The euro and US dollar sorted out a few things last week, or more accurately, market sentiment did as the week ended with the European currency having its best week in nine months against the greenback.
Despite that, oil ended fairly steady at around $US91 a barrel, but gold fell a nasty $US26 an ounce.
Perhaps the currency readjustment put a cap on oil which on Thursday looked as though it wanted to charge to the $US100 a barrel mark and keep going.
Successful bond sales by Spain, Italy and Portugal helped swing sentiment in favour of the euro.
The euro advanced 3.7% last week to $US1.3388, from $US1.2907 on Friday, January 7.
It nudged $US1.3457 on Thursday, the highest level for a month.
The week’s gain was the biggest since May of last year, according to Bloomberg figures.
The euro appreciated 3.4% to 110.94 yen, from 107.32. The US dollar decreased much less against the yen, dropping by just 0.3% to 82.87 yen, from 83.15.
The Aussie dollar ended at 98.88 USc on Saturday morning in New York, down around half a per cent over the week.
In fact the swing around in sentiment in favour of the euro turned out to be the biggest influence on commodity markets by Friday’s close of trading on various markets.
If it continues it could spark a sell-off by investors holding profits in oil, gold, copper, grains and a host of other commodities, thanks to the run up in the past six months.
US 10 year bonds ended around 3.3%, up slightly on the day, but sharply lower over the past month.
Friday’s close on Nymex in New York saw oil little changed despite a rise in US industrial output that was more than forecast in December and moves by China moved to cool its economy.
Oil finished the week up 4% but was down 1.4% at one stage on Friday after the news from China spread.
Nymex crude for February delivery rose 14c to settle at $US91.54 a barrel.
Oil is now up 15% over the past year after being up 13% in 2010.
Chinese consumption of refined products is forecast to increase 4.8% this year after an 11% rise in 2010, based on estimates from the Paris-based International Energy Agency.
In London Brent crude for February settlement rose 59c, or 0.6%, to $US98.65 a barrel. Earlier, it touched $US99.20, the highest intraday price since October 1, 2008, the last date the North Sea grade traded above $US100 a barrel.
The February Brent contract expired on Friday and the March contract gained $US1.17, or 1.2%, to $US98.46 a barrel.
Gold futures lost more than $US26 an ounce Friday in New York, falling to their lowest closing level in almost eight weeks.
It was the second big fall for the month for gold.
Comex February gold futures fell $US26.50, or 1.9%, to settle at $US1,360.50 an ounce, the lowest closing level since November 22.
The 1.9% drop is the biggest single-day drop since January 4’s $US44.10 slide.
The contract, which posted a gain of $US1.20 in Thursday’s session, ended the week down $8.40, or 0.6%, and prices are down 4.3% year to date.
That’s not a solid start to the year with some forecasts posting a target of over $US1600 for the metal.
Comex March silver followed gold lower, closing down 94cs, or 3.2%, at $US28.32 an ounce, adding to Thursday’s 1% pullback.
But Comex March copper rose on Friday, adding 4c a pound to $US4.41 a pound, a reversal following a loss of 3c in the prior session.
The rise was despite the weakness in the US dollar.
The rise won’t last if the euro continues to remain firm.
LME three month copper hit a record of $US9,754 a tonne on January 4 (the day gold fell $US44.10 an ounce), after rising 30% last year.
