There is a great quote in this article--the high price of oil is directly related to the strength of the dollar. Urethane raw material costs are directly related to the price of a barrel of crude. A strong dollar is key to the U.S. economy, and the urethane economy. It increases our buying power. A strong dollar is related to the strength of our economy and the perception of future inflation of the currency. I think we're borrowing (and spending) too much today, which will lead to inflation and a weaker dollar. Anyway, enough of that, here's the quote and then the article:
By Oliver Biggadike and Margot Habiby
June 23 (Bloomberg) -- The dollar fell by the most in six weeks against the euro, sending oil, gasoline, gold and sugar higher, amid speculation the Federal Reserve will temper expectations for an interest-rate increase this year. Stocks and Treasuries gained.
Futures traders added to bets that Federal Open Market Committee will keep thebenchmark rate close to zero for the rest of this year to support a return to economic growth. The greenback extended declines as European Central Bank council member Axel Weber said policy makers have already used up their room to cut borrowing costs, adding to speculation the euro- area’s benchmark rate will stay higher than the rate in the U.S.
“The market’s a little worried about the FOMC,” said Meg Browne, a senior currency strategist at Brown Brothers Harriman & Co. in New York. “They’re asking the FOMC to provide them with conflicting views. One is to indicate when they’re exiting quantitative easing, but they’re also looking for the Fed to extend the Treasury purchases.”
The U.S. currency weakened as much as 1.75 percent to $1.4108 per euro, the most since May 8. It traded at $1.4077 at 3:39 p.m. in New York, from $1.3865 yesterday. The dollar dropped 0.7 percent to 95.22 yen, the third day of declines. Japan’s currency depreciated 0.9 percent to 134.07 per euro.
The Fed will probably keep its interest-rate target for overnight loans between banks close to zero and continue its $300 billion program of Treasury purchases, according to a Bloomberg News survey of 58 economists before tomorrow’s statement. Traders cut bets the Fed will raise interest rates by at least a quarter-percentage point to 0.5 percent by December, lowering the odds to 42 percent from 49 percent a week ago.
Treasuries Gain
Treasuries gained for a third day as the government’s sale of $40 billion of two-year notes drew higher-than-forecast demand and speculation about the Fed.
The 10-year note yield fell four basis points, or 0.04 percentage point, to 3.65 percent at 2:28 p.m. in New York, according to BGCantor Market Data. The two-year note’s yield declined four basis points to 1.10 percent.
Crude oil rose more than $1 a barrel, gasoline climbed for the first time in five days and gold and silver increased, as a weaker dollar bolstered the appeal of commodity futures as an alternative investment.
“The fundamentals don’t seem to matter,” said Bill O’Grady, the chief markets strategist at St. Louis-based Confluence Investment Management LLC, an investment advisory and management firm. “I can tell you what the oil market is going to do by just looking at the currency market.”
Oil Rises
Crude oil for August delivery climbed $1.74, or 2.6 percent, to settle at $69.24 a barrel at 2:42 p.m. on the New York Mercantile Exchange. Futures, up 55 percent this year, have declined 5.4 percent from a seven-month high of $73.23 reached on June 11.
Gasoline for July delivery increased 3.35 cents, or 1.8 percent, to $1.8932 a gallon in New York.
Gold futures for August delivery rose $3.30, or 0.4 percent, to $924.30 an ounce on the New York Mercantile Exchange’s Comex division. The contract earlier fell as much as 0.8 percent to the lowest since May 12.
Bullion for immediate delivery in London advanced $3.35, or 0.4 percent, to $926.05 an ounce at 7:25 p.m. local time.
Silver futures for July delivery rose 14 cents, or 1 percent, to $13.845 an ounce in New York. Silver for immediate delivery rose 14.5 cents, or 1.1 percent, to $13.88 an ounce at 7:24 p.m. in London.
Sugar jumped to the highest in almost three years on rising signs that a production deficit may extend into a second year and as the dollar weakened. Raw-sugar futures for October delivery rose 0.74 cent, or 4.6 percent, to 16.98 cents a pound on ICE Futures U.S. in New York. The price earlier reached 17 cents, the highest for a most-active contract since July 2006.
Equities Increase
U.S. stocks rose as higher oil and metal prices lifted commodity shares and the Treasury auction eased concern that record government borrowing will boost interest rates.
The Standard & Poor’s 500 Index added 0.2 percent to 895.10 at 4:16 p.m. in New York, rebounding from its steepest loss in two months. The Dow Jones Industrial Average fell 16.10 points, or 0.2 percent, to 8,322.91. The Nasdaq Composite Index lost 1.27 points to 1,764.92.
Today’s U.S. stock trading fell to 8.12 billion shares, among the lowest volume days of this year and 25 percent lower than the 2009 average of 10.9 billion tocks changing hands.
To contact the reporters on this story: Oliver Biggadike in New York atobiggadike@bloomberg.net; Margot Habiby in Dallas atmhabiby@bloomberg.net.
Last Updated: June 23, 2009 17:16 EDT
The oil-dollar relations the relationship between the dollar and oil prices is a tricky one. Rising oil prices and declining dollar values could indicate that inflation is on the wayip is a self-fulfilling prophecy (Inefficient Front his is because people are buying gold and oil as hedges against a weakening dollar, and also because a strengthening economy should increase the demand for oil. tiers)
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Posted by: Gold IRA | July 06, 2009 at 07:03 AM