Dollar Up, Gold Down on Fed Minutes

U.S. 10-year Treasury bond prices were slightly
higher today, after the Fed minutes from the last meeting showed that members
believe that consumer spending will "grow at a more moderate pace." The
announcement 3 weeks ago emphasized that "vigilance" would remain necessary to
control inflation, which has sent bond prices lower steadily since the rate
decision. A number of key economic reports come out tomorrow, so watch for
potentially price-moving data.

The yen continued its rally off of record lows
against the euro, and also climbed against the dollar. Yesterday, China
increased a tax on trading securities, in order to keep a lid on the country’s
rising stock market. Investors around the globe immediately covered their
positions in the emerging markets, which were entered using borrowed Japanese
yen. As traders exited their risky traders, funded by borrowed yen, the worth
of the yen increased, causing the currency to bounce. This yen bounce comes
after months of extended weakness. The euro has been marking new all-time
highs consistently, and does not look to turn around against the yen at all.
In the early March equity fallout across the globe, a similar occurrence
happened, which saw the yen bouncing as traders covered their positions with
borrowed yen. However, a resumption of the global equity bull rally should
push the yen back lower. The dollar continued to rally against the euro today,
and also staged a bounce over the Canadian dollar.

Crude
futures gained about
0.3%, after falling around 3% yesterday on summertime demand speculation.
Prices rose today slightly ahead of the Energy Department’s inventory report
that comes out tomorrow. Traders are betting that the supply glut that has
accumulated due to seasonal refinery closings will not be enough to bring
reserve levels up to a comfortable level before summer. Summer is typically a
period of high demand for energy, and prices usually go higher during the
vacation season. Natural gas jumped over 2% today, on forecasts for a hot
summer, which would increase air conditioner and electricity usage.

Gold futures fell about 0.7%, as the dollar
continues to strengthen on the world market. Gold usually traders inversely to
the dollar, and with oil; dollar action dominated gold trading today. Copper
futures fell about 0.5% today, on worries after an equity slide today in
China.

Grains all traded higher today. Soybeans rose
1.2%, wheat gained over 4% and corn rose 4.6%.


Economic
News

No major economic
news to report for the U.S. today.

John Lee

Associate Editor

johnl@tradingmarkets.com