4%, to close at $12.379 an ounce, July platinum gained 50 cents to end at $1,276 an ounce and September palladium rose 85 cents to close at $368.70 an ounce."