Oil Slips, Yen Bounces Back

U.S. 10-year Treasury bonds continued to move
lower today, extending a nearly 3-week slide following hawkish wording in the
last Fed decision. Three weeks ago, the Fed held overnight rates at 5.25%,
emphasizing continued vigilance and monitoring of inflation. Since then, bonds
have fallen steadily on turn-around housing reports and positive consumer
confidence numbers. Fed minutes from the last meeting and U.S. GDP should give
bond traders more information to work with, when those reports come out later
this week.

The yen reversed early losses to gain
fractionally over the euro, and moderately over the dollar. Both the dollar
and the euro were trading higher than the yen through the morning, but a new
tax in China meant to temper the country’s stock market led to yen buying, as
traders covered the carry trade. The restrictive Chinese tax led investors to
feel that there will be less room for risky investments, which led traders to
buy back yen they had previously borrowed. The euro gave up all gains today
against the dollar to close fractionally changed. The U.S. dollar also
continued to make new lows against the Canadian dollar. The loonie has been
surging on the dollar since the beginning of April.

Crude oil
futures fell about
2.5% today, on speculation that gasoline and crude inventories will be able to
handle the jump in summertime demand. Crude prices typically rise during the
summer, which is typically a period of higher demand than normal. Also, a
strike by Nigerian oil workers ended over the weekend, which also alleviated
traders’ supply concerns. Natural gas futures fell 0.4% on similar sentiments
that supplies are adequate to handle summer demand.

Gold fell fractionally today, in line with the
euro. Gold initially shot higher on euro strength, as traders bought gold and
dumped the dollar. However, as the day went on, the dollar managed to scratch
back some gains, and gold fell accordingly. Copper futures were fractionally
changed, gaining back some losses from earlier in the day.

Grains were all lower today. Soybeans fell
1.9%, corn dropped 2.8% and wheat also fell 1.9%.


Economic
News

The NY Conference
Board consumer confidence index rose to 108, versus forecasts of 107.

John Lee

Associate Editor

johnl@tradingmarkets.com