Money and Metals

The Wall Street Journal reports on currencies. "The dollar hit an all-time low against the euro Wednesday for the second consecutive day amid ongoing concerns about how the subprime mortgage mess could hurt the overall U.S. economy. But a rise in U.S. equity prices Wednesday reduced risk aversion-dollar selling, which pushed the greenback higher against the yen from day-earlier numbers."

"Wednesday's action 'should be looked at in conjunction with the last couple days,' said John McCarthy, director of foreign exchange at ING Capital Markets in New York. 'There's intense pressure on the dollar over the subprime business and as more information comes to light and there are more downgrades, this will weigh on the ability of the (Federal Reserve) to raise rates.'"

"Wednesday afternoon, the euro was at $1.3753 from $1.3728 late Tuesday, while the dollar was at 122.23 yen compared with 122.01 yen, according to EBS. The euro was at 168.10 yen compared with 167.54 yen late Tuesday, while sterling was at $2.0333 from $2.0269. The dollar was at 1.2045 Swiss francs from 1.2050 francs late Tuesday."

"The euro reached its all-time high of $1.3787 during the overnight session after European Central Bank Executive Board Member Juergen Stark downplayed concerns about a strengthening euro, noting an improving euro-zone economy."

"The dollar remained under pressure during the New York session and found little support from comments by Philadelphia Federal Reserve Bank President Charles Plosser, who said the financial system is well-equipped to handle events such as the current subprime mortgage turmoil."

"But Mr. Plosser's comments provided at least a stabilizing effect to the dollar Wednesday that kept the euro from flirting too close to the $1.38 level."

"Elsewhere, Australia's dollar touched a fresh 18-year high of $0.8640 on Wednesday, showing that high-yielding currencies continue to outperform the low-yielders, such as the yen."

"Among the only bright spots for the dollar was its position against Canada's dollar, with the U.S. currency pushing above C$1.06 in overnight trading after falling to a 30-year low of C$1.0444 earlier in the week. But Canadian currency weakness is partly based on fears that what is bad for the U.S. economy may prove even worse for Canada, so the move provides little solace for dollar bulls."

From MarketWatch. "Gold futures closed lower Wednesday, giving back some of the nearly $14 an ounce they gained during a three-session winning streak as the U.S. dollar regained lost ground against some major currencies and oil prices retreated."

"'There is substantial resistance in the mid-$660's and the present demand is eating away at it,' said Julian Phillips, an analyst at GoldForecaster.com. 'We should continue to see a certain amount of ebb and flow until this resistance is absorbed,' he said. 'Once this is complete, expect to see a more vigorous market.'"

"Gold for August delivery closed down $2.30 at $662.10 an ounce on the New York Mercantile Exchange. The contract had climbed $1.90 on Tuesday to tally a three-session win of $13.80."

"'Bullion's recent ascent took a seat on the side bench for the day, as the U.S. dollar managed to cut some of its losses during Wednesday's session,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Overall, the dollar has 'a downside bias against most of the major currencies, as the capital markets reel from heightened subprime woes,' said Marc Chandler, currency strategist at Brown Brothers Harriman."

"And 'concern that difficulties in the U.S. subprime mortgage sector could spread to the wider economy is undermining the dollar and makes gold more attractive as an alternative investment,' said analysts at Action Economics. 'High oil prices and geopolitical tensions in the Middle East are also supporting factors.'"

"The dollar is falling into 'new lower territory,' said Phillips. 'Combine this with the oil price holding and the pressure on the gold price is upwards.'"

"Most other metals prices gained ground Wednesday, though September silver finished unchanged at $12.975 an ounce. September palladium closed at $371.45 an ounce, up $1.20, and October platinum added $2.60 to end at $1,316.10 an ounce."