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Forex outlook:
The dollar hovered near a two-month high against the euro on Monday, holding on to gains made late last week when the benchmark U.S. Treasury yield jumped to its highest level in around a year. The U.S. currency floated within range of a 4 1/2-year high against the yen, having clawed back from losses posted early last week, after U.S. share prices recovered from a sell-off thanks to a mild rebound in the Treasury market on Friday. As markets in the United States and around the world calm down after investors dumped both stocks and bonds earlier last week on concerns about rising rates, analysts said the market would warm up to riskier, yen-selling trades, which would support the dollar. "If you look at risk appetite for the dollar at the moment, it's unlikely that last week's dollar selling will continue," said Junya Tanase, a forex strategist at JPMorgan Chase Bank. The euro edged down 0.15 percent to $1.3350 closing in on a two-month low around $1.3320 touched on Friday.
The dollar steadied around 121.60 yen, On Friday, it climbed to around 121.85 yen, boosted by a surge in the 10-year Treasury yield to 5.25 percent -- an 11-month high and matching the Federal Reserve's official funds rate. That helped to pull the dollar away from a three-week low of 120.75 yen hit earlier on Friday and put the currency back on course towards the psychologically key level of 122.20 yen, which would be the highest since December 2002. Traders brushed off revised data on Monday that showed Japan's economy expanded by an expected 0.8 percent in January-March from the previous quarter, up from an initial estimate of 0.6 percent.
The single European currency slipped 0.15 percent to 162.50 yen as the yen inched up broadly against higher-yielding currencies following heavy losses last week. But analysts said support for the yen due to investors unwinding carry trades, in which the Japanese currency is used to buy overseas assets offering higher yields, was unlikely to last as calmer markets were likely to crank up the appetite for such strategies.
Gold: Cash gold rose on Monday as bargain hunters lifted the metal from its lowest level in nearly three months that was hit on Friday. Koji Suzuki, a market analyst at Kazaka Commodity Co. Ltd., said he remained bullish on his long-term gold outlook. "Gold is likely to hover around the support-level of $650 for the time being," Suzuki said. He said investors had used last week's sharp rise in U.S. Treasury bond yields as an excuse to pocket profits. U.S. Treasury bond yields reached or topped 5 percent across the board last week, the first time the yield curve was at or above that threshold since July. U.S. gold futures closed lower on Friday, pressured by a resurgent dollar.
Crude Oil: Oil prices edged higher on Monday, as dealers saw a buying opportunity after a sharp slide, with OPEC producers maintaining supply curbs and worries remaining over U.S. summer gasoline supplies. "It's a light correction after such a decline -- I'm not confident that the drop-off has been stopped," said Ken Hasegawa at Himiwari CX in Tokyo. "But the oil market is supported by fundamentals." Top oil exporter Saudi Arabia has told its Asian lifters that it will keep supplies steady in July versus the month before at around 10 percent below full contracted volumes, showing no signs of attempting to soften oil prices by pumping extra barrels. Oil traders will be watching for any further OPEC signals from Iran's Oil Minister Kazem Vaziri-Hamaneh, who said in Kuala Lumpur on Monday the country's oil output is expected to rise to 5.3 million barrels per day (2004) in 2014, from 4.3 million bpd currently. OPEC President Mohammed al-Hamli said on Thursday oil supplies were sufficient and there was no need for an emergency meeting. Consumers have been urging the group to produce more oil to lower prices.
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