Monday, March 19, 2007


Gold And US$ Higher

MarketWatch reports on currencies. "The yen fell sharply against other currencies Monday, as risk appetite returned to the financial market, prompting investors to reestablish carry trade positions. Speculation that the Bank of Japan on Tuesday will leave rates unchanged and signal future rate hikes will remain gradual further weighed on the yen.

"'The single most correlated trade in all of finance over the past two weeks has been the relationship of the [dollar/yen] to global equity markets,' said Boris Schlossberg, senior currency strategist at 'As equities rose and risk appetite returned, the [dollar/yen] rose as well and when equities sold off so did the currency pair.'"

"Late in New York, the dollar was quoted at 117.49 yen, compared with 116.81 yen late Friday. The euro stood at $1.3291, compared with $1.3308. The British pound traded at $1.9435, compared with $1.9418. The dollar changed hands at 1.213 Swiss francs, compared with 1.2076 francs."

"In other trading, the Slovak currency, the koruna, rallied to a record high on Monday after the country surprised the market by revaluing its currency by 8.5%, triggering speculation that other new members of the European Union will follow suit."

"Slovakia gained approval from the European Commission to revalue the koruna's central parity rate against the euro in a move to control inflation and prevent the Slovak economy from overheating. Slovakia is preparing to join the euro zone in 2009.
The new parity is now at 35.4424 versus the euro, compared with 38.4550 previously."

"Elsewhere, China over the weekend hiked its interest rates by 0.27 percentage point for the third time in less than a year to retrain credit and investment and promote balanced growth. The People's Bank of China raised its one-year deposit rate to 2.79% and its lending rate to 6.39%."

"Gold futures posted a small gain Monday, taking their three-session win to almost $12 an ounce as traders eyed upcoming U.S. economic data as well as a decision by the Federal Reserve on interest rates due later this week."

"'Traders were on economic-data watch,' said Jon Nadler, an analyst at Kitco Bullion Dealers. But 'buoyancy in the dollar kept a lid on fresh longs.'"

"The Federal Open Market Committee, the Fed's policy-setting panel, starts its two-day policy meeting on Tuesday. Economists believe the Fed will almost certainly keep monetary policy on hold for the sixth consecutive meeting, maintaining its federal funds rate target at 5.25%. The Fed will announce its decision at 2:15 p.m. Eastern on Wednesday."

"Nadler said a rate adjustment is not expected at the coming Fed meeting, thought a cut is possible at the next meeting. 'There is no doubt that the folks with their fingers on the interest rate faucet are having a tougher time steering the economy by relying on old tricks,' Nadler said."

"Gold for April delivery rose 40 cents to close at $654.30 an ounce on the New York Mercantile Exchange, its strongest level since March 8. Prices peaked at the $656 level earlier. The contract had also dipped to a low of $652.80 Monday as the dollar rose against major counterparts in the foreign-exchange market."

"Other metals prices climbed along with gold. April platinum rose $13.50 to close at $1,234.70 an ounce and June palladium added $1.70 to end at $354.10 an ounce, while May silver closed at $13.233 an ounce, gaining 1.8 cents."

"'We've seen gold and silver prices stabilize after the market turmoil from the past two weeks and resume their upward trends,' said Neal Ryan, director of economic research at Blanchard. 'Investors are reentering the precious metals market and we could see some significant gains into the end of the week as positions are established in front of what is seasonally one of the strongest periods for precious-metals markets,' he said."

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