Commodity prices rose modestly last week amid weakness in USD. Reuters/Jefferies CRB Index added +1.4% while USD Index plunged almost -2% to 76.6, the lowest close in a year. Commodities normally trade in opposite direction with the dollar. The generation low interest rate in the US (Fed funds rate: 0-0.25%) has caused massive selloff in USD. Against the euro, the greenback plunged for 4 out of 5 trading days and closed -1.9% lower at 1.457, the lowest level in 9 months, for the week. Against the pound, USD also slid -1.6% to 1.6655, a 1-month low, last week. There were 3 central bank meetings last week. All of the RBNZ, BOE and BOC left interest rates unchanged at 2.5%, 0.5% and 0.25% respectively during the meetings but policymakers indicated brighter economic outlooks for 2H09 and 2010. In the coming week, the BOJ and SNB will decide on rates. We believe both banks will leave policy rates unchanged at 0.1% and 0.25% respectively.
Crude Oil
After spiking to 72.9, crude oil tumbled to as low as 68.8. The October contract plunged -3.9% to settle at 69.12 Friday, leaving this week's gain to +1.2% only. The black gold's decline Friday was accompanied by the dollar's weakness and strong US economic data. These were in contrary to the usual inverse relationship between commodities and USD.....Read the entire article
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