Oil shoots past US$83, spurred byweak dollar

September 29 2007

LONDON: Oil rose above US$83 (US$1 = RM3.42) a barrel yesterday and closed in on an all-time high as fund buying, spurred by a weak dollar, provided support.

US crude climbed 39 cents to US$83.27 by 1247 GMT, after gaining US$2.58, or 3.24 per cent, in the previous session.

Oil was recovering from a profit-taking dip earlier this week that knocked prices from a peak of US$83.90 hit on September 20.

London Brent crude surged to a record high of US$80.54, up 51 cents.

"The ever-weakening US dollar is probably the key driver of this, with non-commercial long interest being fuelled by the view that the US will sacrifice its currency to prop up growth," said a Citigroup research note.

The dollar hit an all-time low against a basket of currencies for the second consecutive day yesterday, pressured by worries about the health of the US economy and likelihood of more interest rate cuts.

"On a macro level people are clearly buying crude oil as a hedge against a weaker dollar. The crude market is structually very solid," said a hedge fund manager based in Asia.

The weak dollar, which can strengthen the nominal values of commodities traded in the currency, also boosted metals. - Reuters

http://www.btimes.com.my/Current_News/BT/Saturday/Corporate/oilbo.xml/Article/

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.

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.

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.

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.

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.

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.

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.

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.