Dollar Slides on China Sanctions

U.S. 10-year Treasury bond prices closed slightly
lower on a high-range day today. Consumer spending and a positive business
activity report helped to boost confidence in the U.S. economy. Bonds have
been trading in a fairly tight range for about a month, and despite the
whipsawing, prices closed within normal range today. Housing reports
continue to be a major focus for traders, who see the housing sector as a broad
economic indicator of U.S. economic health.

The dollar fell against the euro and the yen
today, after U.S. imposed trade sanctions on China. The protectionist
measure caused to the dollar to fall against the major currencies. The yen
has been the key focus for currency traders lately, as the ramifications of the
yen carry trade are felt during global selloffs, when traders buy back the yen
to cover riskier positions. Before bouncing significantly on a global
equities selloff nearly a month ago, the yen was trading at record lows against
the yen and near yearly lows against the dollar.

Crude oil was down about 0.5% today, still
trading near 6-month highs on Iran/UK tensions. When Iran kidnapped 15
British sailors last week, oil shot up on supply worries. Geopolitical
tensions with Iran were a primary factor in crude’s record prices this summer,
and this latest incident proves that investors remain nervous about the
prospects of Iran removing its oil supply from the market. Natural gas
rose about 1.5% as forecasts call for cold weather in the Northeast over the
next week.

Gold prices rose fractionally today. Gold
has been trading closely in-line with oil lately, as traders use the metal as a
safety against rising oil prices. Despite crude’s slight decline, the
relatively high price of oil kept gold prices moving higher today. Copper
futures rose about 1.5% on continued signs of strong demand across the globe,
especially from Asia.

Grains fell across the board after a report
showed that farmers planted more corn this year than was previously expected.
Corn fell just over 5%, wheat fell about 4.7% and soybeans dropped nearly 2%.


Consumer spending
and incomes both grew about 0.6%.

John Lee

Associate Editor