Dollar Plummets Against Euro, Yen

U.S. 10-year Treasury notes were little changed, wavering near
7-month highs, after a jobs report released today showed that jobless claims
rose in the past week. Bonds shot up in June when the Fed initiated a
rate-pause on the grounds that the economy is slowing and inflation is not as
big of a concern. Conflicting reports and announcements from the Fed board
have kept bonds trading near their highs, and investors seem to be waiting for
more data before committing to send bond prices higher. The high jobless
numbers certainly affected inflationary and interest rate sentiments; interest
rate futures are showing a greater than 30% chance that the Fed will have
reduced rates by the end of March.

The dollar fell to its lowest levels in five months against
the euro, and dropped steeply against the yen, after a jobs report was released
showing an increase in unemployment, pointing to a cooling U.S. economy.
The currency market has been dominated by interest rate and inflationary news,
and today’s report lends weight to investor speculation that the dollar is weak
with a cooling U.S. economy behind it. The ECB has basically guaranteed
rate hikes before the year is out, while the U.S. central bank and the BoJ both
see very little chance of a rate hike any time soon. The global currency
market favors currencies backed by growing, inflationary economies that have to
continue to raise rates to stay ahead of inflation.

Crude oil fell over 2% to close at $59 a barrel today, after
U.S. inventories showed that oil and gas supplies jumped last week. The
double gain in gas and crude supplies helped to push crude prices lower on high
supply. Crude has fallen 25% from record July highs; OPEC has called for
an international reduction in output from its member neighbors, but the effects
from the reduction have yet to find significance in the marketplace.
Natural gas fell nearly 3% on near-record inventory levels and warm weather

Gold rose more than 0.5% today as the dollar plummeted against
the euro. Gold usually moves inversely against the dollar and in-line with
crude oil, as investors use the metal to hedge against inflation and rising
energy prices. Gold is down 20% from its May highs, mirroring crude’s
recent drastic fall. Copper prices fell 0.4% on continued weakened demand
in China and ample supplies of the metal.

Cocoa rose over 1% on signs that supplies from Africa have
slowed right as candy makers bulk up production for the holidays. Corn
rose 0.4% and soybeans were up fractionally.

Economic News

A jobs report showed that U.S. first-time jobless claims rose
by about 12,000 last week.

The University of Michigan’s consumer confidence report shows
U.S. consumer confidence hovering near 15-month highs.

John Patrick Lee