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Forex outlook:
U.S. stocks rose on Wednesday, helped by gains in energy shares, while the dollar
dropped on continued U.S. sub prime mortgage fears and bonds fell out of favor. The beaten-down financial sector also rebounded from some of Tuesday's losses after concerns about a widening sub prime crisis pulled indexes 1 percent lower.
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"Some people feel there was an overreaction to S&P's announcement about sub prime debt," said Michael Metz, chief investment strategist, with Oppenheimer & Co. in New York. Government bonds fell on Wednesday, partially reversing some of the previous session's gains related to sub prime worries. "It looks like Treasuries certainly continue to keep an eye on stocks, if not trade one for one with them at times," said Kim Rupert, managing director of global fixed-income analysis
The dollar fell, hitting a record low against the euro for a second day. It suffered from a two-pronged assault: the specter of widening sub prime problems and the recent drop in Treasury yields, which makes other currencies more attractive. "U.S. Treasury yields have come down and that has weighed on the dollar. The market is still focused on interest rates and in an environment where most G7 (central banks) are in a tightening mode, the Federal Reserve is on hold," said Ron Simpson, director of currency research, at Action Economics, in Tampa, Florida.
The dollar also swooned to a 26-year low against sterling, and a one-month trough against the yen.
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The Euro was up 0.12 percent at $1.3761 from a previous session close of $1.3745. Against the Japanese yen, the dollar was up 0.35 percent at 122.15 from a previous
session close of 121.73.
Crude Oil: U.S. crude oil futures steadied past midday on Wednesday as traders were factoring in a drawdown last week in crude supplies, the first in six weeks. "I would consider the data to be neutral to a little bearish. We did get a surprise draw in crude but the product data, especially on gasoline, look a little bearish," said Bill O'Grady, assistant director of market analysis at A.G. Edwards in St. Louis, Missouri. The August future contract on crude oil was traded around the levels of 72.550$ a barrel at 18:30 (GMT). OPEC President and United Arab Emirates Energy Minister Mohammed al-Hamli told reporters on Wednesday that the exporter group sees no need to raise output at the moment, but is ready to pump more oil when necessary.
Gold: The precious metal fell in New York on speculation the dollar will halt a slide against the Euro, eroding the appeal of the precious metal as an alternative investment. ``Gold is acting as a bellwether,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. ``It's saying the Euro is not sustainable at these levels. The euro's gain is an event-driven move as opposed to a long-term reevaluation.’ Gold futures for August delivery fell $2.30, or 0.4 percent, to $662.10 an ounce on the Comex division of the New York Mercantile Exchange. Historical charts show gold's rally may stall around $665, where some traders have orders to sell, analysts said. Gold last closed above $665 on June 7. It traded as high as $667.80 today.
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