Posts Tagged ‘US Dollar index’

Commodity Weekly Commentary 2nd – 6th August

Bullion counter hammered down last week as prices fell like nine pins after investors wind up their long positions in gold and silver. Gold slid nearly $100.0 from the historic record highs, recorded June 21 at $1265.30 an ounce, affected by traders reducing their stakes and investments in the SPDR Gold Trust, the world’s largest exchange-trade fund.

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The absence of fundamentals from Europe, led traders to turn to the US for signs of global recovery, but the disappointment came from US durable goods report which slumped in the month of June by 1.0 percent, compared with a revised -0.8%. Base metal pack extended their previous week gains as global inventory draw down and gains in the euro boosted the metals despite a surprise decline in U.S. orders for long-lasting
goods.

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Western world unwrought aluminium stocks fell to 1.192 million tonnes in June from a revised 1.306 million tonnes in May, industry data showed. Moreover, gains in equity market also supported the prices as investors anticipate robust demand in near future. In energy counter crude oil prices wiped out its previous week gains and just fell from the level of $80 after the U.S Energy department reported a surge in inventories in the US. However, crude oil prices managed tom conquer some part of the lost territory mainly on the back of the softer US dollar index.

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However, natural gas futures ended higher last week, backed by firmer cash prices and a government report
showing another light weekly inventory build despite ongoing concerns about too much supply.

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As regards agro commodity, the week gone by majorly known for profit booking at higher levels in many commodities. Traders preferred profit booking in most of the spices as they became overbought in the market. Cardamom futures caught the attention of traders as they traded in lower circuits throughout the week, supported by weak spot market.

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After trading in positive territory for many weeks, finally jeera, turmeric and pepper saw pause in the rally as stockiest released some stocks at higher levels. Good monsoon and improved sowing in producing area dragged down guar counter in both spot and future market.

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What surprised the market was the upside move oil seeds. R M seed, refined soya oil and crude palm oil witnessed nonstop four week rally on confident move in CBOT amid fall in dollar index.

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Maize futures ignored the positive sentiments of CBOT and moved down on profit booking. Additionally, soyabean saw good short covering. Good export demand supported mentha futures to recover from its week low. Weak sentiments in spot market continuously hammered the potato futures.

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DOLLAR INDEX “BASKET OF CURRENCIES”

The US Dollar Index (USDX) is an index (or measure) of the value of the United States dollar relative to a basket of foreign currencies. It is a leading benchmark for the international value of the US dollar and the world’s most widely recognized, publicly-traded currency index. The U.S. Dollar Index is the creation of the New York Board of Trade (NYBOT). It was established in 1973 for tracking the value of the USD against a basket of currencies, which, at that time, represented the largest trading partners of the United States. The baseline of 100.00 on the USDX was set at its launch in March 1973.

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Updated on………

USDX is updated whenever US Dollar markets open, which is from Sunday evening New York time (early Monday morning Asia time) for 24 hours a day to late Friday afternoon New York time.

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Composition

It is a weighted geometric mean of the dollar’s value

compared only with:

·Euro (EUR), 57.6% weight                                    

·Japanese yen (JPY), 13.6% weight

·Pound sterling (GBP), 11.9% weight

·Canadian dollar (CAD), 9.1% weight

·Swedish krona (SEK), 4.2% weight and

·Swiss franc (CHF) 3.6% weight.

The importance of the trade weighted average between the currencies represents a more realistic asset value of underlying commodities than the actively traded dollar.

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Monitoring

By using the Dollar Index, investors can take advantage of moves in the value of the US dollar relative to a basket of world currencies or can hedge their portfolio of assets against the risk of a move in the US dollar in a single transaction. The rise and fall of the US dollar is said to be responsible for many movements in stock and commodity markets. When it looks like the US dollar is getting strong then there is a common conclusion that it will leads to weaker commodity prices.

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A Weak Dollar Can Make Commodities More Profitable

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Gone are the days when the simple fundamentals of demand and supply were used to predict prices. As rules of the game have been modified, the long-term trends are sometimes defined trend of dollar index. The increasing presence of index investors in commodities markets precipitated a fundamental process of financialization amongst the commodities markets, through which commodity prices now become the resultant of spillover effects of dollar index. Rising dollar eventually produces lower commodity prices. A falling dollar has the exact opposite effect; it is bullish for commodities. Importantly, as long as the U.S. dollar index continues to trend lower commodity futures markets are likely to continue to see their prices trend generally higher.

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The price of all US Dollar denominated commodities, like gold, will change to reflect the fact that it will take fewer or more dollars to buy that commodity. So it’s quite possible, in fact it’s almost always the case that a portion of the change in the price of gold is really just a reflection of a change in the value of the US Dollar. Sometimes that portion is insignificant. But often the opposite is true where the entire change in the gold price is simply a mathematical recalculation of an ever-changing US Dollar value.

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Therefore, in order to determine commodity price trends, one needs to develop a comprehensive and holistic approach between U.S dollar index & commodities.

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Stay Tuned for More updates :)

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Coming ‘Diwali’ – Gold Prices Set to Reach Over, Rs 16,000 level :)

Gold prices are again ready for a good rally and is likely to reach over Rs 16,000 level before 'Diwali'.

Gold prices are again ready for a good rally and is likely to reach over Rs 16,000 level before 'Diwali'.

After taking a brief consolidation, gold prices are again ready for a good rally and is likely to reach over Rs 16,000 level before ‘Diwali’.

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According to experts, gold prices have declined for a short period last week as the precious metal dipped following a counter rally taken by the dollar.

However, the US dollar index has again started showing weakness and today dipped by 0.6 per cent at 76.54 level, which will be positive for the gold price, SMC Global’s Rajesh Jain said.

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He said gold is likely to reach 1,020 dollar an ounce (28.34 grams) level in the international markets before ‘Diwali’.

However, in the domestic market the rising trend is likely to be capped with strengthening of Rupee against the US dollar, he added.

In the domestic market the prices are likely to be slightly over Rs 16,000 per 10 grams level, Jain said.

He said, the Rupee will keep on strengthening as the equity markets are performing well, which will encourage the Foreign Institutional Investors (FIIs) to bring in more money.

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Today, the gold was trading at Rs 15,585 per 10 grams, while in the global markets it was at $1,001 an ounce.

Meanwhile, independent analysts have remarked that the bull run in gold will continue as the various monetary and fiscal stimulus programs have failed to boost the world economy, feeding through to a dis-inflationary conditions.

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The US dollar, which is considered a safe haven, softens due to the weakening economic condition.

As dollar declines, many investors and central banks continue to hold gold as their safe haven to protect themselves from unforeseen global economic shocks, boosting the demand for the yellow metal.

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WEEKLY MARKET OUTLOOK & NEWS CAPSULES :)

WEEKLY MARKET OUTLOOK

Market Outlook & News Round Up for the Week Gone By !

Market Outlook & News Round Up for the Week Gone By !

The trend of most world markets remains up.

However in coming days, domestic markets are likely to remain sideways with mostly a positive bias and its trajectory will hinge on FII inflows, external environment and also on the announcement made by G20 ministers that stimulus measures would continue until recovery is secured.

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Moreover Q2 results are just round the corner and there is optimism for results as advance tax collections registered a positive growth in the second quarter after witnessing a negative growth in the first quarter.

The US Dollar index movement last week kept all asset classes very volatile.

Nifty has support between 4750-4640 and Sensex between 16000-15500 levels.

As the markets are going higher, expect the volatility to increase.

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News Round Up

Economy

·Inflation further rose to 0.37 per cent for the week ended September 12, from 0.12 per cent in the previous week due to increasing prices of essential food items.

The wholesale price-based inflation stood at 12.42 per cent during the corresponding week a year ago.

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Capital Goods

·BHEL has bagged a Rs 365 crore order from the Nuclear Power Corporation of India Limited for supply of four steam generators for India’s second 700 MWe nuclear power station, being set up at Rajasthan Atomic Power Project, Kota.

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Automobile

·Mahindra & Mahindra (M&M), India’s largest tractor maker, is planning to consolidate its stake in Swaraj Engines, as part of a plan to expand the diesel engine business.

·Bajaj Auto Ltd is all set to launch the Kawasaki Ninja 250R motorcycle in India on October 5.

The Ninja 250R is considered to be an entry-level sports bike manufactured by Japanese two-wheeler maker Kawasaki.

The bike would be priced between Rs 1.50 lakh and Rs 2 lakh.

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Oil & Gas

·ONGC plans to invest nearly Rs 5,000 crore in appraisal of its oil and gas fields off the country’s east coast, where production is likely to start from mid-2010.

Tata Power, which is implementing the 4000 MW Mundra ultra mega power project, has said it will exceed the 2012 target by 800 MW.

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Retail

Future Group chief Kishore Biyani is looking to hive off hypermarket chain Big Bazaar and list it to unlock value as part of ambitious restructuring and growth plans to become a Rs 25,000-crore group in four years.

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MONEY MARKET & ECONOMIC INDICATORS

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