THE NEWS TRIBUNE Published: December 25th, 2007 01:00 AM
T he British pound hit record lows against the euro on Monday for the second straight day, weighed down by falling home prices and expectations that the Bank of England will keep cutting interest rates. The euro rose to 72.710 British pence, compared with the earlier record of 72.350 pence from May 27, 2003. The Bank of England cut its key interest rate a quarter-point to 5.5 percent earlier this month amid fears the fallout from the U.S. subprime crisis would hurt economic growth. The pound also drifted lower against the dollar, to $1.9760 from $1.9828.
Source: thenewstribune.com
Tuesday, December 25, 2007
Dollar May Rise to 115.70 Yen on Technical Charts, MUFG Says
By Kosuke Goto
Dec. 25 (Bloomberg) -- The dollar may strengthen to a two- month high of 115.70 yen in a few weeks, said Masashi Hashimoto, a currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., citing technical charts.
Resistance at around 115.70 yen represents a 50 percent retracement of the dollar's decline from its June 22 high of 124.13 to its Nov. 26 low of 107.23, according to a series of numbers known as the Fibonacci sequence. The U.S. currency is poised to gain after it rose above the upper side of clouds on the so-called Ichimoku chart, which stayed at 113.53 today. Resistance is a level where sell orders may be clustered.
``The dollar's uptrend is very firm technically,'' said Hashimoto at Bank of Tokyo-Mitsubishi UFJ, a unit of Japan's largest publicly listed lender. ``It will likely challenge higher levels in the coming few weeks.''
The dollar traded at 114.28 yen at 7:45 a.m. in London from 114.29 in New York yesterday, when it advanced to 114.49, the strongest since Nov. 7.
Other Fibonacci levels include 23.6 percent, 38.2 percent and 76.4 percent. A break of one indicates a currency may move to the next. A failure suggests a trend may stall.
An Ichimoku chart analyzes the midpoints of historic highs and lows. A cloud, used to identify levels of support where traders expect buying, or resistance where they expect selling, is the area between the first and second leading span lines.
Moving Averages
The dollar is also likely to rise after it broke through its 65-day and 90-day moving averages. The dollar has risen above the 65-day moving average, which stayed at 113.28 yen today, since Dec. 14. It also climbed above the 90-day moving average today, which stayed at 113.83 yen, signaling the dollar is likely to remain strong in the medium term.
Traders typically look for evidence of a currency's short- term trend by viewing the five-day moving average, and aim to forecast two- to three-week trends with the 21-day moving average and a three-month trend with 65-day and 90-day moving averages. They use moving averages to identify levels of support, where buying is expected, or resistance, where selling is forecast to take place.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
Source: bloomberg.com
Dec. 25 (Bloomberg) -- The dollar may strengthen to a two- month high of 115.70 yen in a few weeks, said Masashi Hashimoto, a currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., citing technical charts.
Resistance at around 115.70 yen represents a 50 percent retracement of the dollar's decline from its June 22 high of 124.13 to its Nov. 26 low of 107.23, according to a series of numbers known as the Fibonacci sequence. The U.S. currency is poised to gain after it rose above the upper side of clouds on the so-called Ichimoku chart, which stayed at 113.53 today. Resistance is a level where sell orders may be clustered.
``The dollar's uptrend is very firm technically,'' said Hashimoto at Bank of Tokyo-Mitsubishi UFJ, a unit of Japan's largest publicly listed lender. ``It will likely challenge higher levels in the coming few weeks.''
The dollar traded at 114.28 yen at 7:45 a.m. in London from 114.29 in New York yesterday, when it advanced to 114.49, the strongest since Nov. 7.
Other Fibonacci levels include 23.6 percent, 38.2 percent and 76.4 percent. A break of one indicates a currency may move to the next. A failure suggests a trend may stall.
An Ichimoku chart analyzes the midpoints of historic highs and lows. A cloud, used to identify levels of support where traders expect buying, or resistance where they expect selling, is the area between the first and second leading span lines.
Moving Averages
The dollar is also likely to rise after it broke through its 65-day and 90-day moving averages. The dollar has risen above the 65-day moving average, which stayed at 113.28 yen today, since Dec. 14. It also climbed above the 90-day moving average today, which stayed at 113.83 yen, signaling the dollar is likely to remain strong in the medium term.
Traders typically look for evidence of a currency's short- term trend by viewing the five-day moving average, and aim to forecast two- to three-week trends with the 21-day moving average and a three-month trend with 65-day and 90-day moving averages. They use moving averages to identify levels of support, where buying is expected, or resistance, where selling is forecast to take place.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.
Source: bloomberg.com
Euro hits fresh record
Source ::: AFP
london • The euro gained on the dollar and struck a fresh record against the pound here yesterday on a market largely deserted by traders heading for holiday destinations.
The London currency market will be closed on Tuesday. The single European currency in late-day deals was at $1.4405 against 1.4378 late Friday in New York.
The euro shot to a new record against the pound, hitting 72.89 pence, the euro's best showing since its creation in 1999. The dollar was meanwhile trading at 114.36 yen, up from 114.09 on Friday.
There has been "very little movement ... but the euro has managed to move into the black," said Peter Stoneham at Thomson IFR Markets as the euro edged up against the dollar during the day.
“The thin holiday conditions have been exacerbated by the lack of fresh factors for the market to trade off. Corporate activity has leant some direction with patchy euro demand out of Europe," he said.
From: thepeninsulaqatar.com
london • The euro gained on the dollar and struck a fresh record against the pound here yesterday on a market largely deserted by traders heading for holiday destinations.
The London currency market will be closed on Tuesday. The single European currency in late-day deals was at $1.4405 against 1.4378 late Friday in New York.
The euro shot to a new record against the pound, hitting 72.89 pence, the euro's best showing since its creation in 1999. The dollar was meanwhile trading at 114.36 yen, up from 114.09 on Friday.
There has been "very little movement ... but the euro has managed to move into the black," said Peter Stoneham at Thomson IFR Markets as the euro edged up against the dollar during the day.
“The thin holiday conditions have been exacerbated by the lack of fresh factors for the market to trade off. Corporate activity has leant some direction with patchy euro demand out of Europe," he said.
From: thepeninsulaqatar.com
Wednesday, November 21, 2007
Japan Supermarket Sales Down 1.1% On Year In October
Thu, Nov 22 2007, 05:15 GMT
http://www.djnewswires.com/eu
Japan Supermarket Sales Down 1.1% On Year In October
TOKYO (Dow Jones)--Japan's nationwide supermarket sales fell 1.1% on year to Y1.1339 trillion in October, adjusted for changes in the number of stores, the Japan Chain Stores Association said Thursday.
The fall marked the 22 straight month of decline.
The association said that sales of clothing fell 3.6% on year, while overall food product sales increased 0.2% from a year earlier
From: FXStreet.com
http://www.djnewswires.com/eu
Japan Supermarket Sales Down 1.1% On Year In October
TOKYO (Dow Jones)--Japan's nationwide supermarket sales fell 1.1% on year to Y1.1339 trillion in October, adjusted for changes in the number of stores, the Japan Chain Stores Association said Thursday.
The fall marked the 22 straight month of decline.
The association said that sales of clothing fell 3.6% on year, while overall food product sales increased 0.2% from a year earlier
From: FXStreet.com
Fed minutes weigh heavily on dollar
Fed minutes weigh heavily on dollar
By Peter Garnham
The dollar fell to record lows against the euro and Swiss franc on Wednesday as investors digested the newly released minutes of the Federal Reserve’s October meeting.
These showed that the central bank remained concerned both about the risks of a sharper growth slowdown as well as a pick-up in inflation. The bank also saw the October interest rate cut as a “close call”.
“Although the minutes probably had the intention of conveying the message that further interest rate cuts are far from certain, this was ignored by the market,” said Geoffrey Yu at UBS.
“Fed forecasts, which for the first time accompanied the minutes, clearly showed the economy was on a downtrend and lower yields were immediately priced in, hurting the dollar as a result.”
The dollar fell as low as $1.4856 against the euro and SFr1.1025 against the Swiss franc. It hit Y108.27 against the Japanese yen, its weakest level since May 2005.
The dollar later recouped some of its losses to stand 0.2 per cent lower at $1.4790 against the euro by midday in New York, down 0.3 per cent at SFr1.1040 against the Swiss franc and 1.4 per cent lower at Y108.50 against the yen.
The yen also soared against other currencies as sliding equity markets saw investors shy away from risky carry trades, in which the low-yielding Japanese unit is sold to fund the purchase of riskier, higher-yielding assets.
The yen rose 1.8 per cent to Y160.10 against the euro and jumped 3.7 per cent to Y94.21 and 3 per cent to Y81.49, respectively, against the higher-yielding Australian and New Zealand dollars.
Hans Redeker at BNP Paribas said equity investors had been disappointed by the Fed minutes, which showed a central bank that downgraded its growth forecasts but was unwilling to ease interest rates.
“The minutes signalled that the Fed was no longer pre-emptive,” he said. “With this, equity markets are likely to face further selling pressure, suggesting the yen is set to break higher.”
The pound fell to its lowest level in 4½ years against the euro and lost ground across the board after minutes from the Bank of England’s November meeting showed two of its nine-strong monetary policy committee voted for a cut in UK interest rates.
Analysts expressed surprise that John Gieve, the central bank’s normally hawkish deputy governor ,ad joined with David Blanchflower, who was alone in voting for a cut in rates at the October meeting.
Chiara Corsa at UniCredit said the central bank could move to cut interest rates as early as next month.
The pound fell 0.5 per cent to 0.7211 against the euro, its weakest level since May 2003, lost 0.5 per cent to $2.0550 against the dollar and dropped 1.8 per cent to Y222.95 against the yen.
From: FT.com
By Peter Garnham
The dollar fell to record lows against the euro and Swiss franc on Wednesday as investors digested the newly released minutes of the Federal Reserve’s October meeting.
These showed that the central bank remained concerned both about the risks of a sharper growth slowdown as well as a pick-up in inflation. The bank also saw the October interest rate cut as a “close call”.
“Although the minutes probably had the intention of conveying the message that further interest rate cuts are far from certain, this was ignored by the market,” said Geoffrey Yu at UBS.
“Fed forecasts, which for the first time accompanied the minutes, clearly showed the economy was on a downtrend and lower yields were immediately priced in, hurting the dollar as a result.”
The dollar fell as low as $1.4856 against the euro and SFr1.1025 against the Swiss franc. It hit Y108.27 against the Japanese yen, its weakest level since May 2005.
The dollar later recouped some of its losses to stand 0.2 per cent lower at $1.4790 against the euro by midday in New York, down 0.3 per cent at SFr1.1040 against the Swiss franc and 1.4 per cent lower at Y108.50 against the yen.
The yen also soared against other currencies as sliding equity markets saw investors shy away from risky carry trades, in which the low-yielding Japanese unit is sold to fund the purchase of riskier, higher-yielding assets.
The yen rose 1.8 per cent to Y160.10 against the euro and jumped 3.7 per cent to Y94.21 and 3 per cent to Y81.49, respectively, against the higher-yielding Australian and New Zealand dollars.
Hans Redeker at BNP Paribas said equity investors had been disappointed by the Fed minutes, which showed a central bank that downgraded its growth forecasts but was unwilling to ease interest rates.
“The minutes signalled that the Fed was no longer pre-emptive,” he said. “With this, equity markets are likely to face further selling pressure, suggesting the yen is set to break higher.”
The pound fell to its lowest level in 4½ years against the euro and lost ground across the board after minutes from the Bank of England’s November meeting showed two of its nine-strong monetary policy committee voted for a cut in UK interest rates.
Analysts expressed surprise that John Gieve, the central bank’s normally hawkish deputy governor ,ad joined with David Blanchflower, who was alone in voting for a cut in rates at the October meeting.
Chiara Corsa at UniCredit said the central bank could move to cut interest rates as early as next month.
The pound fell 0.5 per cent to 0.7211 against the euro, its weakest level since May 2003, lost 0.5 per cent to $2.0550 against the dollar and dropped 1.8 per cent to Y222.95 against the yen.
From: FT.com
Dollar Poised for Drop to `Final' Support, Bank of America Says
By Ye Xie
Nov. 21 (Bloomberg) -- The U.S. Dollar Index may fall at least 1.6 percent by year-end to a level that equates to $1.506 per euro, as the Federal Reserve will lower borrowing costs to support the economy, according to Bank of America Corp.
The Dollar Index, which gauges the value of the dollar against six major currencies, including the euro and yen, may reach the ``final'' technical support level of 73.92, the bank said in a research note today. The index, traded on ICE Futures U.S. in New York, has declined 10 percent this year and touched 74.95 today, the lowest since its creation in 1973.
``The overall outlook for the dollar remains bleak,'' Kamal Sharma, a currency strategist at Bank of America in London, said in an interview. ``If we don't hold onto that level, there's limited chance for a rebound in the dollar. That adds a technical argument to the fundamental argument for remaining bearish on the dollar.''
The dollar traded at $1.4827 per euro at 12:18 p.m. in New York, after earlier touching an all-time low of $1.4856. The U.S. currency fell 1.3 percent today to 108.55 yen, touching a more than two-year low. The Dollar Index, composed of the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, traded at 75.13.
The U.S. currency has lost 15 percent against the Canadian dollar this year and reached a 26-year low against the pound as the U.S. housing market slump and lower interest rates dimmed the allure of dollar-denominated assets.
Fed Forecast
The Fed cut its benchmark overnight interest rate by a half- percentage point to 4.5 percent on Sept. 18 and then by a quarter-point on Oct. 31. Futures contracts traded on the Chicago Board of Trade show a 90 percent chance the Fed will lower its rate to 4.25 percent when policy makers meet on Dec. 11.
The central bank will cut the rate a quarter-point at each of the next three meetings, to 3.75 percent by March 18, according to Bank of America. The bank, based in Charlotte, North Carolina, is the biggest U.S. bank by market capitalization.
U.S. 10-year note yields fell below 4 percent today for the first time since 2005. A government report yesterday showed homebuilding permits in the U.S. declined in October to their lowest level since 1993.
``We have ongoing stress in the financial system,'' said Sharma. ``The market continues to believe the Fed has to pull the trigger to cut rates. The fundamental argument for dollar weakness remains intact.''
The 73.92 level is derived from a 30-year trend line tracking the lows of the Dollar Index, according to Sharma.
``There are few significant support levels left,'' he said.
To contact the reporter on this story: Ye Xie in New York at
From: Bloomberg.com
Nov. 21 (Bloomberg) -- The U.S. Dollar Index may fall at least 1.6 percent by year-end to a level that equates to $1.506 per euro, as the Federal Reserve will lower borrowing costs to support the economy, according to Bank of America Corp.
The Dollar Index, which gauges the value of the dollar against six major currencies, including the euro and yen, may reach the ``final'' technical support level of 73.92, the bank said in a research note today. The index, traded on ICE Futures U.S. in New York, has declined 10 percent this year and touched 74.95 today, the lowest since its creation in 1973.
``The overall outlook for the dollar remains bleak,'' Kamal Sharma, a currency strategist at Bank of America in London, said in an interview. ``If we don't hold onto that level, there's limited chance for a rebound in the dollar. That adds a technical argument to the fundamental argument for remaining bearish on the dollar.''
The dollar traded at $1.4827 per euro at 12:18 p.m. in New York, after earlier touching an all-time low of $1.4856. The U.S. currency fell 1.3 percent today to 108.55 yen, touching a more than two-year low. The Dollar Index, composed of the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, traded at 75.13.
The U.S. currency has lost 15 percent against the Canadian dollar this year and reached a 26-year low against the pound as the U.S. housing market slump and lower interest rates dimmed the allure of dollar-denominated assets.
Fed Forecast
The Fed cut its benchmark overnight interest rate by a half- percentage point to 4.5 percent on Sept. 18 and then by a quarter-point on Oct. 31. Futures contracts traded on the Chicago Board of Trade show a 90 percent chance the Fed will lower its rate to 4.25 percent when policy makers meet on Dec. 11.
The central bank will cut the rate a quarter-point at each of the next three meetings, to 3.75 percent by March 18, according to Bank of America. The bank, based in Charlotte, North Carolina, is the biggest U.S. bank by market capitalization.
U.S. 10-year note yields fell below 4 percent today for the first time since 2005. A government report yesterday showed homebuilding permits in the U.S. declined in October to their lowest level since 1993.
``We have ongoing stress in the financial system,'' said Sharma. ``The market continues to believe the Fed has to pull the trigger to cut rates. The fundamental argument for dollar weakness remains intact.''
The 73.92 level is derived from a 30-year trend line tracking the lows of the Dollar Index, according to Sharma.
``There are few significant support levels left,'' he said.
To contact the reporter on this story: Ye Xie in New York at
From: Bloomberg.com
Sunday, November 18, 2007
Gulf States Mull Revaluing Currencies, Person Says
Gulf States Mull Revaluing Currencies, Person Says (Update1)
By Matthew Brown and Anchalee Worrachate
Nov. 18 (Bloomberg) -- Gulf states, including Saudi Arabia and the United Arab Emirates, may revalue their currencies while maintaining their pegs to the U.S. dollar, a person familiar with Saudi monetary policy said.
The states may revalue by an unspecified amount in as soon as a month's time, the person, who declined to be identified because the matter is confidential, said yesterday. No final decision has been made, he said. The comments came as heads of state of the Organization of Petroleum Exporting Countries met in Riyadh.
Gulf states face record inflation, caused partly by the weakening dollar that has made imports from Europe more expensive. Consumer prices rose a record 4.9 percent in Saudi Arabia in August and inflation in the United Arab Emirates accelerated to a record 9.3 percent last year. Qatar has the highest inflation rate in the region, reaching 14.8 percent in the first quarter.
``It makes sense for them to do it,'' said Jens Nordvig, senior global markets economist at Goldman Sachs Group Inc. in New York. ``Given the emerging inflation pressures, there are very good reasons for them to allow currency appreciation.''
The decline in the value of the dollar is a ``concern'' to OPEC members, Qatari Energy Minister Abdullah Al-Attiyah said after a meeting of OPEC oil, finance and energy ministers in Riyadh on Nov. 16.
Currency Basket
Saudi Arabia, Qatar, Bahrain and Oman have repeatedly said they have no plans to change exchange rate policies. Still, U.A.E. Central Bank Governor Sultan Bin Nasser al-Suwaidi said on Nov. 15 the U.A.E. may drop the dirham's peg in favour of a basket of currencies. Some economists recommend such a move.
``We believe that the basket will be more beneficial'' than a revaluation, said Monica Malik, a Dubai-based economist with EFG Hermes, Egypt's largest investment bank. ``Just re-pegging the currency would mean that GCC interest rates will still have to follow U.S. rates and imported inflation would still increase if the dollar continues to weaken,'' she said.
``Linking GCC currencies to a trade-weighted basket would enable Gulf countries to counterbalance any dollar weakness and provide greater flexibility on monetary policy,'' Malik said.
Heads of state from the six Gulf Cooperation Council states will hold their annual meeting in Qatar on Dec. 3-4 and will discuss monetary policy and security. The person did not specify if a decision would be made then. Evidence has been gathered and will be presented to policy makers, he said without giving details.
`Unlikely' Move
The leaders will, though, take a decision on whether to abandon a proposed Gulf single currency, Hamad Saud al-Sayari, governor of the Saudi Arabian Monetary Agency, said after a meeting of finance ministers and central bank governors on Oct. 27.
``It's unlikely they are going to move to a flexible system,'' Nordvig said. ``If they're going to make an adjustment, they should make one that matters. Something in the 5 percent to 10 percent range seems like a range that would have some impact without being overly dramatic.''
The dollar slid to a record low of $1.4752 against the euro on Nov. 9, taking it down 10 percent since the start of this year, and has fallen versus 15 of the 16 most actively traded currencies tracked by Bloomberg in the past 10 1/2 months.
The Saudi riyal rose to a 20-year high after the Fed cut rates on Sept. 18 and the Saudi Arabian Monetary Agency chose not to follow. The riyal and the dirham rose this week after al-Suwaidi questioned the U.A.E.'s currency peg.
The riyal was trading at 3.725 to the dollar at 10.09 p.m. in Riyadh, 0.7 percent higher than the peg price of 3.75. Contracts to buy U.A.E. dirhams in 12 months time rose the most in at least 10 years on Nov. 15 after al-Suwaidi's comments, and were trading at a 2.5 percent premium to the spot price yesterday.
Venezuelan Support
Venezuela backed an Iranian proposal to add the group's concern over the falling dollar to a summit declaration to be made today. Saudi Arabian Foreign Minister Prince Saud Al-Faisal said that no mention of the dollar should be made in the declaration because he didn't want the U.S. currency to ``collapse.''
Nigerian Finance Minister Shamsudeen Usman said on Nov. 16 his country's law has been changed to allow it to diversify its foreign reserves out of dollars. Angola may shift its international reserves away from the dollar, Finance Minister Jose Pedro de Morais said.
OPEC's $6 billion development fund is hedging its exposure to the weakening dollar, Director-General Suleiman Jasir al-Herbish told reporters in Riyadh yesterday. ``The issue of the dollar in our investments, we are tackling it. We are hedging; we have other instruments.''
Internal Conflict
Saudi Arabia's King Abdullah said OPEC shouldn't make oil a source of conflict, contradicting Venezuelan President Hugo Chavez who wants the oil exporter group to become an active ``political agent.''
``Oil is an energy for building and prosperity, it shouldn't become a means of conflict,'' King Abdullah said at the start of the group's summit in Riyadh yesterday. ``Those who want OPEC to become an organization of monopoly and exploitation ignore the truth.''
OPEC, provider of more than 40 percent of the world's oil, is holding its third heads of state summit since it was founded in 1960. Saudi Arabia's foreign minister clashed yesterday with a push by Iran and Venezuela to debate pricing oil in currencies other than the U.S. dollar.
``OPEC was born as a geopolitical force and not only as a technical or economic one in the '60s,'' Chavez said, speaking before King Abdullah. ``We should continue to strengthen OPEC, but beyond that, OPEC should set itself up as an active political agent.''
`Fair' Level
The contrasting view on OPEC's role in the world comes a day after a disagreement between Venezuela's Oil Minister Rafael Ramirez and Al-Faisal on whether to move away from the dollar was accidentally aired on live television.
Chavez said in his speech yesterday that he's confident OPEC will do what it can to keep oil prices at a ``fair'' level, adding that if Iran was invaded, prices could easily rise to $200 a barrel.
Crude oil for December delivery rose $1.67 to $95.10 a barrel on Nov. 16 on the New York Mercantile Exchange.
The last OPEC heads of state summit was in 2000 in Venezuela and was hosted by Chavez, who was sworn in as president a year earlier. Iran and Venezuela both have tense political relations with the U.S.
Ibrahim Ibrahim, an executive at Qatar Petroleum, said that while Venezuela has helped OPEC become a stronger organization over the years, ``there is no need for OPEC to be a political force now. It just has to ensure that the oil market is stable.''
From: Bloomberg.com
By Matthew Brown and Anchalee Worrachate
Nov. 18 (Bloomberg) -- Gulf states, including Saudi Arabia and the United Arab Emirates, may revalue their currencies while maintaining their pegs to the U.S. dollar, a person familiar with Saudi monetary policy said.
The states may revalue by an unspecified amount in as soon as a month's time, the person, who declined to be identified because the matter is confidential, said yesterday. No final decision has been made, he said. The comments came as heads of state of the Organization of Petroleum Exporting Countries met in Riyadh.
Gulf states face record inflation, caused partly by the weakening dollar that has made imports from Europe more expensive. Consumer prices rose a record 4.9 percent in Saudi Arabia in August and inflation in the United Arab Emirates accelerated to a record 9.3 percent last year. Qatar has the highest inflation rate in the region, reaching 14.8 percent in the first quarter.
``It makes sense for them to do it,'' said Jens Nordvig, senior global markets economist at Goldman Sachs Group Inc. in New York. ``Given the emerging inflation pressures, there are very good reasons for them to allow currency appreciation.''
The decline in the value of the dollar is a ``concern'' to OPEC members, Qatari Energy Minister Abdullah Al-Attiyah said after a meeting of OPEC oil, finance and energy ministers in Riyadh on Nov. 16.
Currency Basket
Saudi Arabia, Qatar, Bahrain and Oman have repeatedly said they have no plans to change exchange rate policies. Still, U.A.E. Central Bank Governor Sultan Bin Nasser al-Suwaidi said on Nov. 15 the U.A.E. may drop the dirham's peg in favour of a basket of currencies. Some economists recommend such a move.
``We believe that the basket will be more beneficial'' than a revaluation, said Monica Malik, a Dubai-based economist with EFG Hermes, Egypt's largest investment bank. ``Just re-pegging the currency would mean that GCC interest rates will still have to follow U.S. rates and imported inflation would still increase if the dollar continues to weaken,'' she said.
``Linking GCC currencies to a trade-weighted basket would enable Gulf countries to counterbalance any dollar weakness and provide greater flexibility on monetary policy,'' Malik said.
Heads of state from the six Gulf Cooperation Council states will hold their annual meeting in Qatar on Dec. 3-4 and will discuss monetary policy and security. The person did not specify if a decision would be made then. Evidence has been gathered and will be presented to policy makers, he said without giving details.
`Unlikely' Move
The leaders will, though, take a decision on whether to abandon a proposed Gulf single currency, Hamad Saud al-Sayari, governor of the Saudi Arabian Monetary Agency, said after a meeting of finance ministers and central bank governors on Oct. 27.
``It's unlikely they are going to move to a flexible system,'' Nordvig said. ``If they're going to make an adjustment, they should make one that matters. Something in the 5 percent to 10 percent range seems like a range that would have some impact without being overly dramatic.''
The dollar slid to a record low of $1.4752 against the euro on Nov. 9, taking it down 10 percent since the start of this year, and has fallen versus 15 of the 16 most actively traded currencies tracked by Bloomberg in the past 10 1/2 months.
The Saudi riyal rose to a 20-year high after the Fed cut rates on Sept. 18 and the Saudi Arabian Monetary Agency chose not to follow. The riyal and the dirham rose this week after al-Suwaidi questioned the U.A.E.'s currency peg.
The riyal was trading at 3.725 to the dollar at 10.09 p.m. in Riyadh, 0.7 percent higher than the peg price of 3.75. Contracts to buy U.A.E. dirhams in 12 months time rose the most in at least 10 years on Nov. 15 after al-Suwaidi's comments, and were trading at a 2.5 percent premium to the spot price yesterday.
Venezuelan Support
Venezuela backed an Iranian proposal to add the group's concern over the falling dollar to a summit declaration to be made today. Saudi Arabian Foreign Minister Prince Saud Al-Faisal said that no mention of the dollar should be made in the declaration because he didn't want the U.S. currency to ``collapse.''
Nigerian Finance Minister Shamsudeen Usman said on Nov. 16 his country's law has been changed to allow it to diversify its foreign reserves out of dollars. Angola may shift its international reserves away from the dollar, Finance Minister Jose Pedro de Morais said.
OPEC's $6 billion development fund is hedging its exposure to the weakening dollar, Director-General Suleiman Jasir al-Herbish told reporters in Riyadh yesterday. ``The issue of the dollar in our investments, we are tackling it. We are hedging; we have other instruments.''
Internal Conflict
Saudi Arabia's King Abdullah said OPEC shouldn't make oil a source of conflict, contradicting Venezuelan President Hugo Chavez who wants the oil exporter group to become an active ``political agent.''
``Oil is an energy for building and prosperity, it shouldn't become a means of conflict,'' King Abdullah said at the start of the group's summit in Riyadh yesterday. ``Those who want OPEC to become an organization of monopoly and exploitation ignore the truth.''
OPEC, provider of more than 40 percent of the world's oil, is holding its third heads of state summit since it was founded in 1960. Saudi Arabia's foreign minister clashed yesterday with a push by Iran and Venezuela to debate pricing oil in currencies other than the U.S. dollar.
``OPEC was born as a geopolitical force and not only as a technical or economic one in the '60s,'' Chavez said, speaking before King Abdullah. ``We should continue to strengthen OPEC, but beyond that, OPEC should set itself up as an active political agent.''
`Fair' Level
The contrasting view on OPEC's role in the world comes a day after a disagreement between Venezuela's Oil Minister Rafael Ramirez and Al-Faisal on whether to move away from the dollar was accidentally aired on live television.
Chavez said in his speech yesterday that he's confident OPEC will do what it can to keep oil prices at a ``fair'' level, adding that if Iran was invaded, prices could easily rise to $200 a barrel.
Crude oil for December delivery rose $1.67 to $95.10 a barrel on Nov. 16 on the New York Mercantile Exchange.
The last OPEC heads of state summit was in 2000 in Venezuela and was hosted by Chavez, who was sworn in as president a year earlier. Iran and Venezuela both have tense political relations with the U.S.
Ibrahim Ibrahim, an executive at Qatar Petroleum, said that while Venezuela has helped OPEC become a stronger organization over the years, ``there is no need for OPEC to be a political force now. It just has to ensure that the oil market is stable.''
From: Bloomberg.com
Betting Against the Dollar? This Time, Asia May Deserve a Look
Betting Against the Dollar? This Time, Asia May Deserve a Look
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By WILLIAM J. HOLSTEIN
Published: November 18, 2007
JIM O’NEILL, the chief economist of Goldman Sachs, has been down on the American dollar for at least 10 years. “Being bearish on the dollar has been one of the easiest things to do,” Mr. O’Neill said. And there are still lucrative currency bets to be made, Mr. O’Neill and many other financial professionals say, even though the direction of the American currency isn’t as obvious today. “It’s getting trickier,” Mr. O’Neill said.
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Haruyoshi Yamaguchi/Bloomberg News
A yen-to-the-dollar rate last Monday in Tokyo. The dollar has not fallen nearly as much against Asian currencies as it has against the euro.
One reason for the difficulty is that the dollar has lost so much value against the euro, the British pound and the Canadian dollar that it may not have much further to go before it reverses course against them. Mr. O’Neill, who is based in London, points out that while it took just 84.5 cents to buy a euro as recently as six years ago, it now takes $1.45, a move of more than 70 percent.
If the cheap dollar continues to help spur American exports and thereby reduce the trade deficit, Mr. O’Neill says he thinks that the dollar may be near its bottom against those currencies. “The dollar could weaken further in the very short term,” he says, “but a year from now I personally expect the dollar will be stronger against most European currencies.”
But that’s not likely to be the case with Asian currencies, like those of China, Japan, India and even tiny Singapore, in his view. “Many of these economies are seeing enormous growth,” Mr. O’Neill said. And the dollar has not lost as nearly much value against these currencies, which tend to be controlled or influenced by the government. China intervenes in foreign exchange markets to manage the value of the yuan and has allowed an upward drift of only about 5 percent year to date. Japan does not intervene, but its huge pools of liquidity and near-zero interest rates have spawned the so-called carry trade, in which hedge funds and other major institutional investors borrow money in yen and convert the yen to other currencies to invest in other markets. The practical effect has been much the same as government intervention: the yen has risen only slightly against the dollar.
Despite some Asian governments’ desire to keep their currencies where they are, many experts believe that big upward moves are inevitable throughout the region. “The game is just getting ramped up,” said Arthur P. Steinmetz, senior vice president and portfolio manager at the OppenheimerFunds in New York. “There are some powerful fundamental forces that are going to make this interesting.”
One of the most important, says Mr. Steinmetz, who manages $22 billion in mutual funds, is the direction of interest rates in the United States. “The biggest driver of movement in currencies is interest rate differentials,” he said. “Money naturally flows to countries with high interest rates and away from countries with low interest rates. The United States is a low-yielding country and interest rates are going lower because of what the Federal Reserve is doing.”
Add it all up and it may be time for individual investors to make decisions not only about whether to invest in dollar-denominated or other instruments, but also whether to choose mutual funds and exchange traded funds that have the appropriate exposure to Asian currencies rather than relying on plain-vanilla international funds that may be equally exposed to different regions of the world. (Very few experts recommend that individual investors become involved in foreign-exchange derivative trading or in buying individual non-American stocks.)
But charting a winning Asian currency strategy is hard because stock markets in China, Hong Kong, India and elsewhere in the region are at or near all-time highs — China’s stock market has more than doubled this year — and a vast majority of experts expect corrections if not short-term crashes.
What’s an investor to do? “I would invest through funds whose managers know how to shift from what’s too high to what’s cheap,” said Roger Kubarych, chief United States economist for UniCredit Markets and Investment Banking, who is based in New York. “That’s why you go to professionals. Any individual would have to study the markets for two or three years to understand them. Starting from a standing stop, you’re better off in mutual funds. There’s no doubt about it.”
From: Nytimes.com
Article Tools Sponsored By
By WILLIAM J. HOLSTEIN
Published: November 18, 2007
JIM O’NEILL, the chief economist of Goldman Sachs, has been down on the American dollar for at least 10 years. “Being bearish on the dollar has been one of the easiest things to do,” Mr. O’Neill said. And there are still lucrative currency bets to be made, Mr. O’Neill and many other financial professionals say, even though the direction of the American currency isn’t as obvious today. “It’s getting trickier,” Mr. O’Neill said.
Skip to next paragraph
Haruyoshi Yamaguchi/Bloomberg News
A yen-to-the-dollar rate last Monday in Tokyo. The dollar has not fallen nearly as much against Asian currencies as it has against the euro.
One reason for the difficulty is that the dollar has lost so much value against the euro, the British pound and the Canadian dollar that it may not have much further to go before it reverses course against them. Mr. O’Neill, who is based in London, points out that while it took just 84.5 cents to buy a euro as recently as six years ago, it now takes $1.45, a move of more than 70 percent.
If the cheap dollar continues to help spur American exports and thereby reduce the trade deficit, Mr. O’Neill says he thinks that the dollar may be near its bottom against those currencies. “The dollar could weaken further in the very short term,” he says, “but a year from now I personally expect the dollar will be stronger against most European currencies.”
But that’s not likely to be the case with Asian currencies, like those of China, Japan, India and even tiny Singapore, in his view. “Many of these economies are seeing enormous growth,” Mr. O’Neill said. And the dollar has not lost as nearly much value against these currencies, which tend to be controlled or influenced by the government. China intervenes in foreign exchange markets to manage the value of the yuan and has allowed an upward drift of only about 5 percent year to date. Japan does not intervene, but its huge pools of liquidity and near-zero interest rates have spawned the so-called carry trade, in which hedge funds and other major institutional investors borrow money in yen and convert the yen to other currencies to invest in other markets. The practical effect has been much the same as government intervention: the yen has risen only slightly against the dollar.
Despite some Asian governments’ desire to keep their currencies where they are, many experts believe that big upward moves are inevitable throughout the region. “The game is just getting ramped up,” said Arthur P. Steinmetz, senior vice president and portfolio manager at the OppenheimerFunds in New York. “There are some powerful fundamental forces that are going to make this interesting.”
One of the most important, says Mr. Steinmetz, who manages $22 billion in mutual funds, is the direction of interest rates in the United States. “The biggest driver of movement in currencies is interest rate differentials,” he said. “Money naturally flows to countries with high interest rates and away from countries with low interest rates. The United States is a low-yielding country and interest rates are going lower because of what the Federal Reserve is doing.”
Add it all up and it may be time for individual investors to make decisions not only about whether to invest in dollar-denominated or other instruments, but also whether to choose mutual funds and exchange traded funds that have the appropriate exposure to Asian currencies rather than relying on plain-vanilla international funds that may be equally exposed to different regions of the world. (Very few experts recommend that individual investors become involved in foreign-exchange derivative trading or in buying individual non-American stocks.)
But charting a winning Asian currency strategy is hard because stock markets in China, Hong Kong, India and elsewhere in the region are at or near all-time highs — China’s stock market has more than doubled this year — and a vast majority of experts expect corrections if not short-term crashes.
What’s an investor to do? “I would invest through funds whose managers know how to shift from what’s too high to what’s cheap,” said Roger Kubarych, chief United States economist for UniCredit Markets and Investment Banking, who is based in New York. “That’s why you go to professionals. Any individual would have to study the markets for two or three years to understand them. Starting from a standing stop, you’re better off in mutual funds. There’s no doubt about it.”
From: Nytimes.com
Greenspan Says Dollar's Decline Has No `Fundamental' Impact
Greenspan Says Dollar's Decline Has No `Fundamental' Impact
By Anthony Massucci
Nov. 18 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the dollar's decline hasn't affected the economy and is a ``market phenomenon.''
``So long as the dollar weakness does not create inflation, which is a major concern around the globe for everyone who watches the exchange rate, then I think it's a market phenomenon, which aside from those who travel the world, has no real fundamental economic consequences,'' he said.
The U.S. economy outside of the housing industry is ``doing reasonably well,'' Greenspan told an investor conference in New York today. ``If we can get beyond this housing problem I think we'll do pretty well.''
To contact the reporter on this story: Anthony Massucci in New York at amassucc@bloomberg.net .
Last Updated: November 18, 2007 09:44 EST
From: Bloomberg.com
By Anthony Massucci
Nov. 18 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the dollar's decline hasn't affected the economy and is a ``market phenomenon.''
``So long as the dollar weakness does not create inflation, which is a major concern around the globe for everyone who watches the exchange rate, then I think it's a market phenomenon, which aside from those who travel the world, has no real fundamental economic consequences,'' he said.
The U.S. economy outside of the housing industry is ``doing reasonably well,'' Greenspan told an investor conference in New York today. ``If we can get beyond this housing problem I think we'll do pretty well.''
To contact the reporter on this story: Anthony Massucci in New York at amassucc@bloomberg.net .
Last Updated: November 18, 2007 09:44 EST
From: Bloomberg.com
Thursday, November 15, 2007
Yen Turns Lower Against Majors
Yen Turns Lower Against Majors
(RTTNews) - The Japanese yen has turned lower against major world currencies. The yen is trading lower vs. the euro, British pound, U.S. dollar and Swiss franc
(RTTNews) - The Japanese yen has turned lower against major world currencies. The yen is trading lower vs. the euro, British pound, U.S. dollar and Swiss franc
China orders Shenzhen banks to limit cash withdrawals - report
Fri, Nov 16 2007, 01:51 GMT
http://www.afxnews.com
BEIJING (XFN-ASIA) - Commercial banks in the southern Chinese city of Shenzhen have been ordered to limit cash withdrawals in a bid to cut off sources of unauthorized investment in Hong Kong stocks, the official China Securities Journal reported.
The newspaper, citing banking sources, said the local branch of the People's Bank of China imposed limits of 30,000 yuan for over-the-counter transactions by individuals and 100,000 yuan for corporate accounts.
Previously there were no restrictions on teller withdrawals, except for branch requirements to withdraw large amounts by appointment.
The 20,000 yuan daily ATM withdrawal limit was not affected, it added.
(1 usd = 7.43 yuan)
http://www.afxnews.com
BEIJING (XFN-ASIA) - Commercial banks in the southern Chinese city of Shenzhen have been ordered to limit cash withdrawals in a bid to cut off sources of unauthorized investment in Hong Kong stocks, the official China Securities Journal reported.
The newspaper, citing banking sources, said the local branch of the People's Bank of China imposed limits of 30,000 yuan for over-the-counter transactions by individuals and 100,000 yuan for corporate accounts.
Previously there were no restrictions on teller withdrawals, except for branch requirements to withdraw large amounts by appointment.
The 20,000 yuan daily ATM withdrawal limit was not affected, it added.
(1 usd = 7.43 yuan)
Japanese Market Falls On Weak Lead From U.S., Stronger Yen
Japanese Market Falls On Weak Lead From U.S., Stronger Yen
(RTTNews) - Friday, Tokyo shares opened sharply lower, tracking the fall on Wall Street overnight. The appreciation of the yen and uncertainty about the government's fiscal policy also weighed on market sentiment.
At 10:11 a.m. local time, the benchmark Nikkei 225 index was down 254.70 points at 15,141.60, while the broader Topix index for all First Section issues on the Tokyo Stock Exchange was down 29.21 points at 1,469.65.
In the U.S., department store operator J.C. Penney reported a 9% drop in fiscal third-quarter profit on weak sales and cut its fourth-quarter outlook. Additionally, Wells Fargo president and chief executive, John Stumpf, said that the U.S. housing market is seeing its steepest decline since the Great Depression.
The U.S. dollar traded at the mid 110-yen level in early trade in Tokyo. At 9:51 a.m. local time, the dollar was quoted at 110.50-110.52, down 0.89 yen from Thursday's 5:00 p.m. quotes of 111.39-111.41 yen.
In the oil space, Nippon Oil plunged 2.7%, Nippon Mining Holdings plummeted 2.3%, and Showa Shell Sekiyu KK lost 1.0%.
Among banks, Mitsubishi UFJ Financial Group fell 3.5%, Sumitomo Mitsui Financial Group gave away 2.9%, Mizuho Financial Group tumbled 4.0%, and Resona Holdings lost 3.0%.
Automaker Honda lost 1.3%, Toyota tumbled 1.6%, Nissan fell 2.01%, and Suzuki dropped 0.6%. Mazda advanced 0.4%.
Among high tech stocks, Kyocera slipped 0.6%, Fanuc lost 1.1%, Fujitsu fell 1.4%, Matsushita Electric Industrial gave away 1.1%, Sony slipped 1.1%, NEC plunged 2.3%, and Oki Electric Industry plummeted 3.1%. Advantest gained 1.0% and Tokyo Electron rose 1.2%.
(RTTNews) - Friday, Tokyo shares opened sharply lower, tracking the fall on Wall Street overnight. The appreciation of the yen and uncertainty about the government's fiscal policy also weighed on market sentiment.
At 10:11 a.m. local time, the benchmark Nikkei 225 index was down 254.70 points at 15,141.60, while the broader Topix index for all First Section issues on the Tokyo Stock Exchange was down 29.21 points at 1,469.65.
In the U.S., department store operator J.C. Penney reported a 9% drop in fiscal third-quarter profit on weak sales and cut its fourth-quarter outlook. Additionally, Wells Fargo president and chief executive, John Stumpf, said that the U.S. housing market is seeing its steepest decline since the Great Depression.
The U.S. dollar traded at the mid 110-yen level in early trade in Tokyo. At 9:51 a.m. local time, the dollar was quoted at 110.50-110.52, down 0.89 yen from Thursday's 5:00 p.m. quotes of 111.39-111.41 yen.
In the oil space, Nippon Oil plunged 2.7%, Nippon Mining Holdings plummeted 2.3%, and Showa Shell Sekiyu KK lost 1.0%.
Among banks, Mitsubishi UFJ Financial Group fell 3.5%, Sumitomo Mitsui Financial Group gave away 2.9%, Mizuho Financial Group tumbled 4.0%, and Resona Holdings lost 3.0%.
Automaker Honda lost 1.3%, Toyota tumbled 1.6%, Nissan fell 2.01%, and Suzuki dropped 0.6%. Mazda advanced 0.4%.
Among high tech stocks, Kyocera slipped 0.6%, Fanuc lost 1.1%, Fujitsu fell 1.4%, Matsushita Electric Industrial gave away 1.1%, Sony slipped 1.1%, NEC plunged 2.3%, and Oki Electric Industry plummeted 3.1%. Advantest gained 1.0% and Tokyo Electron rose 1.2%.
US Dollar Rallies Despite Plummeting Treasury Bond Yields - What Gives?
US Dollar Rallies Despite Plummeting Treasury Bond Yields - What Gives?
Thursday, 15 November 2007 18:37:31 GMT
Written by David Rodriguez, Currency Analyst
The US dollar continued to recover against major currency counterparts, as deterioration in global risk sentiment encouraged currency traders to cover dollar-short positions. The greenback saw the bulk of its gains through early morning European trade. Germany’s DAX index shed a sizeable 1.5 percent and London’s FTSE 100 lost a similar 1.1 percent—sinking the euro and the British pound against its downtrodden US counterpart. A similar unwind in carry trades made the Japanese Yen the strongest performer on the day, while the high-yielding Australian and New Zealand dollars slipped further off of recent heights.
Mixed US economic data had little effect on the domestic currency, with an exactly as-expected result in the key Consumer Price Index report having no immediate effect on market sentiment. Indeed, interest rate futures remained almost exactly unchanged in immediate aftermath of the highly-anticipated inflation report. A later tumble in the Dow Jones Industrial Average was the most market-moving event of the session, and it seems as though risk sentiment continues to deteriorate into late New York trading. Given a sharp decline in US Treasury Bond yields, investors are clearly showing their reluctance to buy and hold risky US stocks.
Interest rate futures have responded in kind, and the implied yield on the December Federal Reserves Funds Future fell a significant 5 basis points to 4.32 percent. Such price action shows that traders predict a 92 percent chance that the Fed will cut interest rates by a minimum of 25 basis points to 4.25 percent. Under and markets continue to expect that the US Federal Reserve will cut interest rates at its upcoming meeting. Under normal market conditions, falling US bond yields and Fed rate expectations would hurt the dollar. Yet we continue to see market risk aversion trump changes in yield differentials across key risk-sensitive currencies.
The Dow Jones Industrial Average continued to suffer on market risk aversion, losing 0.4 percent to 13,180 through late New York trading. Losses were clearly distributed among the broad spectrum of US stocks, as the S&P 500 was the largest decliner at -0.8 percent to 1,459. The tech-heavy NASDAQ Composite was not far behind as it shed a further 0.6 percent to 2,630.
US Treasury Markets were unsurprisingly volatile through the trading session. In a move one would normally see in emerging market government debt, the 2-year US Treasury Note shed a whopping 14 basis points to 3.36 percent. The combination of worsening risk sentiment and interest rate outlook sunk the yield to fresh 33-month lows, and a strong uptrend in bond prices showed few signs of abating through active trading.
Written by David Rodríguez, Currency Analyst for DailyFX.com
Thursday, 15 November 2007 18:37:31 GMT
Written by David Rodriguez, Currency Analyst
The US dollar continued to recover against major currency counterparts, as deterioration in global risk sentiment encouraged currency traders to cover dollar-short positions. The greenback saw the bulk of its gains through early morning European trade. Germany’s DAX index shed a sizeable 1.5 percent and London’s FTSE 100 lost a similar 1.1 percent—sinking the euro and the British pound against its downtrodden US counterpart. A similar unwind in carry trades made the Japanese Yen the strongest performer on the day, while the high-yielding Australian and New Zealand dollars slipped further off of recent heights.
Mixed US economic data had little effect on the domestic currency, with an exactly as-expected result in the key Consumer Price Index report having no immediate effect on market sentiment. Indeed, interest rate futures remained almost exactly unchanged in immediate aftermath of the highly-anticipated inflation report. A later tumble in the Dow Jones Industrial Average was the most market-moving event of the session, and it seems as though risk sentiment continues to deteriorate into late New York trading. Given a sharp decline in US Treasury Bond yields, investors are clearly showing their reluctance to buy and hold risky US stocks.
Interest rate futures have responded in kind, and the implied yield on the December Federal Reserves Funds Future fell a significant 5 basis points to 4.32 percent. Such price action shows that traders predict a 92 percent chance that the Fed will cut interest rates by a minimum of 25 basis points to 4.25 percent. Under and markets continue to expect that the US Federal Reserve will cut interest rates at its upcoming meeting. Under normal market conditions, falling US bond yields and Fed rate expectations would hurt the dollar. Yet we continue to see market risk aversion trump changes in yield differentials across key risk-sensitive currencies.
The Dow Jones Industrial Average continued to suffer on market risk aversion, losing 0.4 percent to 13,180 through late New York trading. Losses were clearly distributed among the broad spectrum of US stocks, as the S&P 500 was the largest decliner at -0.8 percent to 1,459. The tech-heavy NASDAQ Composite was not far behind as it shed a further 0.6 percent to 2,630.
US Treasury Markets were unsurprisingly volatile through the trading session. In a move one would normally see in emerging market government debt, the 2-year US Treasury Note shed a whopping 14 basis points to 3.36 percent. The combination of worsening risk sentiment and interest rate outlook sunk the yield to fresh 33-month lows, and a strong uptrend in bond prices showed few signs of abating through active trading.
Written by David Rodríguez, Currency Analyst for DailyFX.com
Saturday, November 3, 2007
CAD - Hits $1.07
Along with the impressive employment numbers, the loonie got an extra boost today from a rebound in world prices for oil, which jumped to almost $95 US a barrel, and a healthy rise in gold, which was up to more than $800 US an ounce.
The dollar closed at $1.0704 US after reaching a high of $1.0729 earlier in the day - heights not seen since the late 1880s, well before official monetary records were even kept. But for many analysts, it's a case of looking a gift horse in the mouth.
From a distance, the economy seems to be humming along quite nicely. But these analysts say a closer look reveals a shrinking manufacturing sector - aggregated by the higher cost of exports due to the loonie's rise - and a slowdown in the United States, Canada's largest export market.
Investors also appeared concerned, sending the Canadian stock market down, not up. It was the same on Wall Street, where the blue-chip Dow also slipped despite news of U.S. job growth of 166,000, double what analysts expected.
In Canada, even consumers are apparently not convinced that the good times will continue to roll, according to a survey that found their confidence sagging on concerns about job layoffs down the road if things turn bad. But first the good news.
Canadian employment continued to rise in October, split between full and part time, pulling the jobless rate down a notch to its lowest level since 1974, which in fact is the furthest back that comparable levels go, making the jobless rate a record low. And so far this year, employment has increased by 2.1 per cent or 346,000 jobs, the strongest pace of growth in five years, lifting the employment rate to a record high 63.7 per cent.
But TD Bank deputy chief economist Craig Alexander said "... something does not add up."
"There is a considerable dichotomy between the employment gains and recent economic data," he said. "Either employment growth is going to slow remarkably fast or forecasters, such as ourselves, have completely misjudged the underlying strength of the economy," Alexander said.
National Bank of Canada economist Stefane Marion also admitted to being "baffled" that the public sector which accounts for just 19 per cent of total employment, has accounted for all of the job growth for the past quarter year, while private sector payrolls have shrunk.
"This disconnect is unprecedented and we do not think that it can be sustained," Marion said. And J.P. Morgan economist Ted Carmichael forecast a significant slowdown in job growth in the months to come, noting that private sector employment has been a better guide to downturns in the economy and that business payrolls have shrunk by 12,000 over the past three months.
Consumers also sense something doesn't add up, according to the Conference Board of Canada. It reported that its consumer confidence index fell 1.7 points in October to 98.2 as "consumers grew increasingly wary of future job market conditions."
There was a "notable decline" in optimism about the outlook for jobs. Confidence fell in the Atlantic Provinces, Ontario, and the Prairies, was flat in Quebec, but rose in British Columbia, although that gain followed five straight months of deterioration in the mood on the West coast.
Not everyone, however, was shocked by the continuing job surge, although the reason doesn't bode well for the economy either.
"In fact, it only underlines the serious shortage of labour facing our country that our members have been warning us about for some time," said Garth Whyte, of the Canadian Federation of Independent Business.
"Not only are many businesses having trouble finding workers, but the tight labour market is also pushing up wages, which is a real concern for smaller companies already coping with the strong dollar, high energy costs and uneasy credit markets."
Wages last month were 4.1 per cent higher than a year earlier, nearly double the increase in the cost of living over that time, although the gains ranged from 8.4 per cent in Newfoundland, 7.1 in Alberta and 6.2 in Saskatchewan to as little as 0.1 per cent in Prince Edward Island, and 1.8 in British Columbia.
But Canadian Labour Congress economist Erin Weir said that it's about time workers got a fairer share of the economic pie following years of record profit growth and "two decades of anemic wage growth." The strong wage growth is despite what was seen as a slight decline in the quality of the jobs being created.
"The tip towards part-time and self-employed jobs this month took CIBC World Market's Employment Quality Index down a few notches this month, but is still the second best reading for 2007," said CIBC economist Avery Shenfeld Shenfeld. Some of the job growth was temporary and due to hiring related to the Ontario election, he said, also noting that the muted performance of private sector employment is more in line with the moderate performance of the economy.
The dollar closed at $1.0704 US after reaching a high of $1.0729 earlier in the day - heights not seen since the late 1880s, well before official monetary records were even kept. But for many analysts, it's a case of looking a gift horse in the mouth.
From a distance, the economy seems to be humming along quite nicely. But these analysts say a closer look reveals a shrinking manufacturing sector - aggregated by the higher cost of exports due to the loonie's rise - and a slowdown in the United States, Canada's largest export market.
Investors also appeared concerned, sending the Canadian stock market down, not up. It was the same on Wall Street, where the blue-chip Dow also slipped despite news of U.S. job growth of 166,000, double what analysts expected.
In Canada, even consumers are apparently not convinced that the good times will continue to roll, according to a survey that found their confidence sagging on concerns about job layoffs down the road if things turn bad. But first the good news.
Canadian employment continued to rise in October, split between full and part time, pulling the jobless rate down a notch to its lowest level since 1974, which in fact is the furthest back that comparable levels go, making the jobless rate a record low. And so far this year, employment has increased by 2.1 per cent or 346,000 jobs, the strongest pace of growth in five years, lifting the employment rate to a record high 63.7 per cent.
But TD Bank deputy chief economist Craig Alexander said "... something does not add up."
"There is a considerable dichotomy between the employment gains and recent economic data," he said. "Either employment growth is going to slow remarkably fast or forecasters, such as ourselves, have completely misjudged the underlying strength of the economy," Alexander said.
National Bank of Canada economist Stefane Marion also admitted to being "baffled" that the public sector which accounts for just 19 per cent of total employment, has accounted for all of the job growth for the past quarter year, while private sector payrolls have shrunk.
"This disconnect is unprecedented and we do not think that it can be sustained," Marion said. And J.P. Morgan economist Ted Carmichael forecast a significant slowdown in job growth in the months to come, noting that private sector employment has been a better guide to downturns in the economy and that business payrolls have shrunk by 12,000 over the past three months.
Consumers also sense something doesn't add up, according to the Conference Board of Canada. It reported that its consumer confidence index fell 1.7 points in October to 98.2 as "consumers grew increasingly wary of future job market conditions."
There was a "notable decline" in optimism about the outlook for jobs. Confidence fell in the Atlantic Provinces, Ontario, and the Prairies, was flat in Quebec, but rose in British Columbia, although that gain followed five straight months of deterioration in the mood on the West coast.
Not everyone, however, was shocked by the continuing job surge, although the reason doesn't bode well for the economy either.
"In fact, it only underlines the serious shortage of labour facing our country that our members have been warning us about for some time," said Garth Whyte, of the Canadian Federation of Independent Business.
"Not only are many businesses having trouble finding workers, but the tight labour market is also pushing up wages, which is a real concern for smaller companies already coping with the strong dollar, high energy costs and uneasy credit markets."
Wages last month were 4.1 per cent higher than a year earlier, nearly double the increase in the cost of living over that time, although the gains ranged from 8.4 per cent in Newfoundland, 7.1 in Alberta and 6.2 in Saskatchewan to as little as 0.1 per cent in Prince Edward Island, and 1.8 in British Columbia.
But Canadian Labour Congress economist Erin Weir said that it's about time workers got a fairer share of the economic pie following years of record profit growth and "two decades of anemic wage growth." The strong wage growth is despite what was seen as a slight decline in the quality of the jobs being created.
"The tip towards part-time and self-employed jobs this month took CIBC World Market's Employment Quality Index down a few notches this month, but is still the second best reading for 2007," said CIBC economist Avery Shenfeld Shenfeld. Some of the job growth was temporary and due to hiring related to the Ontario election, he said, also noting that the muted performance of private sector employment is more in line with the moderate performance of the economy.
Slumping dollar takes shine off British Airways' record profits
Slumping dollar takes shine off British Airways' record profits
By Danny Fortson
Published: 03 November 2007
British Airways unveiled a record set of results yesterday but warned that growth would slow due to the high oil price and the plunging dollar.
The performance, coming despite a near one per cent drop in passenger revenue to £3.9bn, was fuelled by a series of cost cuts that have been pushed through by chief executive Willie Walsh. The carrier earned £593m before tax for the first six months of the year, up from £471m in the same period last year, and achieved a 12.5 per cent operating margin, beating its stated 10 per cent goal.
Mr Walsh reduced the revenue growth forecast however to 3.5 per cent – the second cut of the year – blaming the slowdown on America's weakening currency. "The big impact is the US dollar," he said. The greenback hit a new all-time low against the euro last week while the pound recently passed the $2 barrier.
The weak dollar wasn't all bad news for BA. The falling value of the greenback also meant that less money was flowing out of its coffers – its weakness was the main reason for a £150m drop in operating costs. Investors were nonetheless disappointed by the numbers, sending BA shares down 2.5 per cent.
BA is facing a raft of challenges – the oil price chief among them. Mr Walsh predicted that the soaring value of the black stuff will push the carrier's fuel bill for the year up to £2bn, an increase of £100m from the year before.
The company has also begun trialling Heathrow's new Terminal 5, set to open in March next year. Mr Walsh said it will be a catalyst for growth. Explaining the carrier's underwhelming revenue performance, he said: "We deliberately held back because we are focused on Terminal 5 getting established. "We will start to focus now on growing the business again. I think it's a bit of a crossroads for us, but it's exciting. Now it will be about fulfilling the potential of the company."
He predicted "strong revenue growth" for the second half, powered by continued strong demand from high margin business class and first class passengers. He didn't expect this to be dented by the Open Skies agreement, which will open the highly lucrative transatlantic routes to America to new competitors when it comes into effect in April.
BA will take advantage of the loosened regulations by shifting some flights now departing from Gatwick, such as those to Houston and Dallas, to Heathrow, and increase frequency of other services to prime destinations like Washington DC and Seattle. Gert Zonneveld, an analyst at Panmure Gordon, said that the spectre of increased competition was not an imminent threat.
"Open Skies will not have a substantially negative impact on BA in the near term. Heathrow is exceptionally congested and we only expect a limited number of new routes by US competitors (most of which could replace existing Gatwick services)," he said. "We also expect benefits from the opening of Terminal 5 next year and the possible relaxation of hand luggage restrictions, which is having a negative impact on connecting traffic.
Mr Walsh also said BA was making "good progress" on the joint bid it is preparing with American private equity giant TPG for Iberia, the Spanish airline. The bidding partners, who are also working with a trio of Spanish investment firms on the offer, are working on getting the financing in place to launch a bid that will value the carrier at up to ¿3.4bn. "We are confident and committed to making progress. A firm offer is likely still "two to four weeks away," he said.
from: news.independent.co.uk
By Danny Fortson
Published: 03 November 2007
British Airways unveiled a record set of results yesterday but warned that growth would slow due to the high oil price and the plunging dollar.
The performance, coming despite a near one per cent drop in passenger revenue to £3.9bn, was fuelled by a series of cost cuts that have been pushed through by chief executive Willie Walsh. The carrier earned £593m before tax for the first six months of the year, up from £471m in the same period last year, and achieved a 12.5 per cent operating margin, beating its stated 10 per cent goal.
Mr Walsh reduced the revenue growth forecast however to 3.5 per cent – the second cut of the year – blaming the slowdown on America's weakening currency. "The big impact is the US dollar," he said. The greenback hit a new all-time low against the euro last week while the pound recently passed the $2 barrier.
The weak dollar wasn't all bad news for BA. The falling value of the greenback also meant that less money was flowing out of its coffers – its weakness was the main reason for a £150m drop in operating costs. Investors were nonetheless disappointed by the numbers, sending BA shares down 2.5 per cent.
BA is facing a raft of challenges – the oil price chief among them. Mr Walsh predicted that the soaring value of the black stuff will push the carrier's fuel bill for the year up to £2bn, an increase of £100m from the year before.
The company has also begun trialling Heathrow's new Terminal 5, set to open in March next year. Mr Walsh said it will be a catalyst for growth. Explaining the carrier's underwhelming revenue performance, he said: "We deliberately held back because we are focused on Terminal 5 getting established. "We will start to focus now on growing the business again. I think it's a bit of a crossroads for us, but it's exciting. Now it will be about fulfilling the potential of the company."
He predicted "strong revenue growth" for the second half, powered by continued strong demand from high margin business class and first class passengers. He didn't expect this to be dented by the Open Skies agreement, which will open the highly lucrative transatlantic routes to America to new competitors when it comes into effect in April.
BA will take advantage of the loosened regulations by shifting some flights now departing from Gatwick, such as those to Houston and Dallas, to Heathrow, and increase frequency of other services to prime destinations like Washington DC and Seattle. Gert Zonneveld, an analyst at Panmure Gordon, said that the spectre of increased competition was not an imminent threat.
"Open Skies will not have a substantially negative impact on BA in the near term. Heathrow is exceptionally congested and we only expect a limited number of new routes by US competitors (most of which could replace existing Gatwick services)," he said. "We also expect benefits from the opening of Terminal 5 next year and the possible relaxation of hand luggage restrictions, which is having a negative impact on connecting traffic.
Mr Walsh also said BA was making "good progress" on the joint bid it is preparing with American private equity giant TPG for Iberia, the Spanish airline. The bidding partners, who are also working with a trio of Spanish investment firms on the offer, are working on getting the financing in place to launch a bid that will value the carrier at up to ¿3.4bn. "We are confident and committed to making progress. A firm offer is likely still "two to four weeks away," he said.
from: news.independent.co.uk
US Dollar Fails to Respond to Blowout Payrolls Number: What Gives?
US Dollar Fails to Respond to Blowout Payrolls Number: What Gives?
Next to the Federal Reserve’s interest rate decision, non-farm payrolls was the most anticipated event risk this week and it did live up to its reputation of being market moving, particularly on an intraday basis. However the reaction in the US dollar was not what everyone expected; it has puzzled most traders who wonder why a number that doubled expectations could have sent the US dollar to a fresh record low against the Euro and Canadian dollar. The US dollar did rise in the seconds after the release, but the move completely reversed within five minutes. Theoretically the sharp rise payrolls should give the Federal Reserve more reason to keep interest rates unchanged even though the underlying details of the report were somewhat softer. The breadth of job gains (also known as the diffusion index) and average hourly earnings were weaker than expected. The unemployment rate on an unrounded basis also increased from 4.696 to 4.727 percent. Yet these details are probably not the reason why the dollar fell because they do not have the significance to offset the blowout headline number. Instead, the price action in the market today reflects everyone’s unwillingness to buy dollars. Those who want to be long are already long and any “new” positions being taken are mostly on the short side. If the US dollar can’t rally on strong economic data, what will it rally on? We think that the dollar’s rally will come to an end only when the Federal Reserve ups their degree of hawkishness or the European Central Bank cries uncle and finally warns that the Euro’s rally has become too excessive. We may actually get part of this opportunity next week when Bernanke testifies before the Joint Economic Committee. Besides that, the only numbers worth watching in the US are service sector ISM, the trade balance and import prices. At this point, a move up to 1.50 in the EUR/USD is still more likely than a move back below 1.40.
from: dailyfx.com
Next to the Federal Reserve’s interest rate decision, non-farm payrolls was the most anticipated event risk this week and it did live up to its reputation of being market moving, particularly on an intraday basis. However the reaction in the US dollar was not what everyone expected; it has puzzled most traders who wonder why a number that doubled expectations could have sent the US dollar to a fresh record low against the Euro and Canadian dollar. The US dollar did rise in the seconds after the release, but the move completely reversed within five minutes. Theoretically the sharp rise payrolls should give the Federal Reserve more reason to keep interest rates unchanged even though the underlying details of the report were somewhat softer. The breadth of job gains (also known as the diffusion index) and average hourly earnings were weaker than expected. The unemployment rate on an unrounded basis also increased from 4.696 to 4.727 percent. Yet these details are probably not the reason why the dollar fell because they do not have the significance to offset the blowout headline number. Instead, the price action in the market today reflects everyone’s unwillingness to buy dollars. Those who want to be long are already long and any “new” positions being taken are mostly on the short side. If the US dollar can’t rally on strong economic data, what will it rally on? We think that the dollar’s rally will come to an end only when the Federal Reserve ups their degree of hawkishness or the European Central Bank cries uncle and finally warns that the Euro’s rally has become too excessive. We may actually get part of this opportunity next week when Bernanke testifies before the Joint Economic Committee. Besides that, the only numbers worth watching in the US are service sector ISM, the trade balance and import prices. At this point, a move up to 1.50 in the EUR/USD is still more likely than a move back below 1.40.
from: dailyfx.com
Dollar falls from 23-year highs
Dollar falls from 23-year highs
November 03, 2007 12:00am
THE Australian dollar closed one and a half cents weaker yesterday after renewed credit fears sent traders scurrying towards the safety of the US dollar.
At at close of local trade yesterday, the Australian dollar was trading at 91.63 US cents, down one and a half US cents from yesterday's close of 93.14 US cents.
Commonwealth Bank chief currency strategist Richard Grace said the Australian dollar was sold off strongly as risk aversion returned and equity markets fell.
Sparking concerns was a newspaper report on Thursday in the US that Merrill Lynch had made deals with hedge funds to delay losses from its sub-prime mortgage sector exposure.
The US Federal Reserve also overnight injected $US41 billion ($A45.03 billion) in temporary reserves into money markets in an effort to boost liquidity. It was the biggest one-day cash infusion since September 2001.
While the Australian dollar remained lower than yesterday's close, Mr Grace said it had been recovering through much of the local session.
”But in late afternoon trade, there's more renewed concerns about the equity market and the health of US financials in particular,'' he said.
”That's put a little bit of a dampener on the Australian dollar and it dragged the Australian dollar/yen down as well.
”But I'd be surprised if it lasts. I suspect the Aussie is going to continue to grind higher.''
November 03, 2007 12:00am
THE Australian dollar closed one and a half cents weaker yesterday after renewed credit fears sent traders scurrying towards the safety of the US dollar.
At at close of local trade yesterday, the Australian dollar was trading at 91.63 US cents, down one and a half US cents from yesterday's close of 93.14 US cents.
Commonwealth Bank chief currency strategist Richard Grace said the Australian dollar was sold off strongly as risk aversion returned and equity markets fell.
Sparking concerns was a newspaper report on Thursday in the US that Merrill Lynch had made deals with hedge funds to delay losses from its sub-prime mortgage sector exposure.
The US Federal Reserve also overnight injected $US41 billion ($A45.03 billion) in temporary reserves into money markets in an effort to boost liquidity. It was the biggest one-day cash infusion since September 2001.
While the Australian dollar remained lower than yesterday's close, Mr Grace said it had been recovering through much of the local session.
”But in late afternoon trade, there's more renewed concerns about the equity market and the health of US financials in particular,'' he said.
”That's put a little bit of a dampener on the Australian dollar and it dragged the Australian dollar/yen down as well.
”But I'd be surprised if it lasts. I suspect the Aussie is going to continue to grind higher.''
Euro On its Way to 1.50 Now that the French Have Stopped Screaming
Euro On its Way to 1.50 Now that the French Have Stopped Screaming
Friday, 02 November 2007 21:13:54 GMT
Written by Kathy Lien, Chief Strategist
If the Euro manages to close above 1.45 against the US dollar, it could once again be on its way to hitting 1.50. Despite slightly weaker economic data, demand for Euros or distaste for US dollars continues to grow. Both German and Italian manufacturing PMI dropped last month even though the French and overall Eurozone number remained unchanged. Today’s rally may be partially due to comments from the French who in the past were the most vocally opposed to Euro strength.
The French Secretary of State said this morning that they are resolving their arguments with the ECB because they have realized that the stronger Euro is helping keep prices under control. This is the main reason why the ECB is so stubbornly hawkish. With oil prices climbing close to $96 a barrel, foreign nations are scrambling to keep prices under control. ECB President Trichet next week, who will be speaking after the bank’s monetary policy meeting, should share this sentiment; interest rates are expected to remain unchanged. Aside from that, we are also expecting service sector ISM, Eurozone PPI, retail sales, German manufacturing data and the German trade balance. As for the Swiss franc, consumer prices were stronger today, but that did little to pressure EUR/CHF. Next week, the Swiss unemployment rate and SECO consumer climate survey are due for release.
Friday, 02 November 2007 21:13:54 GMT
Written by Kathy Lien, Chief Strategist
If the Euro manages to close above 1.45 against the US dollar, it could once again be on its way to hitting 1.50. Despite slightly weaker economic data, demand for Euros or distaste for US dollars continues to grow. Both German and Italian manufacturing PMI dropped last month even though the French and overall Eurozone number remained unchanged. Today’s rally may be partially due to comments from the French who in the past were the most vocally opposed to Euro strength.
The French Secretary of State said this morning that they are resolving their arguments with the ECB because they have realized that the stronger Euro is helping keep prices under control. This is the main reason why the ECB is so stubbornly hawkish. With oil prices climbing close to $96 a barrel, foreign nations are scrambling to keep prices under control. ECB President Trichet next week, who will be speaking after the bank’s monetary policy meeting, should share this sentiment; interest rates are expected to remain unchanged. Aside from that, we are also expecting service sector ISM, Eurozone PPI, retail sales, German manufacturing data and the German trade balance. As for the Swiss franc, consumer prices were stronger today, but that did little to pressure EUR/CHF. Next week, the Swiss unemployment rate and SECO consumer climate survey are due for release.
Thursday, October 18, 2007
FOREX-Dollar index drops to record low on economic outlook
Thu Oct 18, 2007 4:29 PM BST144
NEW YORK, Oct 18 (Reuters) - The dollar dropped to a record low against a basket of currencies and the euro on Thursday after Bank of America's third-quarter earnings results missed estimates and renewed concerns of a U.S. economic slowdown.
Weak earnings from the second-largest U.S. bank on the back of mounting credit losses sent U.S. stock indexes lower and U.S. Treasury prices higher on expectations slowing activity might prompt the U.S. Federal Reserve to cut interest rates.
The yen gained against the dollar as investors became more risk-averse and unwound carry trades in which they buy high-yielding currencies funded by borrowing low-yielders such as the yen.
It was the yen's fourth straight day of gains against the dollar, the longest streak of gains since the four days leading up to the Fed's surprise 50 basis point cut of the discount rate, at which it lends to banks, on Aug. 17.
"Bank of America earnings play up concerns about the health of the financial sector and suggest we are likely to see fall out from market volatility, with the yen being the main beneficiary," said Omer Esiner, foreign exchange analyst at Ruesch International in Washington.
Late morning in New York, the euro was up around 0.6 percent on the day at $1.4287, after climbing to a lifetime peak at $1.4310 in the opening hours of the New York session, according to Reuters data.
from: http://investing.reuters.co.uk/
NEW YORK, Oct 18 (Reuters) - The dollar dropped to a record low against a basket of currencies and the euro on Thursday after Bank of America's third-quarter earnings results missed estimates and renewed concerns of a U.S. economic slowdown.
Weak earnings from the second-largest U.S. bank on the back of mounting credit losses sent U.S. stock indexes lower and U.S. Treasury prices higher on expectations slowing activity might prompt the U.S. Federal Reserve to cut interest rates.
The yen gained against the dollar as investors became more risk-averse and unwound carry trades in which they buy high-yielding currencies funded by borrowing low-yielders such as the yen.
It was the yen's fourth straight day of gains against the dollar, the longest streak of gains since the four days leading up to the Fed's surprise 50 basis point cut of the discount rate, at which it lends to banks, on Aug. 17.
"Bank of America earnings play up concerns about the health of the financial sector and suggest we are likely to see fall out from market volatility, with the yen being the main beneficiary," said Omer Esiner, foreign exchange analyst at Ruesch International in Washington.
Late morning in New York, the euro was up around 0.6 percent on the day at $1.4287
from: http://investing.reuters.co.uk/
Banks seek to buy time with rescue fund
Banks seek to buy time with rescue fund
Wed, Oct 17 2007, 21:13 GMT
http://www.afxnews.com
WASHINGTON (AP) - A lifeline banks are extending to owners of mortgage-backed securities that have plunged in value will avert a near-term crisis but not necessarily a painful reckoning long-term.
At some point, banks and others will have to update their balance sheets to reflect huge losses from the collapse in subprime mortgages extended to risky borrowers during the housing boom.
Yet Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., with approval from the Treasury Department, have devised a scheme to spread out the balance sheet losses over time and prevent dramatic swings in asset valuations that could unbalance financial markets.
The banks hope the creation of the Master Liquidity Enhancement Conduit or M-LEC, will prevent turmoil in mortgage-backed securities from further spilling into other parts of the credit market. Not controlling the spillover could force a fire sale of distressed assets, making borrowers more reluctant to lend. The result: higher interest rates and slower economic growth.
The jury is out on whether M-LEC will be successful, especially over the long haul. Some economists argue it simply delays the inevitable, as banks will eventually have to mark down the value of securities backed by subprime mortgages now in default.
"They're just trying to buy time," said Christopher Whalen, managing director of Institutional Risk Analytics, a consulting firm.
Others, though, say M-LEC is a crucial step in restoring calm to a market near chaos.
In just the past few months, leading banks and investment houses, such as Citigroup and Merrill Lynch & Co. Inc., have already reduced the value of asset-backed securities on their books by approximately $30 billion, said Brian Bethune, U.S. economist at Global Insight, a consulting firm.
More writedowns are coming but "it's just not appropriate to have it all in two months," he added.
At the same time, M-LEC gives the market some time to asses the extent of the problem in asset-backed securities. No one is quite sure how many of the securities are in trouble in the $400 billion global market.
Part of the reason is because many of the securities are held by banks in off-balance sheet funds, known as structured investment vehicles or SIVs.
The SIVs sell short-term debt to investors and use the proceeds to buy longer-term, asset-backed securities, which earn higher yields. As investors became aware of the problems in the mortgage-backed mortgage, they began to steer clear of short-term debt sold by SIVs.
M-LEC will purchase securities held by the SIVs that aren't in trouble, strengthening balance sheets of the SIVs and restoring confidence in the market so that investors will be willing to buy short-term debt from them.
Critics of the plan though say all that's happening is postponing the re-pricing of the most troubled assets, which could prolong problems in the credit market.
"Liquidity crises last longer if there's something truly wrong with the collateral that needs to be worked out," said Joseph Mason, a finance professor at Drexel University. The banks' plan "will continue to prevent" accurate accounting of the losses, he added.
Accounting regulators have yet to weigh in on the proposal, which was the result of brainstorming sponsored in recent weeks by Treasury Secretary Henry Paulson. Of some concern, analysts say, is whether securities purchased by M-LEC will be accurately priced at the time of sale.
The answer to that question will determine how much confidence investors will have in M-LEC's ability to be effective, says Tanya Azarchs, managing director for S&P's Financial Services Ratings Group.
David Resler, U.S. economist at Nomura Securities, said M-LEC might also delay accurately accounting for the value of the securities it buys as part of the effort to buy time for a distressed market. "If they're selling for fair market value, then why do they need" the fund, he wondered.
Azarchs agreed. "How the current market prices will be determined will be key to this whole thing," she said.
Wed, Oct 17 2007, 21:13 GMT
http://www.afxnews.com
WASHINGTON (AP) - A lifeline banks are extending to owners of mortgage-backed securities that have plunged in value will avert a near-term crisis but not necessarily a painful reckoning long-term.
At some point, banks and others will have to update their balance sheets to reflect huge losses from the collapse in subprime mortgages extended to risky borrowers during the housing boom.
Yet Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., with approval from the Treasury Department, have devised a scheme to spread out the balance sheet losses over time and prevent dramatic swings in asset valuations that could unbalance financial markets.
The banks hope the creation of the Master Liquidity Enhancement Conduit or M-LEC, will prevent turmoil in mortgage-backed securities from further spilling into other parts of the credit market. Not controlling the spillover could force a fire sale of distressed assets, making borrowers more reluctant to lend. The result: higher interest rates and slower economic growth.
The jury is out on whether M-LEC will be successful, especially over the long haul. Some economists argue it simply delays the inevitable, as banks will eventually have to mark down the value of securities backed by subprime mortgages now in default.
"They're just trying to buy time," said Christopher Whalen, managing director of Institutional Risk Analytics, a consulting firm.
Others, though, say M-LEC is a crucial step in restoring calm to a market near chaos.
In just the past few months, leading banks and investment houses, such as Citigroup and Merrill Lynch & Co. Inc., have already reduced the value of asset-backed securities on their books by approximately $30 billion, said Brian Bethune, U.S. economist at Global Insight, a consulting firm.
More writedowns are coming but "it's just not appropriate to have it all in two months," he added.
At the same time, M-LEC gives the market some time to asses the extent of the problem in asset-backed securities. No one is quite sure how many of the securities are in trouble in the $400 billion global market.
Part of the reason is because many of the securities are held by banks in off-balance sheet funds, known as structured investment vehicles or SIVs.
The SIVs sell short-term debt to investors and use the proceeds to buy longer-term, asset-backed securities, which earn higher yields. As investors became aware of the problems in the mortgage-backed mortgage, they began to steer clear of short-term debt sold by SIVs.
M-LEC will purchase securities held by the SIVs that aren't in trouble, strengthening balance sheets of the SIVs and restoring confidence in the market so that investors will be willing to buy short-term debt from them.
Critics of the plan though say all that's happening is postponing the re-pricing of the most troubled assets, which could prolong problems in the credit market.
"Liquidity crises last longer if there's something truly wrong with the collateral that needs to be worked out," said Joseph Mason, a finance professor at Drexel University. The banks' plan "will continue to prevent" accurate accounting of the losses, he added.
Accounting regulators have yet to weigh in on the proposal, which was the result of brainstorming sponsored in recent weeks by Treasury Secretary Henry Paulson. Of some concern, analysts say, is whether securities purchased by M-LEC will be accurately priced at the time of sale.
The answer to that question will determine how much confidence investors will have in M-LEC's ability to be effective, says Tanya Azarchs, managing director for S&P's Financial Services Ratings Group.
David Resler, U.S. economist at Nomura Securities, said M-LEC might also delay accurately accounting for the value of the securities it buys as part of the effort to buy time for a distressed market. "If they're selling for fair market value, then why do they need" the fund, he wondered.
Azarchs agreed. "How the current market prices will be determined will be key to this whole thing," she said.
Wednesday, October 17, 2007
Dollar, gold fall in Europe
October 17, 2007 8:59 AM
LONDON (AP) - The U.S. dollar fell against other major currencies in European trading Wednesday. Gold fell.
The euro traded at $1.4205, up from $1.4164 late Tuesday in New York. Later, in midday trading in New York, the euro fetched $1.4205.
Other dollar rates in Europe, compared with late Tuesday, included 116.60 Japanese yen, down from 116.69; 1.1800 Swiss francs, down from 1.1824; and 0.9741 Canadian dollars, down from 0.9798.
The British pound was quoted at $2.0377, up from $2.0315.
In midday New York trading, the dollar bought 116.58 yen and 1.1816 Swiss francs, while the pound was worth $2.0389.
Gold traded in London at $756.95 per troy ounce, down from $758.40 late Tuesday. In Zurich, gold traded at $754.90 bid per troy ounce, down from $755.00. Gold closed $5.40 lower in Hong Kong Wednesday at $758.15 an ounce.
Silver traded in London at $13.58, down from $13.60.
from: http://www.newspress.com/Top/Article/article.jsp?Section=BUSINESS&ID=565105808229401463
LONDON (AP) - The U.S. dollar fell against other major currencies in European trading Wednesday. Gold fell.
The euro traded at $1.4205, up from $1.4164 late Tuesday in New York. Later, in midday trading in New York, the euro fetched $1.4205.
Other dollar rates in Europe, compared with late Tuesday, included 116.60 Japanese yen, down from 116.69; 1.1800 Swiss francs, down from 1.1824; and 0.9741 Canadian dollars, down from 0.9798.
The British pound was quoted at $2.0377, up from $2.0315.
In midday New York trading, the dollar bought 116.58 yen and 1.1816 Swiss francs, while the pound was worth $2.0389.
Gold traded in London at $756.95 per troy ounce, down from $758.40 late Tuesday. In Zurich, gold traded at $754.90 bid per troy ounce, down from $755.00. Gold closed $5.40 lower in Hong Kong Wednesday at $758.15 an ounce.
Silver traded in London at $13.58, down from $13.60.
from: http://www.newspress.com/Top/Article/article.jsp?Section=BUSINESS&ID=565105808229401463
Dollar falls broadly as US housing starts plunge
NEW YORK (Reuters) - The dollar fell broadly on Wednesday after a report showed U.S. housing starts dropped to their lowest level in 14 years in September, adding to concerns that the housing market may drag on the U.S. economy.
Traders sold dollars after the Commerce Department said home construction starts fell 10.2 percent last month to below Wall Street's consensus forecast. For details, see.
A weaker housing market and a slow U.S. economy may prompt Federal Reserve policy-makers to cut benchmark interest rates again from the current 4.75 percent. Fed officials next meet on October 30-31.
"The U.S. housing market is going to continue to be a significant drag on the overall U.S. economy, and the U.S. dollar is going to weaken as a result," said Firas Askari, head currency trader at BMO Capital Markets in Toronto.
"The Federal Reserve is more likely to be easing rates, maybe not on October 31, but definitely within the next three to six months," he added.
In late morning trading in New York, the euro was 0.4 percent higher at $1.4215. The dollar index, which measures the value of the greenback against a basket of six currencies, fell 0.35 percent to 78.057.
Against the yen, the U.S. currency reversed earlier gains and fell 0.1 percent to 116.68.
According to another government report, U.S. consumer prices rose at the sharpest rate in four months in September. But core prices, which exclude volatile food and energy costs, rose in line with expectations.
"CPI came in about as expected, so there's more focus on the big drop in housing starts," said Shaun Osborne, a senior currency strategist at TD Securities in Toronto. "The general trend is toward risk-taking again today after the rebound in Asian equities."
The Federal Reserve's "beige book," a snapshot of conditions in the U.S. economy, may provide further clues on the Fed's next move on rates when it is released at 2 p.m.
Traders sold dollars after the Commerce Department said home construction starts fell 10.2 percent last month to below Wall Street's consensus forecast. For details, see.
A weaker housing market and a slow U.S. economy may prompt Federal Reserve policy-makers to cut benchmark interest rates again from the current 4.75 percent. Fed officials next meet on October 30-31.
"The U.S. housing market is going to continue to be a significant drag on the overall U.S. economy, and the U.S. dollar is going to weaken as a result," said Firas Askari, head currency trader at BMO Capital Markets in Toronto.
"The Federal Reserve is more likely to be easing rates, maybe not on October 31, but definitely within the next three to six months," he added.
In late morning trading in New York, the euro was 0.4 percent higher at $1.4215. The dollar index, which measures the value of the greenback against a basket of six currencies, fell 0.35 percent to 78.057.
Against the yen, the U.S. currency reversed earlier gains and fell 0.1 percent to 116.68.
According to another government report, U.S. consumer prices rose at the sharpest rate in four months in September. But core prices, which exclude volatile food and energy costs, rose in line with expectations.
"CPI came in about as expected, so there's more focus on the big drop in housing starts," said Shaun Osborne, a senior currency strategist at TD Securities in Toronto. "The general trend is toward risk-taking again today after the rebound in Asian equities."
The Federal Reserve's "beige book," a snapshot of conditions in the U.S. economy, may provide further clues on the Fed's next move on rates when it is released at 2 p.m.
Sterling rallies, breaks through stop-loss levels
LONDON, Oct 17 (Reuters) - Sterling spiked up against the dollar on Wednesday, adding half a cent to hit session highs, with traders saying the move was accelerated by the pair going through stop-loss levels.
Selling interest in euro/sterling was also helping the pound move higher ahead of minutes from this month's Bank of England meeting and UK jobs data at 0830 GMT.
By 0758 GMT, sterling was up 0.2 percent at $2.0361, while the euro was down 0.1 percent at 69.66 pence .
"We've gone through some stops at $2.0300, and then again at $2.0340," said a trader at a UK bank.
With European equity markets moving into the black <.FTEU3> and risk aversion abating, the high-yielding sterling also benefitted from a renewed interest in carry trades.
Fonte:
Selling interest in euro/sterling was also helping the pound move higher ahead of minutes from this month's Bank of England meeting and UK jobs data at 0830 GMT.
By 0758 GMT, sterling was up 0.2 percent at $2.0361
"We've gone through some stops at $2.0300, and then again at $2.0340," said a trader at a UK bank.
With European equity markets moving into the black <.FTEU3> and risk aversion abating, the high-yielding sterling also benefitted from a renewed interest in carry trades.
Fonte:
Friday, October 5, 2007
Fed's Warsh says financial markets 'normalizing'
Fri, Oct 5 2007, 23:28 GMT
http://www.afxnews.com
WASHINGTON (Thomson Financial) - While it is "premature to judge the ultimate effects" of the Fed's rate cut and other actions on the financial markets or the economy, Federal Reserve Governor Kevin Warsh said it appears that "financial conditions might be normalizing somewhat."
He cited narrowing of interest-rate spreads and improvements in the markets for commercial paper market and leveraged loans.
In a speech New York State Economics Association annual conference, Warsh said "the functioning of several markets continues to be strained" and that strain may continue. A copy of remarks was released in Washington.
In explaining the Fed's recent actions, Warsh said concerns about financial stability "may rightly shape" the policymakers' views about the economic outlook and the risks surrounding it.
Looking forward, he said the Fed policymakers would be relying not only on their economic models but on "real-time, forward looking indicators" to make their judgments.
http://www.afxnews.com
WASHINGTON (Thomson Financial) - While it is "premature to judge the ultimate effects" of the Fed's rate cut and other actions on the financial markets or the economy, Federal Reserve Governor Kevin Warsh said it appears that "financial conditions might be normalizing somewhat."
He cited narrowing of interest-rate spreads and improvements in the markets for commercial paper market and leveraged loans.
In a speech New York State Economics Association annual conference, Warsh said "the functioning of several markets continues to be strained" and that strain may continue. A copy of remarks was released in Washington.
In explaining the Fed's recent actions, Warsh said concerns about financial stability "may rightly shape" the policymakers' views about the economic outlook and the risks surrounding it.
Looking forward, he said the Fed policymakers would be relying not only on their economic models but on "real-time, forward looking indicators" to make their judgments.
Dollar Financial opens 200th store in UK
The 200th store is located in West London on Edgware Road and offers a range of consumer financial products and services, including check cashing, payday loans, installment loans, foreign exchange, pawnbroking, Western Union money order and money transfer products, and the reloadable MasterCard branded debit card. It is the company's 39th store in London.
Jeff Weiss, chairman and CEO, said: "We are very pleased to reach this significant milestone, which underscores the successful build out of our UK operations as well as our commitment to further expanding our global store footprint."
Jeff Weiss, chairman and CEO, said: "We are very pleased to reach this significant milestone, which underscores the successful build out of our UK operations as well as our commitment to further expanding our global store footprint."
Tuesday, October 2, 2007
Pound Falls Versus Euro; Building Data May Show Slowing Growth
Pound Falls Versus Euro; Building Data May Show Slowing Growth
By Agnes Lovasz
Oct. 2 (Bloomberg) -- The pound weakened against the euro before a report that may show an index of construction fell last month, heightening concern growth in Europe's second-largest economy is slowing.
The U.K. currency last week dropped to the lowest in more than 2 1/2 years versus the euro on concern a slowdown in housing and a global credit squeeze threatens to dent economic expansion. Interest-rate futures suggest there's an increasing chance the Bank of England will cut interest rates after a two- day meeting that starts tomorrow.
``The market is trying to assess whether the central bank may be cutting rates,'' said Antje Praefcke, a currency strategist at Commerzbank AG in Frankfurt. ``Some people think the BOE will cut rates and that will weigh on sterling. And we may see those moves in euro-sterling.''
The pound was at 69.718 pence per euro at 7:22 a.m. in London, from 69.630 pence yesterday. It was also at $2.0382, from $2.0472.
U.K. construction, which accounts for 6 percent of the economy, probably slowed, an industry survey is forecast to show today. An index based on a survey of purchasing managers at building companies dropped to 63 from 64.8 in August, the London-based Chartered Institute of Purchasing and Supply will say, according to a Bloomberg survey of economists.
The implied rate on the December interest-rate futures contract fell 2 basis points yesterday to 6.02 percent. The contract settles to the three-month London interbank offered rate for the pound, which has averaged about 16 basis points more than the benchmark rate over the past decade. The Bank of England's key interest rate is 5.75 percent.
Reports yesterday showed U.K. house-price growth stalled in September and banks approved the fewest mortgages in four months in August.
The average cost of a home in England and Wales was unchanged in September from a month earlier, at 176,300 pounds ($358,000), London-based research group Hometrack Ltd. said.
Lenders granted 109,000 loans for house purchase in August, the least since April, according to the Bank of England, as five interest-rate increases in the past year and financial-market turmoil rattled buyers' confidence
from: http://www.bloomberg.com/apps/news?pid=20601083&sid=aJK_ndxkxs20&refer=currency
By Agnes Lovasz
Oct. 2 (Bloomberg) -- The pound weakened against the euro before a report that may show an index of construction fell last month, heightening concern growth in Europe's second-largest economy is slowing.
The U.K. currency last week dropped to the lowest in more than 2 1/2 years versus the euro on concern a slowdown in housing and a global credit squeeze threatens to dent economic expansion. Interest-rate futures suggest there's an increasing chance the Bank of England will cut interest rates after a two- day meeting that starts tomorrow.
``The market is trying to assess whether the central bank may be cutting rates,'' said Antje Praefcke, a currency strategist at Commerzbank AG in Frankfurt. ``Some people think the BOE will cut rates and that will weigh on sterling. And we may see those moves in euro-sterling.''
The pound was at 69.718 pence per euro at 7:22 a.m. in London, from 69.630 pence yesterday. It was also at $2.0382, from $2.0472.
U.K. construction, which accounts for 6 percent of the economy, probably slowed, an industry survey is forecast to show today. An index based on a survey of purchasing managers at building companies dropped to 63 from 64.8 in August, the London-based Chartered Institute of Purchasing and Supply will say, according to a Bloomberg survey of economists.
The implied rate on the December interest-rate futures contract fell 2 basis points yesterday to 6.02 percent. The contract settles to the three-month London interbank offered rate for the pound, which has averaged about 16 basis points more than the benchmark rate over the past decade. The Bank of England's key interest rate is 5.75 percent.
Reports yesterday showed U.K. house-price growth stalled in September and banks approved the fewest mortgages in four months in August.
The average cost of a home in England and Wales was unchanged in September from a month earlier, at 176,300 pounds ($358,000), London-based research group Hometrack Ltd. said.
Lenders granted 109,000 loans for house purchase in August, the least since April, according to the Bank of England, as five interest-rate increases in the past year and financial-market turmoil rattled buyers' confidence
from: http://www.bloomberg.com/apps/news?pid=20601083&sid=aJK_ndxkxs20&refer=currency
Euro Weakens Against Dollar
(RTTNews) - After moving slightly higher against the US dollar, the European currency lost ground by about 8:55 pm ET, in the early Asian deals on Tuesday. Falling from 1.4243, the pair hit a low of 1.4202 by about 2:15 am ET. Downside, 1.4191 is seen as the next target level for the pair. Investors now await Euro-Zone PPI and the unemployment rate data for August, which are expected shortly. The US Pending Home sales data for the month of August is also expected later in the morning.
Forex - Dollar gains vs euro after policymakers voice concern over euro strength
Tue, Oct 2 2007, 06:44 GMT
http://www.afxnews.com
HONG KONG (Thomson Financial) - The US dollar recovered against the euro in Asia midsession after European policy makers aired concerns about the pace of the single currency's appreciation.
European Central Bank President Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker both expressed some apprehension about the dollar's weakness, which would make European products exported to the US more expensive.
"The European officials don't want the US dollar to fall too quickly against the euro," said Mark Wan, vice president for treasury at DBS Bank in Hong Kong. "That's the reason behind the weakening of the euro. They want to slow down the appreciation of the euro."
At 1:00 pm, the euro was trading at 1.4217 dollars from 1.4236 this morning in Sydney. The euro hit all-time high record of 1.4283 dollars in Asian trade on Monday.
The dollar was quoted at 115.42 yen, down from 115.74 this morning and 115.80 in late New York trading overnight.
A decline in European exports to the US may slow growth in the euro zone, and this could prompt European policymakers to hold off hiking benchmark interest rates in the euro zone, reducing the lure of euro-denominated assets.
On the other hand, signs that the subprime mortgage crisis is subsiding and that fallout in the US economy has been contained may stay the Fed's hand from further rate cuts after this month, and that would increase investor appetite for dollar-denominated securities.
"The market is closely watching economic data releases in the US, particularly the payroll figures for September," Wan said.
If the September payroll report showed that jobless claims are improving, then "that could change the whole interest rate picture in the US," Wan said.
Jobless claims in the US unexpectedly fell in the week ending Sept 12, the second week of a decline in unemployment claims.
Wan expects the Fed to follow its bold half-a-percent rate cut on September 18 by another quarter-point cut by end of the month. That may be the last rate reduction for this year should the economy show signs of a recovery, he said.
Still, Wan is keeping his forecast that the euro may hit an all-time high of 1.44 dollars by yearend, while the yen will likely stick to the 114-117 range against the dollar.
"We have to wait and see if Japan can sustain its record-high exports to Europe and Asia in September, a sign that it has reduced its dependence on the US market," he said.
If this happens, then the yen may appreciate to the 110 per dollar level or even higher than that, he added.
In August, Japan's exports grew at an annual 14.5 percent, as sales to Europe and Asia soared while sales to the US inched up. Japan's trade surplus nearly quadrupled to 743.2 billion yen during the period.
John Noonan, analyst at Thomson IFR, said the recovery from extreme market turbulence seen in August due to the housing loan market crisis is now complete, with the Dow Jones Industrial Average at record highs and yen-funded carry trades nearly back at the levels they were in before the market turmoil began.
Carry trades refer to the practice of borrowing in low-yielding currency such as the yen to invest in high-yielding currencies elsewhere.
Noonan said the growing view that the worst might be over for the US economy could bring on a broad US dollar correction and send the euro lower, which would be a relief for euro zone officials worried that the euro was becoming too strong.
http://www.afxnews.com
HONG KONG (Thomson Financial) - The US dollar recovered against the euro in Asia midsession after European policy makers aired concerns about the pace of the single currency's appreciation.
European Central Bank President Jean-Claude Trichet and Luxembourg Prime Minister Jean-Claude Juncker both expressed some apprehension about the dollar's weakness, which would make European products exported to the US more expensive.
"The European officials don't want the US dollar to fall too quickly against the euro," said Mark Wan, vice president for treasury at DBS Bank in Hong Kong. "That's the reason behind the weakening of the euro. They want to slow down the appreciation of the euro."
At 1:00 pm, the euro was trading at 1.4217 dollars from 1.4236 this morning in Sydney. The euro hit all-time high record of 1.4283 dollars in Asian trade on Monday.
The dollar was quoted at 115.42 yen, down from 115.74 this morning and 115.80 in late New York trading overnight.
A decline in European exports to the US may slow growth in the euro zone, and this could prompt European policymakers to hold off hiking benchmark interest rates in the euro zone, reducing the lure of euro-denominated assets.
On the other hand, signs that the subprime mortgage crisis is subsiding and that fallout in the US economy has been contained may stay the Fed's hand from further rate cuts after this month, and that would increase investor appetite for dollar-denominated securities.
"The market is closely watching economic data releases in the US, particularly the payroll figures for September," Wan said.
If the September payroll report showed that jobless claims are improving, then "that could change the whole interest rate picture in the US," Wan said.
Jobless claims in the US unexpectedly fell in the week ending Sept 12, the second week of a decline in unemployment claims.
Wan expects the Fed to follow its bold half-a-percent rate cut on September 18 by another quarter-point cut by end of the month. That may be the last rate reduction for this year should the economy show signs of a recovery, he said.
Still, Wan is keeping his forecast that the euro may hit an all-time high of 1.44 dollars by yearend, while the yen will likely stick to the 114-117 range against the dollar.
"We have to wait and see if Japan can sustain its record-high exports to Europe and Asia in September, a sign that it has reduced its dependence on the US market," he said.
If this happens, then the yen may appreciate to the 110 per dollar level or even higher than that, he added.
In August, Japan's exports grew at an annual 14.5 percent, as sales to Europe and Asia soared while sales to the US inched up. Japan's trade surplus nearly quadrupled to 743.2 billion yen during the period.
John Noonan, analyst at Thomson IFR, said the recovery from extreme market turbulence seen in August due to the housing loan market crisis is now complete, with the Dow Jones Industrial Average at record highs and yen-funded carry trades nearly back at the levels they were in before the market turmoil began.
Carry trades refer to the practice of borrowing in low-yielding currency such as the yen to invest in high-yielding currencies elsewhere.
Noonan said the growing view that the worst might be over for the US economy could bring on a broad US dollar correction and send the euro lower, which would be a relief for euro zone officials worried that the euro was becoming too strong.
Monday, October 1, 2007
Euro Trending Down Against Yen
(RTTNews) - The European currency lost ground against the Japanese yen by about 6:55 pm ET in the early Asian deals on Tuesday. Down from 164.93, the pair hit a low of 163.75 by about 2:35 am ET. If the pair weakens further, 162.44 can probably be the next level of target. Early Asian deals were likely to have been affected by the Bank of Japan's monetary report released at 7:50 pm ET. The market now turns toward the Euro-Zone PPI and unemployment rate data for August, which are expected shortly.
BOJ Sees October Money Market Has Y2.87T Shortage
Tue, Oct 2 2007, 00:03 GMT
http://www.djnewswires.com/eu
BOJ Sees October Money Market Has Y2.87T Shortage
TOKYO (Dow Jones)--Japan's money market faces a deficit of Y2.87 trillion in October, compared with the Y3.396 trillion shortage in October last year, according to forecast by the Bank of Japan released Tuesday.
The details of the forecast are as follows:
Oct. 2007 Oct. 2006 Change
Total -2,870.0 -3,396.0 526.0
Banknotes -300.0 -308.1 8.1
Treasury funds and others -2,570.0 -3,087.9 517.9
Net JGBs and TBs -8,350.0 -10,128.2 1,778.2
Net FBs -1,060.0 -1,136.8 76.8
Other items 6,840.0 8,177.1 -1,337.1
Figures are in billions of yen. Negative figures represent a shortage of funds.
Net values show the difference between issuance and redemption of government bonds and treasury bills or financing bills.
http://www.djnewswires.com/eu
BOJ Sees October Money Market Has Y2.87T Shortage
TOKYO (Dow Jones)--Japan's money market faces a deficit of Y2.87 trillion in October, compared with the Y3.396 trillion shortage in October last year, according to forecast by the Bank of Japan released Tuesday.
The details of the forecast are as follows:
Oct. 2007 Oct. 2006 Change
Total -2,870.0 -3,396.0 526.0
Banknotes -300.0 -308.1 8.1
Treasury funds and others -2,570.0 -3,087.9 517.9
Net JGBs and TBs -8,350.0 -10,128.2 1,778.2
Net FBs -1,060.0 -1,136.8 76.8
Other items 6,840.0 8,177.1 -1,337.1
Figures are in billions of yen. Negative figures represent a shortage of funds.
Net values show the difference between issuance and redemption of government bonds and treasury bills or financing bills.
Yen May Extend Drop Versus Euro as Stocks Fuel Risk Appetite
Oct. 2 (Bloomberg) -- The yen may fall for a sixth day versus the euro, its longest slide since January, as rallying stocks encourage carry-trade investors to borrow in Japan to buy higher-yielding assets elsewhere.
Since the Federal Reserve cut its benchmark overnight rate on Sept. 18, Japan's currency has lost 4.9 percent versus the New Zealand dollar and 4.4 percent against the Australian dollar, both beneficiaries of the carry trade. The Dow Jones Industrial Average rose to a record yesterday as investors speculated the global economy will continue to expand.
``Risk appetite is obviously coming back to the market,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The stabilization in the global stock market provided a shot in the arm for carry trades.''
The yen traded at 164.64 per euro at 5:39 a.m. in Tokyo, near the weakest since Aug. 9, after falling 0.5 percent yesterday. Japan's currency traded at 115.69 per dollar after decreasing 0.8 percent.
The yen has fallen 1.5 percent versus the euro since Sept. 18, when the Fed reduced its key rate 0.5 percentage point to 4.75 percent. Japan's rate of 0.5 percent is the lowest among major economies and compares with 8.25 percent in New Zealand and 6.5 percent in Australia.
The Dow Jones Average rallied yesterday as investors speculated the worst of the subprime fallout may be over. The Morgan Stanley Capital International Asia-Pacific Index reached an all-time high.
Economic Outlook
The economy of the 13 countries that use the euro will expand 2.6 percent in 2007 compared with Japan's 1.8 percent, according to Deutsche Bank AG. The U.S. economy will grow 1.9 percent this year and 2.2 percent in 2008 as rate cuts help the economy weather the housing slump, the bank forecasts.
Lehman Brothers Holdings Inc. said yesterday an in-house measure showed yen carry trades have increased at an ``impressive'' rate, helped by the Fed's half-point cut.
The firm said in a note to clients yesterday its yen carry- unwind signal has fallen to 19 percent from 95 percent in early August, showing investment in the strategy has increased.
The implied volatility of a one-month euro-yen option was 10 percent yesterday, down from 17.5 percent on Aug. 16. A decline in volatility encourages investors to borrow in Japan and buy assets overseas where yields are higher.
The National Association of Realtors is forecast to report today that the number of Americans entering into contracts to buy previously owned homes fell 2.1 percent in August, according to the median estimate of 30 economists surveyed by Bloomberg. Pending home sales fell 12.2 percent in July, the most since records began in 2001.
The Turkish lira, the biggest gainer among emerging-market currencies versus the yen this year, rose 1.3 percent against the currency yesterday. Turkey's benchmark rate is 17.25 percent.
``The carry trade is fairly well established and the conditions for the trade remain in place,'' said Win Thin, a currency strategist in New York at Brown Brothers Harriman & Co.
Since the Federal Reserve cut its benchmark overnight rate on Sept. 18, Japan's currency has lost 4.9 percent versus the New Zealand dollar and 4.4 percent against the Australian dollar, both beneficiaries of the carry trade. The Dow Jones Industrial Average rose to a record yesterday as investors speculated the global economy will continue to expand.
``Risk appetite is obviously coming back to the market,'' said Michael Malpede, a senior currency analyst in Chicago at Man Global Research. ``The stabilization in the global stock market provided a shot in the arm for carry trades.''
The yen traded at 164.64 per euro at 5:39 a.m. in Tokyo, near the weakest since Aug. 9, after falling 0.5 percent yesterday. Japan's currency traded at 115.69 per dollar after decreasing 0.8 percent.
The yen has fallen 1.5 percent versus the euro since Sept. 18, when the Fed reduced its key rate 0.5 percentage point to 4.75 percent. Japan's rate of 0.5 percent is the lowest among major economies and compares with 8.25 percent in New Zealand and 6.5 percent in Australia.
The Dow Jones Average rallied yesterday as investors speculated the worst of the subprime fallout may be over. The Morgan Stanley Capital International Asia-Pacific Index reached an all-time high.
Economic Outlook
The economy of the 13 countries that use the euro will expand 2.6 percent in 2007 compared with Japan's 1.8 percent, according to Deutsche Bank AG. The U.S. economy will grow 1.9 percent this year and 2.2 percent in 2008 as rate cuts help the economy weather the housing slump, the bank forecasts.
Lehman Brothers Holdings Inc. said yesterday an in-house measure showed yen carry trades have increased at an ``impressive'' rate, helped by the Fed's half-point cut.
The firm said in a note to clients yesterday its yen carry- unwind signal has fallen to 19 percent from 95 percent in early August, showing investment in the strategy has increased.
The implied volatility of a one-month euro-yen option was 10 percent yesterday, down from 17.5 percent on Aug. 16. A decline in volatility encourages investors to borrow in Japan and buy assets overseas where yields are higher.
The National Association of Realtors is forecast to report today that the number of Americans entering into contracts to buy previously owned homes fell 2.1 percent in August, according to the median estimate of 30 economists surveyed by Bloomberg. Pending home sales fell 12.2 percent in July, the most since records began in 2001.
The Turkish lira, the biggest gainer among emerging-market currencies versus the yen this year, rose 1.3 percent against the currency yesterday. Turkey's benchmark rate is 17.25 percent.
``The carry trade is fairly well established and the conditions for the trade remain in place,'' said Win Thin, a currency strategist in New York at Brown Brothers Harriman & Co.
EUR/USD: Euro enters in overbought zone
Mon, Oct 1 2007, 09:26 GMT
http://www.fxstreet.com
FXstreet.com (Barcelona) – The Euro’ upward trend has been renewed after September’s correction; Ted Wilson, technical analysts of iForex affirms: “Last week the EUR/USD sharply rose and overcame the resistance level 1.4205 and the psychological level 1.4250, after which it reached new historical level 1.4271.” About the daily trend, Wilson adds: “On a daily time frame the upwards trend accelerated but the Euro gets into overbought zone. Rising above 1.4282 may provoke further upward movement to the upper limit 1.4302. Going under 1.4195 may give signal for correction of the currency couple.”
http://www.fxstreet.com
FXstreet.com (Barcelona) – The Euro’ upward trend has been renewed after September’s correction; Ted Wilson, technical analysts of iForex affirms: “Last week the EUR/USD sharply rose and overcame the resistance level 1.4205 and the psychological level 1.4250, after which it reached new historical level 1.4271.” About the daily trend, Wilson adds: “On a daily time frame the upwards trend accelerated but the Euro gets into overbought zone. Rising above 1.4282 may provoke further upward movement to the upper limit 1.4302. Going under 1.4195 may give signal for correction of the currency couple.”
Australian dollar surges as demand for greenback falls
October 02, 2007 07:22am
THE dollar has opened firmly above 89 US cents for the first time since 1989, and continues to test historical highs as demand for the US dollar falls.
At 7am AEST, the Australian dollar was trading at $US0.8942/45, up from yesterday's close of 0.8918/24.
Overnight, it traded between a low of $US0.8854 and a high of 0.8950 - equalling the level last traded on February 10, 1989.
Bank of New Zealand currency strategist Danica Hampton said the Australian dollar had more potential to rise, but would likely meet with some resistance at about $US0.8960.
She said it would be well bought on dips of $US0.8920.
Ms Hampton said the Australian dollar rose overnight on support from the carry trades as investor sentiment and risk appetite grew due to a strong rise in US stocks.
The Dow Jones industrial average finished up 191.92 points, or 1.38 per cent, 14,087.55 after surging to an all-time high of 14,115.51.
The Standard & Poor's 500 Index gained 20.29 points, or 1.33 per cent, to end at 1547.04.
The Australian dollar has attracted support because of its high yielding interest rate, with the differential between US and local rates expected to increase, further boosting the currency.
But while sentiment remains overwhelmingly in the Australian dollar's favour, US sub-prime concerns caused a brief sell-off in the Australian dollar overnight.
"We heard some negative news from UBS and Citigroup, and that caused a little bit of a carry trade liquidation, but the losses were short lived," Ms Hampton said.
US bank Citigroup said overnight its fourth quarter profit will drop by about 60 per cent because of $5.9 billion in losses and write-downs as a result of sub-prime and leveraged loans.
Meanwhile, UBS said it would write down the value of its assets by $US3.4 billion because of losses in sub-prime mortgages.
"The US equity market shrugged them off and finished really strongly, so renewed the appetite for carry trades," Ms Hampton said.
"And so we saw a lot of momentum buying and a solid demand for Aussie/yen helped support the Aussie."
Also overnight, the US Institute of Supply Management's (ISM) performance of manufacturing index (PMI) index for September was
slightly weaker than expected at 52 points compared with expectations of a 52.6 reading.
However, the result remained above the critical 50 level, which separates expansion from contraction, with economic activity in the sector growing for the eighth straight month.
There is no first tier local data due today to guide the market.
The board of the Reserve Bank of Australia (RBA) meets today, however, and will announce its interest rate decision tomorrow.
Interest rates are expected to remain at 6.50 per cent, but some economists are tipping another rate rise by early next year
THE dollar has opened firmly above 89 US cents for the first time since 1989, and continues to test historical highs as demand for the US dollar falls.
At 7am AEST, the Australian dollar was trading at $US0.8942/45, up from yesterday's close of 0.8918/24.
Overnight, it traded between a low of $US0.8854 and a high of 0.8950 - equalling the level last traded on February 10, 1989.
Bank of New Zealand currency strategist Danica Hampton said the Australian dollar had more potential to rise, but would likely meet with some resistance at about $US0.8960.
She said it would be well bought on dips of $US0.8920.
Ms Hampton said the Australian dollar rose overnight on support from the carry trades as investor sentiment and risk appetite grew due to a strong rise in US stocks.
The Dow Jones industrial average finished up 191.92 points, or 1.38 per cent, 14,087.55 after surging to an all-time high of 14,115.51.
The Standard & Poor's 500 Index gained 20.29 points, or 1.33 per cent, to end at 1547.04.
The Australian dollar has attracted support because of its high yielding interest rate, with the differential between US and local rates expected to increase, further boosting the currency.
But while sentiment remains overwhelmingly in the Australian dollar's favour, US sub-prime concerns caused a brief sell-off in the Australian dollar overnight.
"We heard some negative news from UBS and Citigroup, and that caused a little bit of a carry trade liquidation, but the losses were short lived," Ms Hampton said.
US bank Citigroup said overnight its fourth quarter profit will drop by about 60 per cent because of $5.9 billion in losses and write-downs as a result of sub-prime and leveraged loans.
Meanwhile, UBS said it would write down the value of its assets by $US3.4 billion because of losses in sub-prime mortgages.
"The US equity market shrugged them off and finished really strongly, so renewed the appetite for carry trades," Ms Hampton said.
"And so we saw a lot of momentum buying and a solid demand for Aussie/yen helped support the Aussie."
Also overnight, the US Institute of Supply Management's (ISM) performance of manufacturing index (PMI) index for September was
slightly weaker than expected at 52 points compared with expectations of a 52.6 reading.
However, the result remained above the critical 50 level, which separates expansion from contraction, with economic activity in the sector growing for the eighth straight month.
There is no first tier local data due today to guide the market.
The board of the Reserve Bank of Australia (RBA) meets today, however, and will announce its interest rate decision tomorrow.
Interest rates are expected to remain at 6.50 per cent, but some economists are tipping another rate rise by early next year
Tokyo stocks likely to gain on Dow and soft yen
TOKYO, Oct 2 (Reuters) - Japan's Nikkei stock average is likely to open higher on Tuesday and may rise above the psychologically key 17,000 as investor snap up exporters such as Sony Corp (6758.T: Quote, NEWS , Research) following a jump on Wall Street and a fall in the yen.
KDDI Corp (9433.T: Quote, NEWS , Research) will be a focal point after the Nikkei business daily said the mobile phone operator plans to introduce a new fee system in November that cuts call charges by roughly 30 percent but raises handset prices in turn. KDDI rival NTT DoCoMo (9437.T: Quote, NEWS , Research) is expected to follow suit, the newspaper said.
Another stock in the spotlight is Matsushita Electric Industrial Co (6752.T: Quote, NEWS , Research) after the Nikkei said it sold all 17 of its large domestic distribution facilities to a real estate developer and will use the 85 billion yen in proceeds to strengthen its core businesses such as plasma screen TVs.
"Exporters are likely to lead the market on the yen's slide against the dollar. Financials are also expected to be bought amid growing expectations that the worst may soon be over" in the market turmoil of the last few months, said Kazuhiro Takahashi, a general manager of equity marketing at Daiwa Securities SMBC.
Still, he said the upside was also heavy as investors remain cautious about making big bets ahead of U.S. employment data due out later this week.
"The Nikkei is likely to test 17,000, but it's unlikely investors will keep buying to send the index further up," he said.
Market participants said the benchmark Nikkei average <.N225> will likely move between 16,900 and 17,100 on Tuesday.
KDDI Corp (9433.T: Quote, NEWS , Research) will be a focal point after the Nikkei business daily said the mobile phone operator plans to introduce a new fee system in November that cuts call charges by roughly 30 percent but raises handset prices in turn. KDDI rival NTT DoCoMo (9437.T: Quote, NEWS , Research) is expected to follow suit, the newspaper said.
Another stock in the spotlight is Matsushita Electric Industrial Co (6752.T: Quote, NEWS , Research) after the Nikkei said it sold all 17 of its large domestic distribution facilities to a real estate developer and will use the 85 billion yen in proceeds to strengthen its core businesses such as plasma screen TVs.
"Exporters are likely to lead the market on the yen's slide against the dollar. Financials are also expected to be bought amid growing expectations that the worst may soon be over" in the market turmoil of the last few months, said Kazuhiro Takahashi, a general manager of equity marketing at Daiwa Securities SMBC.
Still, he said the upside was also heavy as investors remain cautious about making big bets ahead of U.S. employment data due out later this week.
"The Nikkei is likely to test 17,000, but it's unlikely investors will keep buying to send the index further up," he said.
Market participants said the benchmark Nikkei average <.N225> will likely move between 16,900 and 17,100 on Tuesday.
SKorea's current account surplus narrows in August
SKorea's current account surplus narrows in August
SEOUL (Thomson Financial) - South Korea's current account surplus narrowed in August on higher overseas payments of royalties, interest and dividends and a smaller trade surplus, the Bank of Korea said Tuesday.
The central bank said the current account was in surplus by 610.3 million US dollars last month, compared to a revised surplus of 1.55 billion dollars in July. The figure for July was initially reported at 1.64 billion dollars.
August was the fourth straight month that a surplus was registered.
A surplus in August is uncommon. In previous years the current account has often been in deficit in August because of outbound tourism during the vacation season. But exports were brisker this August than in previous years.
The current account is the broadest measure of trade, covering the flow of goods, services and investment income across border
SEOUL (Thomson Financial) - South Korea's current account surplus narrowed in August on higher overseas payments of royalties, interest and dividends and a smaller trade surplus, the Bank of Korea said Tuesday.
The central bank said the current account was in surplus by 610.3 million US dollars last month, compared to a revised surplus of 1.55 billion dollars in July. The figure for July was initially reported at 1.64 billion dollars.
August was the fourth straight month that a surplus was registered.
A surplus in August is uncommon. In previous years the current account has often been in deficit in August because of outbound tourism during the vacation season. But exports were brisker this August than in previous years.
The current account is the broadest measure of trade, covering the flow of goods, services and investment income across border
Dolar rose
THE dollar rose slightly from record lows against the euro as investors cashed out bets against the US currency ahead of a fresh batch of economic data and central bank meetings this week. The greenback pared some gains after a measure of US manufacturing activity hit a low, but the gauge's employment measure registered growth.
Friday, September 28, 2007
Oil shoots past US$83, spurred byweak dollar
September 29 2007
LONDON: Oil rose above US$83 (US$1 = RM3.42) a barrel yesterday and closed in on an all-time high as fund buying, spurred by a weak dollar, provided support.
US crude climbed 39 cents to US$83.27 by 1247 GMT, after gaining US$2.58, or 3.24 per cent, in the previous session.
Oil was recovering from a profit-taking dip earlier this week that knocked prices from a peak of US$83.90 hit on September 20.
London Brent crude surged to a record high of US$80.54, up 51 cents.
"The ever-weakening US dollar is probably the key driver of this, with non-commercial long interest being fuelled by the view that the US will sacrifice its currency to prop up growth," said a Citigroup research note.
The dollar hit an all-time low against a basket of currencies for the second consecutive day yesterday, pressured by worries about the health of the US economy and likelihood of more interest rate cuts.
"On a macro level people are clearly buying crude oil as a hedge against a weaker dollar. The crude market is structually very solid," said a hedge fund manager based in Asia.
The weak dollar, which can strengthen the nominal values of commodities traded in the currency, also boosted metals. - Reuters
http://www.btimes.com.my/Current_News/BT/Saturday/Corporate/oilbo.xml/Article/
LONDON: Oil rose above US$83 (US$1 = RM3.42) a barrel yesterday and closed in on an all-time high as fund buying, spurred by a weak dollar, provided support.
US crude climbed 39 cents to US$83.27 by 1247 GMT, after gaining US$2.58, or 3.24 per cent, in the previous session.
Oil was recovering from a profit-taking dip earlier this week that knocked prices from a peak of US$83.90 hit on September 20.
London Brent crude surged to a record high of US$80.54, up 51 cents.
"The ever-weakening US dollar is probably the key driver of this, with non-commercial long interest being fuelled by the view that the US will sacrifice its currency to prop up growth," said a Citigroup research note.
The dollar hit an all-time low against a basket of currencies for the second consecutive day yesterday, pressured by worries about the health of the US economy and likelihood of more interest rate cuts.
"On a macro level people are clearly buying crude oil as a hedge against a weaker dollar. The crude market is structually very solid," said a hedge fund manager based in Asia.
The weak dollar, which can strengthen the nominal values of commodities traded in the currency, also boosted metals. - Reuters
http://www.btimes.com.my/Current_News/BT/Saturday/Corporate/oilbo.xml/Article/
Banks in cash crunch as third quarter ends
NEW YORK: US and European banks struggled for cash on wholesale lending markets yesterday as they closed books on the final day of a tumultuous third quarter amid signs credit was still tight.A continued lack of liquidity on interbank markets on both sides of the Atlantic and ongoing difficulties for some smaller banks trying to raise short-term funds offset optimism earlier in the week about an opening up of international bond markets for specific borrowers.
Benchmark euro zone lending rates rose to six-year highs and three-month interbank offered rates were fixed at 4.792 per cent - the highest since May 2001 and almost 80 basis points above the European Central Bank's key interest rate.
Federal funds, the key overnight market for borrowing between banks, traded at 5.25pc yesterday in New York, a full 50 basis points above the fed funds target rate the US central bank sets.
Normally, Fed funds would not trade more than a handful of basis points on either side of the target rate, which is now at 4.75pc after the Fed cut it for the first time in four years.
Climbing fed funds rates pointed to a double whammy of quarter-end supply pressures and fear about lending conditions in money markets, analysts said.
"You do have some quarter-end pressures in effect that provide some of the reasoning for the upward pressure on both Fed funds and London Interbank Offered Rate (Libor)," said Kenneth Kim, economist with Stone & McCarthy Research Associates in Princeton, New Jersey, US.
"The other explanation is there are concerns in the market that the liquidity crisis has not dissipated," Kim added. "We have pressure returning (to short-term lending markets) and I would say there is cause for concern," he said.
"In short-term money markets, there certainly does appear to be an issue...there is a lot of jitteriness and fear going into not just month end but also quarter end," said T J Marta, fixed income strategist with Royal Bank of Canada Capital Markets in New York.
"There is a fair amount of trepidation that we have not found the skeletons yet," showing the full extent of banks exposures to riskier assets across the world, Marta added.
Benchmark euro zone lending rates rose to six-year highs and three-month interbank offered rates were fixed at 4.792 per cent - the highest since May 2001 and almost 80 basis points above the European Central Bank's key interest rate.
Federal funds, the key overnight market for borrowing between banks, traded at 5.25pc yesterday in New York, a full 50 basis points above the fed funds target rate the US central bank sets.
Normally, Fed funds would not trade more than a handful of basis points on either side of the target rate, which is now at 4.75pc after the Fed cut it for the first time in four years.
Climbing fed funds rates pointed to a double whammy of quarter-end supply pressures and fear about lending conditions in money markets, analysts said.
"You do have some quarter-end pressures in effect that provide some of the reasoning for the upward pressure on both Fed funds and London Interbank Offered Rate (Libor)," said Kenneth Kim, economist with Stone & McCarthy Research Associates in Princeton, New Jersey, US.
"The other explanation is there are concerns in the market that the liquidity crisis has not dissipated," Kim added. "We have pressure returning (to short-term lending markets) and I would say there is cause for concern," he said.
"In short-term money markets, there certainly does appear to be an issue...there is a lot of jitteriness and fear going into not just month end but also quarter end," said T J Marta, fixed income strategist with Royal Bank of Canada Capital Markets in New York.
"There is a fair amount of trepidation that we have not found the skeletons yet," showing the full extent of banks exposures to riskier assets across the world, Marta added.
EUR/USD: Will The Weak USD Give ISM Manufacturing An Unexpected Lift?
Friday, 28 September 2007 20:24:11 GMT
Written by Terri Belkas, Currency Analyst
OCT 1
ISM Manufacturing (SEP) (10:00 EST; 14:00 GMT)
ISM Prices Paid (SEP) (10:00 EST; 14:00 GMT)
Expected: 52.5
Expected: 62
Previous: 52.9
Previous: 63
How Will The Markets React?
Conditions in the US manufacturing sector are anticipated to deteriorate for the third month in a row during September, as the Institute for Supply Management index is estimated to fall to 52.5 from 52.9. Over the past few periods, we’ve seen that the weaker US dollar has helped contribute to the ‘new export orders’ component, as American products prove to be cheaper and more attractive, while the broader ‘new orders’ index has staged a strong recovery after falling below the 50 boom/bust level last November. Meanwhile, the highest readings we’ve seen in the ISM manufacturing report have consistently been in the ‘prices paid’ component, which has only underpinned Federal Reserve Bank inflation hawks’ concerns. However, the price index is expected to ease back further in September, supporting broad market speculation of additional rate cuts by the central bank throughout the rest of the year. Furthermore, the ‘employment’ component has struggled to hold above 50 throughout the year, and an index reading below that figure in September (marking a contraction) would bode very ill for this Friday’s NFP report (October 5th), especially as the US financial and housing sectors are likely to have racked up substantial job losses during the month. As a result, now that the Federal Reserve has finally started to note major downside risks to growth and has stopped focusing on inflation, signs that the labor force is diminishing could lead markets to ramp up speculation of a 25 basis point rate cut in October.
Written by Terri Belkas, Currency Analyst
OCT 1
ISM Manufacturing (SEP) (10:00 EST; 14:00 GMT)
ISM Prices Paid (SEP) (10:00 EST; 14:00 GMT)
Expected: 52.5
Expected: 62
Previous: 52.9
Previous: 63
How Will The Markets React?
Conditions in the US manufacturing sector are anticipated to deteriorate for the third month in a row during September, as the Institute for Supply Management index is estimated to fall to 52.5 from 52.9. Over the past few periods, we’ve seen that the weaker US dollar has helped contribute to the ‘new export orders’ component, as American products prove to be cheaper and more attractive, while the broader ‘new orders’ index has staged a strong recovery after falling below the 50 boom/bust level last November. Meanwhile, the highest readings we’ve seen in the ISM manufacturing report have consistently been in the ‘prices paid’ component, which has only underpinned Federal Reserve Bank inflation hawks’ concerns. However, the price index is expected to ease back further in September, supporting broad market speculation of additional rate cuts by the central bank throughout the rest of the year. Furthermore, the ‘employment’ component has struggled to hold above 50 throughout the year, and an index reading below that figure in September (marking a contraction) would bode very ill for this Friday’s NFP report (October 5th), especially as the US financial and housing sectors are likely to have racked up substantial job losses during the month. As a result, now that the Federal Reserve has finally started to note major downside risks to growth and has stopped focusing on inflation, signs that the labor force is diminishing could lead markets to ramp up speculation of a 25 basis point rate cut in October.
Euro Reversal?
Friday, 28 September 2007 12:24:38 GMT
Printer Friendly | Email Article | RSS | Previous articles
Previous Articles
* Sep 28 - Euro Reversal?
* Sep 27 - Euro May Test 1.4200 Before a Reversal
* Sep 26 - Euro Ending Diagonal
* Sep 25 - Euro In Deeper Correction?
* Sep 24 - Euro 5 Waves Complete at 1.4130?
* Sep 21 - Euro Registers High Above 1.4100
* Sep 20 - Euro Breaks 1.4000
* Sep 19 - Euro to 1.4000 but Upside Potential is Limited
* Sep 18 - Euro Wave 4 Correction Possibly Complete
* Sep 14 - Euro Wave 4 Correction Underway
* Sep 13 - Euro All-Time High
* Sep 12 - Euro Testing 1.3900
* Sep 11 - Euro Working Towards 1.4000
* Sep 10 - Euro Tests 1.3800
* Sep 07 - Euro Bullish Against 1.3551
* Sep 06 - Euro Decline 5 Waves Up Warrants Bullish Bias
* Sep 05 - Euro Decline Appears Corrective So Far
* Sep 04 - Euro Working Lower
* Aug 31 - Euro Could Still Test 1.3750
* Aug 30 - Euro Large B Wave Correction
Written by Jamie Saettele, Currency Analyst
Commentary: We wrote yesterday that “an ending diagonal may be unfolding in wave 5 from 1.4040. This remains a possibility as long as price is above 1.4061. One more high may complete the larger advance near 1.4200. The upper diagonal line is close to 1.4200. A rally to there may complete the advance from 1.4041 and possibly a larger rally. A drop below 1.4111 signals a short opportunity against the high.” There is no change to the call for a top and reversal that brings the EURUSD back to at least 1.4040. The area surrounding 1.4200 should provide strong resistance.
Printer Friendly | Email Article | RSS | Previous articles
Previous Articles
* Sep 28 - Euro Reversal?
* Sep 27 - Euro May Test 1.4200 Before a Reversal
* Sep 26 - Euro Ending Diagonal
* Sep 25 - Euro In Deeper Correction?
* Sep 24 - Euro 5 Waves Complete at 1.4130?
* Sep 21 - Euro Registers High Above 1.4100
* Sep 20 - Euro Breaks 1.4000
* Sep 19 - Euro to 1.4000 but Upside Potential is Limited
* Sep 18 - Euro Wave 4 Correction Possibly Complete
* Sep 14 - Euro Wave 4 Correction Underway
* Sep 13 - Euro All-Time High
* Sep 12 - Euro Testing 1.3900
* Sep 11 - Euro Working Towards 1.4000
* Sep 10 - Euro Tests 1.3800
* Sep 07 - Euro Bullish Against 1.3551
* Sep 06 - Euro Decline 5 Waves Up Warrants Bullish Bias
* Sep 05 - Euro Decline Appears Corrective So Far
* Sep 04 - Euro Working Lower
* Aug 31 - Euro Could Still Test 1.3750
* Aug 30 - Euro Large B Wave Correction
Written by Jamie Saettele, Currency Analyst
Commentary: We wrote yesterday that “an ending diagonal may be unfolding in wave 5 from 1.4040. This remains a possibility as long as price is above 1.4061. One more high may complete the larger advance near 1.4200. The upper diagonal line is close to 1.4200. A rally to there may complete the advance from 1.4041 and possibly a larger rally. A drop below 1.4111 signals a short opportunity against the high.” There is no change to the call for a top and reversal that brings the EURUSD back to at least 1.4040. The area surrounding 1.4200 should provide strong resistance.
Forex - Strong US jobless claims, PCE inflation data fail to help ailing dollar
LONDON (Thomson Financial) - Strong US data this afternoon failed to give
much of a boost to the dollar, with the euro merely coming very slightly off an
earlier new record high of 1.4189 usd.
US jobless claims figures showed first time claims for unemployment
insurance fell to their lowest level in more than four months last week. Claims
fell by 15,000 from the previous week to 298,000 and much better than
expectations for a reading of around 315,000.
Meanwhile, although other data showed a downward revision in US second
quarter annual GDP growth to 3.8 pct from 4.0 pct, measures of inflation were
revised up.
The overall PCE price index rose 4.3 pct in the quarter, revised from the
4.2 pct gain in the earlier estimate and the fastest rate in a year. Meanwhile,
the Federal Reserve's preferred measure of inflation, the core PCE price index,
was revised up to a 1.4 pct quarterly gain from the previous estimate of 1.3
pct.
The euro edged down only very slightly after the data, having hit a 1.4189
usd new record high. At 1.12 pm GMT, the single currency was trading at 1.4176
usd.
The dollar continues to be battered by a recovery in risk appetite and
growing expectations that other major central banks, including the European
Central Bank, will not follow the Federal Reserve's lead and cut interest rates.
Analysts also noted speculation in the market that US new home sales
figures, due for release at 2.00 pm GMT, will come in much worse than expected.
much of a boost to the dollar, with the euro merely coming very slightly off an
earlier new record high of 1.4189 usd.
US jobless claims figures showed first time claims for unemployment
insurance fell to their lowest level in more than four months last week. Claims
fell by 15,000 from the previous week to 298,000 and much better than
expectations for a reading of around 315,000.
Meanwhile, although other data showed a downward revision in US second
quarter annual GDP growth to 3.8 pct from 4.0 pct, measures of inflation were
revised up.
The overall PCE price index rose 4.3 pct in the quarter, revised from the
4.2 pct gain in the earlier estimate and the fastest rate in a year. Meanwhile,
the Federal Reserve's preferred measure of inflation, the core PCE price index,
was revised up to a 1.4 pct quarterly gain from the previous estimate of 1.3
pct.
The euro edged down only very slightly after the data, having hit a 1.4189
usd new record high. At 1.12 pm GMT, the single currency was trading at 1.4176
usd.
The dollar continues to be battered by a recovery in risk appetite and
growing expectations that other major central banks, including the European
Central Bank, will not follow the Federal Reserve's lead and cut interest rates.
Analysts also noted speculation in the market that US new home sales
figures, due for release at 2.00 pm GMT, will come in much worse than expected.
Canada Aug industrial prices down 1.0 pct vs July
Fri, Sep 28 2007, 13:07 GMT
http://www.afxnews.com
LONDON (Thomson Financial) - Canadian industrial product prices posted their fourth consecutive monthly decline in August as raw materials prices posted their first large monthly drop since January, according to figures released by Statistics Canada.
Industrial prices, as measured by the Industrial Product Price Index (IPPI), fell by 1.0 pct in August from July after a 0.7 pct drop the previous month.
The drop in prices essentially reflected lower prices for primary metal products, petroleum and coal products, and chemical products. However, there were higher prices for motor vehicles and other transportation equipment, as well as for pulp and paper products, StatCan said.
Excluding petroleum and coal products, the IPPI fell by 0.7 pct.
Meanwhile, raw materials prices, measured by the Raw Materials Price Index (RMPI), fell by 2.8 pct between July and August, a marked change from the 4.0 pct gain in July and pulled lower by falls in prices for non-ferrous metals and mineral fuels. Increases in the prices for vegetable products and ferrous materials had little effect on the movement of the RMPI, the statistics office said.
http://www.afxnews.com
LONDON (Thomson Financial) - Canadian industrial product prices posted their fourth consecutive monthly decline in August as raw materials prices posted their first large monthly drop since January, according to figures released by Statistics Canada.
Industrial prices, as measured by the Industrial Product Price Index (IPPI), fell by 1.0 pct in August from July after a 0.7 pct drop the previous month.
The drop in prices essentially reflected lower prices for primary metal products, petroleum and coal products, and chemical products. However, there were higher prices for motor vehicles and other transportation equipment, as well as for pulp and paper products, StatCan said.
Excluding petroleum and coal products, the IPPI fell by 0.7 pct.
Meanwhile, raw materials prices, measured by the Raw Materials Price Index (RMPI), fell by 2.8 pct between July and August, a marked change from the 4.0 pct gain in July and pulled lower by falls in prices for non-ferrous metals and mineral fuels. Increases in the prices for vegetable products and ferrous materials had little effect on the movement of the RMPI, the statistics office said.
Dollar drops to fresh record low against euro
Friday, September 28, 2007
NEW YORK - The U.S. dollar dropped to a record low against the euro for a sixth consecutive session Thursday, sagging under expectations of a U.S. Federal Reserve rate cut next month.
The dollar has skidded to new lows against the European currency since the Fed last week cut interest rates by a larger-than-expected half percentage point.
The fresh low on Thursday came as market expectations build for another rate cut by the Fed amid more signs the U.S. economy is in a funk. And some think the greenback is likely to remain in a swoon until the economy stops weakening.
Journal Star news services
Thursday's disappointing economic data included a sharp drop in new homes sales for August. It followed other discouraging reports released this week that could prompt the central bank to further cut rates when it meets next month.
Lower interest rates, used to jump-start an economy, can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.
With so many warnings signs of a weakening economy, the dollar will be hard-pressed to eke out a rebound, said Michael Woolfolk, senior currency strategist at the Bank of New York.
"We're going to have to live with a sagging dollar in the foreseeable future, until the U.S. economy gets back on its feet," he said.
The euro rose as high as $1.4189 Thursday, breaking its previous record of $1.4162 from early Wednesday. It later retreated to $1.4160 in late New York trading, up from $1.4136 late Wednesday.
The Commerce Department reported Thursday that sales of new homes tumbled 8.3 percent in August to the lowest level in seven years, a stark sign that the credit crisis, triggered by bad U.S. mortgages, is aggravating an already painful housing slump.
In a second report, the government said that the economy grew at a 3.8 percent annual rate in the April-to-June quarter, the strongest showing in just over a year - but below a previous estimate of 4 percent.
The dollar recovered slightly Thursday on a report showing that fewer people signed up for unemployment benefits last week, raising hopes that recent weakness in the labor market could relent. Jobless claims fell 15,000 to 298,000 in the week ended Sept. 22 - the lowest level since May.
The American currency's slump has been welcome news for some, including manufacturers who are eager to see American exports become more competitive, Woolfolk said. While it also spells rising prices for imports and diminished spending power for American tourists overseas, the dollar's weakness could encourage U.S. vacationers to spend their money stateside, he said.
The Treasury Department remains largely unconcerned about the dollar's largely gradual decline, and is unlikely to intervene absent a major market shake up, said David Solin, a partner at Foreign Exchange Analytics in Essex, Conn.
"There hasn't been any dislocation in financial markets caused by the weaker dollar," he said.
In other trading Thursday, the dollar hovered near parity with Canada's currency, buying 1.0013 Canadian dollars, down from 1.0056 late Wednesday. The Canadian dollar broke even with the U.S. dollar last week for the first time since 1976, gaining on the Fed's rate cut, as well as soaring prices for Canada's plentiful oil and a strong economy north of the border.
The British pound rose to $2.0270 from $2.0155 in New York late Wednesday, while the dollar rose to 115.59 yen from 115.43 yen. The U.S. currency climbed to 1.1724 Swiss francs from 1.1699.
NEW YORK - The U.S. dollar dropped to a record low against the euro for a sixth consecutive session Thursday, sagging under expectations of a U.S. Federal Reserve rate cut next month.
The dollar has skidded to new lows against the European currency since the Fed last week cut interest rates by a larger-than-expected half percentage point.
The fresh low on Thursday came as market expectations build for another rate cut by the Fed amid more signs the U.S. economy is in a funk. And some think the greenback is likely to remain in a swoon until the economy stops weakening.
Journal Star news services
Thursday's disappointing economic data included a sharp drop in new homes sales for August. It followed other discouraging reports released this week that could prompt the central bank to further cut rates when it meets next month.
Lower interest rates, used to jump-start an economy, can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns.
With so many warnings signs of a weakening economy, the dollar will be hard-pressed to eke out a rebound, said Michael Woolfolk, senior currency strategist at the Bank of New York.
"We're going to have to live with a sagging dollar in the foreseeable future, until the U.S. economy gets back on its feet," he said.
The euro rose as high as $1.4189 Thursday, breaking its previous record of $1.4162 from early Wednesday. It later retreated to $1.4160 in late New York trading, up from $1.4136 late Wednesday.
The Commerce Department reported Thursday that sales of new homes tumbled 8.3 percent in August to the lowest level in seven years, a stark sign that the credit crisis, triggered by bad U.S. mortgages, is aggravating an already painful housing slump.
In a second report, the government said that the economy grew at a 3.8 percent annual rate in the April-to-June quarter, the strongest showing in just over a year - but below a previous estimate of 4 percent.
The dollar recovered slightly Thursday on a report showing that fewer people signed up for unemployment benefits last week, raising hopes that recent weakness in the labor market could relent. Jobless claims fell 15,000 to 298,000 in the week ended Sept. 22 - the lowest level since May.
The American currency's slump has been welcome news for some, including manufacturers who are eager to see American exports become more competitive, Woolfolk said. While it also spells rising prices for imports and diminished spending power for American tourists overseas, the dollar's weakness could encourage U.S. vacationers to spend their money stateside, he said.
The Treasury Department remains largely unconcerned about the dollar's largely gradual decline, and is unlikely to intervene absent a major market shake up, said David Solin, a partner at Foreign Exchange Analytics in Essex, Conn.
"There hasn't been any dislocation in financial markets caused by the weaker dollar," he said.
In other trading Thursday, the dollar hovered near parity with Canada's currency, buying 1.0013 Canadian dollars, down from 1.0056 late Wednesday. The Canadian dollar broke even with the U.S. dollar last week for the first time since 1976, gaining on the Fed's rate cut, as well as soaring prices for Canada's plentiful oil and a strong economy north of the border.
The British pound rose to $2.0270 from $2.0155 in New York late Wednesday, while the dollar rose to 115.59 yen from 115.43 yen. The U.S. currency climbed to 1.1724 Swiss francs from 1.1699.
Monday, September 17, 2007
Yen Moving Toward The 111.90 Resistance Level Versus Canadian Dollar; Pair Now At 111.98
(RTTNews) - Yen moving toward the 111.90 resistance level versus Canadian dollar; pair now at 111.98.
Asian Currencies Fall as Credit Turmoil May Spur Regional Exit
Asian Currencies Fall as Credit Turmoil May Spur Regional Exit
By Jake Lee
Sept. 18 (Bloomberg) -- The Singapore dollar and Malaysian ringgit touched the lowest in almost a week on speculation investors will cut holdings of riskier assets as the credit- market turmoil spreads.
Thirteen currencies of Asia's 17 biggest economies fell as a cash injection by the Bank of England into the U.K.'s Northern Rock Plc prompted a run on deposits by savers. E*Trade Financial Corp., a New York-based online brokerage, cut its profit forecast because it expects losses on housing loans and Bank of America Corp. warned market turmoil will effect earnings.
``Investor confidence is deteriorating and that works to the detriment of Asian currencies,'' said David Cohen, an economist at Action Economics in Singapore. ``There's a flight to safety, which is going to benefit the U.S. dollar and the Japanese yen.''
The Singapore dollar declined 0.1 percent to S$1.5174 per U.S. dollar as of 12 p.m. local time, and the ringgit slipped as much as 0.2 percent to 3.4960, both the weakest since Sept. 12. The yen rose against 15 of the world's 16 most-active currencies.
Shares in the region dropped following declines in the U.S. The Morgan Stanley Capital International Asia-Pacific Index fell 1.3 percent, the most since Sept. 10.
Overseas investors sold more South Korean stocks than they bought today and shed shares in Taiwan, the Philippines and Thailand yesterday. Korea's won weakened 0.1 percent to 929.80 against the dollar, according to Seoul Money Brokerage Services Ltd.
``When a crisis comes there's a tendency for individuals to veer away from Asian currencies and to hold on to dollars as a safe haven,'' said Jonathan Ravelas, a strategist at BDO Unibank in Manila.
Fed Meeting
The Federal Reserve's decision on interest rates today may paint a clearer picture as to the extent of the credit meltdown and the outlook for Asian exports.
Traders see a 50 percent chance the Fed will lower its overnight rate for loans between banks by 50 basis points to 4.75 percent today, according to interest-rate futures, versus 72 percent a week ago.
The Indonesia rupiah weakened 0.1 percent to 9,391 per dollar. Bank Indonesia Governor Burhanuddin Abdullah yesterday said the central bank has room to cut interest rates should the U.S. reduce borrowing costs. The local central bank kept its reference rate on hold at 8.25 percent at its past two meetings.
``The timing for further movement in the currency hinges on international conditions,'' said Lawrence Goodman, emerging- market currency strategist at Bank of America based in New York. ``In the near term, we will remain in an environment of risk and uncertainty.''
Elsewhere, Taiwan markets were closed as supertyphoon Wipha approached the north of the island. The Vietnamese dong was little changed at 16,225 and the Thai baht onshore was 34.28.
By Jake Lee
Sept. 18 (Bloomberg) -- The Singapore dollar and Malaysian ringgit touched the lowest in almost a week on speculation investors will cut holdings of riskier assets as the credit- market turmoil spreads.
Thirteen currencies of Asia's 17 biggest economies fell as a cash injection by the Bank of England into the U.K.'s Northern Rock Plc prompted a run on deposits by savers. E*Trade Financial Corp., a New York-based online brokerage, cut its profit forecast because it expects losses on housing loans and Bank of America Corp. warned market turmoil will effect earnings.
``Investor confidence is deteriorating and that works to the detriment of Asian currencies,'' said David Cohen, an economist at Action Economics in Singapore. ``There's a flight to safety, which is going to benefit the U.S. dollar and the Japanese yen.''
The Singapore dollar declined 0.1 percent to S$1.5174 per U.S. dollar as of 12 p.m. local time, and the ringgit slipped as much as 0.2 percent to 3.4960, both the weakest since Sept. 12. The yen rose against 15 of the world's 16 most-active currencies.
Shares in the region dropped following declines in the U.S. The Morgan Stanley Capital International Asia-Pacific Index fell 1.3 percent, the most since Sept. 10.
Overseas investors sold more South Korean stocks than they bought today and shed shares in Taiwan, the Philippines and Thailand yesterday. Korea's won weakened 0.1 percent to 929.80 against the dollar, according to Seoul Money Brokerage Services Ltd.
``When a crisis comes there's a tendency for individuals to veer away from Asian currencies and to hold on to dollars as a safe haven,'' said Jonathan Ravelas, a strategist at BDO Unibank in Manila.
Fed Meeting
The Federal Reserve's decision on interest rates today may paint a clearer picture as to the extent of the credit meltdown and the outlook for Asian exports.
Traders see a 50 percent chance the Fed will lower its overnight rate for loans between banks by 50 basis points to 4.75 percent today, according to interest-rate futures, versus 72 percent a week ago.
The Indonesia rupiah weakened 0.1 percent to 9,391 per dollar. Bank Indonesia Governor Burhanuddin Abdullah yesterday said the central bank has room to cut interest rates should the U.S. reduce borrowing costs. The local central bank kept its reference rate on hold at 8.25 percent at its past two meetings.
``The timing for further movement in the currency hinges on international conditions,'' said Lawrence Goodman, emerging- market currency strategist at Bank of America based in New York. ``In the near term, we will remain in an environment of risk and uncertainty.''
Elsewhere, Taiwan markets were closed as supertyphoon Wipha approached the north of the island. The Vietnamese dong was little changed at 16,225 and the Thai baht onshore was 34.28.
Trade in Manufactured Parts and Components Helps East Asia Cope with Forex Rise
By . Agence France-Presse
Sept. 18, 2007 -- The growing trade in manufactured parts and components is helping East Asia weather the strengthening of regional currencies while inducing greater economic integration, an Asian Development Bank (ADB) report said Sept. 17. "This burgeoning 'trade in tasks' is less sensitive to real exchange movements than exports of primary commodities or finished manufactured goods," the ADB said in its updated Asian Development Outlook report.
The sub-region's intermediate goods trade burgeoned between 1990 and 2006, with China becoming a significant export destination for neighbors, particularly for machinery and transport equipment parts and components. The shift away from labor-intensive products exports was driven by rising wage costs and attendant real currency appreciation. Although outsourcing components is now a global phenomenon, "it is far more important and is growing more rapidly in East Asia than elsewhere in the world," the ADB said.
"Though exports are now growing quickly in some countries of South Asia, it has not yet latched onto international production networks to the same degree as East Asia," it added. Parts and components production now account for 57.8 % of total manufacturing in the Philippines, 50.4 % in Malaysia, 47.6% in Singapore, 38.7% in Taiwan, 33.2% in South Korea, 31.4% in China, 30.8% in Thailand, 29.7% in Hong Kong and 16.1% in Indonesia.
"It is clear that international product fragmentation taking place in this region has induced more intraregional trade over the past 15 years," it added.
Sept. 18, 2007 -- The growing trade in manufactured parts and components is helping East Asia weather the strengthening of regional currencies while inducing greater economic integration, an Asian Development Bank (ADB) report said Sept. 17. "This burgeoning 'trade in tasks' is less sensitive to real exchange movements than exports of primary commodities or finished manufactured goods," the ADB said in its updated Asian Development Outlook report.
The sub-region's intermediate goods trade burgeoned between 1990 and 2006, with China becoming a significant export destination for neighbors, particularly for machinery and transport equipment parts and components. The shift away from labor-intensive products exports was driven by rising wage costs and attendant real currency appreciation. Although outsourcing components is now a global phenomenon, "it is far more important and is growing more rapidly in East Asia than elsewhere in the world," the ADB said.
"Though exports are now growing quickly in some countries of South Asia, it has not yet latched onto international production networks to the same degree as East Asia," it added. Parts and components production now account for 57.8 % of total manufacturing in the Philippines, 50.4 % in Malaysia, 47.6% in Singapore, 38.7% in Taiwan, 33.2% in South Korea, 31.4% in China, 30.8% in Thailand, 29.7% in Hong Kong and 16.1% in Indonesia.
"It is clear that international product fragmentation taking place in this region has induced more intraregional trade over the past 15 years," it added.
Dollar Ticking Up Against British Pound; Pair Now Worth 1.9883
(RTTNews) - Dollar Ticking Up Against British Pound; Pair Now Worth 1.9883.
Australian Dollar Declines Against Majors
(RTTNews) - During the early Asian session on Tuesday, the Australian dollar declined against its major counterparts. The downtrend pushed the Aussie to fell to a 26-day low versus the Canadian dollar. On the other hand, the Aussie hit a 1-week low against the rest of majors. However, around 9:35 pm ET Monday, the major Aussie pairs started reversing the losses.
Deals in the session were likely influenced by the Australian preliminary BoP imports data for the month of August.
The Australian Bureau of Statistics said that the merchandise imports to Australia on a balance of payments basis increased a seasonally adjusted 7% in August, rebounded from a fall of 4% in July.
Japan's tertiary activity index for the month of July which was also released during the session weakened the Aussie versus the Yen.
As expected, Japan's tertiary industry activity index dropped a seasonally adjusted 0.5% to 109.7 in July from the previous month.
The market now turns toward the Bank of Japan's target rate decision. The central bank's current rate is 0.50%, and is expected to remain unchanged this time. German ZEW survey data for September is slated for 5:00 am ET.
The U.S. Producer price index data for August is expected later in the morning, followed by the FOMC rate decision at 2:15 pm ET. Economists expect the Fed to cut rates by 25 basis points to 5.00% in today's announcement.
The Australian dollar moved sideways against the U.S. currency in the early Asian deals on Tuesday. But by about 9:10 pm ET Monday, the Aussie fell sharply and touched a 1-week low of 0.8275. Thereafter, the pair strengthened slightly and it is currently trading near 0.832. The near term resistance level for the pair is seen around 0.836.
After moving briefly sideways, the Australian dollar lost ground versus the Euro during the early Asian session on Tuesday. The pair touched 1.6756 by about 9:35 pm ET Monday and this was the 1-week low for the Aussie. The Aussie then gained slightly and the pair has been trading at 1.666 as of now. The near term resistance level for the Aussie is seen around 1.662.
In the early Asian deals on Tuesday, the Aussie rallied against the Canadian dollar. However, at about 8:05 pm ET Monday, the pair edged down and thus the pair moved from 0.8579 to 0.8513, which sets a 26-day low for the Aussie. The pair then traded sideways and it is currently trading near 0.853. The next downside target for the Aussie is seen around 0.827.
The Australian dollar ticked down versus the Japanese Yen in the early Asian deals on Tuesday. After hitting a 1-week low of 95.00 at 9:35 pm ET Monday, the Aussie advanced slightly. As of now, the pair has been trading near 95.6 with the next target level seen around 96.9.
Deals in the session were likely influenced by the Australian preliminary BoP imports data for the month of August.
The Australian Bureau of Statistics said that the merchandise imports to Australia on a balance of payments basis increased a seasonally adjusted 7% in August, rebounded from a fall of 4% in July.
Japan's tertiary activity index for the month of July which was also released during the session weakened the Aussie versus the Yen.
As expected, Japan's tertiary industry activity index dropped a seasonally adjusted 0.5% to 109.7 in July from the previous month.
The market now turns toward the Bank of Japan's target rate decision. The central bank's current rate is 0.50%, and is expected to remain unchanged this time. German ZEW survey data for September is slated for 5:00 am ET.
The U.S. Producer price index data for August is expected later in the morning, followed by the FOMC rate decision at 2:15 pm ET. Economists expect the Fed to cut rates by 25 basis points to 5.00% in today's announcement.
The Australian dollar moved sideways against the U.S. currency in the early Asian deals on Tuesday. But by about 9:10 pm ET Monday, the Aussie fell sharply and touched a 1-week low of 0.8275. Thereafter, the pair strengthened slightly and it is currently trading near 0.832. The near term resistance level for the pair is seen around 0.836.
After moving briefly sideways, the Australian dollar lost ground versus the Euro during the early Asian session on Tuesday. The pair touched 1.6756 by about 9:35 pm ET Monday and this was the 1-week low for the Aussie. The Aussie then gained slightly and the pair has been trading at 1.666 as of now. The near term resistance level for the Aussie is seen around 1.662.
In the early Asian deals on Tuesday, the Aussie rallied against the Canadian dollar. However, at about 8:05 pm ET Monday, the pair edged down and thus the pair moved from 0.8579 to 0.8513, which sets a 26-day low for the Aussie. The pair then traded sideways and it is currently trading near 0.853. The next downside target for the Aussie is seen around 0.827.
The Australian dollar ticked down versus the Japanese Yen in the early Asian deals on Tuesday. After hitting a 1-week low of 95.00 at 9:35 pm ET Monday, the Aussie advanced slightly. As of now, the pair has been trading near 95.6 with the next target level seen around 96.9.
Australia's central bank governor calls for greater subprime disclosure
SYDNEY (Thomson Financial) - Australia's central bank governor Glenn Stevens on Tuesday called on financial institutions to fully disclose their exposures to the US subprime mortgage crisis.
In a speech to the CEO Asia Update Luncheon in Sydney, Stevens said the lack of transparency - not the size of the exposures - was the biggest problem facing financial institutions.
''The sooner they are all on the table, the sooner the uncertainty will be lessened and the sooner market participants can discriminate sensibly among their counterparts,'' Stevens said in his speech.
''It would be very damaging for that lack of information to lead to a lengthy period of severely reduced credit flow to perfectly good borrowers simply because investors cannot tell who is sound and who is not. More information is needed.''
Stevens said while the global credit crisis may not be over, Asian countries and Australia appear to be "weathering the storm fairly well".
Stevens said the central bank will maintain a tightening bias, noting the strength of the Australian economy going into the credit crisis and the fact there have been few signs of momentum slowing.
''Assessments of how much is warranted could be affected by changes in the international environment as well as by developments in the domestic economy. These are matters the Board will need to grapple with over the period ahead,'' Stevens said.
In a speech to the CEO Asia Update Luncheon in Sydney, Stevens said the lack of transparency - not the size of the exposures - was the biggest problem facing financial institutions.
''The sooner they are all on the table, the sooner the uncertainty will be lessened and the sooner market participants can discriminate sensibly among their counterparts,'' Stevens said in his speech.
''It would be very damaging for that lack of information to lead to a lengthy period of severely reduced credit flow to perfectly good borrowers simply because investors cannot tell who is sound and who is not. More information is needed.''
Stevens said while the global credit crisis may not be over, Asian countries and Australia appear to be "weathering the storm fairly well".
Stevens said the central bank will maintain a tightening bias, noting the strength of the Australian economy going into the credit crisis and the fact there have been few signs of momentum slowing.
''Assessments of how much is warranted could be affected by changes in the international environment as well as by developments in the domestic economy. These are matters the Board will need to grapple with over the period ahead,'' Stevens said.
Canadian Dollar Extends Yesterday's Gains Against Aussie
(RTTNews) - Against the Australian dollar, the Canadian currency strengthened in Asian trading on Tuesday. The pair moved to 0.8508 from 0.8571 by about 9:30 pm ET, but thereafter, held steady. The Canadian dollar is now worth 0.8527 against the Aussie. If the loonie loses ground, immediate support is seen around the 0.8543 level, which is the 50-day moving average on a 5-minute chart of the aussie-loonie pair. By virtue of the recent gains, the Canadian currency added to its yesterday's advancements, and the pair is now trading near a 1-month high.
New Zealand Dollar Ticks Up Versus Euro
(RTTNews) - After moving sideways, the New Zealand dollar fell sharply against the European currency in the early Asian deals on Tuesday. Down from yesterday's close of 1.9619, the pair hit a low of 1.9790 by about 9:35 pm ET. However, the kiwi reversed direction thereafter and was worth 1.9692 versus the euro, as of 11:00 pm. Investors now turn toward the German September ZEW economic sentiment, which is expected at 5:00 am.
Forex - Northern Rock crisis continues to batter pound; FOMC meeting in focus
LONDON (Thomson Financial) - The consequences from the crisis at Northern Rock PLC continued to batter the pound, which dropped below 2 usd for the first time in several weeks and slumped to a fourteen month low against the pound.
Last week's news that Northern Rock had to seek emergency funding from the Bank of England has led to hoards of customers queuing to withdraw their savings outside branches. This is set to continue today and the company's share price has fallen by a further 30 pct this morning.
"Expect a very shaky start to the week for UK assets, with the pound looking particularly vulnerable in the near-term," said Audrey Childe-Freeman at CIBC Markets.
She also pointed to a weekend report that the Nationwide building society has warned that UK house price growth will halve next year as a result of the credit crunch. This comes after Rightmove's latest house price survey revealed a 2.6 pct monthly fall in house prices in September.
The pound has dropped below 2 dollars for the first time since August 29, while the euro hit a high of 0.6939 stg, its strongest level since July 2006.
The euro is benefiting from the contrasting outlooks for monetary policy in the euro zone and the UK. While the European Central Bank is expected at least to leave interest rates unchanged, short sterling futures are rapidly pricing in a Bank of England rate cut in the coming months.
"The net result of all this has been that euro/sterling has not only now broken out of the narrowing range that had defined trading since 2003 but is also accelerating rapidly. Indeed, last week's move was the largest weekly rally since November of 2005," said Simon Derrick at the Bank of New York Mellon.
Attention in the UK this week will centre on the release of the minutes to the BoE's Monetary Policy Committee meeting earlier this month and, more importantly, the grilling that BoE governor Mervyn King will face before the Treasury Select Committee on Thursday.
Meanwhile, the yen was broadly higher on increased risk aversion as worries over the extent to which the credit crunch will hit the global economy.
Elsewhere, however, the prime focus for currency markets will be on tomorrow's interest rate decision by the Federal Reserve Open Market Committee. Market expectations are that rates will be cut, possibly by 50 basis points rather than the usual 25.
Last week's news that Northern Rock had to seek emergency funding from the Bank of England has led to hoards of customers queuing to withdraw their savings outside branches. This is set to continue today and the company's share price has fallen by a further 30 pct this morning.
"Expect a very shaky start to the week for UK assets, with the pound looking particularly vulnerable in the near-term," said Audrey Childe-Freeman at CIBC Markets.
She also pointed to a weekend report that the Nationwide building society has warned that UK house price growth will halve next year as a result of the credit crunch. This comes after Rightmove's latest house price survey revealed a 2.6 pct monthly fall in house prices in September.
The pound has dropped below 2 dollars for the first time since August 29, while the euro hit a high of 0.6939 stg, its strongest level since July 2006.
The euro is benefiting from the contrasting outlooks for monetary policy in the euro zone and the UK. While the European Central Bank is expected at least to leave interest rates unchanged, short sterling futures are rapidly pricing in a Bank of England rate cut in the coming months.
"The net result of all this has been that euro/sterling has not only now broken out of the narrowing range that had defined trading since 2003 but is also accelerating rapidly. Indeed, last week's move was the largest weekly rally since November of 2005," said Simon Derrick at the Bank of New York Mellon.
Attention in the UK this week will centre on the release of the minutes to the BoE's Monetary Policy Committee meeting earlier this month and, more importantly, the grilling that BoE governor Mervyn King will face before the Treasury Select Committee on Thursday.
Meanwhile, the yen was broadly higher on increased risk aversion as worries over the extent to which the credit crunch will hit the global economy.
Elsewhere, however, the prime focus for currency markets will be on tomorrow's interest rate decision by the Federal Reserve Open Market Committee. Market expectations are that rates will be cut, possibly by 50 basis points rather than the usual 25.
Sterling falls sharply as rate outlook dims
LONDON (Reuters) - The sterling trade-weighted index fell to its lowest since October 2006 on Monday as troubles at one of the country's largest mortgage lenders dimmed expectations for a near-term interest rate increase by the Bank of England.
Last week the government authorised the rescue of Northern Rock (NRK.L: Quote, Profile, Research) after a global credit crunch impaired the lender's ability to raise cash in money markets.
The outlook for sterling has been damaged because the Northern Rock bail-out suggested that the global credit crisis that started in the United States has found it way to the UK economy.
Photo
Analysts said that meant that the Bank may have finished tightening interest rates which should diminish the appeal of sterling assets to global investors.
"The situation with the state of British banks in the light of Northern Rock is putting pressure on sterling," said Hans Henrik Jensen, FX risk manager, at Jyske Markets in Silkeborg, Denmark.
The currency fell to a fresh 14-month low against the euro around 69.39 pence. By 8:50 a.m. the euro traded at 69.26 pence, up 0.3 percent.
The pound fell half a percent to $1.9992, dipping below the psychologically key $2 mark for the first time in nearly three weeks. On a trade weighted basis it opened at a one-month low of 102.30.
To appease the market Chancellor Alistair Darling said on Monday authorities would consider every option to solve the crisis at Northern Rock. He also said liquidity is not a problem for the financial system, but banks are reluctant to lend.
Last week the government authorised the rescue of Northern Rock (NRK.L: Quote, Profile, Research) after a global credit crunch impaired the lender's ability to raise cash in money markets.
The outlook for sterling has been damaged because the Northern Rock bail-out suggested that the global credit crisis that started in the United States has found it way to the UK economy.
Photo
Analysts said that meant that the Bank may have finished tightening interest rates which should diminish the appeal of sterling assets to global investors.
"The situation with the state of British banks in the light of Northern Rock is putting pressure on sterling," said Hans Henrik Jensen, FX risk manager, at Jyske Markets in Silkeborg, Denmark.
The currency fell to a fresh 14-month low against the euro around 69.39 pence. By 8:50 a.m. the euro traded at 69.26 pence, up 0.3 percent.
The pound fell half a percent to $1.9992, dipping below the psychologically key $2 mark for the first time in nearly three weeks. On a trade weighted basis it opened at a one-month low of 102.30.
To appease the market Chancellor Alistair Darling said on Monday authorities would consider every option to solve the crisis at Northern Rock. He also said liquidity is not a problem for the financial system, but banks are reluctant to lend.
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