Dollar at Monthly Highs over Euro, Yen

By John Lee

U.S. 10-year Treasury bond prices fell to 3-month highs before bouncing back to close slightly up on the day. Bonds have been falling steadily since the Fed held rates and came out with slightly hawkish wording about 2 weeks ago. Bonds typically fall on positive economic news, and rise on weak news; traders have speculated that the recent wording hints that the Fed will not be cutting rates any time soon.

The U.S. dollar rose to the highest level in over a month against the euro, and to the highest levels in 3 months over the yen. The the dollar continued to gain momentum today after hawkish Fed comments 2 weeks ago; the Fed held rates, but promised to continue monitoring inflation vigilantly, leading traders to reduce bets that the Fed will cut rates any time soon. The euro recently hit record highs over the dollar, so this dollar momentum is helping to calm traders down a bit. Traders speculated that yen weakness against the dollar was due to a major resumption of the carry trade. Against the euro, the yen gained fractionally.

Crude oil rose just over 2% today, in anticipation of increased summer demand. U.S. refineries have stepped up gasoline production to meet summer demand, pulling more crude from reserves to create usable gas. Summer is usually a period of high demand for all types of energy use, and prices usually rise in line with the extra usage.

Gold futures rose fractionally today. Gold usually trades inversely to the dollar and with oil; today's oil gains led to gold buying, as traders hedged against the pressures of rising energy prices. Traders decided to ignore a strong dollar today, to instead worry about summer energy demands. Copper rose over 2% today, as global copper inventories sit at 7-month lows.

Grains all traded higher today. Soybeans rose about 1%, wheat gained 1.8% and corn rose 2.5%.

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