Dollar Moves Higher on Positive Data

U.S. 10-year Treasury notes fell today, after reports showed that U.S.
personal spending and consumer confidence beat analyst expectations.
Traders pared gains from yesterday’s run-up before the 3-day weekend.
Bonds have been trading back and forth on conflicting economic reports and
announcements coming from the U.S. The weaker the report is, the more
bonds move higher; bonds initially shot up in June when the Fed began a
rate-pause to deal with a slowing economy with moderating inflation. Bonds
had begun to pull back from 11-month highs when yesterday’s Philly Fed came in
much weaker than expected, sending bonds higher. As the year nears its
end, investors are still undecided on the future of the U.S. economy and bond
prices. Data and reports continue to send mixed signals.

The dollar moved to 8-week highs against the yen, and moved moderately higher
against the euro, after two key economic reports showed positive results in the
U.S. The dollar had fallen to 20-month lows against the euro before rallying on
a string of positive economic data reports. The global currency market has
been dominated by inflationary and rate-hike news. Europe has the best
position right now on the global market, with its economy growing much faster
than both the U.S. and Japan. The yen and dollar will face a tough 2007
unless more positive economic data starts to show up.

Crude oil futures fell 0.4% to close at $62.41, despite attacks on Nigerian
oil-producing facilities. Warm weather in the U.S. continues to drive
prices lower, as energy demands decrease along with warm weather. Crude is
down 25% from its highs, which has prompted OPEC to call for a reduction cut
which nears 2 million barrels a day. Despite the warnings, the price of
crude continues to fall on warm weather and ample supplies. Natural gas
fell to 9-week lows on warm weather and large supplies.

Gold rose fractionally today as investors brace for increased demand.
Weakness in the dollar and rising oil prices usually send gold higher, but there
was not enough action in those markets to spark a major move in the metal.
Gold is used as a hedge against rising oil and inflation; gold is down nearly
20% from its May highs, but still rests well above levels from last year.
Copper continued to fall today on high supplies and weakening manufacturing in
the U.S.

Wheat rose the most in a month today, extending its recent mega-rally, on
speculation that crop damage will limit global supplies. Corn futures rose to a
3-week high on speculations that ethanol production will double in the coming
years, obviously creating more demand for corn.

Economic News

U.S. personal spending increases the most since July.

Durable good orders rose in November, but business equipment demand slowed.

John Lee

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