Risk appetite waned although US' manufacturing data showed some pleasant surprises. Moody's warning of credit downgrades in the US and the UK, together with fading hopes of a quick fix to Greece's deficit problem, hurt sentiment and spurred demand for safe-haven assets including gold and USD.

The front-month contract for WTI crude oil plummeted to as low as 79.13 before settling at 79.8, down -1.8%. This was the first time in 2 weeks the crude oil closed below 80. 2 consecutive days of selloff signals that price has temporary peaked at 83.16, $0.79 below 2010-high. Price remains soft in Asian session today.

In the US, the NY Empire State Manufacturing Index fell to 22.86 in March (February: 24.9) while the market had anticipated a deeper fall to 20. The bright spots came from 'new orders', which jumped to 25.4 from 8.8 in February, and 'shipments', which rose to 25.6 from 15.6 in February. The 'employment' and 'inventory' indices also improved, signaling manufacturing activities have established a firm footing in New York. Industrial production surprisingly rose +0.1% m/m in February (January: +0.9%), compared with consensus forecast of a flat reading. Moderation is expected as snowstorm in the Northern hemisphere during the period suspended a lot of economic activities. This is encouraging as industrial outputs managed to grow despite adverse weather.

The set of upbeat manufacturing failed to boost optimism as investors focused on deficit problems. The disappointing housing market index also triggered selling.

The NAHB housing market index slid to 15 in March while the market had expected a flat reading at 17. All 3 components (present sales, expected 6 month's sales and prospective homebuyers' traffic) declined and indicated sluggishness in the US property market.

Moody's said both the US and the UK are moving closer to losing their AAA credit ratings as their debt affordability is the most stretched. This, together with persisting concerns over Greece's debt issues, sent precious metals higher.

After edging higher to 1105.4, the yellow metal extends gains to 1113.5 in Asian session today. Others in the complex also rise with silver surging to 17.26 (+1.2% from Friday's close) and platinum to 1625 (+1% from Friday's close). Palladium, after slipping modestly on Monday, recovers as driven by strength in other precious metals.

Although USD is regarded as a safe investment due to its highly liquid and enormous debt market, the amount of currency circulation and the depth of the currency. Moreover, investors choose to park money in the dollar as they perceive the US economy and government as 'stable'. However, things have changed after the worst recession since World War II. Rating agencies have warned several times of massive debt in the US. In fact, the biggest US creditors have reduced holdings in the country's assets.

China, while remaining the biggest owner of Treasuries, has been a net seller for the third consecutive month. The chart below shows china's holdings have declined to $889B in January from the peak of $940B in July 2009.

It looks interesting to see the dollar rising although it may have difficulties to repay its huge debts. One of the reasons is the status quo behavior of investors. Moreover, while gold is 'safe' in nature, it's categorized under the commodity sector which is treated as a risky asset. Therefore, investors tend to park money to USD and JPY when they lose risk appetite.