Dollar Struggles to Bounce

By John Lee

U.S. 10-year Treasury bond prices fell today on factory orders data, but rallied back to close near flat for the day. Yesterday, a positive manufacturing report sent bonds lower, as traders bet on U.S. economic strength. Despite inflationary numbers today, bond prices could only move fractionally lower, echoing U.S. dollar struggles to fight off lows against the euro. Although the data was strong, traders are waiting on key inflationary and jobs reports to come at the end of the week.

The U.S. inched out some gains over the euro, pushing higher off of recent record lows; the dollar opened strongly, but gave up gains as the day went on. Today, a government report was released that showed U.S. factory orders grew more than expected in March. The dollar recently hit all-time lows against the European currency, but bounced yesterday on unexpected manufacturing growth. Today's factory order report helped to continue the dollar rebound. The dollar also rose against the yen, which has been struggling against most other currencies lately.

The Canadian dollar fell briefly against the U.S. dollar this morning after the factory orders report, but bounced back after a private labor report showed that more jobs were cut in April than initially thought. Despite the spotty track record of these types of private-sector report, the Canadian dollar rallied against the dollar, pushing towards recent highs. The Canadian dollar has been pushing rising against the U.S. dollar since about March.

Crude oil futures fell about 1% after an Energy Department report showed that crude stockpiles rose more than expected because refineries across the country have shut down for cleaning and repairs. Refineries usually shut down this time of year to gear up for high-demand summers, which leaves crude supplies to build on themselves until the refineries are up and running again. Crude has also been trading in relationship to geopolitical tensions in the Middle East. The recent Iran/UK hostage situation, and crude's rally last summer, both point to crude prices being under the influence of political pressures. Natural gas futures rose fractionally, as prices consolidated ahead of tomorrow's supply report.

Gold fell about 0.2% today, touching 1-month lows before rallying back a little. Gold fell on the dollar rebound against the euro. Gold usually trades inversely to the dollar and with oil; today, dollar strength dominated gold trading. Copper futures rose fractionally today, on growing U.S. factory orders.

Grains fell today. Corn dropped over 2%, wheat fell about 1.7% and soybeans fell about 1%.

Economic News
U.S factory orders grew 3.1% in march, compared to predictions of 2.2%.