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Forex outlook:
The dollar fell to multiyear lows against higher-yielding currencies on Monday and remained near a record low versus the euro as investors braced for data expected to show declines in home construction and inflation.
Weakness in those reports would provide fresh incentives for dollar bears, who punished the greenback last week as a deepening housing slump and a decline in retail sales further dented the case for higher U.S. interest rates this year. "The dollar still seems to be trading off last week's toxic fumes," said Marc Chandler, senior currency strategist at Brown Brothers Harriman, referring to soft retail sales and agency downgrades to billions of dollars in risky mortgage debt.
The Euro was changing hands at $1.3780, just below its record high of $1.3813 hit Friday, while sterling hit a 26-year peak at $2.0405 before easing to $2.0368, still up 0.1 percent from late Friday.
Strong inflation data pushed the New Zealand dollar to its highest level against the greenback since being freely floated in 1985 while the Australian dollar hit an 18-year peak.
Investors will look for any signs of concern from Bernanke about trouble in the U.S. sub prime mortgage market or a shift in the Fed's focus from the core inflation rate to the higher headline figure, which includes energy and food costs. Bernanke "is probably going to stand by his view on inflation, but his comments on the sub prime meltdown may move the markets," said Mark Meadows, a currency strategist at Tempus Consulting in Washington. "In the end, what we are likely to get is a reminder that rates here are lower and that the Fed may actually be forced to cut them."
Crude Oil: U.S. crude oil futures were near unchanged in choppy trading on Monday afternoon, pressured from their early peak by falling gasoline futures and London
Brent futures slipping ahead of the August contract's expiration. On the New York Mercantile Exchange, August crude rose 22 cents, or 0.3 percent, to settle at $74.15 per barrel, trading from $73.63 to $74.50. The Organization of Petroleum Exporting Countries' July Monthly Oil Market report said world oil demand will grow moderately next year, while supply from non-OPEC producers will expand, reducing the need for OPEC crude. NYMEX crude oil speculators boosted net long positions to a record high in the week ended July 10, the Commodity Futures Trading Commission said Friday. Analysts also pointed to the U.S. dollar's weakness, at multi-year lows against higher-yielding currencies on Monday, as another supportive factor in a market where most producers are paid in dollars.
Gold: Speculation the Euro rally against the dollar will stall, reducing the appeal of the precious metal as an alternative investment. ``Gold is having trouble climbing higher,'' said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. ``Gold's move depends on the dollar and the dollar is overdone on the downside.'' Gold futures for August delivery fell $1, or 0.2 percent, to $666.30 an ounce on the Comex division of the New York Mercantile Exchange. `Dollar weakness is the main driver for gold,'' said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. ``Investors want to see the dollar get weaker.''
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