Treasury

Last Update: 1/6/2009 10:31:03 AM Good Morning! The Dollar slipped against the Yen Today, paring sharp gains made the previous day on expectations that a planned U.S. stimulus package would help the faltering economy. The Euro hovered close to a three-week low against the Dollar on speculation that interest rates in the Euro zone will continue to be lowered after data showed slowing inflation in Spain and Italy. The Dollar came under selling pressure as investors were hesitant to build Dollar long positions further while a proposed U.S. economic stimulus package remains in the planning stages. The U.S. currency hit a nearly one-month high against the Yen on Monday as investors cheered the plans which include up to $310 billion in tax cuts. The Dollar fell 0.4 percent from late New York trade on Monday to 93.13 Yen. The U.S. currency had risen as high as 93.59 Yen on trading platform EBS in U.S. trade, its highest since early December. The U.S. currency tumbled to near 87 Yen in mid-December, its lowest in more than 13 years, after drastic interest rate cuts by the Federal Reserve. Some analysts said hopes for the U.S. stimulus package were the sole driver behind the Dollars recent recovery -- hopes that have yet to be borne out by an improvement in the economy. The Euro faced selling pressure on a growing view that the European Central Bank will keep lowering interest rates, which would reduce the interest rate gap between the Euro zone and the United States. The Euro declined 0.3 percent to $1.3598 after falling as low as $1.3546 on EBS on Monday, its lowest since mid-December. Against the Yen, the Euro dropped 0.6 percent to 126.63 Yen. Data on Monday showed that Spanish inflation slowed to a decade low and Italys annual inflation slowed to a 14-month trough. ECB Vice President Lucas Papademos said on Sunday that more rate cuts may be warranted to shield the euro zone from recession. Investors were looking ahead to U.S. economic indicators including the Institute for Supply Managements non-manufacturing index for December and housing market data for November later today. The U.S. Federal Reserve will also release the minutes from its December meeting.   STOCKS  Japans Nikkei average rose 0.3 percent today, buoyed by exporters such as Canon Inc on a weaker yen and hopes for economic stimulus steps by the U.S. administration taking office later this month. Toyota Motor Corp gained despite a more than 30 percent plunge in its U.S. auto sales for December. Hit by a sharp deterioration in global demand, the carmaker said it would halt production at all of its domestic plants for a total of 11 days in February and March. Japanese stocks started the year on an upbeat note, gaining over 2 percent the previous day after a panic-ridden 2008 in which the benchmark Nikkei marked its worst year ever with a 42 percent tumble. Optimism seems to have returned among investors on expectations for economic measures by U.S. President-elect Barack Obama, market analysts said, with Japanese stocks receiving additional help from a softer Yen. The Nikkei had already gained 4 percent in December helped by those expectations, after it booked its worst monthly drop ever in October amid the deterioration of the global economy. U.S. stocks fell on Monday as investors booked profits after last weeks run-up, while concerns about slowing cell phone sales hit shares of the biggest telecommunications companies. Dow components Verizon Communications Inc and AT&T stumbled after Bernstein Research downgraded both companies, saying the stocks have come too far, too fast as it forecast slower wireless growth and worsening land-line performance. Financial stocks also slumped after Deutsche Bank cut its earnings forecast on 16 large commercial banks, including JPMorgan Chase & Co, another Dow component. JPMorgan fell nearly 7 percent. Stocks had closed out a holiday-shortened week with a more than 6 percent gain as investors bet a recovery was on the horizon after the worst year since the Great Depression.   COMMODITY  Gold extended losses early today, slipping half a percent following Mondays drop of nearly two percent on dollar weakness and worries about physical demand from India, the worlds largest gold consumer. The U.S. Dollar edged higher against the Euro at $1.3592, holding near Mondays three-week high versus the single currency. He added that the risks appeared weighted towards a stronger Dollar and gold prices could slip another 15 percent or more in the next three months. Gold traded $3.90 lower at $855.00 an ounce, from New Yorks notional close on Monday, when it dipped to $843.50, its lowest in over a week. But not all analysts were looking for the Dollar rally to continue. Worries about the ailing international economy in the first half of 2009 would generate some safe haven demand for bullion, but slowing physical demand from India was a concern. Gold imports by India, the worlds largest buyer of the metal, fell 81 percent in December, and were down 47 percent in 2008 as high prices and a slowing economy dented demand. Oil prices ticked down 12 cents or 0.25 percent to $48.69 a barrel, supported by geopolitical worries in the Middle East and a dispute between Russia and Ukraine over gas pricing. Oil prices have risen from around $35 a barrel since Israel launched its Gaza offensive on Dec. 27, heightening fears of possible disruptions of crude supplies from the Middle East. Wish you a good day ahead! Saudi Riyal Market Dollar/Riyal traded around 3.7490/3.7540 and the Saudi cash market is fairly liquid on short  and long term dates. The one-week SAR is quoted around 0.90%, and the USD/SAR swap market kept the same levels with small interest to take any position.  One-year swap trades at  +40/+60.