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/
Friday, September 28, 2007
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.
Aussie Drops To 1-Week Low Against Euro
(RTTNews) - 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 1.667 as of now. The near term resistance level for the Aussie is seen around 1.662. Deals in the session were likely influenced by the Australian preliminary BoP imports for August. German ZEW survey data for September is expected during the upcoming European session.
New Zealand Dollar Rebounds Versus Yen
(RTTNews) - Against the Japanese yen, the New Zealand dollar edged down in the early Asian deals on Tuesday. The pair hit a low of 80.42 by about 9:35 pm ET, compared to yesterday's close of 81.38. Since then, the kiwi has been moving higher against the yen and was quoted at 80.94 as of 10:45 pm. If the pair strengthens further 81.68 can likely be the next target level.
China's Yuan Falls After Some Asian Currencies in Basket Drop
Sept. 18 (Bloomberg) -- The yuan fell after some Asian currencies, such as South Korea's won, that the central bank uses to manage its exchange rate weakened against the dollar.
The People's Bank of China set a weaker reference rate for daily trading for a second day since the central bank increased interest rates on Sept. 14 for the fifth time since March. The authority may want to temper yuan appreciation by encouraging two-way fluctuations, said Wu Bingsong, a treasury dealer at Maybank Shanghai.
``The yuan's decline was influenced by the basket of currencies,'' Wu said. ``Hot money speculating on further yuan gains may rise with a narrowing interest rate gap with the U.S., so the central bank may want to curb the inflows.''
The yuan weakened 0.07 percent to 7.5276 against the dollar as of 9:55 a.m. in Shanghai, cutting gains since the end of the fixed exchange rate in July 2005 to 10 percent.
China's central bank has been managing the yuan against a basket of currencies since the end of a dollar link in July 2005. All but one of the 10 most-active currencies in Asia fell today.
The central bank last week raised the benchmark one-year deposit rate to 3.87 percent from 3.6 percent. A U.S. dollar one- year deposit now earns 5.08 percent.
Investors trimmed bets the Federal Reserve will cut its overnight lending rate between banks by 0.5 percentage point to 4.75 percent. Interest-rate futures show a 50 percent chance of a half-percentage-point cut, compared with 76 percent a week ago.
The Fed is scheduled to announce its rate decision today.
The People's Bank of China set a weaker reference rate for daily trading for a second day since the central bank increased interest rates on Sept. 14 for the fifth time since March. The authority may want to temper yuan appreciation by encouraging two-way fluctuations, said Wu Bingsong, a treasury dealer at Maybank Shanghai.
``The yuan's decline was influenced by the basket of currencies,'' Wu said. ``Hot money speculating on further yuan gains may rise with a narrowing interest rate gap with the U.S., so the central bank may want to curb the inflows.''
The yuan weakened 0.07 percent to 7.5276 against the dollar as of 9:55 a.m. in Shanghai, cutting gains since the end of the fixed exchange rate in July 2005 to 10 percent.
China's central bank has been managing the yuan against a basket of currencies since the end of a dollar link in July 2005. All but one of the 10 most-active currencies in Asia fell today.
The central bank last week raised the benchmark one-year deposit rate to 3.87 percent from 3.6 percent. A U.S. dollar one- year deposit now earns 5.08 percent.
Investors trimmed bets the Federal Reserve will cut its overnight lending rate between banks by 0.5 percentage point to 4.75 percent. Interest-rate futures show a 50 percent chance of a half-percentage-point cut, compared with 76 percent a week ago.
The Fed is scheduled to announce its rate decision today.
Australian August Imports Rise
(RTTNews) - 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, the Australian Bureau of Statistics said Tuesday.
The August growth was mainly due to increased imports of mineral fuels, lubricants and related materials, machinery and transport equipment and Manufactured goods classified chiefly by material. However, imports of Crude materials, inedible, except fuels and Animal and vegetable oils, fats and waxes declined in August from the previous month, which pulled down the August growth.
The August growth was mainly due to increased imports of mineral fuels, lubricants and related materials, machinery and transport equipment and Manufactured goods classified chiefly by material. However, imports of Crude materials, inedible, except fuels and Animal and vegetable oils, fats and waxes declined in August from the previous month, which pulled down the August growth.
Birinyi Says `Psychology of Fear' Created Bargains
Sept. 17 (Bloomberg) -- An unfounded concern that the U.S. economy will slip into a recession has pushed some stocks down too far, investor Laszlo Birinyi said.
``Right now, we have that psychology of fear,'' said Birinyi, who helps manage about $600 million as president of Birinyi Associates Inc. in Westport, Connecticut. ``Good, solid companies which have nothing to do with finance, which are really immune from all these other issues, are being punished just as severely as stocks which are really tied to the issues.''
The Standard & Poor's 500 Index has declined 5 percent from a July 19 record amid concern a rise in borrowing costs sparked by defaults on subprime home loans will stifle growth in the world's largest economy and erode companies' earnings.
Birinyi said shares of some companies that pay relatively large dividends including commercial real estate investment trusts may be good investments. He said his firm owns shares of Vornado Realty Trust, the second-largest U.S. REIT. The S&P 500 Real Estate Index has a dividend yield of 3.7 percent after dropping 11 percent this year.
``Commercial building is still strong,'' Birinyi said in an interview. The market has ``been throwing the baby out with the bathwater.''
Brokerages, Homebuilders
The money manager also said ``a lot of the bad news has been factored in'' to share prices of some brokerage firms such as Goldman Sachs Group Inc., the world's biggest securities firm by market value, and Bear Stearns Cos., the No. 2 underwriter of U.S. mortgage bonds.
The Amex Securities Broker/Dealer Index has declined 7.7 percent this year, compared with a 4 percent gain for the S&P 500.
``The risk-reward is on the side of the reward right now,'' he said. Birinyi said his firm has a ``significant position'' in some brokerage stocks, though he is ``severely underweight'' financial shares relative to benchmark indexes and has a ``very small'' position in banks.
As for shares of homebuilders, it's ``too early and too dangerous'' to start buying because of uncertainty in the mortgage market, Birinyi said.
``To me housing is like a centipede,'' he said. ``The other shoe keeps dropping and then there's another shoe, and yet another.''
Birinyi is known for pioneering money flow analysis, which compares the dollar amounts moving into or out of a stock or index to establish whether it is being more aggressively bought or sold.
``The markets are OK,'' Birinyi said. ``The problem is that we have a lot of smoke and a lot of noise going on.''
``Right now, we have that psychology of fear,'' said Birinyi, who helps manage about $600 million as president of Birinyi Associates Inc. in Westport, Connecticut. ``Good, solid companies which have nothing to do with finance, which are really immune from all these other issues, are being punished just as severely as stocks which are really tied to the issues.''
The Standard & Poor's 500 Index has declined 5 percent from a July 19 record amid concern a rise in borrowing costs sparked by defaults on subprime home loans will stifle growth in the world's largest economy and erode companies' earnings.
Birinyi said shares of some companies that pay relatively large dividends including commercial real estate investment trusts may be good investments. He said his firm owns shares of Vornado Realty Trust, the second-largest U.S. REIT. The S&P 500 Real Estate Index has a dividend yield of 3.7 percent after dropping 11 percent this year.
``Commercial building is still strong,'' Birinyi said in an interview. The market has ``been throwing the baby out with the bathwater.''
Brokerages, Homebuilders
The money manager also said ``a lot of the bad news has been factored in'' to share prices of some brokerage firms such as Goldman Sachs Group Inc., the world's biggest securities firm by market value, and Bear Stearns Cos., the No. 2 underwriter of U.S. mortgage bonds.
The Amex Securities Broker/Dealer Index has declined 7.7 percent this year, compared with a 4 percent gain for the S&P 500.
``The risk-reward is on the side of the reward right now,'' he said. Birinyi said his firm has a ``significant position'' in some brokerage stocks, though he is ``severely underweight'' financial shares relative to benchmark indexes and has a ``very small'' position in banks.
As for shares of homebuilders, it's ``too early and too dangerous'' to start buying because of uncertainty in the mortgage market, Birinyi said.
``To me housing is like a centipede,'' he said. ``The other shoe keeps dropping and then there's another shoe, and yet another.''
Birinyi is known for pioneering money flow analysis, which compares the dollar amounts moving into or out of a stock or index to establish whether it is being more aggressively bought or sold.
``The markets are OK,'' Birinyi said. ``The problem is that we have a lot of smoke and a lot of noise going on.''
Euro Rallies Versus Pound To Extend 14-Month High
(RTTNews) - The euro is rising again in the late-morning against the British pound and topped the fresh 14-month high it touched earlier in the morning. The European currency reached 0.6950 at 5 a.m. ET but edged back over the next few hours. It started to rise again at around 11:30 a.m. ET and has reached 0.6951, its best level since June of 2006.
Traders considered data showing the Euro zone trade balance showed a surplus of 4.6 billion euros in July. The trade surplus narrowed from the 7.6 billion euros recorded in June, revised down from 7.8 billion euros initially estimated.
In England, mortgage company Northern Rock is once again in the news, as its customers emptied out over $4 billion in deposits this weekend due to fears of insolvency. The problems at Northern Rock once again ignited fears that troubles in the financial markets have not yet played themselves out.
Traders considered data showing the Euro zone trade balance showed a surplus of 4.6 billion euros in July. The trade surplus narrowed from the 7.6 billion euros recorded in June, revised down from 7.8 billion euros initially estimated.
In England, mortgage company Northern Rock is once again in the news, as its customers emptied out over $4 billion in deposits this weekend due to fears of insolvency. The problems at Northern Rock once again ignited fears that troubles in the financial markets have not yet played themselves out.
UK Food Price Inflation Slows Despite Poor Summer
UK Food Price Inflation Slows Despite Poor Summer
LONDON (Dow Jones)--U.K. annual food price inflation eased for the fourth consecutive month in August, indicating the underlying strength of the country's grocery market, the British Retail Consortium said Monday.
Annual food price inflation slowed to 2.1% in August from a peak of 3.9% in April.
Despite poor weather plaguing U.K. farmers over the summer months, food prices fell on the month in July and August as price competition within the grocery market intensified. Food prices fell 0.5% between July and August, greater than the decline of 0.3% between June and July.
"The August results underline the strength of retail competition in the grocery market and should be a useful counterweight in some of the more alarmist forecasts of the future price rises," said Kevin Hawkins, head of the BRC.
Upward inflationary pressure from fresh fruit, vegetables and fish was kept low by unprecedented levels of promotional activity over the summer months and a limited impact from supply chain pressures, the report said.
Mike Watkins, retail services manager at Neilsen who contributed to the survey, stressed the importance of price-led strategies in restraining inflation.
"Promotions reached an all-time high over the summer, and in August almost 28% of the value of the (average) food shopping basket was still being promoted," he said.
Economic policymakers in the U.K. have been concerned that the impact of severe flooding in the U.K. this summer could eventually feed through to higher inflation. That this inflationary pressure has so far been muted could lead to lower-than-expected overall inflation this autumn.
Inflationary pressure from foods, such as pickles, peanut butter and ketchup, or so-called ambient foods, has been kept low through feverish promotional activity, the report said.
But downward pressure on prices is also coming from alcoholic and non-alcoholic drinks alongside convenience foods and snacks, soups and some tinned produce.
But the report also warned that inflationary pressure from grocery supply chains is yet to fully affect consumer prices.
Poor harvests in key wheat, grain and barley growing countries, such as America, Australia and Canada have caused a supply shortage, resulting in the cost of wheat-related produce to rise.
"The full impact of this cost inflation within wheat hasn't been felt by the consumer yet, as promotional activity is keeping prices down," the report said.
LONDON (Dow Jones)--U.K. annual food price inflation eased for the fourth consecutive month in August, indicating the underlying strength of the country's grocery market, the British Retail Consortium said Monday.
Annual food price inflation slowed to 2.1% in August from a peak of 3.9% in April.
Despite poor weather plaguing U.K. farmers over the summer months, food prices fell on the month in July and August as price competition within the grocery market intensified. Food prices fell 0.5% between July and August, greater than the decline of 0.3% between June and July.
"The August results underline the strength of retail competition in the grocery market and should be a useful counterweight in some of the more alarmist forecasts of the future price rises," said Kevin Hawkins, head of the BRC.
Upward inflationary pressure from fresh fruit, vegetables and fish was kept low by unprecedented levels of promotional activity over the summer months and a limited impact from supply chain pressures, the report said.
Mike Watkins, retail services manager at Neilsen who contributed to the survey, stressed the importance of price-led strategies in restraining inflation.
"Promotions reached an all-time high over the summer, and in August almost 28% of the value of the (average) food shopping basket was still being promoted," he said.
Economic policymakers in the U.K. have been concerned that the impact of severe flooding in the U.K. this summer could eventually feed through to higher inflation. That this inflationary pressure has so far been muted could lead to lower-than-expected overall inflation this autumn.
Inflationary pressure from foods, such as pickles, peanut butter and ketchup, or so-called ambient foods, has been kept low through feverish promotional activity, the report said.
But downward pressure on prices is also coming from alcoholic and non-alcoholic drinks alongside convenience foods and snacks, soups and some tinned produce.
But the report also warned that inflationary pressure from grocery supply chains is yet to fully affect consumer prices.
Poor harvests in key wheat, grain and barley growing countries, such as America, Australia and Canada have caused a supply shortage, resulting in the cost of wheat-related produce to rise.
"The full impact of this cost inflation within wheat hasn't been felt by the consumer yet, as promotional activity is keeping prices down," the report said.
Dollar in narrow range as Fed meeting looms; sterling weakens
The dollar index, which tracks the U.S. currency against a basket of major currencies, was 0.2% higher at 79.735.
The dollar was down 0.4% against the Japanese yen to 114.92 yen, after markets in Tokyo were closed for a holiday Monday.
The euro was slightly down, at $1.3859.
The dollar extended its gains against the pound sterling, which fell 0.7% to $1.9931 after shares of the U.K.'s Northern Rock (UK:NRK: news, chart, profile) dropped sharply for the second straight session. The mortgage lender said last week it needed Bank of England for emergency funding in the face of difficulties raising financing.
Investors' main focus remained on Tuesday's Federal Open Market Committee meeting, at which the central bank is expected to trim its federal funds target rate by a quarter-point. See Economic Preview.
Investors and analysts will be closely parsing the Fed's accompanying statement for clues about future interest rate moves.
"The statement might also shed more light on the Fed's reluctance to cut its key policy rate, and its reliance on an array of other measures, including moral suasion, to mitigate the dislocations in credit and money markets," wrote Sherry Cooper, chief economist at BMO Capital Markets.
Manufacturing activity in the New York area slowed a bit in September, according to data released early Monday by the New York Federal Reserve. Its Empire State Manufacturing index fell to 14.7 points in September from 25.1 in August, and below the 18.0 expected by economists. See Economic Report.
Stocks opened lower after the data and seesawed in early trading, adding to pressure on the U.S. currency. See Market Snapshot.
Former Federal Reserve Chairman Alan Greenspan contributed to the pressure when he told news program "60 Minutes" on Sunday that the outlook for the U.S. economy is "pretty gloomy," and said the long-term impact on the economy from the current financial market turmoil is not clear.
Greenspan said on another news program Monday morning that he tried to raise mortgage rates to head off a housing bubble, but the effort came to naught because of "global forces" that had the effect of keeping long-term interest rates low
The dollar was down 0.4% against the Japanese yen to 114.92 yen, after markets in Tokyo were closed for a holiday Monday.
The euro was slightly down, at $1.3859.
The dollar extended its gains against the pound sterling, which fell 0.7% to $1.9931 after shares of the U.K.'s Northern Rock (UK:NRK: news, chart, profile) dropped sharply for the second straight session. The mortgage lender said last week it needed Bank of England for emergency funding in the face of difficulties raising financing.
Investors' main focus remained on Tuesday's Federal Open Market Committee meeting, at which the central bank is expected to trim its federal funds target rate by a quarter-point. See Economic Preview.
Investors and analysts will be closely parsing the Fed's accompanying statement for clues about future interest rate moves.
"The statement might also shed more light on the Fed's reluctance to cut its key policy rate, and its reliance on an array of other measures, including moral suasion, to mitigate the dislocations in credit and money markets," wrote Sherry Cooper, chief economist at BMO Capital Markets.
Manufacturing activity in the New York area slowed a bit in September, according to data released early Monday by the New York Federal Reserve. Its Empire State Manufacturing index fell to 14.7 points in September from 25.1 in August, and below the 18.0 expected by economists. See Economic Report.
Stocks opened lower after the data and seesawed in early trading, adding to pressure on the U.S. currency. See Market Snapshot.
Former Federal Reserve Chairman Alan Greenspan contributed to the pressure when he told news program "60 Minutes" on Sunday that the outlook for the U.S. economy is "pretty gloomy," and said the long-term impact on the economy from the current financial market turmoil is not clear.
Greenspan said on another news program Monday morning that he tried to raise mortgage rates to head off a housing bubble, but the effort came to naught because of "global forces" that had the effect of keeping long-term interest rates low
Thursday, September 13, 2007
Euro Eases Off High Against Dollar
(RTTNews) - The euro eased slightly against the dollar after setting a new record high in overnight trading. The early advance followed the release of higher-than-expected consumer inflation reports out of Europe. The euro jumped against the pound on the inflation news, but has since given back some of those gains.
The euro has rallied lately on perception that the European Central Bank is the most hawkish of the world's major central banks. The U.S. Federal Reserve is largely expected to cut its benchmark interest rate next week, and recent data out of Japan has indicated signs of weakness.
Meanwhile, housing data out of the UK and recent comments by Bank of England Governor Mervyn King left the impression that the UK central bank would not be raising rates in the near future.
Even though the ECB left rates unchanged last week, comments from the bank's president indicated that the region's monetary policy will remain geared toward fighting inflation. Thursday's inflation data did little to change this picture.
However, given the recent run-up in the euro, which took it to a much-publicized new high versus the dollar, traders were wary to push the European currency much higher on Thursday.
French consumer prices rose more than expected in August, official data showed Thursday. A report from the statistical office INSEE announced that annual inflation accelerated to 1.2% in August from the 1.1% recorded in July. Economists expected consumer prices growth to remain at 1.1%.
In overnight trading, the euro briefly saw a new record high against the dollar trading at 1.3926 as of 4am ET. Since then the euro fell to 1.3862 before recovering to trade at 1.3895.
There was not much economic news out of the U.S. However, the Department of Labor released its report on initial jobless claims in the week ended September 8, showing that jobless claims rose less than economists had been expecting compared to the previous week.
This news softened the blow somewhat of last Friday's U.S. Department of Labor report indicating a modest decrease in jobs in the month of August, and may have temporarily helped slow the euro.
Traders are looking forward to next Tuesday's highly anticipated rate decision from the Federal Reserve. The Fed is widely expected to lower its benchmark interest rate by at least 25 basis points. This speculation helped fuel the dollar's slide to record lows against the euro recently.
The euro spiked to 0.6874 at 5:30 against the pound, its highest level since May of this year. however, into late morning trading the euro has given up all its gains and then some, slipping to 0.6844, almost the same as it was 24 hours ago.
The Royal Institute of Chartered Surveyors said that the U.K. house prices fell 1.8 percentage point in August compared to 10.8 percentage point gain in July. The findings may indicate the housing market is slowing in the UK as well, as lenders pass the costs on to first-time buyers.
The euro has rallied lately on perception that the European Central Bank is the most hawkish of the world's major central banks. The U.S. Federal Reserve is largely expected to cut its benchmark interest rate next week, and recent data out of Japan has indicated signs of weakness.
Meanwhile, housing data out of the UK and recent comments by Bank of England Governor Mervyn King left the impression that the UK central bank would not be raising rates in the near future.
Even though the ECB left rates unchanged last week, comments from the bank's president indicated that the region's monetary policy will remain geared toward fighting inflation. Thursday's inflation data did little to change this picture.
However, given the recent run-up in the euro, which took it to a much-publicized new high versus the dollar, traders were wary to push the European currency much higher on Thursday.
French consumer prices rose more than expected in August, official data showed Thursday. A report from the statistical office INSEE announced that annual inflation accelerated to 1.2% in August from the 1.1% recorded in July. Economists expected consumer prices growth to remain at 1.1%.
In overnight trading, the euro briefly saw a new record high against the dollar trading at 1.3926 as of 4am ET. Since then the euro fell to 1.3862 before recovering to trade at 1.3895.
There was not much economic news out of the U.S. However, the Department of Labor released its report on initial jobless claims in the week ended September 8, showing that jobless claims rose less than economists had been expecting compared to the previous week.
This news softened the blow somewhat of last Friday's U.S. Department of Labor report indicating a modest decrease in jobs in the month of August, and may have temporarily helped slow the euro.
Traders are looking forward to next Tuesday's highly anticipated rate decision from the Federal Reserve. The Fed is widely expected to lower its benchmark interest rate by at least 25 basis points. This speculation helped fuel the dollar's slide to record lows against the euro recently.
The euro spiked to 0.6874 at 5:30 against the pound, its highest level since May of this year. however, into late morning trading the euro has given up all its gains and then some, slipping to 0.6844, almost the same as it was 24 hours ago.
The Royal Institute of Chartered Surveyors said that the U.K. house prices fell 1.8 percentage point in August compared to 10.8 percentage point gain in July. The findings may indicate the housing market is slowing in the UK as well, as lenders pass the costs on to first-time buyers.
Dollar briefly falls to record low against euro
FRANKFURT, Germany -- The dollar briefly sank to a record low against the euro today for a second successive day amid speculation that the U.S. central bank will cut interest rates amid turbulence in financial markets.
The euro rose to $1.3927, topping the record $1.3914 reached the previous day. It then settled back to $1.3887 in early afternoon European trading and was below the $1.3908 it bought late Wednesday in New York.
A higher euro makes goods from the 13-nation euro zone more expensive for customers elsewhere, and cuts into manufacturers' profits if they try to keep the dollar price of products constant. While it makes U.S. exports cheaper, it cuts the spending power of Americans visiting Europe.
The euro has benefited from healthy economic news in the euro zone and the European Central Bank's campaign of gradual interest rate increases.
However, its current strength is widely seen primarily as a result of problems afflicting the dollar.
The subprime mortgage crisis in the United States and signs of economic frailty, particularly weak August jobs data, have prompted speculation that the Federal Reserve will cut interest rates by as much as half a percentage point next week from the current 5.25 percent.
Howard Archer, the chief UK and European economist at Global Insight, said the record euro was not all bad news for European firms.
"Euro zone consumers could benefit from cheaper prices for some imported goods. There is also some good news for euro zone companies," he said.
"Given that oil, metals and many raw material prices are typically quoted in dollars, the strength of the euro against the dollar should dampen firms' input costs."
The price of oil was near record highs today after a report showed U.S. crude inventories fell in the latest week, driving oil futures above $80 a barrel for the first time.
Some, however, point to the potential dangers of a strong euro to the economies of countries that use the currency -- including Germany, the world's largest exporter.
"In this situation, everything that has a disadvantageous effect on exports is a problem, and the rising euro is part of that," Peter Bofinger, a member of the German government's independent economic advisory panel, was quoted as telling the daily Berliner Zeitung.
"If the rate climbs further, politicians should think about supportive buying in favor of the dollar," he added, according to the report.
Along with the euro, the British pound also has been exceptionally strong against the dollar. The pound broke through $2 earlier this year for the first time in nearly 15 years, and has remained around that level.
But today, the pound fell to $2.0265, down from $2.0302 yesterday, while the dollar rose to 114.76 Japanese yen from 114.26 yen.
The euro's latest push forward has been helped by impressions that the European Central Bank has another interest rate increase in the pipeline before the end of the year -- an option that the bank left open when it left rates on hold at 4 percent last week.
Lower interest rates, used to jump-start the economy, can weaken a currency by giving investors lower returns on investments denominated in the currency. Higher rates, a tool to combat inflation, can strengthen a currency.
ECB governing council member Yves Mersch wrote in a report published today that risks to euro zone price stability persist and promised that the bank will act "in a firm and timely manner" to counter these risks.
"The orientation of the ECB's monetary policy remains accommodative," said Mersch, the governor of Luxembourg's central bank -- adding that the ECB "may resume tightening," depending on the analysis of new data.
The euro rose to $1.3927, topping the record $1.3914 reached the previous day. It then settled back to $1.3887 in early afternoon European trading and was below the $1.3908 it bought late Wednesday in New York.
A higher euro makes goods from the 13-nation euro zone more expensive for customers elsewhere, and cuts into manufacturers' profits if they try to keep the dollar price of products constant. While it makes U.S. exports cheaper, it cuts the spending power of Americans visiting Europe.
The euro has benefited from healthy economic news in the euro zone and the European Central Bank's campaign of gradual interest rate increases.
However, its current strength is widely seen primarily as a result of problems afflicting the dollar.
The subprime mortgage crisis in the United States and signs of economic frailty, particularly weak August jobs data, have prompted speculation that the Federal Reserve will cut interest rates by as much as half a percentage point next week from the current 5.25 percent.
Howard Archer, the chief UK and European economist at Global Insight, said the record euro was not all bad news for European firms.
"Euro zone consumers could benefit from cheaper prices for some imported goods. There is also some good news for euro zone companies," he said.
"Given that oil, metals and many raw material prices are typically quoted in dollars, the strength of the euro against the dollar should dampen firms' input costs."
The price of oil was near record highs today after a report showed U.S. crude inventories fell in the latest week, driving oil futures above $80 a barrel for the first time.
Some, however, point to the potential dangers of a strong euro to the economies of countries that use the currency -- including Germany, the world's largest exporter.
"In this situation, everything that has a disadvantageous effect on exports is a problem, and the rising euro is part of that," Peter Bofinger, a member of the German government's independent economic advisory panel, was quoted as telling the daily Berliner Zeitung.
"If the rate climbs further, politicians should think about supportive buying in favor of the dollar," he added, according to the report.
Along with the euro, the British pound also has been exceptionally strong against the dollar. The pound broke through $2 earlier this year for the first time in nearly 15 years, and has remained around that level.
But today, the pound fell to $2.0265, down from $2.0302 yesterday, while the dollar rose to 114.76 Japanese yen from 114.26 yen.
The euro's latest push forward has been helped by impressions that the European Central Bank has another interest rate increase in the pipeline before the end of the year -- an option that the bank left open when it left rates on hold at 4 percent last week.
Lower interest rates, used to jump-start the economy, can weaken a currency by giving investors lower returns on investments denominated in the currency. Higher rates, a tool to combat inflation, can strengthen a currency.
ECB governing council member Yves Mersch wrote in a report published today that risks to euro zone price stability persist and promised that the bank will act "in a firm and timely manner" to counter these risks.
"The orientation of the ECB's monetary policy remains accommodative," said Mersch, the governor of Luxembourg's central bank -- adding that the ECB "may resume tightening," depending on the analysis of new data.
Wednesday, September 12, 2007
Oil Prices Surge and Dollar Falls
The dollar fell to an all-time low against the euro today and oil prices surged to a record, suggesting that a weaker American economy will be accompanied by higher prices for energy and other imported goods.
As of early this afternoon, one euro was trading at $1.391, up from $1.384 on Tuesday evening; the euro is up 5.4 percent against the dollar so far this year and about 1 percent so far this week. Crude oil prices were up 2.2 percent, to $79.91 a barrel, after briefly trading above $80, a day after OPEC said its members would increase production by a modest amount.
The Federal Reserve is widely expected to cut its benchmark lending rate when its policy-making committee meets on Tuesday, after a report released last week suggested that the troubled housing market was hurting the broader economy more severely than had been previously thought.
Gold prices, which were little changed today, have also surged in recent days as fears of a recession have mounted. Gold futures are up 5.7 percent so far this month, to $714 an ounce on the New York Mercantile Exchange.
In the stock market, trading was light and stocks were mixed. The Standard & Poor’s 500-stock index ended the day essentially even, and the Dow Jones industrial average closed down 0.1 percent. Treasuries were down slightly.
Though the dollar had been falling against foreign currencies for much of the year, it has weakened significantly since Friday, when a government report showed that businesses reduced net employment by 4,000 in August. Now, investors widely expect that the Federal Reserve will cut its key short-term interest rate, now at 5.25 percent, when it meets next week. Some think that policy makers will cut the rate by as much as half a percentage point.
“The payroll report was seen as a macro economic justification or the coup de grâce for expectations of a rate cut next week,” said Ashraf Laidi, chief foreign currency analyst at CMC Markets in New York.
Currencies are influenced by a number of factors, chief among those are expectations for interest rates and inflation. If interest rates were indeed to fall in the United States and remain unchanged in Europe, as many investors are expecting, markets are likely to bid up the price of euros.
The dollar has also been falling against the British pound and the Canadian and Australian dollars. The Japanese yen is up about 4 percent against the dollar for the year, though it has lost some ground in the last few days.
The weakening dollar will be a boon to exporters whose goods and services will become more competitive on the world market. Exports have been one of the brightest spots in the American economy this year, growing at an annual pace of about 11.3 percent while imports have been growing at about 4.6 percent.
Conversely, the depreciating dollar will make imports more expensive. Many investors believe energy commodities will be among those things.
Already near records that it set just two months ago, oil prices have surged in recent weeks. The decision by the Organization of the Petroleum Exporting Countries on Tuesday to increase production by 500,000 barrels a day, a relatively small amount when compared to total production, appeared to make little difference. Analysts said that was largely because global demand for energy led by the fast-growing economies of China and India is growing far faster than overall production, especially among oil producers that are not members of OPEC.
As of early this afternoon, one euro was trading at $1.391, up from $1.384 on Tuesday evening; the euro is up 5.4 percent against the dollar so far this year and about 1 percent so far this week. Crude oil prices were up 2.2 percent, to $79.91 a barrel, after briefly trading above $80, a day after OPEC said its members would increase production by a modest amount.
The Federal Reserve is widely expected to cut its benchmark lending rate when its policy-making committee meets on Tuesday, after a report released last week suggested that the troubled housing market was hurting the broader economy more severely than had been previously thought.
Gold prices, which were little changed today, have also surged in recent days as fears of a recession have mounted. Gold futures are up 5.7 percent so far this month, to $714 an ounce on the New York Mercantile Exchange.
In the stock market, trading was light and stocks were mixed. The Standard & Poor’s 500-stock index ended the day essentially even, and the Dow Jones industrial average closed down 0.1 percent. Treasuries were down slightly.
Though the dollar had been falling against foreign currencies for much of the year, it has weakened significantly since Friday, when a government report showed that businesses reduced net employment by 4,000 in August. Now, investors widely expect that the Federal Reserve will cut its key short-term interest rate, now at 5.25 percent, when it meets next week. Some think that policy makers will cut the rate by as much as half a percentage point.
“The payroll report was seen as a macro economic justification or the coup de grâce for expectations of a rate cut next week,” said Ashraf Laidi, chief foreign currency analyst at CMC Markets in New York.
Currencies are influenced by a number of factors, chief among those are expectations for interest rates and inflation. If interest rates were indeed to fall in the United States and remain unchanged in Europe, as many investors are expecting, markets are likely to bid up the price of euros.
The dollar has also been falling against the British pound and the Canadian and Australian dollars. The Japanese yen is up about 4 percent against the dollar for the year, though it has lost some ground in the last few days.
The weakening dollar will be a boon to exporters whose goods and services will become more competitive on the world market. Exports have been one of the brightest spots in the American economy this year, growing at an annual pace of about 11.3 percent while imports have been growing at about 4.6 percent.
Conversely, the depreciating dollar will make imports more expensive. Many investors believe energy commodities will be among those things.
Already near records that it set just two months ago, oil prices have surged in recent weeks. The decision by the Organization of the Petroleum Exporting Countries on Tuesday to increase production by 500,000 barrels a day, a relatively small amount when compared to total production, appeared to make little difference. Analysts said that was largely because global demand for energy led by the fast-growing economies of China and India is growing far faster than overall production, especially among oil producers that are not members of OPEC.
Japan govt to lower economic assessment for September - report
TOKYO (Thomson Financial) - The Japanese government will downgrade its assessment of the economy for the first time in 10 months in September due to weaker consumer spending and capital investments, the Nikkei business daily reported on Thursday.
The move comes after gross domestic product for the April-June quarter declined in real terms for the first time in three quarters, hit by weakness in corporate capital spending and slower growth in consumer spending.
In the September report, the government will characterize personal spending as flat, down from the prior month's view that "private consumption is picking up," Nikkei said, without citing sources.
The government will also cite weakness in capital investment amid a general upward trend, down from the view in August that it was increasing.
The September report will maintain the outlook that "the economic recovery is expected to continue," but also mention the need to monitor the impact of the US economy and crude oil prices on the Japanese and overseas economies.
The Cabinet Office is scheduled to release its latest economic assessment tomorrow.
(1 US dollar = 114.16 yen)
The move comes after gross domestic product for the April-June quarter declined in real terms for the first time in three quarters, hit by weakness in corporate capital spending and slower growth in consumer spending.
In the September report, the government will characterize personal spending as flat, down from the prior month's view that "private consumption is picking up," Nikkei said, without citing sources.
The government will also cite weakness in capital investment amid a general upward trend, down from the view in August that it was increasing.
The September report will maintain the outlook that "the economic recovery is expected to continue," but also mention the need to monitor the impact of the US economy and crude oil prices on the Japanese and overseas economies.
The Cabinet Office is scheduled to release its latest economic assessment tomorrow.
(1 US dollar = 114.16 yen)
UK RICS House Price Balance -1.8% In Aug Vs +10.8% In Jul
UK RICS House Price Balance -1.8% In Aug Vs +10.8% In Jul
LONDON (Dow Jones)--U.K. house price growth fell in August for the first time since October 2005, as higher interest rates and consumer caution begin to weigh on the housing market, according to a survey released by the Royal Institution of Chartered Surveyors Thursday.
The RICS survey showed that, in seasonally adjusted terms, the proportion of surveyors reporting a rise in house prices was exceeded by the proportion reporting a fall in prices with the balance falling to -1.8 percentage points in August, down from 10.8 points in July.
The decline in the headline measure was a surprise. Economists surveyed by Dow Jones Newswires last week had expected only a small slowdown in the measure to a positive balance of 10.
RICS also revised the July number downward from an originally reported 12.6 points.
"Potential house buyers have become far more cautious as they wait and see what effect interest rate rises will have on household finances," said RICS spokesman Ian Perry. "Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step too far."
The survey is weaker than other August house price indexes from U.K. lenders Nationwide and Halifax, although both did report a slowdown in the annual rate of price inflation, which, economists say, is due to higher interest rates.
The RICS survey, which also reports forward looking housing market measures, said that new buyer inquiries declined for the ninth straight month in August and at the fastest pace since the peak of the last rate cycle in August 2004.
The level of sales expected by surveyors improved a little from July but remains in negative territory while the number of newly agreed sales fell for the third month in a row and by the largest amount since October 2004, RICS said.
"The market will soften further going into the autumn, reducing some impetus from those that have been chasing a rapidly moving target," Perry said.
The rate at which the housing market slows should be contained, however, as economists now expect the Bank of England to keep rates on hold at 5.75% for some time, a view that was further cemented by a statement released by the Monetary Policy Committee following the bank's announcement to keep rates unchanged at its September meeting last week.
A key point the bank made was on inflation: "CPI inflation fell back to 1.9% in July and may remain around, or a little below, the 2% target for the next few months. Pay pressures remain muted," the MPC said.
Keeping inflation anchored remains key for the BoE so news that the CPI may have been tamed earlier than expected is clear evidence that rates may well have now peaked.
RICS also reported that house prices fell in eight of the 12 regions it covers, with the sharpest decline of -41 reported in the west midlands of England. Prices continued to rise in London at a balance of +31 and they also rose in Scotland and south east England. There was no change in average house prices in south west England, RICS said.
LONDON (Dow Jones)--U.K. house price growth fell in August for the first time since October 2005, as higher interest rates and consumer caution begin to weigh on the housing market, according to a survey released by the Royal Institution of Chartered Surveyors Thursday.
The RICS survey showed that, in seasonally adjusted terms, the proportion of surveyors reporting a rise in house prices was exceeded by the proportion reporting a fall in prices with the balance falling to -1.8 percentage points in August, down from 10.8 points in July.
The decline in the headline measure was a surprise. Economists surveyed by Dow Jones Newswires last week had expected only a small slowdown in the measure to a positive balance of 10.
RICS also revised the July number downward from an originally reported 12.6 points.
"Potential house buyers have become far more cautious as they wait and see what effect interest rate rises will have on household finances," said RICS spokesman Ian Perry. "Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step too far."
The survey is weaker than other August house price indexes from U.K. lenders Nationwide and Halifax, although both did report a slowdown in the annual rate of price inflation, which, economists say, is due to higher interest rates.
The RICS survey, which also reports forward looking housing market measures, said that new buyer inquiries declined for the ninth straight month in August and at the fastest pace since the peak of the last rate cycle in August 2004.
The level of sales expected by surveyors improved a little from July but remains in negative territory while the number of newly agreed sales fell for the third month in a row and by the largest amount since October 2004, RICS said.
"The market will soften further going into the autumn, reducing some impetus from those that have been chasing a rapidly moving target," Perry said.
The rate at which the housing market slows should be contained, however, as economists now expect the Bank of England to keep rates on hold at 5.75% for some time, a view that was further cemented by a statement released by the Monetary Policy Committee following the bank's announcement to keep rates unchanged at its September meeting last week.
A key point the bank made was on inflation: "CPI inflation fell back to 1.9% in July and may remain around, or a little below, the 2% target for the next few months. Pay pressures remain muted," the MPC said.
Keeping inflation anchored remains key for the BoE so news that the CPI may have been tamed earlier than expected is clear evidence that rates may well have now peaked.
RICS also reported that house prices fell in eight of the 12 regions it covers, with the sharpest decline of -41 reported in the west midlands of England. Prices continued to rise in London at a balance of +31 and they also rose in Scotland and south east England. There was no change in average house prices in south west England, RICS said.
UK RICS House Price Balance -1.8% In Aug Vs +10.8% In Jul
UK RICS House Price Balance -1.8% In Aug Vs +10.8% In Jul
LONDON (Dow Jones)--U.K. house price growth fell in August for the first time since October 2005, as higher interest rates and consumer caution begin to weigh on the housing market, according to a survey released by the Royal Institution of Chartered Surveyors Thursday.
The RICS survey showed that, in seasonally adjusted terms, the proportion of surveyors reporting a rise in house prices was exceeded by the proportion reporting a fall in prices with the balance falling to -1.8 percentage points in August, down from 10.8 points in July.
The decline in the headline measure was a surprise. Economists surveyed by Dow Jones Newswires last week had expected only a small slowdown in the measure to a positive balance of 10.
RICS also revised the July number downward from an originally reported 12.6 points.
"Potential house buyers have become far more cautious as they wait and see what effect interest rate rises will have on household finances," said RICS spokesman Ian Perry. "Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step too far."
The survey is weaker than other August house price indexes from U.K. lenders Nationwide and Halifax, although both did report a slowdown in the annual rate of price inflation, which, economists say, is due to higher interest rates.
The RICS survey, which also reports forward looking housing market measures, said that new buyer inquiries declined for the ninth straight month in August and at the fastest pace since the peak of the last rate cycle in August 2004.
The level of sales expected by surveyors improved a little from July but remains in negative territory while the number of newly agreed sales fell for the third month in a row and by the largest amount since October 2004, RICS said.
"The market will soften further going into the autumn, reducing some impetus from those that have been chasing a rapidly moving target," Perry said.
The rate at which the housing market slows should be contained, however, as economists now expect the Bank of England to keep rates on hold at 5.75% for some time, a view that was further cemented by a statement released by the Monetary Policy Committee following the bank's announcement to keep rates unchanged at its September meeting last week.
A key point the bank made was on inflation: "CPI inflation fell back to 1.9% in July and may remain around, or a little below, the 2% target for the next few months. Pay pressures remain muted," the MPC said.
Keeping inflation anchored remains key for the BoE so news that the CPI may have been tamed earlier than expected is clear evidence that rates may well have now peaked.
RICS also reported that house prices fell in eight of the 12 regions it covers, with the sharpest decline of -41 reported in the west midlands of England. Prices continued to rise in London at a balance of +31 and they also rose in Scotland and south east England. There was no change in average house prices in south west England, RICS said.
LONDON (Dow Jones)--U.K. house price growth fell in August for the first time since October 2005, as higher interest rates and consumer caution begin to weigh on the housing market, according to a survey released by the Royal Institution of Chartered Surveyors Thursday.
The RICS survey showed that, in seasonally adjusted terms, the proportion of surveyors reporting a rise in house prices was exceeded by the proportion reporting a fall in prices with the balance falling to -1.8 percentage points in August, down from 10.8 points in July.
The decline in the headline measure was a surprise. Economists surveyed by Dow Jones Newswires last week had expected only a small slowdown in the measure to a positive balance of 10.
RICS also revised the July number downward from an originally reported 12.6 points.
"Potential house buyers have become far more cautious as they wait and see what effect interest rate rises will have on household finances," said RICS spokesman Ian Perry. "Affordability is at its most stretched in over a decade and many will worry that rising mortgage repayments will prove a step too far."
The survey is weaker than other August house price indexes from U.K. lenders Nationwide and Halifax, although both did report a slowdown in the annual rate of price inflation, which, economists say, is due to higher interest rates.
The RICS survey, which also reports forward looking housing market measures, said that new buyer inquiries declined for the ninth straight month in August and at the fastest pace since the peak of the last rate cycle in August 2004.
The level of sales expected by surveyors improved a little from July but remains in negative territory while the number of newly agreed sales fell for the third month in a row and by the largest amount since October 2004, RICS said.
"The market will soften further going into the autumn, reducing some impetus from those that have been chasing a rapidly moving target," Perry said.
The rate at which the housing market slows should be contained, however, as economists now expect the Bank of England to keep rates on hold at 5.75% for some time, a view that was further cemented by a statement released by the Monetary Policy Committee following the bank's announcement to keep rates unchanged at its September meeting last week.
A key point the bank made was on inflation: "CPI inflation fell back to 1.9% in July and may remain around, or a little below, the 2% target for the next few months. Pay pressures remain muted," the MPC said.
Keeping inflation anchored remains key for the BoE so news that the CPI may have been tamed earlier than expected is clear evidence that rates may well have now peaked.
RICS also reported that house prices fell in eight of the 12 regions it covers, with the sharpest decline of -41 reported in the west midlands of England. Prices continued to rise in London at a balance of +31 and they also rose in Scotland and south east England. There was no change in average house prices in south west England, RICS said.
Dollar hits all-time low against euro
NEW YORK (AP) - The dollar plunged to its lowest point ever against the
euro Wednesday amid speculation that the Federal Reserve will soon cut interest
rates and on a warning from the U.S. treasury secretary that turbulence in
financial markets may linger.
The 13-nation euro rose as high as $1.3914 in New York trading -- topping
its previous record of $1.3852 reached July 24. It later fell back to $1.3908,
still up from $1.3832 in New York late Tuesday.
The euro surged after Treasury Secretary Henry Paulson, speaking to
officials from some of the biggest financial firms in the U.S., said volatility
in financial markets will take some time to be resolved, particularly in the
area of subprime mortgages.
"We have been experiencing market turbulence and as I have said for awhile,
it is going to take some time to work its way out," Paulson said at a meeting at
the Treasury Department. "We are going to work our way through this, in some
markets more quickly than others."
The euro's strength threatens to make European exports more expensive, and
therefore less competitive -- although the currency's movements this year have
been gradual rather than abrupt.
The weakening dollar conversely makes U.S. exports more competitive, which
is good news for American manufacturers but means rising prices for imports to
the U.S. The dollar's decline also diminishes the spending power of American
tourists in Europe, while attracting to the U.S. visitors from Europe seeking
cheaper accommodations and shopping.
The dollar, which has hovered within a few cents of its record low over
recent weeks amid the market turmoil caused by the subprime mortgage crisis, had
come under new pressure since the U.S. Labor Department issued unexpectedly poor
August jobs data Friday.
That report strengthened speculation that the Fed will cut interest rates at
its Sept. 18 meeting by as much as half a percentage point. A cut from the
current rate, 5.25 percent, would be the first reduction in four years.
Lower interest rates, used to jump-start the economy, can weaken a currency
by giving investors lower returns on investments denominated in the currency.
"There will be a point when foreign investors won't be as willing to put
money to work in the U.S.," said David Gilmore, a partner at Foreign Exchange
Analytics in Essex, Conn.
Fed Chairman Ben Bernanke offered no hints about the potential for a rate
cut during a speech in Germany on Tuesday.
"The fact no mention of monetary policy was made in yesterday's speech in
Berlin has done little to placate the market, and we're also seeing growing
speculation that the Fed may elect to cut rates by a half a point as they try to
steer the economy away from recession," said James Hughes, a market analyst at
CMC Markets.
The European Central Bank last week put its own two-year run of gradual
interest rate rises on hold but left many economists still expecting a
quarter-point increase from the current 4 percent before the end of the year.
The dollar was lower Wednesday against the British pound, drifting down to
$2.0302 from $2.0317 in New York late Tuesday.
The U.S. currency was lower against the Japanese yen, even as Prime Minister
Shinzo Abe announced that he would resign, putting an end to his troubled
year-old government. The dollar dipped to 114.26 yen from 114.30 yen.
In other trading, the dollar bought 1.0362 Canadian dollars, down from
1.0424 late Tuesday, and 1.1848 Swiss francs, falling from 1.1893.
At Berlin's Brandenburg Gate, American newlyweds Doracy and Russell Harrison
said the unfavorable exchange rate had prompted changes in their plans.
"Accommodation is where you really feel it," said Doracy Harrison, 27, of
Raleigh, N.C., a program manager at an aquatic center.
"We probably wouldn't have come if were weren't staying with friends. We
haven't been as gung-ho about eating out and have planned on low-key cafes
instead of nicer places we'd usually eat."
euro Wednesday amid speculation that the Federal Reserve will soon cut interest
rates and on a warning from the U.S. treasury secretary that turbulence in
financial markets may linger.
The 13-nation euro rose as high as $1.3914 in New York trading -- topping
its previous record of $1.3852 reached July 24. It later fell back to $1.3908,
still up from $1.3832 in New York late Tuesday.
The euro surged after Treasury Secretary Henry Paulson, speaking to
officials from some of the biggest financial firms in the U.S., said volatility
in financial markets will take some time to be resolved, particularly in the
area of subprime mortgages.
"We have been experiencing market turbulence and as I have said for awhile,
it is going to take some time to work its way out," Paulson said at a meeting at
the Treasury Department. "We are going to work our way through this, in some
markets more quickly than others."
The euro's strength threatens to make European exports more expensive, and
therefore less competitive -- although the currency's movements this year have
been gradual rather than abrupt.
The weakening dollar conversely makes U.S. exports more competitive, which
is good news for American manufacturers but means rising prices for imports to
the U.S. The dollar's decline also diminishes the spending power of American
tourists in Europe, while attracting to the U.S. visitors from Europe seeking
cheaper accommodations and shopping.
The dollar, which has hovered within a few cents of its record low over
recent weeks amid the market turmoil caused by the subprime mortgage crisis, had
come under new pressure since the U.S. Labor Department issued unexpectedly poor
August jobs data Friday.
That report strengthened speculation that the Fed will cut interest rates at
its Sept. 18 meeting by as much as half a percentage point. A cut from the
current rate, 5.25 percent, would be the first reduction in four years.
Lower interest rates, used to jump-start the economy, can weaken a currency
by giving investors lower returns on investments denominated in the currency.
"There will be a point when foreign investors won't be as willing to put
money to work in the U.S.," said David Gilmore, a partner at Foreign Exchange
Analytics in Essex, Conn.
Fed Chairman Ben Bernanke offered no hints about the potential for a rate
cut during a speech in Germany on Tuesday.
"The fact no mention of monetary policy was made in yesterday's speech in
Berlin has done little to placate the market, and we're also seeing growing
speculation that the Fed may elect to cut rates by a half a point as they try to
steer the economy away from recession," said James Hughes, a market analyst at
CMC Markets.
The European Central Bank last week put its own two-year run of gradual
interest rate rises on hold but left many economists still expecting a
quarter-point increase from the current 4 percent before the end of the year.
The dollar was lower Wednesday against the British pound, drifting down to
$2.0302 from $2.0317 in New York late Tuesday.
The U.S. currency was lower against the Japanese yen, even as Prime Minister
Shinzo Abe announced that he would resign, putting an end to his troubled
year-old government. The dollar dipped to 114.26 yen from 114.30 yen.
In other trading, the dollar bought 1.0362 Canadian dollars, down from
1.0424 late Tuesday, and 1.1848 Swiss francs, falling from 1.1893.
At Berlin's Brandenburg Gate, American newlyweds Doracy and Russell Harrison
said the unfavorable exchange rate had prompted changes in their plans.
"Accommodation is where you really feel it," said Doracy Harrison, 27, of
Raleigh, N.C., a program manager at an aquatic center.
"We probably wouldn't have come if were weren't staying with friends. We
haven't been as gung-ho about eating out and have planned on low-key cafes
instead of nicer places we'd usually eat."
Euro Zone manufacturing
The Euro Zone manufacturing Purchasing Managers’ Index - PMI signaled moderation in the manufacturing sector in August, results of a survey showed Monday.
The latest report from the Royal Bank of Scotland and NTC Economics revealed that the Euro zone manufacturing PMI fell to 54.3 in August from the 54.9 in July. The number came in slightly higher than the flash reading of 54.2, released earlier. The report noted that the PMI fell to a 19-month low level in August.
source: RTTnews
The latest report from the Royal Bank of Scotland and NTC Economics revealed that the Euro zone manufacturing PMI fell to 54.3 in August from the 54.9 in July. The number came in slightly higher than the flash reading of 54.2, released earlier. The report noted that the PMI fell to a 19-month low level in August.
source: RTTnews
Stocks hovers as traders adjust ahead of Fed, while dollar falls and oil rises
Stocks tottered in search of direction Wednesday as investors remained confident the Federal Reserve will lower rates next week, but tread cautiously amid record-high oil prices and a sinking dollar.
Wall Street widely expects the central bank next Tuesday to lower the benchmark federal funds rate by a quarter percentage point. The decision has not been guaranteed, though, and furthermore, many investors worry that a quarter-point rate reduction might not be enough to address the market's woes.
Trading has been extremely volatile since the middle of the summer as investors try to gauge the chance of a rate cut and the economy's strength amid an ongoing housing slump and credit market problems.
Recently, crude oil's surge to record highs due to tightening supplies and a weakening dollar have rekindled concerns about inflation's effect on growth. Accelerating inflation is not only a threat to consumer spending - a pillar of the economy that Wall Street fears is weakening - but it also gives the Fed a reason to keep rates where they are.
Jack A. Ablin, chief investment officer at Harris Private Bank, pointed out that price surges in commodities hit Americans particularly hard because they're denominated in the dollar - which is at a record low versus the euro.
''I think the Fed has to pay attention to this. They need as much elbow room as they can to make a decision they feel is right,'' Ablin said. ''Should this dollar continue to fall, it has the potential to limit the Fed's ability to respond to the economy.''
However, inflationary concerns are partially offset by the belief that strong global demand is driving costs, and the fact that higher energy prices help boost the profits of oil and gas companies. Over the last four weeks, the energy sector has advanced about 7 percent, boosted by increasing energy prices.
The Dow Jones industrial average rose 3.58, or 0.03 percent, to 13,311.97, weaving in and out of positive territory after soaring 180 points on Tuesday.
Broader stock indexes also gained slightly. The Standard & Poor's 500 index futures rose 1.79, or 0.12 percent, to 1,473.28, and the Nasdaq composite index rose 6.84, or 0.26 percent, to 2,604.31.
The Nasdaq got a lift from medical device maker Cardica Inc., which received a key European approval for a gadget that connects blood vessels during heart bypass surgery. Cardica shares surged $1.57, or 18 percent, to $10.21.
Bond prices slipped. The yield on the 10-year Treasury note, which moves opposite its price, rose to 4.41 percent from 4.37 percent late Tuesday.
The dollar extended its slide against the euro, hitting a new record low amid expectations of a rate cut, which would make the U.S. currency a less attractive investment vehicle. The 13-nation euro rose as high as $1.3901 in late European trading, surpassing its previous record of $1.3852 reached July 24.
The dollar also weakened against the yen - an important currency for the stock market because of the yen carry-trade, where people invest their yen in higher-yielding dollar assets. When the dollar falls against the yen, people tend to exit these positions.
Commodity prices in several markets stayed in record territory Wednesday after the U.S. government report declines last week in crude and gasoline supplies. Crude oil briefly spiked above $79 a barrel, a new intraday trading high. Gold also rose, and so did wheat - which on Tuesday finished just shy of $9 a bushel, an all-time peak.
As Americans deal with rising food and energy costs, the housing and credit markets remain far from recovery. Treasury Secretary Henry Paulson said Wednesday that financial market turmoil will take some time to be resolved, especially in the area of subprime mortgages.
Wall Street widely expects the central bank next Tuesday to lower the benchmark federal funds rate by a quarter percentage point. The decision has not been guaranteed, though, and furthermore, many investors worry that a quarter-point rate reduction might not be enough to address the market's woes.
Trading has been extremely volatile since the middle of the summer as investors try to gauge the chance of a rate cut and the economy's strength amid an ongoing housing slump and credit market problems.
Recently, crude oil's surge to record highs due to tightening supplies and a weakening dollar have rekindled concerns about inflation's effect on growth. Accelerating inflation is not only a threat to consumer spending - a pillar of the economy that Wall Street fears is weakening - but it also gives the Fed a reason to keep rates where they are.
Jack A. Ablin, chief investment officer at Harris Private Bank, pointed out that price surges in commodities hit Americans particularly hard because they're denominated in the dollar - which is at a record low versus the euro.
''I think the Fed has to pay attention to this. They need as much elbow room as they can to make a decision they feel is right,'' Ablin said. ''Should this dollar continue to fall, it has the potential to limit the Fed's ability to respond to the economy.''
However, inflationary concerns are partially offset by the belief that strong global demand is driving costs, and the fact that higher energy prices help boost the profits of oil and gas companies. Over the last four weeks, the energy sector has advanced about 7 percent, boosted by increasing energy prices.
The Dow Jones industrial average rose 3.58, or 0.03 percent, to 13,311.97, weaving in and out of positive territory after soaring 180 points on Tuesday.
Broader stock indexes also gained slightly. The Standard & Poor's 500 index futures rose 1.79, or 0.12 percent, to 1,473.28, and the Nasdaq composite index rose 6.84, or 0.26 percent, to 2,604.31.
The Nasdaq got a lift from medical device maker Cardica Inc., which received a key European approval for a gadget that connects blood vessels during heart bypass surgery. Cardica shares surged $1.57, or 18 percent, to $10.21.
Bond prices slipped. The yield on the 10-year Treasury note, which moves opposite its price, rose to 4.41 percent from 4.37 percent late Tuesday.
The dollar extended its slide against the euro, hitting a new record low amid expectations of a rate cut, which would make the U.S. currency a less attractive investment vehicle. The 13-nation euro rose as high as $1.3901 in late European trading, surpassing its previous record of $1.3852 reached July 24.
The dollar also weakened against the yen - an important currency for the stock market because of the yen carry-trade, where people invest their yen in higher-yielding dollar assets. When the dollar falls against the yen, people tend to exit these positions.
Commodity prices in several markets stayed in record territory Wednesday after the U.S. government report declines last week in crude and gasoline supplies. Crude oil briefly spiked above $79 a barrel, a new intraday trading high. Gold also rose, and so did wheat - which on Tuesday finished just shy of $9 a bushel, an all-time peak.
As Americans deal with rising food and energy costs, the housing and credit markets remain far from recovery. Treasury Secretary Henry Paulson said Wednesday that financial market turmoil will take some time to be resolved, especially in the area of subprime mortgages.
Dollar Hits Record Low Vs. Euro On Expectations For U.S. Rate Cut
By Simon Kennedy
The dollar marked a new record low against the euro Wednesday amid growing expectations that the Federal Reserve will cut U.S. interest rates next week and fears that the credit crunch is threatening the health of the U.S. economy.
The euro was up 0.5% against the greenback, at $1.3911 -- its highest level since the European currency was launched in 1999.
The dollar has been in decline for the last several sessions amid a growing consensus that the central bank will cut its key federal funds rate. The debate is now centered on whether the Fed will chop a quarter-point or a half-point off its 5.25% at its next policy meeting Sept 18.
"[W]e have high confidence for a 25 basis-point ease next week and see the market finding some equilibrium for that likelihood and in the void of new information from now until then," wrote David Ader, U.S. Government Bond Strategist at RBS Greenwich Capital.
At the same time, the European Central Bank has continued its hawkish commentary. The central bank held interest rates steady at a meeting earlier in September, but Jean-Claude Trichet, the ECB's president, has continued to emphasize anchoring inflationary expectations and said that rate policy was still "accommodative."
The ECB has raised its benchmark rate eight times since late 2005, to 4%.
"The risk assessment in Europe is in transition, though many market participants have yet to completely give up on the idea that the ECB will hike again," wrote analysts at Brown Brothers Harriman & Co.
"We are concerned that the tightening of credit conditions has effectively delivered the tightening that ECB President Trichet had appeared to promise in August," they added.
Japan PM quits
The dollar was slightly down against its Japanese counterpart. It initially strengthened against the yen after Japanese Prime Minister Shinzo Abe announced his resignation, but fell back in European trading as the focus on the currency pair returned to rate expectations.
Abe quit after failing to win popular support in the aftermath of his party's resounding defeat in the July Upper House elections. Abe had reportedly been considering his future after approval ratings didn't recover following the elections.
The dollar was trading at 114.18, up from 113.98 yen in London Wednesday but down from 114.24 yen in late U.S. trading Tuesday.
"When the news of Abe's proposed resignation hit the wires, the knee-jerk reaction was to buy the dollar," Barclays Capital strategists said in a note to clients. "But with reports of Abe's declining popularity heavily populating the media of late, this piece of news is hardly a revelation."
The growing political uncertainty is negative for the yen because it will slow down the economic reform process and will make Bank of Japan Governor Toshiko Fukui less eager to raise rates, but these factors are already accounted for in the market, the Barcap analysts argued.
They added they expect the dollar to fall back below 110 yen by the end of the year as Japanese retail investors become more risk-averse.
Fukui's five-year term expires in March 2008. Under his stewardship, the central bank lifted its quantitative monetary easing in March 2006 and then ended its zero-rate policy in July of that year.
At its last monthly meeting, the BOJ held its key interest rate steady at 0.5%, despite what some analysts had interpreted as signs the central bank was preparing for a hike.
Japan's low interest rates have kept its currency weak by inviting carry trades, in which investors borrowed funds in yen at low rates to invest in other higher-yielding assets. As recently as June, the dollar was trading at 124 yen, but dropped when investors started paying back their yen borrowings as yen appreciation threatened to erode their returns.
The stronger yen weighs on the Japanese economy by making Japanese overseas earnings worth less when repatriated into yen.
The dollar marked a new record low against the euro Wednesday amid growing expectations that the Federal Reserve will cut U.S. interest rates next week and fears that the credit crunch is threatening the health of the U.S. economy.
The euro was up 0.5% against the greenback, at $1.3911 -- its highest level since the European currency was launched in 1999.
The dollar has been in decline for the last several sessions amid a growing consensus that the central bank will cut its key federal funds rate. The debate is now centered on whether the Fed will chop a quarter-point or a half-point off its 5.25% at its next policy meeting Sept 18.
"[W]e have high confidence for a 25 basis-point ease next week and see the market finding some equilibrium for that likelihood and in the void of new information from now until then," wrote David Ader, U.S. Government Bond Strategist at RBS Greenwich Capital.
At the same time, the European Central Bank has continued its hawkish commentary. The central bank held interest rates steady at a meeting earlier in September, but Jean-Claude Trichet, the ECB's president, has continued to emphasize anchoring inflationary expectations and said that rate policy was still "accommodative."
The ECB has raised its benchmark rate eight times since late 2005, to 4%.
"The risk assessment in Europe is in transition, though many market participants have yet to completely give up on the idea that the ECB will hike again," wrote analysts at Brown Brothers Harriman & Co.
"We are concerned that the tightening of credit conditions has effectively delivered the tightening that ECB President Trichet had appeared to promise in August," they added.
Japan PM quits
The dollar was slightly down against its Japanese counterpart. It initially strengthened against the yen after Japanese Prime Minister Shinzo Abe announced his resignation, but fell back in European trading as the focus on the currency pair returned to rate expectations.
Abe quit after failing to win popular support in the aftermath of his party's resounding defeat in the July Upper House elections. Abe had reportedly been considering his future after approval ratings didn't recover following the elections.
The dollar was trading at 114.18, up from 113.98 yen in London Wednesday but down from 114.24 yen in late U.S. trading Tuesday.
"When the news of Abe's proposed resignation hit the wires, the knee-jerk reaction was to buy the dollar," Barclays Capital strategists said in a note to clients. "But with reports of Abe's declining popularity heavily populating the media of late, this piece of news is hardly a revelation."
The growing political uncertainty is negative for the yen because it will slow down the economic reform process and will make Bank of Japan Governor Toshiko Fukui less eager to raise rates, but these factors are already accounted for in the market, the Barcap analysts argued.
They added they expect the dollar to fall back below 110 yen by the end of the year as Japanese retail investors become more risk-averse.
Fukui's five-year term expires in March 2008. Under his stewardship, the central bank lifted its quantitative monetary easing in March 2006 and then ended its zero-rate policy in July of that year.
At its last monthly meeting, the BOJ held its key interest rate steady at 0.5%, despite what some analysts had interpreted as signs the central bank was preparing for a hike.
Japan's low interest rates have kept its currency weak by inviting carry trades, in which investors borrowed funds in yen at low rates to invest in other higher-yielding assets. As recently as June, the dollar was trading at 124 yen, but dropped when investors started paying back their yen borrowings as yen appreciation threatened to erode their returns.
The stronger yen weighs on the Japanese economy by making Japanese overseas earnings worth less when repatriated into yen.
Dollar Tumbles on Fed Rate Cut Expectations, but is the Move Overdone?
Forex speculators continued to sell the US dollar, as an inconclusive speech from Fed Chairman Ben Bernanke left markets to believe that the central bank could cut interest rates by up to 50 basis points through its coming meeting. The euro subsequently fell marginally short of record highs against the greenback, while a simultaneous rally in global equity markets made the Japanese Yen the largest decliner on the day.
The dollar reached lows of $1.3847 against its major European counterpart, as the NYBOT-traded Dollar Index fell to a fresh 22-year trough. Demand for high-yielders likewise sent the British Pound Sterling higher, as the GBP scaled monthly highs of $2.0335. Improving risk appetite made the Japanese Yen and the Swiss Franc the only major currencies to lose against the greenback, with the dollar gaining ¥.60 to ¥114.30 and ₣.0030 to ₣1.1893.
Markets largely ignored early morning Trade Balance data, instead reacting to an uneventful speech from Fed Chairman Ben Bernanke at 11:00 EST, 14:00 GMT. The head of the domestic central bank was expected to address overall economic outlook and give hints as to what the Fed may do at its September 18th meeting. Yet Bernanke took the speaking opportunity to discuss the domestic trade and current account deficits—making no overt mention of his stance on economic conditions and implications for monetary policy.
The omission sent mixed signals across financial markets, with some claiming that the Fed Chairman effectively showed little objection to market expectations for up to 50 basis points in Fed Funds rate cuts on the month’s meeting. Such a concept likely explains the dollar’s immediate drop against the Euro, which set intraday highs in mere minutes following the uneventful speech. Yet markets subsequently tempered their reaction to the event, with the Euro easing through subsequent trade. Needless to say, markets are unsure of what to expect from the Fed through their upcoming meeting. Fed Funds futures currently show a nearly 50 percent chance that the Fed will cut interest rates to 4.75 percent, but such an outlook may easily change on upcoming economic data.
Domestic equity markets initially showed a bearish reaction to the morning Fed Chairman speech, with skittish investors suspecting that the uneventful communiqué signaled the central bank’s unwillingness to cut rates. The Dow Jones shed some of its early gains in the trading that followed, but the index remains significantly higher just 40 minutes ahead of the close. Indeed, the Dow has added 1.5 percent to 13,318, while the S&P 500 has rallied 1.4 percent to 1,472. Tech stocks were the largest percentage gainers, with the NASDAQ Composite improving 39 points to 2,598. The strong gains signaled healthy risk appetite on the relatively quiet week of event risk, with a subsequent Japanese Yen tumble only reinforcing said view.
Treasury Yields were unsurprisingly higher on the improved market conditions, with the 2-year Note adding 9 basis points to 3.94 percent. Longer-dated bond yields were likewise higher, with the 10-Year up 4 basis points to 4.34 percent. The drop in bond prices signals that investors feel more confident on future economic prospects. Yet recent volatility has shown that gains in yield may prove transitory in the upcoming days of trade.
Written by David Rodriguez, Currency Analyst for DailyFX.com
http://www.dailyfx.com/story/currency/eur_news/Dollar_Tumbles_on_Fed_Rate_1189539224742.html?engine=rss&keyword=article
The dollar reached lows of $1.3847 against its major European counterpart, as the NYBOT-traded Dollar Index fell to a fresh 22-year trough. Demand for high-yielders likewise sent the British Pound Sterling higher, as the GBP scaled monthly highs of $2.0335. Improving risk appetite made the Japanese Yen and the Swiss Franc the only major currencies to lose against the greenback, with the dollar gaining ¥.60 to ¥114.30 and ₣.0030 to ₣1.1893.
Markets largely ignored early morning Trade Balance data, instead reacting to an uneventful speech from Fed Chairman Ben Bernanke at 11:00 EST, 14:00 GMT. The head of the domestic central bank was expected to address overall economic outlook and give hints as to what the Fed may do at its September 18th meeting. Yet Bernanke took the speaking opportunity to discuss the domestic trade and current account deficits—making no overt mention of his stance on economic conditions and implications for monetary policy.
The omission sent mixed signals across financial markets, with some claiming that the Fed Chairman effectively showed little objection to market expectations for up to 50 basis points in Fed Funds rate cuts on the month’s meeting. Such a concept likely explains the dollar’s immediate drop against the Euro, which set intraday highs in mere minutes following the uneventful speech. Yet markets subsequently tempered their reaction to the event, with the Euro easing through subsequent trade. Needless to say, markets are unsure of what to expect from the Fed through their upcoming meeting. Fed Funds futures currently show a nearly 50 percent chance that the Fed will cut interest rates to 4.75 percent, but such an outlook may easily change on upcoming economic data.
Domestic equity markets initially showed a bearish reaction to the morning Fed Chairman speech, with skittish investors suspecting that the uneventful communiqué signaled the central bank’s unwillingness to cut rates. The Dow Jones shed some of its early gains in the trading that followed, but the index remains significantly higher just 40 minutes ahead of the close. Indeed, the Dow has added 1.5 percent to 13,318, while the S&P 500 has rallied 1.4 percent to 1,472. Tech stocks were the largest percentage gainers, with the NASDAQ Composite improving 39 points to 2,598. The strong gains signaled healthy risk appetite on the relatively quiet week of event risk, with a subsequent Japanese Yen tumble only reinforcing said view.
Treasury Yields were unsurprisingly higher on the improved market conditions, with the 2-year Note adding 9 basis points to 3.94 percent. Longer-dated bond yields were likewise higher, with the 10-Year up 4 basis points to 4.34 percent. The drop in bond prices signals that investors feel more confident on future economic prospects. Yet recent volatility has shown that gains in yield may prove transitory in the upcoming days of trade.
Written by David Rodriguez, Currency Analyst for DailyFX.com
http://www.dailyfx.com/story/currency/eur_news/Dollar_Tumbles_on_Fed_Rate_1189539224742.html?engine=rss&keyword=article
Euro Continues To Rise Against Sterling
The euro has continued to rise against the sterling on Wednesday in New York and has reached its highest level in nearly four months. The European currency rallied in the early morning and then posted sharp gains starting at around 11 a.m. and is currently at a high of 0.6844, its best level since late May.
In economic news, the U.K. claimant count declined for the 11th straight month in August, official data showed Wednesday. Investors also mulled data showing Euro zone industrial output grew by a seasonally adjusted 0.6% month-over-month in July.
In economic news, the U.K. claimant count declined for the 11th straight month in August, official data showed Wednesday. Investors also mulled data showing Euro zone industrial output grew by a seasonally adjusted 0.6% month-over-month in July.
Sunday, September 9, 2007
Japanese stocks fell sharply early Monday
Japanese stocks fell sharply early Monday, reacting to a sell-off on Wall Street in the previous session and a stronger yen, with exporters such as Sony Corp. and financials such as Mizuho Financial Group leading the decline.
Saturday, September 8, 2007
U.S. dollar falls to 15-year low against major currencies
The U.S. dollar tumbled to a 15- year low against major currencies on Friday after a report showed U.S. employers cut payrolls for the first time since 2003.
The Labor Department reported that the U.S. non-farming payroll employment figure dropped by 4,000 in August, the first decline since the same month of 2003.
The report spurred investors' concern that fallout from subprime mortgage defaults may push the country into a recession.
The dollar dropped 1.4 percent against the yen to 113.82 and the euro gained 0.7 percent against the dollar to near 1.38 dollars.
The Labor Department reported that the U.S. non-farming payroll employment figure dropped by 4,000 in August, the first decline since the same month of 2003.
The report spurred investors' concern that fallout from subprime mortgage defaults may push the country into a recession.
The dollar dropped 1.4 percent against the yen to 113.82 and the euro gained 0.7 percent against the dollar to near 1.38 dollars.
Wall Street: Stocks, dollar fall sharply but bond prices surge
Wall Street plunged while bonds surged higher Friday after the government reported payrolls in August fell for the first time in four years rather than rising as had been expected. The Dow Jones industrial average fell nearly 250 points.
Investors were taken aback by the Labor Department’s report that payrolls dropped by 4,000 in August, the first decline since August 2003. Economists had forecast payrolls would increase by 110,000. However, the unemployment rate held steady at 4.6 percent as expected.
The Dow fell 249.97, or 1.87 percent, to 13,113.38.
Broader stock indicators also skidded. The Standard & Poor’s 500 index fell 25.00, or 1.69 percent, to 1,453.55, and the Nasdaq composite index fell 48.62, or 1.86 percent, to 2,565.70.
The three major indexes, though still in positive territory for the year, all finished the week down more than 1 percent.
The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended Friday at 14,655.52, down 192.18, or 1.29 percent, for the week. A year ago, the index was at 12,948.96.
Bonds, meanwhile, soared following the jobs report as investors sought safety. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, skidded to 4.37 percent from 4.51 percent late Thursday.
The dollar fell sharply following the report, as the likelihood of an interest rate cut appeared to increase. Dollar-based assets would earn less interest if the Fed were to cut rates. In addition, gold prices rose sharply because some investors would be expected to abandon a weakening dollar and move into gold if the central bank lowers rates.
Light, sweet crude rose 40 cents to $76.70 a barrel on the New York Mercantile Exchange
Investors were taken aback by the Labor Department’s report that payrolls dropped by 4,000 in August, the first decline since August 2003. Economists had forecast payrolls would increase by 110,000. However, the unemployment rate held steady at 4.6 percent as expected.
The Dow fell 249.97, or 1.87 percent, to 13,113.38.
Broader stock indicators also skidded. The Standard & Poor’s 500 index fell 25.00, or 1.69 percent, to 1,453.55, and the Nasdaq composite index fell 48.62, or 1.86 percent, to 2,565.70.
The three major indexes, though still in positive territory for the year, all finished the week down more than 1 percent.
The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended Friday at 14,655.52, down 192.18, or 1.29 percent, for the week. A year ago, the index was at 12,948.96.
Bonds, meanwhile, soared following the jobs report as investors sought safety. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, skidded to 4.37 percent from 4.51 percent late Thursday.
The dollar fell sharply following the report, as the likelihood of an interest rate cut appeared to increase. Dollar-based assets would earn less interest if the Fed were to cut rates. In addition, gold prices rose sharply because some investors would be expected to abandon a weakening dollar and move into gold if the central bank lowers rates.
Light, sweet crude rose 40 cents to $76.70 a barrel on the New York Mercantile Exchange
Friday, September 7, 2007
Pound Up On Dollar; Down Versus Yen And Euro
The sterling saw mixed results in trading against the other majors. The pound gained against the struggling dollar, but dropped against the yen and euro. With little economic news out of the UK, traders also continued to digest the Bank of England's Monetary Policy's decision Thursday to maintain its benchmark interest rate at 5.75% for the second straight month.
The pound moved to its highest level in almost a month against the U.S. dollar on Friday in New York. The sterling soared ahead of resistance after a weak jobs report in the U.S. and hit as high as 2.0319, its best mark since August 8. The pound cooled back to 2.0279 in the mid-afternoon with a downward trend. The report showed that non-farm payrolls fell by 4,000 jobs in August following a downwardly revised increase of 68,000 in July. Economists had expected an increase of about 110,000 jobs compared to the increase of 92,000 originally reported for the previous month.
The sterling declined against the euro on Friday in New York and hit a 10-day low. The British currency dropped sharply starting at around 6:45 a.m. ET and continued to do so until it reached as low as 0.6798 at 11 a.m. ET. It rallied slightly in the late morning before stabilizing in the afternoon. Traders considered a report showing German employers in the industry and the service sector saw a seasonally adjusted annual increase of 0.9% in labor costs in the second quarter of 2007. Meanwhile, a second report revealed German insolvency courts witnessed 82,702 insolvencies during the first half of 2007, up 9.0% year-on-year.
The pound saw weakness against the yen on Friday in New York. The sterling declined starting at around 8:30 a.m. ET and eventually reached as low as 229.12. Trading took place after Japan's Ministry of Finance said Friday morning that the nation's foreign reserves rose to $932.157 billion at the end of August from $923.718 billion at the end of July.
The pound moved to its highest level in almost a month against the U.S. dollar on Friday in New York. The sterling soared ahead of resistance after a weak jobs report in the U.S. and hit as high as 2.0319, its best mark since August 8. The pound cooled back to 2.0279 in the mid-afternoon with a downward trend. The report showed that non-farm payrolls fell by 4,000 jobs in August following a downwardly revised increase of 68,000 in July. Economists had expected an increase of about 110,000 jobs compared to the increase of 92,000 originally reported for the previous month.
The sterling declined against the euro on Friday in New York and hit a 10-day low. The British currency dropped sharply starting at around 6:45 a.m. ET and continued to do so until it reached as low as 0.6798 at 11 a.m. ET. It rallied slightly in the late morning before stabilizing in the afternoon. Traders considered a report showing German employers in the industry and the service sector saw a seasonally adjusted annual increase of 0.9% in labor costs in the second quarter of 2007. Meanwhile, a second report revealed German insolvency courts witnessed 82,702 insolvencies during the first half of 2007, up 9.0% year-on-year.
The pound saw weakness against the yen on Friday in New York. The sterling declined starting at around 8:30 a.m. ET and eventually reached as low as 229.12. Trading took place after Japan's Ministry of Finance said Friday morning that the nation's foreign reserves rose to $932.157 billion at the end of August from $923.718 billion at the end of July.
Australian Currency Slips Versus Euro Friday
The Australian currency slipped in trading against the euro on Friday afternoon. The aussie edged down to a mark of 1.6630 by 4:00PM EST. Traders considered German data which showed German industrial output grew 0.1% month-over-month in July. In June, industrial output dropped 0.2%, revised from 0.4% fall estimated earlier. Compared to last year, industrial production grew 4.6% in July, smaller than a revised 5.2% growth seen in the prior month.
Gold Prices Climb As Stocks, Dollar Fall
Gold prices advanced Friday as investors sought a haven from sinking stock prices, a falling U.S. dollar and heightened world political risks.
Wall Street slumped after the Labor Department reported payrolls dropped by an unexpected 4,000 in August - the first decline in four years and a shock for economists who projected the nation's employers would add 110,000 jobs to the payrolls. The weakness bolstered the case for a cut in the Federal Reserve's benchmark interest rate, and in turn undermined the U.S. dollar.
Investors have been wary of any sign that the housing slump or tighter credit conditions would spread and spoil growth in the broader economy, and the poor jobs data was "one signal that definitely contradicted the containment scenario," said Jon Nadler, senior analyst with Kitco Bullion Dealers.
The Fed meets Sept. 18 to discuss the direction of its federal funds rate, which banks charge each other on overnight loans.
As the U.S. dollar deflated, December gold gained $5.10 to settle $709.70 an ounce on the New York Mercantile Exchange, after earlier rising as high as $716.60. Silver prices, which often tail gold, jumped 22.7 cents to close at $12.76 an ounce.
Nadler said Friday's rise in gold incorporated "an anxiety premium." If the decline in payrolls foretells a contraction in the world's largest economy, "this cannot help but impact demand" for both precious and base metals, he said.
Meanwhile, threats to stability abroad returned to the forefront on Thursday. The Syrian government charged that Israeli aircraft violated its airspace and dropped "munitions" inside the country, exacerbating tensions in the region. In Nigeria, the U.S. Embassy cautioned that American and other Western installations face the risk of terrorist attack, although the embassy said no specific threat prompted the warning. Nigeria is a major supplier of oil to the U.S.
Gold's rise this week also has a technical component. Once gold prices crossed the $680 an ounce threshold Friday, that opened up a "huge breakout" of technical buying from computer-driven funds that buy or sell when an asset hits a certain level, said Scott Meyers, senior trading analyst with the Pioneer Futures division of MF Global.
The nervousness on Wall Street also led to "a little bit of a flight to quality," he said.
The price of bonds - another safe-haven asset - rose sharply following the payrolls report. The 10-year Treasury note yield, which moves opposite its price, slid to 4.43 percent from 4.51 percent late Thursday.
Industrial metals retreated on the London Metal Exchange amid the economic growth concerns, although the dollar's decline helped prevent an even steeper fall. Commodities are priced in dollars, and a cheaper U.S. currency makes metals more attractive to foreign buyers. Nickel, copper, zinc and lead all lost more than 1 percent on the LME.
Barclays Capital analysts noted in a report that copper prices are likely to remain sensitive to U.S. economic data, although recent and proposed strikes at mines in Latin America will continue to provide support. Nymex copper for December delivery fell 5.1 cents to $3.2515 a pound.
Elsewhere, energy futures climbed on the Nymex, reversing early losses, as concerns about squeezed supplies of oil and gasoline outweighed investor worries about a possible economic slowdown. On Thursday, the Energy Information Administration reported larger-than-expected draws on crude and gasoline inventories last week and a surprising rise in refinery activity. Investors also expect the Organization for Petroleum Exporting Countries to leave output targets unchanged when oil ministers meet Tuesday in Vienna.
Adding to supply concerns was news that a pipeline carrying oil from Canada and the Rockies to the Midwest had been shut down.
Oil prices also remain underpinned by the potential threat of a hurricane in the height of the storm season, as well as world political risks.
Light, sweet crude for October delivery gained 40 cents to settle at $76.70 a barrel a barrel on the Nymex. October gasoline futures 1.47 cents to settle at $1.9864 a gallon.
In Chicago, wheat futures continued their march higher after slipping back earlier in the session, while corn and soybean prices also rose. Wheat prices have piled on a hefty 68 cents, or 9 percent, in a week on the back of global supply concerns and continued robust demand for the grain.
On Friday, the U.S. Department of Agriculture reported exports of 110,000 tons of hard, red winter wheat to unspecified destinations and export sales of 100,000 tons of corn to South Korea.
December wheat jumped 19.5 cents to close at $8.435 a bushel on the Chicago Board of Trade - a new high. November soybeans rose 12.75 cents to $9.0525 a bushel, while December corn added 8.25 cents to $3.475 a bushel.
Wall Street slumped after the Labor Department reported payrolls dropped by an unexpected 4,000 in August - the first decline in four years and a shock for economists who projected the nation's employers would add 110,000 jobs to the payrolls. The weakness bolstered the case for a cut in the Federal Reserve's benchmark interest rate, and in turn undermined the U.S. dollar.
Investors have been wary of any sign that the housing slump or tighter credit conditions would spread and spoil growth in the broader economy, and the poor jobs data was "one signal that definitely contradicted the containment scenario," said Jon Nadler, senior analyst with Kitco Bullion Dealers.
The Fed meets Sept. 18 to discuss the direction of its federal funds rate, which banks charge each other on overnight loans.
As the U.S. dollar deflated, December gold gained $5.10 to settle $709.70 an ounce on the New York Mercantile Exchange, after earlier rising as high as $716.60. Silver prices, which often tail gold, jumped 22.7 cents to close at $12.76 an ounce.
Nadler said Friday's rise in gold incorporated "an anxiety premium." If the decline in payrolls foretells a contraction in the world's largest economy, "this cannot help but impact demand" for both precious and base metals, he said.
Meanwhile, threats to stability abroad returned to the forefront on Thursday. The Syrian government charged that Israeli aircraft violated its airspace and dropped "munitions" inside the country, exacerbating tensions in the region. In Nigeria, the U.S. Embassy cautioned that American and other Western installations face the risk of terrorist attack, although the embassy said no specific threat prompted the warning. Nigeria is a major supplier of oil to the U.S.
Gold's rise this week also has a technical component. Once gold prices crossed the $680 an ounce threshold Friday, that opened up a "huge breakout" of technical buying from computer-driven funds that buy or sell when an asset hits a certain level, said Scott Meyers, senior trading analyst with the Pioneer Futures division of MF Global.
The nervousness on Wall Street also led to "a little bit of a flight to quality," he said.
The price of bonds - another safe-haven asset - rose sharply following the payrolls report. The 10-year Treasury note yield, which moves opposite its price, slid to 4.43 percent from 4.51 percent late Thursday.
Industrial metals retreated on the London Metal Exchange amid the economic growth concerns, although the dollar's decline helped prevent an even steeper fall. Commodities are priced in dollars, and a cheaper U.S. currency makes metals more attractive to foreign buyers. Nickel, copper, zinc and lead all lost more than 1 percent on the LME.
Barclays Capital analysts noted in a report that copper prices are likely to remain sensitive to U.S. economic data, although recent and proposed strikes at mines in Latin America will continue to provide support. Nymex copper for December delivery fell 5.1 cents to $3.2515 a pound.
Elsewhere, energy futures climbed on the Nymex, reversing early losses, as concerns about squeezed supplies of oil and gasoline outweighed investor worries about a possible economic slowdown. On Thursday, the Energy Information Administration reported larger-than-expected draws on crude and gasoline inventories last week and a surprising rise in refinery activity. Investors also expect the Organization for Petroleum Exporting Countries to leave output targets unchanged when oil ministers meet Tuesday in Vienna.
Adding to supply concerns was news that a pipeline carrying oil from Canada and the Rockies to the Midwest had been shut down.
Oil prices also remain underpinned by the potential threat of a hurricane in the height of the storm season, as well as world political risks.
Light, sweet crude for October delivery gained 40 cents to settle at $76.70 a barrel a barrel on the Nymex. October gasoline futures 1.47 cents to settle at $1.9864 a gallon.
In Chicago, wheat futures continued their march higher after slipping back earlier in the session, while corn and soybean prices also rose. Wheat prices have piled on a hefty 68 cents, or 9 percent, in a week on the back of global supply concerns and continued robust demand for the grain.
On Friday, the U.S. Department of Agriculture reported exports of 110,000 tons of hard, red winter wheat to unspecified destinations and export sales of 100,000 tons of corn to South Korea.
December wheat jumped 19.5 cents to close at $8.435 a bushel on the Chicago Board of Trade - a new high. November soybeans rose 12.75 cents to $9.0525 a bushel, while December corn added 8.25 cents to $3.475 a bushel.
Dollar Falls to Lowest in a Month Versus Euro on Payroll Loss
The dollar fell to the lowest in a month against the euro and weakened versus the yen after a government report showed the U.S. economy unexpectedly lost jobs last month for the first time in four years.
The U.S. dollar index comparing the currency with its six primary peers fell to the lowest in 15 years as the payroll data raised speculation the housing slowdown and credit market turmoil are spilling into the broader economy. The yen rose against the 16 most-active currencies as investors sold risky assets to pay back loans made in Japan. Global stocks fell.
``The things the Federal Reserve needs to justify two rate cuts this year are falling into place,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``This is enough of a loss in momentum to put on a rate cut in September. We're seeing a combination of dollar weakness and risk aversion that's benefiting the yen.''
The dollar fell 0.6 percent to $1.3768 per euro at 4 p.m. in New York. The U.S. currency also declined 1.7 percent to 113.41 yen and earlier reached 113.13. The dollar touched $1.3798 per euro, the weakest since Aug. 9. It dropped to a record low of $1.3852 per euro on July 24.
The U.S. currency declined 1 percent against the euro and 2 percent versus the yen this week as the difference in yields between a U.S. two-year Treasury note compared with a comparable- maturity German bund was lower for the first time since 2004.
U.S. Treasury Secretary Henry Paulson said the decline in payrolls during August was ``not totally surprising.'' He expressed confidence that the economy will still expand in the second half of the year.
Euro and Dollar
The yen has gained 6.9 percent against the euro and 9.3 percent versus the dollar since Bear Stearns Cos. said on June 22 it would bail out a hedge fund that lost money on securities related to loans to homeowners struggling to make payments in the worst housing recession in 16 years.
Investors since then have fled the asset-backed money market and corporate debt while banks curbed lending, forcing global central banks, including the Fed and European Central Bank, to supply cash to ease the credit crunch.
`Subprime Problems'
``It's the first clearly recessionary signal out of the economy, and a sign that the subprime problems have crept into the real world,'' said Boris Schlossberg, senior currency strategist in New York at DailyFX.com. ``We'll see a global slowdown led by a U.S. slowdown, and a moratorium on global rate hikes. The focus will begin to shift away from the notion of safe haven in the U.S. to the story of the U.S. recession.''
Schlossberg forecasts the yen may gain to 111 per dollar within weeks.
Non-farm payrolls decreased by 4,000 in August from a revised gain of 68,000 a month earlier, the Labor Department in Washington said. It compared with the median forecast of a 100,000 increase in a Bloomberg News survey of 88 economists. The unemployment rate held at 4.6 percent.
This week central banks from the U.K., the 13-country euro region, Canada, Australia and South Korea kept rates unchanged as they assess how the credit squeeze will affect economic growth.
Interest-rate futures show a 76 percent chance the Fed will cut borrowing costs to 4.75 percent from 5.25 percent at its Sept. 18 meeting, up from no chance a month ago. The odds of a reduction to 5 percent are 24 percent.
`Dollar-Negative Sentiment'
``It added significantly to the dollar-negative sentiment,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The Fed rate cut at this month's meeting is a lock. The question is whether the central bank will cut by 25 basis points or 50 basis points.''
The New York Board of Trade's dollar index fell earlier to 79.841, the lowest since September 1992.
Atlanta Fed President Dennis Lockhart said yesterday he hasn't seen ``conclusive'' signs of a housing spillover into the broader economy and warned that inflation has yet to be contained. St. Louis Fed President William Poole said it's not clear yet that the economy will ``nose dive'' and he's not sure of the right response to housing and financial turmoil.
The pound rose 0.2 percent to $2.0283, gaining for a third day versus the dollar, as the yield advantage of the two-year British note increased 9 basis points, or 0.09 percentage point, to 133 basis points over a comparable-maturity U.S. Treasury security.
European Central Bank policy makers signaled their intention to raise interest rates further to contain inflation once financial-market turbulence has abated.
`Adjusting Interest Rates'
The ECB is ``in a process of adjusting interest rates'' and ``this process hasn't ended yet,'' council member Axel Weber said at a conference in Frankfurt. The ECB, which shelved a planned increase yesterday to leave its benchmark rate at 4 percent, has a ``determination to act in the future whenever it is necessary,'' President Jean-Claude Trichet said at the same event.
The yen traded at 156.19 versus the euro, from 157.95 yesterday. It gained 2.1 percent versus the New Zealand dollar and the Australian currency, two favorites of the so-called carry trades where investors borrow money in countries with low interest rates and buy assets in higher-yielding markets.
The Standard & Poor's 500 Index declined 1.6 percent and the Dow Jones Industrial Average fell 1.8 percent.
Japan's 0.5 percent target lending rate is the lowest among industrialized nations and compares with 8.25 percent in New Zealand and 6.5 percent in Australia.
The U.S. dollar index comparing the currency with its six primary peers fell to the lowest in 15 years as the payroll data raised speculation the housing slowdown and credit market turmoil are spilling into the broader economy. The yen rose against the 16 most-active currencies as investors sold risky assets to pay back loans made in Japan. Global stocks fell.
``The things the Federal Reserve needs to justify two rate cuts this year are falling into place,'' said Robert Sinche, head of global currency strategy at Bank of America Corp. in New York. ``This is enough of a loss in momentum to put on a rate cut in September. We're seeing a combination of dollar weakness and risk aversion that's benefiting the yen.''
The dollar fell 0.6 percent to $1.3768 per euro at 4 p.m. in New York. The U.S. currency also declined 1.7 percent to 113.41 yen and earlier reached 113.13. The dollar touched $1.3798 per euro, the weakest since Aug. 9. It dropped to a record low of $1.3852 per euro on July 24.
The U.S. currency declined 1 percent against the euro and 2 percent versus the yen this week as the difference in yields between a U.S. two-year Treasury note compared with a comparable- maturity German bund was lower for the first time since 2004.
U.S. Treasury Secretary Henry Paulson said the decline in payrolls during August was ``not totally surprising.'' He expressed confidence that the economy will still expand in the second half of the year.
Euro and Dollar
The yen has gained 6.9 percent against the euro and 9.3 percent versus the dollar since Bear Stearns Cos. said on June 22 it would bail out a hedge fund that lost money on securities related to loans to homeowners struggling to make payments in the worst housing recession in 16 years.
Investors since then have fled the asset-backed money market and corporate debt while banks curbed lending, forcing global central banks, including the Fed and European Central Bank, to supply cash to ease the credit crunch.
`Subprime Problems'
``It's the first clearly recessionary signal out of the economy, and a sign that the subprime problems have crept into the real world,'' said Boris Schlossberg, senior currency strategist in New York at DailyFX.com. ``We'll see a global slowdown led by a U.S. slowdown, and a moratorium on global rate hikes. The focus will begin to shift away from the notion of safe haven in the U.S. to the story of the U.S. recession.''
Schlossberg forecasts the yen may gain to 111 per dollar within weeks.
Non-farm payrolls decreased by 4,000 in August from a revised gain of 68,000 a month earlier, the Labor Department in Washington said. It compared with the median forecast of a 100,000 increase in a Bloomberg News survey of 88 economists. The unemployment rate held at 4.6 percent.
This week central banks from the U.K., the 13-country euro region, Canada, Australia and South Korea kept rates unchanged as they assess how the credit squeeze will affect economic growth.
Interest-rate futures show a 76 percent chance the Fed will cut borrowing costs to 4.75 percent from 5.25 percent at its Sept. 18 meeting, up from no chance a month ago. The odds of a reduction to 5 percent are 24 percent.
`Dollar-Negative Sentiment'
``It added significantly to the dollar-negative sentiment,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``The Fed rate cut at this month's meeting is a lock. The question is whether the central bank will cut by 25 basis points or 50 basis points.''
The New York Board of Trade's dollar index fell earlier to 79.841, the lowest since September 1992.
Atlanta Fed President Dennis Lockhart said yesterday he hasn't seen ``conclusive'' signs of a housing spillover into the broader economy and warned that inflation has yet to be contained. St. Louis Fed President William Poole said it's not clear yet that the economy will ``nose dive'' and he's not sure of the right response to housing and financial turmoil.
The pound rose 0.2 percent to $2.0283, gaining for a third day versus the dollar, as the yield advantage of the two-year British note increased 9 basis points, or 0.09 percentage point, to 133 basis points over a comparable-maturity U.S. Treasury security.
European Central Bank policy makers signaled their intention to raise interest rates further to contain inflation once financial-market turbulence has abated.
`Adjusting Interest Rates'
The ECB is ``in a process of adjusting interest rates'' and ``this process hasn't ended yet,'' council member Axel Weber said at a conference in Frankfurt. The ECB, which shelved a planned increase yesterday to leave its benchmark rate at 4 percent, has a ``determination to act in the future whenever it is necessary,'' President Jean-Claude Trichet said at the same event.
The yen traded at 156.19 versus the euro, from 157.95 yesterday. It gained 2.1 percent versus the New Zealand dollar and the Australian currency, two favorites of the so-called carry trades where investors borrow money in countries with low interest rates and buy assets in higher-yielding markets.
The Standard & Poor's 500 Index declined 1.6 percent and the Dow Jones Industrial Average fell 1.8 percent.
Japan's 0.5 percent target lending rate is the lowest among industrialized nations and compares with 8.25 percent in New Zealand and 6.5 percent in Australia.
Dollar falls after drop in U.S. nonfarm payrolls
The dollar was down against its major rivals early Friday after U.S. nonfarm payrolls fell by an estimated 4,000 in August, the Labor Department said. This is the first decline since August 2003. The dollar fell 1% against the Japanese currency to 114.29 yen. The euro was up 0.5% at $1.3755, while the British pound was up 0.3% to $2.0286. The decline in payrolls was much weaker than the 115,000 increase that had been expected by Wall Street economists surveyed by MarketWatch.
Criticism mounts as Bank sits tight
Through a month of credit market turmoil, the Bank of England’s stoicism in the face of financial panic was widely praised. Not for the venerable Threadneedle Street institution that has weathered so many past crises the emergency measures favoured by its counterparts elsewhere in the world.
But this week, criticism has mounted. Bob Diamond, chief executive of investment banking at Barclays bank, compared the Bank’s actions unfavourably with “thoughtful moves” by the Federal Reserve and the European Central Bank.
But this week, criticism has mounted. Bob Diamond, chief executive of investment banking at Barclays bank, compared the Bank’s actions unfavourably with “thoughtful moves” by the Federal Reserve and the European Central Bank.
US NFP - very bad for US Dolar.
US Nonfarm Payrolls decreases to -4K in Aug from revised 68K in Jul
Very bad for US dolar.
Wait for next...
Very bad for US dolar.
Wait for next...
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