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Forex outlook:
The dollar hit a record low against the euro on Monday and more than 20-year lows versus sterling and the New Zealand dollar on worries that problems in the U.S. sub prime mortgage sector may trickle into the broader economy. The dollar is trading around the levels of 1.3825 against the Euro, around the levels of 121.10 against the Yen and around the levels of 2.0570 against the sterling.
The dollar slid to a record low of $1.3845 per Euro after Federal Reserve Chairman Ben S. Bernanke last week said there will be “significant'' losses on loans to homeowners with poor credit. “I expect the Euro to strengthen against the dollar,’ said Robert Rennie, chief currency strategist a Westpac Banking Corp. in Sydney. ”The first half of this week is all about sub prime loans. The data will highlight weakness in the housing market.''
The yen zigzagged, recovering from a record low hit against the Euro in early trading, and touched a six-week peak against the dollar of 120.80 yen on electronic trading platform EBS as some traders unwound risky carry trades. The yen had rallied on Friday, when a fall in U.S. equities dampened investors' appetite for risk, prompting unwinding carry trades, which involve selling low-yielding currencies such as the yen to invest in higher-yielding currencies and assets.
But traders said further gains may be difficult as investors continue to chase higher yields, and that the dollar remained well supported around the technically crucial 120.70 yen level. “If there's further risk reduction, we could see (the 120.70 yen level) taken out, but if not, we could see bets placed on dollar/yen again," said Sean McGoldrick, head of forex trading at Morgan Stanley in Tokyo. “Global risk appetite will determine where dollar/yen is going at the moment."
The New Zealand dollar climbed as high as 80.13 U.S. cents, its strongest level since the country floated the currency in 1985, as investors expect the Reserve Bank of New Zealand to lift its cash rate to 8.25 percent on Thursday.
Gold: US. Gold was mostly steady on Monday as the dollar fell to a record low against the euro and a six-week low against the yen, while Tokyo gold futures gave up earlier gains and fell. "The inverse correlation of spot gold and the dollar is in
place, and we are seeing traders buying on this decline in the value of the U.S. currency," said Koji Suzuki, a market analyst at Kazaka Commodity Co. Ltd. Gold often rises when the greenback falls, as the dollar-denominated metal becomes cheaper for traders overseas. Gold future contract is trading around the levels of 683.600$ per once.
Crude Oil: US. Crude Oil prices fell on Monday, on expectations of higher U.S. refinery production and after remarks by OPEC that it is ready to pump more oil if needed. The Organization of the Petroleum Exporting Countries is concerned about the potential impact of near-record oil prices on the world's economy, but has seen little sign that growth has been hit by higher energy costs, the group's president said on Sunday. OPEC stands ready to pump more oil if needed, but it is not clear whether the group will need to boost output before the end of the year, OPEC President and United Arab Emirates Energy. The Crude Oil future contract is trading around the levels of 75.40$ per barrel.
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