Oil Slips, Yen Bounces Back

By John Lee

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.