Dollar Holds Euro, Bonds Creep Higher
Bonds rose moderately today, giving up some gains from early in the day to
close only slightly higher. Retail sales plunged unexpectedly the fastest in 2
years last month, prompting traders to buy bonds ahead of speculated economic
weakness in the U.S. The subprime mortgage fallout has been weighing heavily on
bond traders, pushing prices higher on fears of U.S. slowing growth. Bonds
typically fall on positive news and rise on weakness, so today could be seen as
a bad sign for the U.S. economy, in relation to bond prices.
The yen bounced moderately against the dollar and the euro today, and the
euro also stalled against the dollar. The big news this morning was a letter
from Iran sent to Japanese refineries, requesting that Japan begin using yen to
buy oil from the Middle Eastern company. Iran is worried about more potential
sanctions to come from the West, which could theoretically freeze Iran’s dollar
assets. The dollar bounced against the Canadian dollar despite a severely weak
retail sales report. The British pound rose over the dollar.
Crude oil futures rose nearly 2% today, after a pipeline shutdown near the
North Sea prompted supply worries. Summer is usually a period of high oil demand
and rising prices, so any potential disruptions could have a major effect on
prices. Natural gas futures rose 2.5% on fears that a Midwest heat wave could
send prices soaring.
Gold futures fell fractionally today, as the euro rally stalled against the
dollar. Gold normally trades inversely to the dollar and with oil; despite oil’s
gains, gold fell on dollar strength. Gold has also been trading inversely with
rising interest rates, as higher rates make the safety metal a less attractive
Grains rose today. Soybeans gained 0.9% and corn rose just over 1%.
For more on today’s stock market action, check out today’s Stock Market