Gold Falls for Fourth Day on Equity Rally; Silver Prices Tumble

Feb. 26 (Bloomberg) -- Gold fell in New York for a fourth straight day, the longest slide in a month, on speculation equities will rebound, reducing the appeal of the precious metal as an alternative investment. Silver sank the most in 12 weeks.

The Standard & Poor’s 500 Index gained as much as 1.9 percent after dropping 8.4 percent from Feb. 12 through yesterday. Stocks rallied on President Barack Obama’s proposal to add as much as $750 billion to bank bailout funds. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, remained unchanged for a fourth straight day after rising 4.4 percent last week to a record 1,029 metric tons.

“The news isn’t that great but what’s changed over the last couple of days is details from the administration,” said Tom Hartmann, a commodity analyst at AltaVest Worldwide Trading Inc. in Mission Viejo, California. “That might give equity markets a little more confidence. There isn’t a lot right now that can bring in a new wave of buying for gold.”

Gold futures for April delivery fell $23.60, or 2.4 percent, to $942.60 an ounce on the Comex division of the New York Mercantile Exchange. The last time gold fell for four straight sessions was Jan. 12 through Jan. 15. The metal is still up 6.6 percent this year.

The budget plan sent to Congress today forecasts spending of $3.55 trillion in the 2010 fiscal year, which begins Oct. 1, with the deficit narrowing to $1.17 trillion from $1.75 trillion projected for this year.

Should the rally in equities be sustained, investors may begin shifting money into stocks from gold, some analysts said.

Susceptible to Equities

“Gold will be susceptible to the direction of equities,” said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.

Gold rose 6.4 percent last week when the S&P Index dropped 6.9 percent. Investment demand helped drive the price of gold to $1,007.70 on Feb. 20, the highest for a most-active contract since March 18. Gold reached a record $1,033.90 on March 17.

Investors may return should gold fall below $920, AltaVest’s Hartmann said.

“The public has been buying gold very steadily in ETFs and coins and that seems to have petered out,” Hartmann said. “A lot of buyers are waiting for a better price before coming back into the market.”

Silver futures for May delivery fell 93.5 cents, or 6.7 percent, to $12.975 an ounce in New York, the biggest percentage decline for a most-active contract since Dec. 1. The metal, up 28 percent this year at the end of last week, still has gained 15 percent since Dec. 31.

Silver ‘Hit Harder’

“Silver has been hit harder than gold simply because it has rallied more this year,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, who favors silver to gold. Silver fell 24 percent last year when gold rallied 5.5 percent.

Platinum futures for April delivery slipped $7, or 0.7 percent, to $1,052.10 an ounce on Nymex. Palladium futures for June delivery fell $3.05, or 1.5 percent, to $198.15 an ounce. Platinum is up 12 percent this year while palladium has gained 5 percent.

Oil Rises, Gasoline Surges to 3-Month High, on Fuel Demand Gain

Feb. 26 (Bloomberg) -- Crude oil rose more than $2 a barrel and gasoline surged to a three-month high after U.S. stockpiles of the motor fuel dropped.

Declining pump prices have spurred demand and cut inventories. Gasoline supplies fell 3.32 million barrels last week, the biggest reduction since September, an Energy Department report showed yesterday. Crude-oil imports dropped as OPEC members cut production in an effort to increase prices.

“The most import factor behind this three-day rally is the improving gasoline fundamentals,” said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. “Inventories are dropping and demand is coming back at an impressive rate.”

Crude oil for April delivery increased $2.72, or 6.4 percent, to $45.22 a barrel at 2:43 p.m. on the New York Mercantile Exchange, the highest settlement since Jan. 26. Prices are up 8.5 percent this month and 1.4 percent this year.

Gasoline futures for March delivery increased 13.37 cents, or 11 percent, to end the session at $1.3004 a gallon in New York, the highest since Nov. 13. It was the biggest one-day increase since Dec. 31.

“Prices are very low compared to where they were six months ago, said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “The improvement in gasoline demand is being driven more by lower prices than any economic recovery.”

The average U.S. pump price for regular gasoline dropped 0.9 cent to $1.882 a gallon yesterday, AAA, the nation’s largest motorist organization, said on its Web site. Prices have declined 54 percent from the record $4.114 a gallon reached in July.

Gasoline Consumption

U.S. gasoline consumption averaged 9 million barrels a day over the past four weeks, up 1.7 percent from a year earlier, yesterday’s Energy Department report showed. The department measures shipments from refineries, pipelines and terminals to calculate demand.

“This is a gasoline-led rally,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, energy consultant. “There’s been a lot of hoopla about the improvement in gasoline demand. There’s a difference between implied demand, which is measured in the report, and actual consumption.”

Crude oil supplies rose 717,000 barrels to 351.3 million barrels last week, the department said yesterday. Inventories were forecast to increase by 1.25 million barrels, according to the median of responses in a Bloomberg News survey. In January stockpiles increased by a weekly average of 5.46 million barrels.

Lower Imports

Imports dropped 0.3 percent to 8.77 million barrels a day, the lowest since the week ended Sept. 18, when ports were shut in the aftermath of hurricanes Gustav and Ike, the report showed.

Supplies of distillate fuel, a category that includes heating oil and diesel, rose 882,000 barrels to 141.6 million barrels, the Energy Department said.

Heating oil for March delivery rose 5.64 cents, or 4.6 percent, to $1.2941 a gallon in New York, the highest settlement since Feb. 13. Heating oil ended the session lower than gasoline for the first time since August 2007.

OPEC agreed on Dec. 17 to reduce oil supplies starting Jan. 1 to bolster prices. The 11 members of the Organization of Petroleum Exporting Countries with quotas, all except Iraq, cut output 3.8 percent to 25.3 million barrels a day in February, consultant PetroLogistics Ltd. of Geneva said Feb. 23. Members have a quota of 24.845 million barrels a day.

Reduced Shipments

OPEC will reduce crude-oil shipments by 1.7 percent in the month ending March 14, according to Oil Movements. Members will load 22.8 million barrels a day in the period, down from 23.2 million a day in the month ended Feb. 14, the Halifax, England- based based tanker tracker said in a report today.

Iran, Venezuela and Iraq said last week that OPEC is prepared to cut production again when it meets on March 15. Ecuadorian Oil and Mines Minister Derlis Palacios said today that no additional reduction was needed.

“U.S. crude-oil supplies aren’t building like they were, and it appears that the OPEC cuts are translating into lower U.S. import levels,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York.

Abu Dhabi National Oil Co. will reduce exports of crude oil in April. The United Arab Emirates state-owned producer will ship 17 percent less of Upper Zakum crude oil than contracted, following a 15 percent reduction for March, the company said in a faxed statement today. Deliveries of Umm Shaif, Lower Zakum and Murban crude will be cut by 15 percent.

Brent crude oil for April settlement increased $2.22, or 5 percent, to end the session at $46.51 a barrel on London’s ICE Futures Europe exchange, the highest since Jan. 26.

Job Cuts

Companies are slashing jobs and orders at a faster pace in the U.S., reports today showed. Orders for durable goods fell 5.2 percent in January, more than twice as much as forecast, Commerce Department figures showed in Washington. The Labor Department said 667,000 Americans filed initial applications for jobless benefits last week, up from 631,000 the prior week.

“I think we are seeing investors desperately latch onto anything bullish,” said Stephen Schork, president of Schork Group Inc. of Villanova, Pennsylvania. “We are looking forward to more economic pain in the months ahead and that will lead to weaker demand.”

Crude oil volume in electronic trading on the exchange was 486,256 contracts as of 3:04 p.m. in New York. Volume totaled 641,172 contracts yesterday, 22 percent higher than the average over the past three months. Open interest was 1.19 million contracts yesterday. The exchange has a one-business-day delay in reporting open interest and full volume data.

FCPO Commentary on 27/02/09

FCPO 3rd month May Futures contract closed marginally RM4 lower at RM1890 as compare to previous trading session with 5513 lots traded in the market. CPO price seems trade lower during the trading session as soybean oil and crude oil electronic trading traded lower despite closed firm during overnight trading.

Technically, CPO price was traded within a downtrend channel in the 15 min chart. We expect CPO price would trade higher in the coming trading session as flag formation was seen in 15min CPO price chart. Traders were advice to hold long position in the coming trading session while be cautious around resistance levels at RM1905 and RM1945 region. Supports were seen RM1880 and RM1830 levels.

FKLI Commentary on 27/02/09

FKLI February futures contract rebound 3.5 points higher to close at 897 as compare to previous trading session with total 5470 lots traded in the market. FKLI was traded higher due to Dow Jones futures electronic trading despite KLSE and other regional indices were traded weak.

Technically, FLKI seems temporary resisted around 898.5 regions; 61.8% Fibonacci figures. We expect FKLI will trade lower in the coming trading session as FKLI was seen break down from hourly chart trend line. Traders were advice to hold short position in the coming trading session around resistance levels at 898 and 905 regions. Supports were seen at 888 and 875.5 regions.

India soyoil up on firm crude prices; soybean drops

MUMBAI, Feb 26 (Reuters) - India soyoil futures rose in early trades Thursday, helped by a rise in Malaysian palm oil and as firm crude oil prices led to expectations of possible demand from the bio fuel industry, analysts said.

Prices were also be supported by the spot market where stockists are buying to meet festive demand next month.

Soybean prices eased on profit-taking after having risen nearly 7 percent in the last two sessions and on expectations that supplies from south America will soon flush international markets, analysts said.

Rapeseed prices edged up on expectations that mills would buy to meet their annual requirements.

At 10:34 a.m., April soybean NSBJ9 on the National Commodity and Derivatives Exchange fell 0.32 percent to 2,331 rupees per 100 kg. April soyoil NSOJ9 was up 0.66 percent at 445.55 rupees per 10 kg.

June rapeseed futures NRSM9 edged up 0.17 percent to 449 rupees per 20 kg.

At 10:36 a.m., benchmark May palm oil KPOc3 on the Bursa Malaysia Derivatives Exchange was up 0.37 percent at 1,901 ringgit a tonne. (Reporting by Abhishek Shanker; editing by Rohini Ananthan)

India soyoil seen up on firm crude; rapeseed may ease

MUMBAI, Feb 26 (Reuters) - India soyoil futures may rise at open on Thursday, helped by firm Malaysian palm oil and as firm crude oil prices led to expectations of possible demand from the bio fuel industry, analysts said.

Prices may also be supported by the spot market where stockists are buying to meet festive demand next month.

Rapeseed prices may ease as arrivals start to peak in largest producer Rajasthan and on expectations of a good crop of about 6.5 million tonnes this year.

Soybean futures may also ease after rising sharply early this week.

At 9:20 a.m., benchmark May palm oil KPOc3 on the Bursa Malaysia Derivatives Exchange was up 1.21 percent at 1,917 ringgit a tonne.

April soybean NSBJ9 on the National Commodity and Derivatives Exchange rose 2.48 percent to 2,338.5 rupees per 100 kg in the previous session, while April soyoil NSOJ9 prices ended up 1.46 percent to 442.65 rupees per 10 kg. (Reporting by Abhishek Shanker; editing by Rohini Ananthan)

Indian soyoil up on Malaysian palm, spot demand

MUMBAI, Feb 25 (Reuters) - Indian soyoil futures rose on Wednesday, lifted by good physical buying ahead of some festivals next month and gains in Malaysian palm oil.

At 3:13 p.m. (0943 GMT), the March futures NSOH9 contract was up 1.51 percent at 451.10 rupees ($9) per 10 kg on the National Commodity and Derivatives Exchange. The April contract NSOJ9 was up 1.55 percent at 443.05 rupees.

Prices in the spot market in the central city of Indore, a hub for soyoil trade, rose 0.91 percent to 44,500 rupees per tonne.

Demand in the spot market has picked up as buyers anticipate a spike in prices ahead of some religious festivals in the second week of March, a trader in Indore said.

Firm prices of Malaysian palm oil and U.S. soyoil also supported Indian markets.

Benchmark May palm oil futures KPOc3 on Bursa Malaysia Derivatives Exchange were up 1.2 percent at 1,894 ringgit a tonne at 0955 GMT.

Chicago Board of Trade July soyoil futures BON9 rose 0.83 percent to 31.40 cents per pound during the electronic trade on Wednesday. ($1=49.9 rupees) (Reporting by Abhishek Shanker; Editing by John Mair)

Gold Most Favored Investment This Year, World Gold Council Says

Feb. 25 (Bloomberg) -- Gold is the most favored investment this year ahead of investment-grade bonds and other assets, according to a survey of investment advisers, the producer-funded World Gold Council said.

About 60 percent of the 31 advisers surveyed in Europe expect investors to take fewer risks this year compared with 2008, while about 30 percent expect investors to be less risk averse, the London-based council said today in a report. Almost 60 percent expect better market conditions this year.

More than $28 trillion has been erased from the value of global equities in the past year as credit losses and writedowns reached $1.1 trillion. Gold, trading at $970.60 an ounce in London at 3 p.m. today, reached an 11-month high of $1,006.29 on Feb. 20. Demand for a store of value has pushed bullion assets in exchange-traded funds to all-time highs.

“In today’s market, safety and stability are at the forefront of investors’ minds,” Marcus Grubb, the council’s managing director of investment research and marketing, said in the report. “Further de-risking” will likely continue this year because of “uncertainty over the financial landscape, combined with future inflationary fears resulting from interest rate cuts and quantitative easing by central banks.”

The majority of respondents are more concerned with counterparty risk and volatility than lower-yielding investments, the council said.

The following is a table of preference for 10 investments. A figure of 1 is most favored and 10 is least favored.



Asset Average Ranking

Gold 3.97
Investment Grade Credit 4.13
Commodity Basket 4.71
Cash 4.74
Alternatives 5.39
Equities 5.42
Oil 5.65
Gilts 6.32
Non-investment Grade Credit 6.45
Property 6.84

Oil Rises as U.S. Gasoline Supplies Decline, Demand Increases

Feb. 25 (Bloomberg) -- Crude oil rose more than $2 a barrel in New York to the highest close in four weeks after a government report showed that U.S. gasoline supplies dropped as demand strengthened and refineries cut operating rates.

Gasoline stockpiles declined 3.32 million barrels to 215.3 million barrels last week, the Energy Department said today. Consumption of the motor fuel averaged 9 million barrels a day over the past four weeks, up 1.7 percent from the same period last year, as pump prices fell.

“Crude oil is up because gasoline demand is increasing,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. “A lot of refiners shut units for maintenance because the demand wasn’t there. With demand rising they may have to change some of their plans.”

Crude oil for April delivery rose $2.54, or 6.4 percent, to $42.50 a barrel at 2:42 p.m. on the New York Mercantile Exchange, the highest settlement since Jan. 26. Prices are down 4.7 percent this year.

Gasoline futures for March delivery increased 8.3 cents, or 7.7 percent, to settle at $1.1667 a gallon in New York, the highest since Feb. 13.

The average U.S. pump price for regular gasoline dropped 0.9 cent to $1.891 a gallon yesterday, AAA, the nation’s largest motorist organization, said on its Web site. Prices have declined 54 percent from the record $4.114 a gallon reached in July.

‘A Hopeful Sign’

“Gasoline prices are down, making it more affordable, so people are buying more,” Sieminski said. “This is a hopeful sign for the economy as a whole. Lower prices may encourage people to make other purchases, helping the economy.”

Analysts were split over whether the Energy Department’s supply report would show a gasoline inventory increase or decline, according to the median of 15 estimates in a Bloomberg News survey.

Refineries operated at 81.4 percent of capacity, down 0.9 percentage point from the week before, the Energy Department said. Plants are running at the lowest rate since the week ended Oct. 3, when the Gulf Coast was recovering from hurricanes Gustav and Ike. Rates were forecast to drop by 0.1 percentage point.

Companies often shut refinery units for maintenance in January and February as attention shifts away from heating oil and before gasoline use rises.

“Refiners may be going a little far with their maintenance programs this year,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “This could lead to product-supply issues down the road.”

Inventories of crude oil rose 717,000 barrels to 351.3 million barrels, the department said. Supplies were forecast to increase by 1.25 million barrels.

Cushing Supplies

Oil supplies at Cushing, Oklahoma, where New York-traded West Texas Intermediate crude is delivered, declined 358,000 barrels to 34.5 million barrels, the report showed. Stockpiles in the week ended Feb. 6 were the highest since at least April 2004, when the department began keeping records for the location.

Traders who purchased oil futures for March delivery today can sell contracts for delivery in December at a higher price, a condition known as contango.

The price of oil for delivery in May is $2.16 a barrel higher than for April, down from a $2.80 premium yesterday. December futures are up $8.29 from the front month, versus a $9.86 premium yesterday.

“The draw at Cushing should support the prompt Nymex contract and as a result the contango will come in a bit,” Mueller said. “Speculation that OPEC production cuts will limit supply later this year has been a factor behind the contango.”

Output Cut

The 11 members of the Organization of Petroleum Exporting Countries with quotas, all except Iraq, reduced output 3.8 percent to 25.3 million barrels a day in February, consultant PetroLogistics Ltd. of Geneva said Feb. 23. Members have a quota of 24.845 million barrels a day.

Iran, Venezuela and Iraq said last week that OPEC is prepared to cut production again when it meets on March 15. OPEC officials, including Botelho de Vasconcelos, who is also Angola’s oil minister, have said oil prices around $75 a barrel are needed to fund investment.

“I do not believe we will see $75 a barrel oil anytime soon, which is what many of them say they want,” Fadel Gheit, director of oil and gas research at Oppenheimer & Co. in New York, said on Bloomberg Television. “They can say as much as they want, the fact of the matter is we will not get it anytime soon.”

Brent crude oil for April settlement increased $1.79, or 4.2 percent, to end the session at $44.29 a barrel on London’s ICE Futures Europe exchange.

Distillate Inventories

U.S. supplies of distillate fuel, a category that includes heating oil and diesel, rose 882,000 barrels to 141.6 million, the first increase in five weeks, the Energy Department said.

Heating oil for March delivery rose 2.95 cents, or 2.4 percent, to $1.2377 a gallon in New York, the highest settlement since Feb. 13.

Crude oil volume in electronic trading on the exchange was 558,115 contracts as of 3:14 p.m. in New York. Volume totaled 472,862 contracts yesterday, 9.4 percent lower than the average over the past three months. Open interest was 1.18 million contracts yesterday. The exchange has a one-business-day delay in reporting open interest and full volume data.

FCPO Commentary on 26/02/09

FCPO 3rd month May Futures contract rose RM23 higher to close at RM1894 as compare to previous trading session with 7076 lots traded in the market. CPO price was traded higher during trading session due to crude oil and soybean oil overnight strong closing.

Technically, CPO seems break up from the trading range of RM1830 and RM1880 levels after 5 consecutive trading days. We expect CPO price would continue to trade higher in the coming trading session provided support levels at RM1880 and RM1830 were not violated. Traders were advice to hold long position in the coming trading session while be cautious around resistance levels at RM1910 and RM1945 regions.

FKLI Commentary on 26/02/09

FKLI February futures contract rebound 6 points higher to close at 893.5 as compare to previous trading session with total 7610 lots traded in the market. FKLI was traded sideways despite wild movement from regional and Dow Jones futures electronic trading.

Technically, FKLI seem traded sideways within 888 and 894 ranges in the hourly chart. FKLI seems break up from sideways trading range and forms a Doji in the daily chart. We expect FKLI would trade lower in the coming trading session after 3 – consecutive rebound trading session. Traders were advice continue to hold short position in the coming trading session provided resistance levels at 897 and 914 were not violated. Supports were seen at 888 and 873.5 levels.

Breaking News-RTRS-UPDATE 1-Indonesia keeps March palm oil export tax at zero

JAKARTA, Feb 25 (Reuters) - Indonesia maintained its zero percent palm oil export tax in March, while cutting the crude palm oil base export prices to $480 a tonne, from $482 a tonne in February, a trade ministry official said on Wednesday.

Indian soyoil up on Argentina protests, spot

MUMBAI, Feb 24 (Reuters) - Indian soyoil futures rose on Tuesday as spot demand improved and a farmers' strike in Argentina triggered short covering.

A firm soybean market also supported soyoil prices.

By 3:22 p.m. (0952 GMT), the March futures NSOH9 contract was up 1.21 percent at 441.90 rupees ($8.8) per 10 kg on the National Commodity and Derivatives Exchange.

The April contract had risen 1.19 percent to 433.5 rupees after falling more than 6 percent in last 10 sessions.

Prices in the spot market in the western city of Mumbai rose 0.71 percent to 425 rupees per 10 kg.

Farmers in Argentina, the world's third largest soybean producer, are protesting against a tax on soy exports and other government agricultural policies. The strike is due to end at midday on Tuesday. [ID:nN23355289]

India imports more than 40 percent of its edible oil in the form of soyoil from Argentina and Brazil and palm oil from Malaysian and Indonesia.

"Soyoil market is tracking gains in soybean and strike in Argentina, but the gains will be short-term as edible oil from winter-sown oilseeds hit the market," a trader in central city of Indore, a hub for soyoil trade, said.

Weakness in Malaysian palm oil weighed on the markets.

Benchmark May palm oil futures KPOc3 on Bursa Malaysia Derivatives Exchange were down 0.64 percent at 1,868 ringgit a tonne at 0952 GMT.

($1=49.9 rupees) (Reporting by Abhishek Shanker)

Gold Falls as Demand Ebbs After Rally to $1,000; Silver Drops

Feb. 24 (Bloomberg) -- Gold fell the most in six weeks as demand ebbed following a rally last week that sent the precious metal above $1,000 an ounce. Silver also declined.

Before sliding today, gold’s seven-day relative-strength index had topped 70 since Feb. 17, a signal that prices may drop in the short term. For the first time since Jan. 28, investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, was unchanged for three straight sessions. The assets rose 4.4 percent last week to a record 1,029 metric tons.

“If the ETF inflows do not start again within a day or two, some traders may attempt to test the downside in gold,” John Reade, a metals strategist at UBS AG in London, said today in a note.

Gold futures for April delivery fell $25.50, or 2.6 percent, to $969.50 an ounce on the New York Mercantile Exchange’s Comex division, the biggest decline for a most-active contract since Jan. 12. Yesterday, the price dropped 0.7 percent.

The metal still has gained 9.6 percent this year. Last week, the price reached $1,007.70, the highest since March 18.

Silver futures for March delivery dropped 45.5 cents, or 3.1 percent, to $13.995 an ounce. The metal is still up 24 percent this year.

Investments in ETFs have helped drive gold and silver prices up this year. Gold and silver were the best performers in the Reuters/Jefferies CRB Index of 19 commodities this year until today.

ETF Growth

Assets in the SPDR Gold Trust have grown 32 percent in 2009 and investment in Barclays Plc’s IShares Silver Trust, the biggest ETF backed by silver, increased 20 percent this year to a record 8,180.5 metric tons yesterday.

“Players had little to choose from as a motivator to load up on more bullion,” said Jon Nadler, an analyst at Kitco Inc. in Montreal. “The gold ETF is reflecting the same wait-and-see attitude.”

Still, a drop in prices may encourage investors seeking a haven from financial turmoil to buy precious metals, said Tom Pawlicki, an analyst at MF Global Ltd. in Chicago.

Federal Reserve Chairman Ben S. Bernanke said the U.S. recession may last into 2010 unless policy makers can stabilize the financial system.

Gold rose 6.4 percent last week as the Standard & Poor’s 500 Index fell 6.9 percent. Stocks in Asia and Europe retreated today. U.S. stocks advanced after six days of declines.

“Gold and other precious metals should continue to receive inflows of investment due to their ongoing outperformance of other asset classes,” Pawlicki said. “Support will continue to come from disappointment in efforts to stem the financial crisis, and the weakness in the stock market that has resulted.”

Oil Rises for First Time in Three Days as U.S. Equities Rebound

Feb. 24 (Bloomberg) -- Crude oil rose for the first time in three days as the U.S. stock market advanced, signaling that fuel use in the world’s biggest energy-consuming country may rebound.

Oil climbed 4 percent as equities rebounded after the Standard & Poor’s 500 Index sank 3.5 percent yesterday. Prices have dropped 73 percent from a record $147.27 on July 11 as the U.S., Europe and Japan face a simultaneous recession that’s cut fuel demand. A government report tomorrow may show that supplies gained last week, a Bloomberg News survey showed.

“The equity markets are a reflection of what people feel about the economy, and that impacts demand,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York. “The oil market is finely poised right now, and the key determinant of its direction is the demand outlook.”

Crude oil for April delivery rose $1.52 to settle at $39.96 a barrel at 2:59 p.m. on the New York Mercantile Exchange. Prices, which are down 10 percent this year, have dropped 60 percent from a year ago.

The Dow Jones Industrial Average increased 236.16 points, or 3.3 percent, to 7,350.94. The Standard & Poor’s 500 Index rose 29.81 points, or 4 percent, to 773.14.

“The oil and equity markets are following similar paths at the moment, which is unusual, but it makes a lot of sense at this time,” Eagles said.

The Organization of Petroleum Exporting Countries, the U.S. Energy Department and International Energy Agency cut their demand forecasts this month because of the economic contraction.

Inventories

Inventories probably gained 1.25 million barrels last week, according to the median of 14 analyst responses in a Bloomberg News survey. Supplies fell 138,000 barrels in the week ended Feb. 13, the first decline so far this year. The Energy Department will release its weekly report tomorrow at 10:30 a.m. in Washington.

The industry-funded American Petroleum Institute said supplies rose 341,000 barrels to 346.2 million barrels a day last week, in a report that was released at 4:30 p.m. in Washington.

The price of oil for delivery in May is $2.80 a barrel higher than for April. December futures are $9.86 higher than the front-month contract. This structure, in which the future month’s price is higher than the one before it, is known as contango and allows buyers to profit from hoarding oil.

Volume in electronic trading on the exchange was 412,500 contracts as of 3:09 p.m. in New York. Volume totaled 505,445 contracts yesterday, 3 percent lower than the average over the past three months. Open interest was 1.17 million contracts yesterday. The exchange has a one-business-day delay in reporting open interest and full volume data.

Cushing Supplies

Crude oil supplies at Cushing, Oklahoma, where New York- traded West Texas Intermediate crude is delivered, declined 52,000 barrels to 34.9 million barrels in the week ended Feb. 13, according to the Energy Department. Inventories in the week ended Feb. 6 were the highest since at least April 2004, when the department began keeping records for the location.

The high inventories at Cushing have depressed the West Texas price so that Brent crude oil traded in London is at a premium to the U.S. grade.

Brent crude oil for April settlement increased $1.51, or 3.7 percent, to end the day at $42.50 a barrel on London’s ICE Futures Europe exchange.

The 11 OPEC members with quotas, all except Iraq, reduced output 3.8 percent to 25.3 million barrels a day in February, consultant PetroLogistics Ltd. of Geneva said yesterday. That’s down from 26.3 million barrels in January, according to Conrad Gerber, founder of PetroLogistics. Members have a quota of 24.845 million barrels a day.

Supply Availability

“OPEC does not want prices to stay here and is willing to do something about it,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “They have reduced the availability of supply in the marketplace.”

Iran, Venezuela and Iraq said last week that OPEC is prepared to cut production again when it meets on March 15.

Analysts were split over whether gasoline supplies rose or fell, according to the Bloomberg News survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, dropped 1.2 million barrels.

Gasoline futures for March delivery increased 4.04 cents, or 3.9 percent, to settle at $1.0837 a gallon in New York. Heating oil for March delivery rose 3.28 cents, or 2.8 percent, to end the session at $1.2082 a gallon.

The average U.S. pump price for regular gasoline dropped 1 cent to $1.90 a gallon yesterday, AAA, the nation’s largest motorist organization, said on its Web site yesterday. Prices have declined 54 percent from the record $4.114 a gallon reached in July.

Yen Trades Near Three-Month Low as Economy Erodes Haven Role

Feb. 25 (Bloomberg) -- The yen traded near the weakest level against the dollar since November as Japan’s deteriorating economy eroded the currency’s appeal as a refuge from the global financial crisis.

The yen weakened yesterday beyond 96 versus the greenback as Japanese Prime Minister Taro Aso’s approval rating slumped and economists forecast Japan’s trade deficit increased last month to the widest level since at least 1986. The dollar dropped versus the euro as U.S. stocks rose from the lowest level in 12 years, reducing demand for the world’s reserve currency as a haven.

“We’ve seen the first signs of the yen’s strength coming to an end,” said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada’s biggest bank by assets. “Exports are under severe pressure.”

Japan’s currency traded at 96.64 per dollar at 7:01 a.m. in Tokyo, after sliding 2.1 percent yesterday and touching 96.93, the weakest level since Nov. 25. The yen was at 124.12 per euro after losing 3.4 percent and reaching 124.76, the weakest level since Jan. 9. The dollar traded at $1.2843 per euro following a 1.2 percent decline.

Ukraine’s hryvnia tumbled yesterday to a record of 9.2900 per dollar after Moody’s Investors Service said it may cut the nation’s credit rating because political disputes are hurting policy makers’ attempts to spur the economy.

Chile’s peso was the biggest gainer versus the dollar among major Latin American currencies yesterday, appreciating 3.2 percent to 603.40. The government said it will sell $50 million a day to convert some of its foreign assets into local currency to fund an economic stimulus plan.

U.S. Stocks Advance

The dollar dropped against the euro as the Standard & Poor’s 500 Index gained 4 percent after Federal Reserve Chairman Ben S. Bernanke told the Senate Banking Committee that U.S. banks need not be nationalized. The Dow Jones Industrial Average rose 3.3 percent.

Japan’s currency declined against all of the major currencies yesterday, losing 4.5 percent to 9.81 against South Africa’s rand and 3.4 percent to 6.54 versus the Mexican peso. The yen declined against the euro for a fifth straight day yesterday, the longest stretch since September.

The dollar-yen correlation with the Nikkei-225 Stock Average was minus 0.89 since Feb. 16, when a report showed Japan’s economy shrank at an annual 12.7 percent pace in the last quarter, the most since the 1974 oil shock. The relationship was positive 0.86 in the 12 months to Feb. 16. A reading of 1 would mean the two moved in lockstep.

‘Broken Down’

“The correlation has broken down because the drivers are now changing,” said Ian Stannard, a foreign-exchange strategist at BNP Paribas SA in London. “Dollar-yen in particular will continue to move quite sharply higher.”

The yen was the best performer in 2008 among the 171 currencies tracked by Bloomberg, climbing 23 percent versus the dollar and 29 percent against the euro. The gains undermined overseas sales for exporters including Toyota Motor Corp., Honda Motor Co. and Sony Corp. The yen will trade at 96 against the dollar at the end of 2009, according to the median forecast of 47 economists surveyed by Bloomberg.

Japan’s trade deficit widened to 1.2 trillion yen ($12.4 billion) in January from 320.7 billion yen in the prior month, according to the median forecast of 29 economists surveyed by Bloomberg News. The report from the Finance Ministry is due later today. A government report on Feb. 27 will show core consumer prices probably dropped for the first time in more than a year, economists in a separate survey forecast.

Approval Rating

Prime Minister Aso’s approval rating fell 6.8 percentage points from last month to 11.4 percent, while his disapproval rating rose 8.8 points to 80.2 percent, according to the Sankei survey, conducted with Fuji News Network. The governing Liberal Democratic Party has the support of 21.9 percent, compared with 25.9 percent for the opposition Democratic Party of Japan.

The relationship between stocks and the yen has been in place since the beginning of 2005, when the so-called carry trade was established, according to Derek Halpenny, European head of global currency research in London at Bank of Tokyo Mitsubishi Ltd., which said at the end of January that the yen would start to weaken.

“From recent price action, I think it’s a fairly good bet that the carry has been unwound, and that will certainly weaken the risk-yen correlation,” Halpenny said.

In the carry trade, investors buy higher-yielding currencies with lower-yielding ones. The yen gained almost 30 percent against the dollar from June 22, 2007, to Dec. 17, 2008, as the carry trade all but evaporated.

FKLI Commentary on 25/02/09

FKLI February futures contract rebound marginally 3.5 points higher to close 887.5 as compare to previous trading session with total 12317 lots traded in the market. FKLI rebound firm despite most of the regional indices were traded weak.

Technically, FKLI seems temporary rebound 78.6% Fibonacci figure at 890 regions; below the hourly trend line. We expect FKLI would trade lower in the coming trading session provided if resistance levels at 894 and 899 were not violated. Traders were advice to hold short position in the coming trading session while be cautious around support levels at 873.5 and 867.

FCPO Commentary on 25/02/09

FCPO 3rd month May Futures contract retrace marginally RM9 lower to close at RM1871 as compare to previous trading session with 8782 lots traded in the market. Another day CPO price was traded sideways while waiting for fresh market leads.

Technically, CPO price seems traded sideways within RM1830 and RM1880 range in the hourly chart while trying to breach 100 – day and 80 – day moving average resistance levels. We expect CPO price would trade higher in the coming trading session provided support levels at RM1830 and RM1810 were violated. Traders were advice to hold long position in the coming trading while be cautious around resistance levels at RM1880 and RM1930 regions.

Yen Falls to 12-Week Low Against Dollar as Haven Allure Weakens

Feb. 24 (Bloomberg) -- The yen fell to a 12-week low against the dollar before government reports this week that may show the world’s second-largest economy is deteriorating, reducing the allure of the currency.

Japan’s currency also approached the weakest level in a month versus the euro after Prime Minister Taro Aso’s approval rating slumped 6.8 percentage points to 11.4 percent in a survey published today by Sankei newspaper. The dollar declined versus the euro on speculation a U.S. report today will show home prices fell at the fastest pace on record in December.

“The yen appears to be losing some of its safe-haven status,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Japan’s economic and political situation is poor. The yen is weakening.”

Japan’s currency fell to 95.21 per dollar as of 7:49 a.m. in London from 94.61 yesterday in New York. It touched 95.35 today, the weakest level since Dec. 1. The yen has dropped 8.4 percent since hitting a 13-year high on Jan. 21. Japan’s currency declined to 121.29 per euro from 120.10 yesterday, when it reached 121.93, the lowest since Jan. 19.

The dollar dropped to $1.2739 per euro from $1.2694 yesterday. It fell to $1.4533 against the British pound from $1.4487 and traded at 1.1640 Swiss francs from 1.1686. Against the pound, the euro was at 87.66 pence from 87.57 pence.

Asian Currencies

Asian currencies declined against the dollar, with the South Korean won approaching an 11-year low, after a slide in U.S. stocks spurred investors to cut holdings of emerging-market assets. The won lost 1.8 percent to 1,516.30, according to Seoul Money Brokerage Services Ltd. The Nikkei 225 Stock Average fell 1.5 percent after the Standard & Poor’s 500 Index slipped yesterday to the lowest close since 1997.

“The global rout in equities is expected to see a more supported dollar against Asian currencies,” Emmanuel Ng, an economist at Oversea-Chinese Banking Corp. in Singapore, wrote in a research note today.

Japan’s currency declined for a fifth day against the euro, the longest stretch since September, before a Ministry of Finance report tomorrow that may show the trade deficit widened to 1.2 trillion yen ($12.7 billion) in January, according to a Bloomberg News survey. That would be the largest in 23 years.

Japan’s core consumer prices probably fell for the first time in more than a year in January, economists surveyed by Bloomberg predict a government report will show on Feb. 27.

The yen also dropped as the relationship between the currency and equity markets has weakened, according to National Australia Bank Ltd., Australia’s biggest lender by assets.

‘Breakdown’ in Correlation

“A breakdown in the correlation between the yen and stock markets and the likely longer-term nature of the deterioration in Japan’s current-account surplus suggest that the currency is losing its ‘safe haven’ appeal,” John Kyriakopoulos, head of currency strategy at National Australia Bank in Sydney, wrote in a research note today.

The dollar-yen now moves in the opposite direction to the Nikkei 225, compared with the same direction about a week ago, according to data compiled by Bloomberg. The correlation between the two has been minus 0.89 since Feb. 16 when Japan’s gross domestic product report was released. The relationship was positive 0.86 in the 12 months to Feb. 16. A reading of 1 would mean the two moved in lockstep.

Demand for the yen as a haven also declined after U.S. financial regulators said yesterday they will begin examinations this week to determine if banks have enough capital. Citigroup Inc. and Bank of America Corp. jumped on the announcement even as the S&P 500 closed at the lowest level in 12 years.

‘Help Stabilize’

“The injection of additional capital into banks should gradually help stabilize the financial system in the U.S., which is saddled with a bad-debt problem,” said Masashi Hashimoto, a Tokyo-based foreign-exchange analyst at Bank of Tokyo Mitsubishi UFJ Ltd., an unit of Japan’s biggest banking group. “This will support the dollar” against the yen, he said.

The dollar dropped against the euro on concern an industry report today will show U.S. home prices fell the most since year-on-year records began in 2001.

The S&P/Case-Schiller index of house prices in 20 cities declined 18.3 percent in December from a year earlier, according to a Bloomberg News survey of economists before the report due at 9 a.m. in Washington.

“U.S. economic data due this week may underscore the unabated decline of the housing market, which should bode ill for the dollar,” said Shinya Furue, an economist in Tokyo at Norinchukin Research Institute Ltd. “If the housing data are weak enough, the dollar may fall back to between 90 yen and 92 yen.”

Business Confidence

The ICE’s Dollar Index, which tracks the greenback against six major trading partners including the euro and the yen, dropped 0.2 percent to 87.075. It reached 88.254 on Feb. 18, the highest level since Nov. 21.

Federal Reserve Chairman Ben S. Bernanke is scheduled to deliver his semi-annual monetary policy report before the Senate Banking Committee today and before the House Financial Services Committee tomorrow.

Demand for the euro may wane on speculation a German report will show business confidence held near the lowest level in more than 26 years, backing the case for the European Central Bank to lower interest rates.

The Ifo Institute report today will show the business climate index held at 83 in February, close to the weakest since November 1982, a separate Bloomberg survey showed. The Ifo will release the report at 10 a.m. in Munich.

“Given mounting economic challenges in the eurozone and neighboring countries, the European Central Bank is unlikely to be able to signal an end to the rate cutting cycle,” said Yousuke Hosokawa, a senior foreign-exchange dealer at Chuo Mitsui Trust and Banking Co. in Tokyo. “This may potentially be a euro negative.”

Yen Approaches Month-Low Against Euro as It Loses Haven Allure

Feb. 24 (Bloomberg) -- The yen fell to near a one-month low against the euro on speculation a weakening Japanese economy damped demand for the currency as a haven.

Japan’s currency also traded close to a three-month low against the dollar before a government report tomorrow that economists say will show the trade deficit widened to the most since at least 1986.

“The yen appears to be losing some of its safe-haven status,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Japan’s economic and political situation is poor, which may be behind this.”

The yen declined to 120.28 euro as of 10:38 a.m. in Tokyo from 120.10 late yesterday in New York, when it touched 121.93, the lowest level since Jan. 19. Japan’s currency traded at 94.68 per dollar from 94.61 yesterday, when it reached 94.95, the weakest level since Dec. 1.

Gold Falls After Reaching 11-Month High in N.Y.; Silver Drops

Feb. 23 (Bloomberg) -- Gold fell in New York as some investors sold the metal after a rally last week to the highest price since March. Silver also declined.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund, or ETF, backed by bullion, rose 4.4 percent last week to a record 1,029 metric tons. Gold’s seven-day relative strength index topped 80 on Feb. 20, when the metal touched $1,007.70 an ounce, the highest since March 18. Analysts say a reading above 70 often signals a price drop in the short term.

“That $1,000 level stopped gold,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Gold is overbought. This isn’t the end of the bull run. You’d rather see a slower, steadier build.”

Gold futures for April delivery fell $7.20, or 0.7 percent, to $995 an ounce on the Comex division of the New York Mercantile Exchange. The price is still up 13 percent this year.

Silver futures for March delivery fell 4 cents, or 0.3 percent, to $14.45 an ounce. The metal has climbed 28 percent this year.

Gold prices dropped as much as 2.6 percent earlier as the Standard & Poor’s 500 Index rose as much as 1 percent before declining. The index sank 6.9 percent last week when gold gained 6.4 percent.

“We continue to be wary of a bear-market rally in equities as profit-taking could see gold correct,” John Reade, a UBS AG metals strategist in London, said today in a report. “We merely highlight the risks that large, long-gold positions on the Comex pose to investors here.”

Long Positions

As of Feb. 17, speculative long positions, or bets prices will rise, increased 1 percent to outnumber short positions by 165,921 contracts on Comex, the Commodity Futures Trading Commission said last week in Washington. That’s the highest level since July 29.

Still, a pullback in prices may be a buying opportunity, some investors said.

“Gold is about the only commodity that’s going higher,” FuturePath’s Lesh said. “There’s a lack of confidence in paper assets. Right now, the gold ETF is getting a lot of capital that would normally go to a bank or equities. There’s a perception that gold is going to hold its value.”

Gold will rise to $1,050 within a month, up from a previous forecast of $900, Reade of UBS said. The metal will trade around $1,100 in three months, he said. Silver will trade at $15.75 within a month and $17 within three months, according to Reade.

Oil Falls on Signs Demand May Drop Faster Than OPEC Cuts Supply

Feb. 23 (Bloomberg) -- Crude oil fell 4 percent on speculation demand will decline faster than the Organization of Petroleum Exporting Countries is curbing supply.

OPEC, the U.S. Energy Department and the International Energy Agency cut their demand forecasts this month because of the recession. U.S. stocks fell for a sixth day, a sign that fuel consumption may drop further. The 11 members with quotas, all except Iraq, reduced output 3.8 percent to 25.3 million barrels a day in February, consultant PetroLogistics Ltd. of Geneva said.

“As long as there’s a recession, it’s hard to see oil prices rising,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “OPEC’s doing a credible job, but their power is limited.”

Crude oil for April delivery declined $1.59 to settle at $38.44 a barrel at 2:46 p.m. on the New York Mercantile Exchange. Prices are down 14 percent this year. Oil declined in nine of the last 11 trading sessions.

Supply from 11 OPEC members will average 25.3 million barrels a day in February, down from 26.3 million barrels in January, Conrad Gerber, founder of PetroLogistics, said in an interview. Members have a quota of 24.845 million barrels a day.

Iran, Venezuela and Iraq said last week that OPEC is prepared to cut production again when it meets on March 15. The group agreed Dec. 17 on output constraints that would reduce supplies in January by 2.2 million barrels a day from December levels. That followed pledges to remove 2 million barrels a day in the fourth quarter of last year.

Price Balance

“The $40 area is the zone of equilibrium for this market,” said John Kilduff, senior vice president of energy at MF Global Inc. in New York. “The market is delicately balanced. You aren’t going to see a sustained rally as long as the economic outlook is negative, despite signs that OPEC is complying with its quota.”

The price of oil for delivery in May is $2.83 a barrel higher than for March. December futures are $10.19 higher than the front-month contract. This structure, in which the future month’s price is higher than the one before it, is known as contango and allows buyers to profit from hoarding oil.

Volume in electronic trading on the exchange was 440,371 contracts as of 3:05 p.m. in New York. Volume totaled 447,535 contracts on Feb. 20, 14 percent lower than the average over the past three months. Open interest was 1.17 million contracts Feb. 20. The exchange has a one-business-day delay in reporting open interest and full volume data.

Cushing Stockpile

Crude oil supplies at Cushing, Oklahoma, where New York- traded West Texas Intermediate crude is delivered, declined 52,000 barrels to 34.9 million barrels in the week ended Feb. 13, an Energy Department report on Feb. 19 showed. Inventories in the week ended Feb. 6 were the highest since at least April 2004, when the department began keeping records for the location.

“The front month is being depressed because of supplies at Cushing,” said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta.

U.S. equities dropped, sending the Standard & Poor’s 500 Index below its lowest close in 12 years, on concern that the deepening recession will erode earnings at technology companies offset the government’s pledge to provide more capital to struggling banks. The S&P 500 lost 3.5 percent to 743.33, the lowest close since April 11, 1997.

“Energy prices are moving on signals from the equity market,” Kilduff said.

Obama Budget

President Barack Obama will make a televised address to a joint session of Congress tomorrow. An overview of Obama’s budget proposal for the 2010 fiscal year, which begins Oct. 1, will be released Feb. 26.

“We are waiting for a compelling story that will result in a price direction,” Edmonds said. “OPEC is being fairly diligent in meeting its production target but people are focused on the economy. We need to have a better idea of what the recovery plan will look like.”

U.S. crude-oil stockpiles increased 1 million barrels last week, according to the median of nine analyst estimates before an Energy Department report this week. Analysts were split over whether gasoline supplies rose or declined. Stockpiles of distillate fuel, a category that includes heating oil and diesel, dropped 1.5 million barrels, according to the survey.

The department is scheduled to release its weekly report on Feb. 25 at 10:30 a.m. in Washington.

Gasoline futures for March delivery declined 3.13 cents, or 2.9 percent, to settle at $1.0433 a gallon in New York. Heating oil for March delivery dropped 2.13 cents, or 1.8 percent, to end the session at $1.1754 a gallon.

The average U.S. pump price for regular gasoline fell 0.7 cents to $1.91 a gallon, AAA, the nation’s largest motorist organization, said on its Web site today. Prices have declined 54 percent from the record $4.114 a gallon reached on July 17.

Brent crude oil for April settlement declined 90 cents, or 2.1 percent, to end the session at $40.99 a barrel on London’s ICE Futures Europe exchange.

Yen Declines as U.S. Pledge on Banks Reduces Demand for Haven

Feb. 23 (Bloomberg) -- The yen fell to the lowest level against the dollar since December and dropped versus the other major currencies as U.S. financial regulators pledged to inject more funds into banks, reducing demand for a haven.

The currency may extend its decline as credit-default swaps gauging Japanese government bond risk surge. The pound gained for a third day against the dollar as a person familiar with the matter said Royal Bank of Scotland Group Plc plans to cut costs by more than 1 billion pounds ($1.44 billion).

“There is an improvement in risk appetite today, and that’s filtered though in terms of dollar strength versus the yen,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The yen is weaker off the back of improved sentiment on banking stocks and the potential for some government involvement.”

The dollar rose 1.2 percent to 94.49 yen at 4:09 p.m. in New York, from 93.35 on Feb. 20, and traded as high as 94.95, the strongest level since Dec. 1. The euro increased 0.3 percent to 120.04 yen from 119.68, touching 121.93, the highest level since Jan. 19. The euro fell 1 percent to $1.2702 from $1.2826 at the end of last week.

The Polish zloty, Hungarian forint and Czech koruna rallied against the euro after eastern European central banks pledged to coordinate support for their currencies. The zloty gained as much as 4 percent to 4.5636 per euro, the biggest intraday advance in almost four months, after Polish central bank governor Slawomir Skrzypek said “an intensification of information exchange and coordination of action” will help regional central banks support their currencies.

Forint’s Advance

The forint climbed 1.9 percent to 298.25 per euro, and the koruna increased 1.2 percent to 28.49.

The three currencies tumbled last week as Moody’s Investors Service said ratings of banks with subsidiaries in eastern Europe may be cut as economies in the region deteriorate.

The yen fell 1.7 percent to 9.38 versus South Africa’s rand and 1.4 percent to 136.63 against the pound after the U.S. Treasury and other regulators said in a joint statement in Washington today that the government “stands firmly behind the banking system during this period of financial strain,” encouraging Japanese investors to halt repatriation of assets.

U.S. financial regulators will begin examinations this week to determine if banks have enough capital, according to the statement. Citigroup Inc. and Bank of America Corp. jumped on the announcement even as the Standard & Poor’s 500 Index closed at its lowest level in 12 years.

‘Yen Selling’

“Yen selling is the main theme,” said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. “The market is buying back bank stocks.”

Yanagihara said some investors also sold the yen in the wake of the resignation of Japanese Finance Minister Shoichi Nakagawa, who quit last week after slurring his words and nodding off during a Feb. 14 press conference at the Group of Seven meeting in Rome.

“After the resignation of the finance minister, things are still in chaos,” Yanagihara said. “That’s absolutely putting pressure on the yen.”

Japan’s currency was headed for a 4.9 percent drop versus the dollar in February, its worst month since April 2004. A government report showed Japan is sinking deeper into recession, with fourth-quarter gross domestic product contracting at an annual rate of 12.7 percent, the most since the 1974 oil shock.

The cost of protecting Japanese government bonds more than doubled to 1.21 percent of the face value on Feb. 17, from 0.49 percent on Jan. 30, according to CMA Datavision.

Investor Concern

Since January, the correlation between the yen and the cost of protecting against a default on Japanese bonds swung to negative 43 percent, showing investor concerns are increasing. The yen and cost of credit-default swaps moved in tandem 88 percent of the time last year.

Traders are starting to use the speculative contracts blamed for fueling Wall Street’s meltdown last year to measure currency strength.

The difference in yield between two-year Treasury notes and Japanese securities with comparable maturity was 0.57 percentage point today, compared with 0.38 percentage point on Jan. 1, making the U.S. assets more attractive.

“The dollar-yen seems to be following the yield spread,” said Paresh Upadhyaya, who helps manage $50 billion in currency assets as a senior vice president at Putnam Investments LLC in Boston. “The recent yen weakness isn’t the start of a new trend. The yen is likely to strengthen in the second quarter because of continued uncertainty and risk aversion.”

Sterling rose as much as 1.6 percent to $1.4662, the highest level since Feb. 10, after a person familiar with the situation said RBS will segregate toxic assets in a new unit as it prepares for a government insurance program to be announced this week. The pound gained 1.2 percent to 87.80 pence per euro.

The euro erased gains against the dollar after European Central Bank President Jean-Claude Trichet said in a speech to European securities regulators in Paris today that credit flows in the euro region are starting to decline.

FKLI Commentary on 24/02/09

FKLI February futures contract rebound another 6 points higher to close 884 as compare to previous trading session with total 8104 lots traded in the market. FKLI was traded higher during the trading session mainly due to Dow Jones futures electronic and regional strong rebound.

Technically, FKLI manage to rebound 50% Fibonacci retracement level at 894 region after manage to breach support levels at 879 region. We expect FKLI would trade lower in the coming trading session provided resistance levels at 903 and 914 were not violated. Traders were advice to hold short position in the coming trading while be cautious around support level at 878 and 873 regions.

FCPO Commentary on 24/02/09

FCPO 3rd month May Futures contract rebound RM40 higher to close at RM1875 as compare to previous trading session with 6863 lots traded in the market. CPO price was traded sideways for another trading session despite of crude oil and soybean oil electronic trading wild movement during trading session.

Technically, CPO price seems traded sideways within RM1830 and RM1880 range in the hourly chart while trying to breach 100 – day and 80 – day moving average resistance levels. We expect CPO price would trade higher in the coming trading session provided support levels at RM1830 and RM1810 were violated. Traders were advice to hold long position in the coming trading while be cautious around resistance levels at RM1880 and RM1930 regions.

FOREX-Dollar eases vs yen, bank nerves keep market wary

TOKYO, Feb 23 (Reuters) - The dollar eased against the yen on Monday, extending losses made on concerns about possible nationalisation of U.S. banks, though Asian traders hesitated to push it much further due to the previous session's high volatility.

The dollar fell more than 1 percent against the yen on Friday and the euro gained as investors used nervousness about the banking sector to abandon bets that the U.S. currency's recent run higher would continue.

The White House said it did not favour nationalising U.S. banks as a tool for repairing the damaged financial system, and regulators were expected to launch "stress tests" soon to determine which banks should get bigger capital cushions. [ID:nN21257393]

But analysts said that uncertainty would keep markets jumpy.

"Asian markets have pretty much opened up with an air of cautiousness following the very volatile price action on Friday," said Sue Trinh, senior currency strategist at RBC in Sydney.

"They're a little bit confused at what appears to be a tentative breakdown of the correlation that everyone has come to know with the U.S. dollar and risk aversion."
The dollar dipped 0.1 percent to 93.17 yen after careening between about 94.40 and 93.30 on Friday.

The euro was down nearly 0.3 percent at $1.2790 after climbing to $1.2885 on Friday.

Tohru Sasaki, chief foreign exchange strategist at JP Morgan in Tokyo, said bank nationalisation concerns could drive the market further on Monday but the connection with dollar sales was not necessarily clear.

The dollar has tended to benefit in times of heightened investor risk aversion.

"The fear of nationalisation was used as an excuse to sell back the dollar," Sasaki said.

Investors also focused on the relationship between the yen and the stock market, as the tendency for shares to rise as the currency weakened appeared to rupture last week, as politics and a deepening Japanese recession weighed on the yen.

The Nikkei share average .N225 fell more than 2 percent after the U.S. Dow industrials ended at a 6-1/2-year low on fears the U.S. government may be forced to nationalise some big banks.

The Nikkei booked its lowest close since Oct. 27 on Friday and the broader Topix .TOPX ended at its weakest in 25 years.

However the yen was picking up some ground. The euro eased 0.24 percent to 119.25 yen , while sterling and the Australian dollar also fell. (Reporting by Charlotte Cooper; Editing by Brent Kininmont)

FCPO Commentary on 23/02/09

FCPO May futures contract traded RM25 lower compare to previous trading session and close at RM1834 with a total 6788 lots traded in the market. CPO price was trading mainly sideways during trading session but plunge down during last trading hours before market close.

Technically, CPO price seems fails to breach 100 – days and 80 – days moving average in the hourly chart despite several attempts during the trading session. We expect CPO price seems temporary supported on 61.8% and 78.6% Fibonacci support levels at RM1830 and RM1810 region. Traders were advice to hold long position only if support levels were not violated. Resistances levels were seen at RM1890 and RM1950 regions.

FKLI Commentary on 23/02/09

FKLI February contract plunge another 17 points lower to close at 878 as compare with previous trading session with a total of 8127 lots traded in the market. FKLI tracking close with Dow Jones futures electronic trading as Dow Jones futures plunge during the trading session.

Technically, FKLI seems challenge final support at 879 levels; 61.8% Fibonacci retrace figures. We expect FKLI would trade higher in the coming trading session provided support levels at 879 and 869; 61.8% and 78.6% Fibonacci figures. Traders were advice to hold long position only if support levels were not violated. Resistance levels at were seen at 885 and 892 regions.