Dollar Up, Gold Down on Fed Minutes

By John Lee

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