Dollar Falls Despite Positive Data

U.S. 10-year bonds fell today to the lowest
levels since October, on a retail sales report that beat expectations.
Investor confidence in the U.S. has been boosted over the last few weeks on a
slew of positive economic reports, including housing, consumer confidence,
retail sales and manufacturing. Retail sales last month rose 0.9%, versus
the 0.7% expected by most analysts. Bond prices have been falling fairly
steadily since the beginning of December; low energy prices are also helping to
boost confidence in the U.S. economy, as low energy prices make it easier and
cheaper to manufacture goods. Bonds initially shot higher in June when the
Fed initiated a rate-pause, but prices are now beginning to significantly trend

The dollar fell against the euro, after reaching
7-week highs. Despite a positive U.S. retail sales report, investors
speculated that central banks across the board were buying euros and selling
dollars, which helped to propel the dollar lower. The dollar has been
under pressure lately, as different countries announce they are diversifying
their currency reserves from dollars into euros. Weakness in the U.S.
housing market and geopolitical tensions have led to dollar selling. The
euro is in the best shape right now, with positive growth and inflationary
numbers continuing to roll out of most of the 13 countries which comprise the EU.
The dollar has been making a stand lately, backed by a string of positive
inflation and growth numbers, while Japan seems to be stuck in a rut.
Japan has been unable to consistently produce hot, inflationary economic

Crude oil rose 2% to close at $52.94, bouncing
off of the 12% slide since the new year. Oil has fallen steadily into
2007, as warm weather in the U.S. and large, stabilized reserves continue to
push the price of crude lower. OPEC has called for reductions of nearly 2
million barrels a day to curb losses, and is threatening more cuts if prices do
not stabilize. Natural gas rose nearly 5%, as traders took advantage of
low prices stemming from yesterday’s 6% loss. Natural gas has been held
lower by warm weather and high supplies.

Gold rose over 2% today, as investors sought
safety from a weak dollar. Gold usually moves inversely to the dollar and
with oil, both of which occurred today. Dollar weakness directly
contributed to gains in gold futures; investors turn to gold as a safe-haven
investment in the face of dollar weakness. Copper prices fell 2% as
inventories continue to rise in the U.S., signaling a slow-down in demand.

Grains surged across the board. Wheat rose
5% today, as investors speculated that wheat supplies will drop as U.S. farmers
plant more corn. Corn also rose over 5% on global demand. Soybeans
rose over 7%.

Economic News

Retail sales rose 0.9% in December, the most in 5

U.S. import prices rose the most in 7 months in

John Lee

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