Headlines: Dollar declined against major currencies
Main news:
- Sterling gained on speculation BOE will raise interest rates
- Crude oil fell below $60 after U.S. crude stockpiles increased
Forex outlook:
The dollar touched $1.2957 per euro, a five-month low on Wednesday and tumbled against the yen as a U.S. report showing an increase in jobless claims suggested the economy is cooling. The dollar dropped to 116.73 yen, from 117.92. The euro traded at 151.01 yen, from 151.46. Investors sold dollars overnight to pare risk within their portfolios ahead of holidays on Thursday in the U.S. and Japan. U.S. consumer sentiment index in November published by University of Michigan slipped to 92.1 from 93.6 against consensus forecast of 93.3. The softer-than-expected reading added to the dollar weakness. In addition, the economic advisors to President Bush yesterday anticipated the U.S. economic growth will slow in 2007 due to a weaker housing market forecast. All the dollar negative data has exaggerated the impact on the markets as thin trading volume ahead of Thanksgiving holiday.
Sterling rose the most in three months against the dollar to $1.9139, on speculation Bank of England policy makers will keep raising interest rates into next year after the release of minutes from the BOE earlier on Wednesday. Investors are predicting the BOE will lift the benchmark rate to 5.25 percent in February from the present 5 percent.
As today, U.S. and Japan markets are closed for the holiday. Investors are mainly focusing on the release of German GDP data for the third quarter, which expected to be 0.6 percent from 0.9 percent for the second quarter, indicating slower economic growth in Germany.
Gold: Gold futures for rose 0.05 percent to $635 an ounce, a second day gain as a slumping dollar boosted the appeal of the metal as an alternative investment against inflation. Gold pared its earlier gains as crude oil prices fell with a surprising rise in U.S. crude stockpiles.
Crude Oil: Crude oil fell 1.6 percent to $59.24 a barrel after the weekly EIA report showed that U.S. crude oil inventories jumped. Crude oil stockpiles rose 5.16 million barrels last week compared with a forecast for a 600,000 barrels increase, put inventories about 6 percent over last year. Kuwait’s oil minister said on Wednesday that OPEC would cut output again in December if prices deteriorated. He said a $55 - $60 price range was satisfactory.
