The recent commodity rally comes down to two factors: a weaker dollar and hopes of an economic rebound, Morgan Stanley says. “If one sees green shoots, one should be long commodities. If one sees future inflationary pressures resulting from excessive fiscal and monetary activism, one should be long commodities. If one sees weakening confidence in the US dollar and the difficulty of US policymakers to sufficiently stimulate the economy without further risk to the dollar, one should be long commodities,” the bank’s commodity researchers say. No surprise that they conclude a slowing in the greenback’s decline is the “biggest near-term risk to commodity prices.”

RBS raises forecast for Indonesia’s 2009 current account
to a $3.1 billion surplus from previous forecast for a $3.4 billion deficit,
after current account swung to $1.8 billion surplus in 1Q after 9 months in
deficit; “the large negative terms of trade shock from sharply lower commodity
prices which could have easily sustained the current account deficit now appear overestimated, and are set to correct. If the Chinese economy registers faster growth than originally expected, commodity prices will provide a further boost to Indonesia’s trade balance.” Notes April exports down 23% vs 28% fall in March; meanwhile, there were net outflows in private sector portfolio investment in 1Q, but this more than offset by government’s $3 billion global bond, $650 million global sukuk, while FDI (chiefly to oil & gas, telecoms) at $2.7 billion highest since June 2005.