Thursday, July 05, 2007


US$ Up Despite UK Rate Hike

The Associated Press reports on currencies. "The dollar rose against the euro and the pound Thursday after an unexpectedly strong report on the U.S. service economy overshadowed widely anticipated interest rate decisions in Europe and Britain. The European Central Bank held its key rate steady at 4 percent in the 13-nation region that shares the euro, while the Bank of England boosted its benchmark rate a quarter of a percentage point to 5.75 percent."

"The euro rose as high as $1.3658 after the ECB decision, but later fell to $1.3598 in late New York trading. The dollar bought $1.3603 euro on Tuesday. U.S. financial markets were closed Wednesday for the July 4th holiday."

"The pound, which has been trading at 26-year highs against the dollar, rose to $2.0200 after the Bank of England lifted its key rate to a six-year high. It was the BOE's fifth such move in a year to contain rising prices and a booming housing market."

"After the strong U.S. service sector report, however, the pound fell to $2.0123. The dollar bought $2.0166 pound on Tuesday."

From AFX News. "Gold fell midafternoon, retracing this morning's gains, as the dollar firmed against the major currencies and as oil prices eased. At 4.09 pm in London, spot gold was trading at 649.20 usd per ounce against 653.30 usd in late New York trade yesterday, having dipped as low as 645.53 in intraday trade."

"'The dollar came back against the yen and the euro as the ECB kept interest rates unchanged. Oil coming down to 71 usd didn't help matters either,' said Jon Nadler, an analyst at Kitco Bullion Dealers."

"Among other precious metals, platinum rose to 1,285 usd from 1,280 usd, while its sister metal palladium dipped to 359 usd per ounce against 363 usd. Silver slipped to 12.44 usd from 12.58 usd in New York trade."

From Reuters. "'Now the euro/dollar is below $1.36 again, so we see some liquidation of long positions which had been taken on Monday and Tuesday. Also, physical demand has been slow but we are expecting the demand back around the $645-$646 level,' said Michael Kempinski, senior trader at Commerzbank International."

"'We are still in a downtrend channel and the first support line is at $635 at the moment. If the euro/dollar doesn't recover above $1.36 again, we will definitely see some more selling,' he added."

"UBS Investment Bank noted that gold held by major exchange traded funds (ETFs) remained at more than 20 million ounces, but some investors moved out of the market in the second quarter. Since a peak in gold holdings on April 19, the ETFs have lost 938,000 ounces, or about 29 tonnes."

"'Gold's recent sell-off has probably triggered some institutional selling, and after gold has apparently based at about $640 this will probably stop,' John Reade, head of metals strategy at UBS, said in a daily note."

"In market news, the Bank of Spain said it sold no gold in June after running down its reserves in each of the previous three months."

"'Palladium prices are potentially exposed to downside risk in the forthcoming weeks as speculative long positions in the metal remain at elevated levels,' Barclays Capital said."

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