Broker's Notes: Gold holds steady; euro edges up

Gold
Gold was steady on Wednesday as investors awaited further developments on the conflict in the Korean peninsula amid worries about the euro zone debt crisis. South Korea warned North Korea of "enormous retaliation" if it took more aggressive steps after Pyongyang fired scores of artillery shells at a South Korean island in one of the heaviest attacks on its neighbour since the Korean War ended in 1953.

Euro

The euro edged up from a two-month low on Wednesday, finding support after a massive sell-off sparked by the euro zone debt crisis and heightened tensions in the Korean Peninsula. The common currency ticked up on light buying back after Europe's inability to contain Ireland's debt woes had knocked it down 1.9 percent to as low as $1.3359. As the low represented an almost 38.2 percent retracement of the euro's rally this year to $1.4283 in early November from $1.1876 in June, the euro may have found short-term support there. The euro rose 0.3 percent to $1.3405 on the day, shrugging off the news that Standard and Poor's had downgraded its sovereign rating on Ireland. The U.S. is scheduled to release a batch of data later in the day, including the weekly initial jobless claims, October durable goods order and new home sales, just ahead of the Thanksgiving holiday on Thursday

Sterling

Sterling hit a two-month high against the euro on Tuesday, helped by fears the euro zone's debt crisis could spread, but it dropped to its lowest in nearly four weeks against the dollar as investors shunned risky assets. North Korea shelling a South Korean island further dented sentiment in a market already worried about debt troubles in the euro zone, with participants seeking the perceived safety of the likes of the dollar. With political uncertainty in Ireland leaving the possibility of a delay to any bailout deal and contagion fears growing, sterling gained one percent against the euro. But it slid versus the dollar as it is still seen as a risky currency. Analysts say Britain stands to gain from the stabilisation of the Irish banking system, with the Bank for International Settlements estimating UK banks had $222.4 billion exposure to Irish borrowers as recently as September

Indian rupee

The Indian rupee weakened further on Wednesday as political tensions in North and South Korea weighed down currencies across Asia. Rupee, which had slid to a two-month low in the previous session, would find support as exporters cash in their dollars. Indian shares flip-flopped in early trade amid weak Asian markets as the Korean tensions weighed on investor sentiment. Foreign portfolio funds have snapped up a record $28.9 billion worth of Indian equities so far this year, helping the benchmark stock index climb nearly 13 percent and pushing the rupee up 1.9 percent. One-month offshore non-deliverable forward contracts were quoted at 45.91, weaker than the onshore spot rate, suggesting a bearish near-term outlook.

Oil

US crude futures edged higher above $81 a barrel on Wednesday after declining 0.6 percent a day earlier, with larger-than-expected falls in U.S. oil product stockpiles providing support to the market. The rise came despite a stronger dollar amid tension on the Korean pennisula. The American Petroleum Institute said gasoline stocks fell 499,000 barrels and distillate stocks fell 311,000 barrels, the API said. That compared with a Reuters poll for a 1.2 million barrel decline in distillate stockpiles and a 600,000 barrel drawdown in gasoline supplies. OPEC is unlikely to change production quotas at its December meeting in Ecuador if oil prices remain at current levels, Qatari Energy Minister Abdullah al-Attiyah said.

Source: Richcomm Global Services DMCC, Dubai