Yen Continues to Fall on Global Strength

U.S. 10-year bonds fell moderately today, after a
report showed that producer prices rose more than expected last month.
Traders bought bonds this week as U.S. stocks took another hit on Tuesday, which
prompted safety buying in longer-term investments. Bonds usually rise on
weakness and fall on strength; weakness in equities has led to higher bond prices,
but today’s PPI numbers helped to move bonds back lower.

The yen fell against the dollar and the euro
today, as more traders re-entered carry trades, borrowing the yen to buy more
profitable assets elsewhere. The yen has been trading closely in-line with
the global equities market. The recent selloffs have been a positive for
yen strength, which has moved higher as speculation of global weakness and risk
has led to yen buying to cover other trades. The international currency
market has favored currencies backed by inflationary, positive-growth economies,
which puts Europe in the best light. Japan’s rate-hike prospects are still
unknown, while most traders are betting that the U.S. will hold rates this

Crude oil futures fell 1% after OPEC confirmed
that the group will not impose more output restrictions. OPEC is currently
keeping nearly 2 million barrels a day of crude oil off the global market, in an
attempt to stabilize prices after a +30% drop from record July highs.
Crude broke major support at 60 on Monday, and has continued falling since.
Natural gas fell about 2% on warm weather demand issues.

Gold futures rose about 0.7% on a positive PPI
report, which led investors to buy the metal as a hedge against inflation.
Gold usually trades inversely to the dollar and with oil, but lately, equities
action has dominated gold trading, as traders liquidate assets to raise cash for
protection. Copper rose over 5% on a positive industrial production report
from China, which is the world’s largest consumer of the metal.

Grains fell across the board today. Wheat
fell about 1.5%, corn dropped around 1.8% and soybeans fell about 0.3%.


U.S. producer
prices rose the most in 3 months last month.

New York and Philadelphia area manufacturing
dropped last month.

John Lee

Associate Editor