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Forex outlook:
The dollar edged up against the yen on Tuesday after a government report showed foreign investors bought a record amount of U.S. securities in May. The Dollar is trading around the levels of 1.3778 against the Euro ‘around the levels of 122.35 against the Yen and around the levels of 2.0460 against the sterling.
A slightly larger-than-expected advance in producer prices last month also provided mild support for the greenback, which helped to ease some concerns that the Federal Reserve will soon have to cut interest rates. However, the dollar failed to get much traction against the Euro or sterling. The latter pushed further above $2.04, a -26 year high, after UK inflation data reinforced expectations of another rate hike from the Bank of England.
"Inflation is still a concern and there is still interest from foreign investors to buy U.S. assets,'' said Christian Dupont, a senior currency trader at Societe Generale SA in Montreal. The reports provide ``some short-term support for the dollar.'' Federal Reserve Chairman Ben S. Bernanke may reiterate in his semi-annual testimony to Congress tomorrow that policy makers are focused on restraining inflation, suggesting the Fed won't lower its benchmark rate this year. U.S. economic growth will pick up to close to 3 percent by year-end, Federal Reserve Bank of Kansas City President Thomas Hoenig said today in a speech in Nebraska. ``Some elements'' of core inflation are backing off, he also said.
Investors' focus will now turn to Bernanke's testimony and his take on inflation as well as the release of consumer price data, due at 14:00 GMT Today. Economists are expecting the core consumer price index to have climbed 0.2 percent in June, above a 0.1 percent gain the prior month.
Gold: US. Gold edged higher on Tuesday, but dealers avoided big moves ahead of testimony by U.S. Federal Reserve Chairman Ben Bernanke later today. The metal has struggled to breach key technical levels after hitting a five-week high last week, but might get support from firm oil prices and the dollar, which stayed near record lows against the euro, analysts said. "The dollar is still the main driver of gold prices and there will be a set of important data points this week, which may influence the euro/dollar and hence gold," said Michael Widmer, research director at Calyon Corporate and Investment Bank. Gold future contract is trading around the levels of 665.50$ per once.
Crude Oil: U.S. crude oil futures ended lower on Tuesday as gasoline futures retreated for the fifth day in a row. News of U.S. refineries restarting units have eased concern about supply, spurring further selling of RBOB gasoline futures, which dropped to their lowest in nearly three months. Earlier, crude prices pushed above $75, with speculative money fueling early buying ahead of the expiration of options on front-month August crude. "Wide daily ranges can indicate a high level of uncertainty in the market," said Mike Fitzpatrick, vice president at Man Financial. Crude Oil contract is trading around the levels of 74.100$ per barrel.
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