Forex

EUR/USD intraday: the upside prevails.

2011-05-30T17:46:00.001+03:00

Pivot: 1.425

Our preference: Long positions above 1.425 with targets @ 1.435 & 1.4425 in extension.

Alternative scenario: Below 1.425 look for further downside with 1.421 & 1.415 as targets.

Comment: the pair has rebounded on its support and is shaping a bullish flag.

Key levels

1.4455

1.4425

1.435

1.4289 last

1.425

1.421

1.415

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More Setback For The Euro

2011-05-25T16:58:00.001+03:00

ECB Executive Board member Bini-Smaghi said Greece would not receive the next loan package if it does not meet EU/IMF conditions. The Dutch finance minister said additional aid for Greece should be preceded by further reform and privatisations.

Greek opposition leader Samaras said that the party rejects Greece new austerity plan, while Greek Prime Minister Papandreou later said he agrees with some of the opposition's proposals but said broad political consensus is a national imperative.

The German IFO numbers signal that growth has peaked, despite the unchanged headline number. Expectations continue to decline, whereas this was offset by yet another improvement in current conditions. The details of German GDP were not so encouraging, especially following yesterday's weak PMI data. If core numbers from Germany start to disappoint, the euro could suffer some further downside.

Moody's said that Italy and Belgium were also likely to come under pressure if Greece defaults while Portugal and Ireland would be at risk of a multi-notch downgrade. The agency said Spain is not in the same category but would likely still face significant market pressure.

ECB Governing Council member Noyer said Greece has no alternative to implementing the EU-IMF programme "completely and entirely," and must use privatization to cut debt. ECB Executive Board member Stark says all euro creditors are `justified' in expecting their money back.

Euro Recovers Mildly

2011-05-24T11:37:00.000+03:00

The euro staged a modest recovery during the Asia session after a failed attempt to break back below 1.40, While Eur/Chf also climbed back, helped higher by some warnings from the SNB about the deflationary risks associated with a stronger Swiss franc, and about its willingness to act if necessary.

Greek Finance Minister Papaconstantinou implied that if Greece does not receive the next quarterly tranche of cash it will be unable to honour its financial obligations. Imagining the likely consequences, he said "the country will halt payments" adding that "wages, pensions - all the state's expenses will not be paid." Papaconstantinou also revealed that the IMF has made it "absolutely clear" that it cannot disburse the next payment without a guarantee that European funding will be made available to Greece next year. This requirement potentially introduces further delay.

Greece announced plans to privatise several state assets. It also revealed its intention to impose fresh fiscal austerity measures designed to save a further 6 bln Euros. Further details are due to be announced next week, and presented to parliament in early June.

Fitch affirmed Belgium's credit rating at AA+ but lowered the outlook to negative from stable, citing heightened political risk. The agency said Belgium would likely be downgraded if it misses official deficit targets.

S&P provided some clarification on its decision to lower the outlook on Italy's rating to negative from stable on Friday. The agency said it does not expect Italy to seek financial assistance from the EU or from the IMF "due to the absence of imbalances". S&P also acknowledged that Italian banks, unlike those in Greece, Ireland, Portugal, or Spain, have made little use of ECB liquidity.

United World Capital, is seeking to hire an individual for the position of a Sales

2011-05-12T22:15:00.000+03:00

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Duties and Responsibilities:

•Promoting the company's products and services, to existing and potential clients.

•Handling new and prospective clients.

•Performing Market analysis and Research.

Qualifications:

•Excellent command of the English language. Knowledge of the (any other language) will be considered as an advantage.

•Excellent communication skills and ability to work under pressure and meet set deadlines.

•Experience in Sales and Marketing will be an advantage.

Training will be provided for the right candidate and an attractive salary will be offered according to qualifications and experience.

CV's should be forwarded to the following email: sales@uwcfx.com

Citigroup Inc. Reverse Stock Split

2011-05-06T14:44:00.000+03:00

New York – Citigroup Inc. today announced a 1-for-10 reverse stock split of Citigroup common stock. Citi also announced that it intends to reinstate a quarterly dividend of $0.01 per common share in the second quarter of 2011, following the effective date of the reverse stock split.

"Citi is a fundamentally different company than it was three years ago," said Vikram Pandit, Chief Executive Officer of Citigroup. "The reverse stock split and intention to reinstate a dividend are important steps as we anticipate returning capital to shareholders starting next year."

Citi anticipates the reverse stock split will be effective after the close of trading on May 6, 2011, and that Citi common stock will begin trading on a split adjusted basis on the New York Stock Exchange (NYSE) at the opening of trading on May 9, 2011. When the reverse stock split becomes effective, every ten shares of issued and outstanding Citigroup common stock will be automatically combined into one issued and outstanding share of common stock without any change in the par value per share. This will reduce the number of outstanding shares of Citigroup common stock from approximately 29 billion to approximately 2.9 billion. Citigroup common stock will continue trading on the NYSE under the symbol "C" but will trade under a new CUSIP number.

Euro Weakens on Trichet’s Comments

2011-05-06T14:04:00.000+03:00

ECB President Trichet disappointed markets at yesterday's press conference, only noting that the ECB would "closely monitor" developments, and said risks were 'balanced'. As a result, the Eruo declined sharply against the dollar and across the board. A July rate hike is still expected, but investors are now expressing a greater sense of caution. In hindsight, Trichet stressed twice last month that right now he wasn't seeing second round effects in the Euro-zone, which did knock the Euro, and yesterday's stance should not have come as such a surprise. Nevertheless, the ECB will remain more hawkish relative to the Fed and this may continue to support the Euro in the immediate future.

The Yen climbed back above the key 80.00 level during the Asia session without any obvious assistance from the Ministry of Finance. In fact, Economy Minister Yosano reiterated remarks made yesterday by Finance Minister Noda, describing the latest price action as being largely due to dollar weakness rather than yen strength. This suggests some reluctance to intervene at current levels by the BoJ.

RBA Leaves Rates Unchanged

2011-05-03T19:18:00.001+03:00

The RBA has left the official cash rate on hold at 4.75 per cent, marking a six-month pause in policy tightening (the central bank last raised interest rates in November last year). Economists had expected the RBA to leave rates unchanged, despite stronger-than-expected inflation data for the March quarter.RBA governor Glenn Stevens said the "mildly restrictive" monetary policy stance remained appropriate, but warned that the decline in underlying inflation since 2008 had "run its course".

RBI (Royal Bank of India) in a bid to clamp down on resurgent inflation, in its first monetary policy review of 2012, raised repo and reverse repo rates by 50 basis points. This takes repo (rate at which it lends to banks) to 7.25% and reverse repo (rate at which it borrow) to 6.25%. However the CRR (Cash Reserve Ratio) has been left unchanged at 6%.

For the US Dollar, the boost from Bin Laden’s death was short-lived, coming under pressure again, although even as the Euro rally remains strong, bearish correction is very likely as investors are becoming increasingly worry following the ‘True Finns’ party stance yesterday against Portugal’s bailout, which means a possible hold on the bailout from the EU, that needs the agreement of its 17 member states.

Hildebrand Hawkish

2011-05-02T16:56:00.001+03:00

Holidays in most parts of the world have kept markets fairly subdued. The dollar continued to drift lower, after Fed Chairman Bernanke on Friday expressed that there is no time frame for the central bank to exit from policy stimulus. Remarks from Swiss National Bank Governor Hildebrand were hawkish; he said 'certain upside risks are visible' to inflation, and that keeping rates at current levels for too long would entail long-term risks to price stability. Swiss Franc jumped to new record high against dollar after comments from SNB President Hildebrand on inflation. He pledged SNB's commitment to maintain price stability and said the bank "will not hesitate to take all measures necessary to ensure price stability in our country, also in the future".

Today’s data releases is light due to the 1st of May holiday, with main focus on Swiss Retail Sales, followed later in the day by the US ISM Manufacturing PMI.

Dollar Stabilises

2011-04-30T21:46:00.000+03:00

With Japan on holiday, and the FOMC statement fully digested, the price action during the Asia session was relatively subdued. US real GDP rose at a +1.8% annual rate in Q1, below consensus estimates. However, given Fed Chairman Bernanke's warning that the number could be weak, the US dollar was not excessively affected. The deceleration mainly reflected a slowing of consumer spending growth. In other data, jobless claims jumped, which probably reflected Easter distortions. Chicago PMI and the University of Michigan confidence index are due, but are not likely on their own to halt the dollar's current downtrend.

In Europe, Talks on the proposed program of external assistance for Portugal continue, but have not yet reached a conclusion. There were further headlines from Euro zone officials, denying a Greek debt restructuring. ECB Governing Council member Mersch said the ECB will continue its gradual exit from its non-standard measures at an appropriate pace, and said the ECB never takes measures aimed at supporting banks in one particular country.

Euro Well Supported

2011-04-14T11:45:00.000+03:00

The dollar initially strengthened against the EUR and the AUD after the Monetary Authority of Singapore tightened policy by less than expected. However, the dollar's gains were quickly erased at the end of the Asia session when local media sources unofficially released a batch of China data ahead of time. CPI was slightly stronger than expected which raises the risk of further policy tightening. However, new loan growth and retail sales were strong, suggesting little sign of a slowdown in China and helping to boost global risk appetite. The Beige Book and retail sales data helped the dollar briefly. The Beige Book noted the economy is expanding, with widespread gains in February and March along with upbeat reports on the near-term outlook.

In Europe, ECB rhetoric levels seemed to increase over the past 24 hours. Belgium's Central Bank Governor Coene, referring to the recent ECB press conference, said that "Trichet gave a signal that the ECB hike was not a one-off" and it should "not be seen as a totally isolated decision". ECB Executive Board member Stark said that raising short term interest rates would not have much of an effect on economies in the Eurozone's periphery, implying once again that the economic difficulties on the periphery are no obstacle to future hikes. Greek Finance Minister Papaconstantinou said a debt restructuring would shut Greece out of the debt markets for a long time, while German Finance Minister Schaeuble said he is awaiting "a detailed analysis on the debt sustainability of Greece" and that if this report concludes that sustainability is in doubt "something must be done about it."

UK Data on Focus

2011-04-13T10:54:00.000+03:00

Sterling weakened yesterday after headline CPI for March came in well below consensus at +4.0% y/y (cons. +4.4%). UK retail sales for March were disappointing, falling by -3.5% y/y (the drop in total sales is the worst since 1995). This is convincing evidence that austerity measures are feeding through into consumer demand. The focus today shifts to the labour sector and jobs figures. ILO unemployment for the three months to February is expected to remain steady at 8.0%. The MPC minutes the coming week will provide further insight on where the debate reached among policy members, but likely the split remains strong with arch dove and arch hawks.

FX price action was relatively subdued during the Asian session, given the lack of news and data flow. New York Fed President Dudley said QE2 is not designed to influence the dollar and the risk of deflation is now "greatly diminished." But until market participants get more clarity on the Fed's next steps, the dollar will be prone to weakness when risk sentiment is positive. It’s safe-haven status could also remain unclear, judging by recent performance vs. the Swiss franc and the yen. Retail sales and the Fed Beige Book are due today.

Bank of Canada’s Rate Announcement Today

2011-04-12T11:08:00.000+03:00

Bank of Canada is expected to leave the policy rate unchanged at 1% for a 7th month, although the accompanying statement will slightly be more hawkish than the previous one, on signs of rising inflation and strong domestic growth. Its widely speculated that the BoC will resume tightening by June 2011, as now uncertainties in Japan following the natural disasters in March, continued unrest in the Middle east and inflation against appreciation in Canadian dollar have prompted the BoC to stay on the sideline in April.

In Asia, the South Korean Central Bank announced today its decision regarding interest rates, where it decided to keep the rates unchanged at 3%, in line with market expectations. The bank reiterated that high crude oil prices together with the aftermath of the Japanese earthquake will affect the economic growth negatively with rising inflation.

Today’s data focus in Europe will be on the UK’s Trade Balance/Core CPI, followed by German and EU ZEW economic sentiment, while the US session will see the release of the US trade balance and Bank of Canada’s rate statement.

EURUSD Consolidates Above 1.44 Level

2011-04-11T12:19:00.001+03:00

The EURUSD remained steady above the 1.44 level following last week’s ECB rate hike of 25 bp, as widely expected, while the US dollar was unchanged US government shutdown was avoided with the agreement on a deficit consolidation plan. Operations will continue as normal until the end of September although public spending cuts were revised to around $38 bln. US economic calendar contains no major data today, except the speeches of several Fed presidents including Evans, Dudley and Yellen.

In Asia, Machine orders in Japan declined more than expectations during March, indicating that Japanese companies were concerned about the strength of recovery, following the devastating earthquake and Tsunami. The governor of Bank of Japan Shirawaka said that the economy will face a strong downward pressure after the catastrophe due to slowdown in corporate output, while the Bank has committed up to 1 trillion yen in 1 year loans, for the companies affected by this natural disaster.

EURUSD Breaches the 1.44 Level

2011-04-08T10:28:00.000+03:00

The ECB hiked the refinance rate by 25bp as expected, but the tone of the press conference was not enough to push market participants' expectations too far in either direction. Although ECB President Trichet did not indicate that yesterday's rate hike was the first in a series, he did once again say that the ECB will act as needed and that interest rates remain exceptionally low. He added that it is paramount to avoid second-round effects and that the ECB will do all in order to ensure price stability. Rate expectations have stayed stable following his comments. Along with stable risk sentiment, this is keeping the euro well supported, where it traded slightly above the 1.4400 mark during the Asian Session.

Eurozone finance ministers are holding an informal meeting in Hungary and they are expected to discuss the pending aid package for Portugal, though a formal request still needs to be extended by Portugal. The meeting should not yield much, as the package will take a couple of weeks to craft, and the press cited a senior EU source saying that the plan will be agreed before the June 5 election. German Deputy Finance Minister Hoyer said that the Portugal decision to take EU aid is right and responsible, and that without the EFSF, Portugal and Eurozone could have been very much at risk.

ECB Rate Decision Today

2011-04-07T11:26:00.000+03:00

Portugal formally requested EU assistance following a bill auction that showed borrowing costs continue to rise. Prime Minister Socrates said the country needs help to guarantee its financing needs and the Portuguese opposition leader supported the request for aid. No details were announced but EU officials said the request was "responsible" and would be processed quickly. The ECB's policy announcement is due, where the consensus is a 25bp rate hike. At the ECB press conference due 45 minutes after the policy announcement, it is expected from Trichet to announce a series of rate hikes, a claim he has made during previous meetings. However, his other remarks will be closely followed to see if current market expectations of future rate hikes are justified.

AUDUSD hit a new post-float high of 1.0482 after another stronger-than-expected employment report. Employment in March grew by +37.8k (cons. +24.0k), while the unemployment rate unexpectedly fell to 4.9% (prev. 5.0%). This data has fuelled speculation that the next RBA hike will come in August.

Today’s main focus will be BoE rate announcement, followed by the ECB meeting, while the US session will see the release of Canadian Building Permits and US Unemployment Claims.

Euro Unaffected by Portugal’s Downgrade

2011-04-06T09:47:00.001+03:00

Yesterday Portugal's sovereign debt was cut to Baa1 from A3 by Moody's, keeping Portugal on review for further downgrades, citing upward revisions of Portugal's deficit and concerns over fiscal consolidation and structural reform. The euro retreated mildly on the announcement, but remains largely driven by ECB rate hike anticipations for the moment.

The FOMC minutes from the March 15th meeting confirmed what recent Fed speeches have suggested - a mild divergence of opinion is starting to emerge on the FOMC. The FOMC minutes revealed that some members felt the risks to inflation had shifted to the upside, although "almost all" Fed officials saw no need to taper asset purchases as QE2 nears an end. The minutes repeated that the recovery is gaining traction and overall reflected the recent shift in views from several Fed officials in recent weeks.

SNB Governing Board member Danthine again referred to the SNB's current policy issue. He repeated that, if the SNB only had to consider the real estate market and the domestic economy, then it would certainly hike interest rates. But given that different conditions are being experienced by Switzerland's exporters, there is limited scope for monetary policy adjustment. Taking the whole economy (domestic and export) into account, Danthine said the current setting of monetary policy is appropriate.

Yen Lower on Japan’s Earthquake, Euro Recovers Mildly

2011-03-11T12:18:00.000+02:00

The yen weakened sharply after a strong earthquake hit Japan. US officials said that earthquake is of 8.8 magnitude, about 400km from Tokyo.

An EU summit is scheduled for today and expectations for any definite actions to emerge from it are low. Any resolution on the pressing issues will likely have to wait for the Eurogroup/Ecofin meetings on March 14-15 and then the next EU summit on March 24-25. Moody’s yesterday downgraded Spain by one notch to AA2 with a negative outlook, which caused a sell-off in Euro. The ratings agency cited concerns over the eventual cost of bank restructuring and structural issue over broader government finances.

Today’s main focus will be the UK PPI in the European session, followed later by the Canada employment data and US retail sales.

ECB Rates on Focus

2011-03-03T18:45:00.000+02:00

FX markets remained tightly range-bound for most of the Asia session, as investors direct their attention to the upcoming ECB press conference. The ECB will likely leave the main refinancing rate unchanged at 1% in March, although delivering a more hawkish tone in the press conference and the accompanying statement. German Chancellor Merkel and Portuguese Prime Minister Socrates met and Socrates reiterated that Portugal does not need external help. Socrates said the March 11 summit aims to boost confidence for market participants and Merkel remained non-committal on possible reductions or alterations to current bailout packages for Ireland and Greece.

In the US, yesterday’s latest Fed Beige Book was a bit more optimistic and the ADP employment data beat consensus, rising +217k in Feb. Fed’s Beige book released yesterday showed all twelve districts reported modest expansion in January and early part of February, with Chicago as the only district that reported slightly weaker conditions. Most districts acknowledged high and rising commodities prices and rising input prices for manufacturers and retailers and there are also plans to passing the costs through to consumers.

RBA leaves Rates Unchanged, BoC on Focus

2011-03-01T11:40:00.000+02:00

The RBA kept policy unchanged, in line with consensus, keeping the cash rate unchanged at 4.75%. The accompanying statement offered little in the way of policy guidance, noting only that the board “judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook”. Australian dollar was mildly lower following the RBA’s decision.

Today’s main focus will be Bank of Canada’s rate decision. Canadian dollar has been strong as supported by recent surge in oil prices. Recent rally extended yesterday after stronger than expected December GDP growth reading of 0.5% mom. It is expected that the bank will likely leave the overnight rate unchanged at 1%.

Ringgit Ditutup Rendah Berbanding Dolar AS

2011-02-24T15:13:00.000+02:00

KUALA LUMPUR, 24 Feb (Bernama) -- Ringgit ditutup rendah berbanding dolar AS pada Khamis apabila situasi pergolakan politik di Timur Tengah dan Afrika Utara kelihatan bertambah memuncak.

Pada 5 petang, mata wang tempatan itu turun kepada 3.0635/0675 daripada 3.0450/0480 pada Rabu.

Seorang peniaga berkata kebimbangan politik mencetuskan permintaan bagi aset selamat dengan franc Swiss menerajui kenaikan pada Khamis.

"Para pelabur kemungkinan menyimpan wang mereka dalam aset yang dianggap selamat untuk mengurangkan pegangan risiko mereka," jelasnya.

Berbanding dolar Singapura, ringgit diniagakan rendah pada 2.3912/3949 daripada 2.3843/3885 pada Rabu dan susut berbanding yen Jepun kepada 3.7384/7437 daripada 3.6829/6883 sebelumnya.

Unit tempatan juga diniagakan rendah berbanding pound British kepada 4.9447/9521 daripada 4.9378/9436 pada Rabu dan lemah berbanding Euro kepada 4.2110/2171 daripada 4.1774/1822 sebelumnya.

Markets Focus on Libya

2011-02-24T06:11:00.001+02:00

23.02.2011

An uneasy calm descended over FX markets during the Asia session, and risk currencies managed to hold their ground despite continuing concerns about Libya while the euro remains supported on expectations of a hawkish ECB press conference next week. The Euro was supported by hawkish comments from the ECB’s Mersch. While his tone was not particularly surprising, comments indicating the possibility of hiking rates with temporary liquidity measures still in place and the specific mention of the March 3 ECB meeting boosted the Euro.

S&P later cautioned that Spain still has significant downside risks to its AA credit rating and could face further problems in obtaining financing in the markets. S&P also said Spain has not done enough to “radically overhaul it’s labor market. ” S&P has the lowest rating on Spain among the three major ratings agencies but the euro nevertheless managed to hold on to some of its earlier gains.

Today’s focus will be on the BoE MPC minutes from the Feb 10 meeting. The minutes are expected to show that debates on whether the bank should start to exit the stimulus problem heat up as inflation jumped.

Markets Focus on Libya

2011-02-24T06:11:00.000+02:00

Euro Declines on Concern Greece Bailout May Fail to Get Support

2010-05-03T21:43:00.000+03:00

May 3 -- The euro fell for the first time in four days against the dollar on concern a 110 billion-euro ($146 billion) bailout package for Greece will fail to win support from some of the region’s governments.

Europe’s common currency slumped versus most of its 16 major counterparts as German Chancellor Angela Merkel began making a public case for her citizens to aid Greece. The pound fell as polls signaled neither of the U.K.’s two biggest parties will gain a governing majority in this week’s election.

“The euro is just patently overvalued,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, who predicts a decline to $1.30 this month. “My complaint is that the package requires some extremely harsh austerity measures that simply won’t be put into place.”

The euro dropped 0.8 percent to $1.3191 at 1:19 p.m. in New York from $1.3294 last week, after earlier touching $1.3361, the strongest level since April 27. The 16-nation currency traded at 124.94 yen from 124.78. The dollar was at 94.70 yen from 93.85 yen.

Mexico’s peso rose as the European Union and International Monetary Fund’s approval yesterday for the Greece aid package for Greece boosting demand for higher-yielding, emerging-market assets.

Loan Approval Timeline

EU leaders are scheduled to meet on May 7 to discuss the timeline of parliamentary approval for loans to Greece. Germany is due to debate the plan on the same day.

“The euro fell because the package hasn’t been approved yet and there’s dissension in the ranks,” said Jessica Hoversen, a Chicago-based analyst at the futures broker MF Global Holdings Ltd. “The real fear is that Greece won’t be able to make the budget cuts.”

Aid for Greece is of “enormous” importance, Merkel told reporters in Berlin today after convening a special meeting of her Cabinet that approved loans for Greece of as much as 22.4 billion euros ($30 billion) over three years.

“It doesn’t only mean that we help Greece, but that we stabilize the euro as a whole, which helps people in Germany,” Merkel said.

The chancellor canceled two campaign rallies today in North Rhine-Westphalia, where polls show her party struggling to retain power at a May 9 vote, to give back-to-back interviews on N24, ZDF and ARD television channels.

Required Cuts

Greece’s three-year financial lifeline requires the nation to cut its budget deficit below the EU limit of 3 percent of gross domestic product by the end of 2014, a year later than originally planned. The deficit was 13.6 percent last year, the region’s second-largest after Ireland. The austerity measures include a second set of wage cuts for public workers and a three-year freeze on pensions.

“There’s never been a country that’s undertaken to save so much and there’s never been a country that’s succeeded in saving so much,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “It’s very, very negative.”

Unions in Greece representing more than 500,000 civil servants called a 48-hour strike starting May 4 to protest what they have called “savage” budget cuts. Local government workers called a strike for today. Teachers are also on strike from tomorrow and a general strike, the third this year, is planned for May 5.

‘Terrific Recession’

“For Greece, this means terrific austerity and terrific recession,” Marc Faber, publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong. “The euro will remain weak, and there’ll be more bailouts,”

Futures traders are more bearish than ever on the euro, suggesting further declines ahead for Europe’s shared currency. Hedge funds and other large speculators raised net wagers on a euro drop by 25 percent to 89,013 contracts in the week ended April 27, Commodity Futures Trading Commission data show.

The euro has depreciated 7.6 percent against the dollar this year, including last week’s 0.7 percent loss, on concern the sovereign debt crisis will slow Europe’s economy.

Mexico’s peso rose 0.5 percent to 12.2509 per U.S. dollar from 12.3109 on April 30. The peso has strengthened 6.7 percent in 2010, the best performer against the dollar of the 16 major currencies tracked by Bloomberg.

“Greece was creating certain pressure for the peso last week because there was still a lot of doubt,” said Rafael Camarena, an economist with Banco Santander SA in Mexico City. “The market today is taking into account that finally a plan to rescue Greece was cemented.”

Britain’s pound dropped for a second day, falling 0.2 percent to $1.5250, as surveys by YouGov Plc and ICM Ltd. today showed Prime Minister Gordon Brown’s Labour Party narrowing the Conservatives’ advantage in popular support and retaking the lead in the forecast number of seats in Parliament. The election will be held on May 6.

Yen Drops as Recovery Signs, Stock Gains Buoy Risk Sentiment

2010-04-26T06:00:00.000+03:00

April 26 (Bloomberg) -- The yen fell against higher- yielding currencies as signs that a worldwide economic recovery is gaining momentum boosted demand for riskier assets.

Japan’s currency dropped against all of its most-active counterparts after a report showed U.K. house prices rose for a ninth straight month and before data forecast to show the U.S. housing market is stabilizing. South Korea’s won strengthened to a 19-month high as global funds pumped more money into the nation’s shares to profit from accelerating economic growth.

“Data across the globe underscore the economy is recovering, which then boosts risk sentiment,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., a unit of Japan’s fourth-largest banking group. “Buoyant risk sentiment will encourage investors to sell the yen and re- invest in higher-yielding assets.”

The yen fell to 126.22 per euro as of 11:04 a.m. in Tokyo from 125.73 in New York on April 23. The currency also dropped to 94.31 yen per dollar from 93.97 in New York. It earlier slid to 87.61 yen per Australian dollar, the lowest since September 2008, before trading at 87.57 from 87.19 last week. The euro was little changed at $1.3378.

The won rose for a fifth day against the yen, trading at 11.6968 against the Japanese currency from 11.7998 on April 23. It earlier touched 11.6933, the highest since October 2008.

The Nikkei 225 Stock Average rose 2.1 percent and the MSCI Asia Pacific Index of regional shares advanced 1.2 percent.

Pound Gains

The pound climbed to a 12-week high against the yen after London-based Hometrack Ltd. said the average cost of a home in England and Wales increased 0.2 percent from March to 158,400 pounds ($243,000). The S&P/Case-Shiller home-price index in the U.S. climbed 1.3 percent, the first increase since December 2006, according to a Bloomberg News survey of economists before the data is released tomorrow.

“The recovery of economies around the world, including the U.K., appears to be firm,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The pound may be bought.”

The U.K. currency advanced to 145.61 yen from 144.49 yen in New York on April 23, after earlier touching 145.71 yen, the highest level since Jan. 29.

Fed’s Policy

The dollar traded near its strongest in almost three weeks versus the yen on speculation the Federal Reserve will move closer to withdrawing stimulus measures at its April 27-28 meeting amid signs the U.S. economic recovery is intact.

Fed policy makers this week will try to decide how and when to sell mortgage-backed securities and reduce its balance sheet, the Wall Street Journal said on April 23, without saying where it got the information.

“Our economists note there is some potential for a very modest reworking of the key policy guidance language,” Gareth Berry, a currency strategist in Singapore at UBS AG, wrote in a research note today. “We continue to look for further dollar strength as the Fed shows every intention of gradually continuing down the path to policy normalization.”

Futures contracts on the Chicago Board of Trade on April 23 showed a 72 percent chance the Fed will raise its benchmark rate at least a quarter-percentage point by its December meeting, up from 66 percent a day earlier.

The U.S. economy expanded 3.4 percent in the first quarter, a Bloomberg News survey of economists showed before the Commerce Department’s report on April 30.

Dollar Strength Grows as Carry Trade Profits Evaporate on Rates

2010-04-26T05:56:00.002+03:00

April 26 (Bloomberg) -- Foreign-exchange profits from carry trades are disappearing as differences in central bank interest rates fail to increase fast enough to compensate for swings in currency rates.

Royal Bank of Scotland Plc’s index tracking the strategy of tapping cash where borrowing costs are low and investing where rates are higher, rose 0.57 percent in the first quarter, the smallest amount in a year, and down from 9.8 percent in all of 2009. Morgan Stanley strategists said in an April 15 research report that the only “functionally attractive” currency to target in carry trades is Australia’s dollar.

Falling demand for carry trades may help the dollar -- a favorite for funding the trades because of record low U.S. rates -- extend a rally that drove it 12 percent higher versus the euro the past six months. Gains of almost 30 percent in Brazil’s real, New Zealand’s dollar and South Africa’s rand the past 12 months suggest they already reflect the prospect of higher rates as central bankers begin to shift monetary policy.

“There is no easy money left in the carry trade,” said Henrik Pedersen, the London-based chief investment officer at Pareto Investment Management Ltd., which oversees $45 billion in currency assets.

“Most of the high-yielding currencies are overvalued and the low-yielders are undervalued,” he said. “The gains you can make on the interest-rate differentials are not going to make you 20 percent a year, it’s probably only going to make you about 2 or 3 percent.”

Central Bank Rates

The dollar touched a two-week high versus the yen on April 23 as orders for U.S. durable goods excluding transportation items surged 2.8 percent in March and sales of new homes jumped 26.9 percent, the most in five decades. The greenback strengthened 0.88 percent to $1.3384 per euro, and 1.95 percent to 93.97 yen.

Measured by Bloomberg Correlation-Weighted Currency indexes, the dollar has gained 1.73 percent this year.

A stronger currency is important to the U.S. because it entices foreign investors to Treasury debt that finances the nation’s record budget deficit. The downside is that it may restrain profit growth at companies with international sales by making U.S. exports more expensive.

Euro Predictions

United Technologies Corp., the Hartford-based maker of Pratt & Whitney jet engines and Black Hawk helicopters, and Providence, Rhode Island-based Textron Inc., which produces Cessna planes, predicted the euro would trade at $1.41 or higher this year. It fell to $1.3384 last week, from a high of $1.4579 in January.

“The global convergence in yields has basically sidelined the demand for carry,” said Mike Moran, a New York-based senior currency strategist at Standard Chartered Plc. “What has happened over the last 18 months has really leveled the playing field in carry trades. It has driven a convergence in the two most important factors in the carry trade, yields and volatility.”

Carry trades, which flourish most when interest-rate spreads are wide and swings in exchange rates muted, lost 31.5 percent in 2008 as the global financial crisis led to a compression of central bank borrowing costs, before rebounding last year, RBS index data shows.

Coordinated Effort

The Federal Reserve, European Central Bank and four other central banks lowered rates in October 2008 in an unprecedented coordinated effort to ease the effects of the worst financial crisis since the Great Depression.

Central bankers are now preparing rate increases as the global economy recovers. Reserve Bank of Australia lifted its overnight cash rate to 4.25 percent this month from 3 percent in October. New Zealand’s benchmark rate is 2.5 percent, compared with 0.1 percent in Japan and a range of zero to 0.25 percent in the U.S.

In January 2007, rates were 0.25 percent in Japan, 5.25 percent in the U.S., 6.25 percent in Australia and 7.25 percent in New Zealand.

Investors who took advantage of global rate differentials averaged annual returns of 16 percent from 2000 to 2005, according to the RBS index. The best gains of the decade were in 2002, when the strategy returned 29.3 percent.

At 10.1 percent, three-month implied option volatility for emerging economies is about one percentage point less than for currencies of major industrialized nations, a JPMorgan Chase & Co. index show. In October 2008, emerging volatility was 13 percentage points more.

‘Not Very Attractive’

Higher volatility dims the allure of carry trades by increasing the probability that swings in exchange rates erode gains. The JPMorgan option index measuring swings in industrialized nation currencies averaged 7.7 percent in the two years before the subprime mortgage market collapsed in August 2007.

“The carry trade is not very attractive now, broadly speaking,” said Ronald Leven, a senior currency strategist at Morgan Stanley in New York. “There also is some shifting away from the dollar as a funding currency.”

Leven forecasts the dollar will appreciate to 109 yen and $1.24 per euro by December. Federal fund futures traded on CME Group Inc.’s Chicago Mercantile Exchange show traders place a 56 percent chance the U.S. central bank will lift its target for overnight loans between banks by November.

The dollar has benefitted at the expense of the euro, which has been plagued by concern about the ability of Greece and other European countries such as Portugal and Spain to meet their debt obligations.

Greece asked the European Union and International Monetary Fund on April 23 to activate a lifeline of as much as 45 billion euros ($60 billion) in an unprecedented test of the euro’s stability and European political cohesion.

‘Financing Stress’

“The alleviating of financing stress in Europe should reduce the risk aversion bid for the dollar that emerged last December and lead markets to return to dollar funding of carry and risk trades,” strategists at Zurich-based Credit Suisse Group AG wrote in an April 13 report.

The firm forecast that the dollar will depreciate to $1.43 per euro and to 92 yen in three months.

The Aussie gained 28 percent against the U.S. dollar and 24 percent versus the Japanese yen in the past 12 months as the Reserve Bank began raising rates in October.

The Bank of Canada signaled last week it may be the first Group of Seven nation to boost borrowing costs. India raised rates for the second time in a month last week, and Sweden’s Riksbank reiterated a forecast to boost its seven-day repurchase rate by the end of the third quarter.

‘Incentive Structure’

“Regardless of when exactly the Fed raises rates, there is already a waterfall going on in movements of U.S. rates above those in other nations,” Marc Chandler, the head of currency strategy at Brown Brothers Harriman & Co. in New York, said. Investors “have been paid for being short the U.S. dollar, but that incentive structure is changing,” he said.

The cost of borrowing in yen for three months between banks fell below the dollar rate on March 4 for the first time since August, lessening the appeal of the greenback as a funding currency.

The London interbank offered rate, or Libor, for three- month yen loans was 8.375 basis points less than the dollar rate last week, the most since July. The dollar rate moved below its yen counterpart last year for the first time.

“Ten years ago it was basically the carry trade as a free lunch,” said Maxime Tessier, chief of foreign exchange at Montreal-based Caisse de Depot et Placement du Quebec, Canada’s biggest pension fund manager, with $131.6 billion in assets. “If we are in an environment where risk appetite remains subdued, and questions remain about what will happen with economies and central banks going forward, and if the fiscal crisis we are now seeing will broaden, then this is not the ideal environment for carry.”

Dollar Rises Versus Yen on Signs of Global Recovery Before Fed

2010-04-25T09:15:00.000+03:00

April 24 (Bloomberg) -- The dollar advanced for the first time in three weeks against the yen on evidence of a global economic recovery including a surge in the U.S. housing market before next week’s Federal Reserve policy meeting.

The euro touched its weakest level in almost a year against the dollar before Greece asked the European Union and the International Monetary Fund yesterday to activate a bailout of as much as 45 billion euros ($60 billion). The yen fell against all of its major counterparts this week as central banks signaled they will begin increasing borrowing costs to contain inflation, encouraging demand for higher-yielding assets.

“There’s lots of good data in the U.S. and globally, and that’s keeping the yen on the back foot,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The aid package for Greece is a temporary stop-gap. The combination of strong U.S. numbers, a more upbeat Fed and sovereign concerns in Europe means it’s just a matter of weeks before the euro breaks $1.30.”

The dollar increased 2 percent to 93.97 yen, from 92.17 on April 16. The euro declined 0.9 percent to $1.3384, from $1.3503 last week. It touched $1.3202 yesterday, the lowest level since April 30, 2009. The euro appreciated 1 percent to 125.73 yen, from 124.44 yen.

New Zealand’s dollar gained 3.2 percent to 67.40 yen and Mexico’s peso increased 2.8 percent to 7.72 yen this week on speculation investors will increase carry trades, in which they buy higher-yielding assets with amounts borrowed in nations with low interest rates. Japan’s benchmark of 0.1 percent has made the yen popular for funding such transactions.

Yuan Forwards

Yuan forwards touched a three-month high on April 22, before yesterday’s meeting of Group of 20 finance chiefs in Washington. The officials called in a statement for “credible” plans to withdraw economic stimulus as the recovery gains momentum and Greece’s fiscal turmoil highlights the risks posed by mounting government debt.

Treasury Secretary Timothy F. Geithner earlier this month called the talks an “avenue for advancing U.S. interests” on the Chinese currency.

Twelve-month non-deliverable yuan forwards ended the week at 6.6115 per dollar, compared with 6.6185 on April 16. The contracts reached 6.5930 on April 22, reflecting bets that the currency will strengthen about 3 percent.

The dollar rose to the strongest level in two weeks versus the yen yesterday as government reports showed U.S. new-home sales rose in March by the most in almost five decades and orders for durable goods surged.

U.S. Housing Market

New-home sales rose 27 percent in March, the most since April 1963, and orders for U.S. durable goods excluding transportation items gained 2.8 percent, the Commerce Department reported. The median forecast of 75 economists in a Bloomberg News survey was for a 0.7 percent advance in bookings for goods meant to last at least three years.

The housing number was “incredible,” and the durable- goods report was “strong,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration. “These reports will send the FOMC back to the drawing board to fine-tune the interest rate trajectory.”

The dollar decreased 0.2 percent against the yen on March 16, when the Fed retained its pledge to keep the target lending rate at virtually zero for an “extended period.”

All of the 98 economists in a Bloomberg News survey predict the Federal Open Market Committee will hold its fed funds target at a range of zero to 0.25 percent on April 28.

Euro Versus Krone

The euro fell for a fourth week against the Norwegian krone, dropping 1 percent to 7.8833, as Greece called for financial assistance in an unprecedented test of the 16-nation currency’s stability and European political cohesion.

“The fragmented nature of the European bond market will call into question the euro’s credibility as a reserve currency,” said Adam Cole, head of global currency strategy at Royal Bank of Canada in London.

Canada’s currency touched its strongest level versus the greenback in almost two years this week after the Bank of Canada signaled it may be the first Group of Seven nation to increase borrowing costs as economic growth accelerates and stokes inflation.

The central bank dropped a phrase regarding its “conditional commitment” to keeping the record low 0.25 percent target lending rate unchanged until July unless the inflation outlook shifted.

The Canadian dollar gained 1.4 percent to 99.91 Canadian cents per U.S. dollar, from C$1.0128 last week. The currency reached parity with the greenback on April 6 for the first time since July 2008.

India’s rupee climbed 1.7 percent to 2.12 yen after the central bank raised interest rates for the second time in a month and ordered lenders to set aside more cash as reserves in an attempt to slow the highest inflation rate among the G-20.

Euro Falls to Near 1-Year Low as G-20 May Discuss Greece Crisis

2010-04-23T07:39:00.002+03:00

April 23 (Bloomberg) -- The euro fell to near the lowest level in a year against the dollar on speculation Group of 20 Leaders will express concern that Greece’s escalating debt crisis will threaten the global recovery.

The euro slid versus all 16 major counterparts as policy makers from G-20 nations meet in Washington today. Europe’s currency headed for a third weekly drop against the yen after the European Union raised its estimate for Greece’s deficit and Moody’s Investors Service cut the nation’s debt rating. The dollar traded close to a one-week high versus the yen before U.S. reports forecast to show improving orders for long-lasting goods and new home sales.

“Chances are G-20 officials will discuss Greece because it could lead to a global financial issue,” said Takashi Kudo, general manager of market information at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp., in Tokyo. “Markets seem to be mounting pressure on Greece to get a bailout, with the euro weakening. Risk aversion is causing the dollar and yen to be bought.”

The euro fell to $1.3215 at 12:28 p.m. in Tokyo from $1.3295 in New York yesterday, and touched $1.3202, the lowest level since April 30, 2009. The 16-nation currency declined to 123.55 yen from 124.28 yen. The dollar traded at 93.50 yen from 93.49 yen, after reaching 93.63 yen, the highest since April 14.

The yen typically strengthens in times of financial turmoil as Japan’s trade surplus frees the nation from dependence on overseas capital. The dollar benefits as the world’s main reserve currency.

G-20 Meeting

The EU lifted its estimate for Greece’s deficit to 13.6 percent of gross domestic product, while Ireland overtook the southern European nation as the EU member with the largest deficit, at 14.3 percent.

“There are a number of countries who could easily go down the same path, and the ability for Europe to bail out all of those economies is, I would imagine, quite limited,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “A resolution is needed quite quickly. Otherwise, the euro is going to continue to weaken.”

Moody’s lowered Greece’s credit rating to A3 from A2, four grades above junk, while credit-default swaps tied to the debt climbed to a record 644 basis points. Greece is prepared to ask euro-region governments for a bridge loan, a Greek government official said, as debt worth $11.3 billion comes due next month and borrowing costs surge to the highest since 1998.

G-20 finance chiefs including U.S. Treasury Secretary Timothy F. Geithner and European Central Bank President Jean- Claude Trichet may also intensify pressure on China to revalue the yuan at today’s talks, which Geithner called an “avenue for advancing U.S. interests” on the Chinese currency.

Central Bankers

Central bankers in India and Brazil this week backed a stronger yuan as did the International Monetary Fund and EU governments. Speculation the G-20 will urge China to revalue its currency boosted yuan non-deliverable forwards to a three-month high yesterday.

“Political pressure on China to resume yuan appreciation will likely remain in place at the G-20 meeting,” said Sebastien Barbe, head of emerging market research at Credit Agricole CIB in Hong Kong. “This should keep the dollar-yuan NDF discount wide.”

Twelve-month non-deliverable forwards were little changed at 6.6023 yuan per dollar after reaching 6.5930 yesterday, the highest level since Jan. 11, according to data compiled by Bloomberg. The contracts reflect bets the currency will strengthen 3.4 percent from the spot rate of 6.8263.

The dollar rose to a seven-week high versus the Swiss franc on speculation signs of U.S. growth will increase.

‘Renewed Optimism’

Durable goods orders rose for a fourth month and new home sales ended four months of declines, Bloomberg News surveys of economists showed before the Commerce Departments reports today.

“Renewed optimism about the strength of the U.S. economy is adding to the dollar’s appeal,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Tonight’s data is all about quality, not quantity, with U.S. durable goods orders due for release.”

The U.S. currency climbed to 1.0837 Swiss francs from 1.0781, after advancing to 1.0850 francs, the strongest since March 2.

The pound weakened against the dollar and yen after a second televised debate renewed concern next month’s election won’t produce a government strong enough to tackle the U.K.’s deficit.

Pound Under Pressure

Conservative David Cameron failed to derail Nick Clegg in the U.K. campaign’s second debate, four instant polls showed, pointing to a hung parliament with Prime Minister Gordon Brown’s Labour Party as the largest bloc.

Sterling weakened 0.3 percent to $1.5335 and 0.3 percent to 143.38 yen.

The pound may rally to a two-month high against the dollar after the U.K. currency stayed above its 20-day moving average, Ueda Harlow Ltd. said, citing trading patterns.

“Technical charts are signaling an acceleration in rising momentum for the British currency,” said Toshiya Yamauchi, a senior foreign-exchange analyst at the online currency-trading company. “The currency may test the $1.56 level, which represents the top of the cloud on a daily ichimoku chart.”

Yen Rises on Bets Obama to Call for New Financial Regulations

2010-04-22T04:53:00.000+03:00

April 22 (Bloomberg) -- The yen rose against the euro for a second day on prospects U.S. President Barack Obama will call for new financial regulations, boosting demand for Japan’s currency as a refuge from turmoil in the global banking sector.

The yen advanced against all 16 major counterparts as Asian stocks dropped. Obama’s spokesman yesterday said the president will call for new regulations in a speech today at New York’s Cooper Union. The 16-nation euro traded near a two-week low against the dollar on concern discussions of a 45 billion-euro ($60.3 billion) aid package for Greece will fail to stem the nation’s debt crisis.

“The markets are wary over what Obama may say about new financial-industry regulations,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The mood is leaning toward risk aversion. The bias is for the yen to be bought.”

The yen rose to 124.38 per euro as of 9:53 a.m. in Tokyo from 124.77 in New York yesterday. The yen gained to 92.88 per dollar from 93.19. The euro was at $1.3388 from $1.3390 yesterday, when it touched $1.3359, the lowest since April 9.

The Nikkei 225 Stock Average fell 1.7 percent today and the MSCI Asia Pacific Index of regional shares declined 0.7 percent.

“Financial reform is something that is born out of an economic collapse that started on Wall Street and spread to Main Street America,” White House press secretary Robert Gibbs said in previewing the president’s address.

Obama’s Speech

Obama is giving the address as he and Democratic leaders push to get legislation on rules for financial markets through Congress by next month. The House passed its version last December. The Senate is poised to take up legislation sponsored by Connecticut Democrat Christopher Dodd, the chairman of the Banking Committee.

The Securities and Exchange Commission last week filed a lawsuit against Goldman Sachs Group Inc. for fraud linked to its derivatives trading.

“The Goldman issue will take time to be solved, keeping stocks in a downtrend,” said Minoru Shioiri, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest publicly traded bank by market value. “There’s a downside risk for cross currencies against the yen.”

The yen tends to strengthen during economic and financial turmoil because Japan’s trade surplus makes it less reliant on foreign capital.

Greece’s Debt

Demand for the euro waned after talks started yesterday on an assistance package including 30 billion euros from the European Union and as much as 15 billion euros from the International Monetary Fund. Greece Finance Minister George Papaconstantinou said the nation may request aid before talks on the conditions for the loans conclude in two weeks.

“I don’t see positives coming out of the Greece situation,” said Toshiya Yamauchi, manager of foreign-exchange margin trading at Ueda Harlow Ltd. in Tokyo. “The issue is deep, and negotiations among nations are also complicating the matter. The euro is poised to continue to fall gradually.”

Greece’s deficit of 12.9 percent of gross domestic product is more than four times the EU limit. Budget shortfalls across the euro region have surged as governments bailed out banks and spent billions on economic stimulus.

The IMF yesterday cautioned that if nations fail to contain soaring public debt that may have “severe” consequences for the world economy.

The yield premium investors demand to hold Greek 10-year bonds instead of benchmark German bunds climbed to 5.01 percentage points, the highest level since at least March 1998.

http://fxisforex.blogspot.com

Yen Rises Versus Euro as Greek Debt Concern Aids Safety Demand

2010-04-21T04:49:00.000+03:00

April 21 -- The yen rose against the euro for the first time in three days as concerns about debt-stricken Greece boosted demand for Japan’s currency as a refuge.

The euro weakened against 14 of its 16 major counterparts as Greece starts talks today on activating a 45 billion-euro ($60 billion) rescue package. The yen advanced against higher- yielding currencies after Federal Reserve Chairman Ben S. Bernanke yesterday said proposals to give regulators authority to dismantle large financial firms would be “constructive.” “Greece’s ability to resolve its debt problem is an ongoing worry,” said Toshihiko Sakai, head of trading for currencies and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. “The trend is for the euro to be sold. The yen may also be bought.”

The yen rose to 124.90 per euro as of 9:23 a.m. in Tokyo from 125.24 in New York yesterday. The euro dropped to $1.3413 from $1.3435 after touching $1.3409, the lowest since April 9. Japan’s currency traded at 93.11 per dollar from 93.22. Yesterday it touched 93.39 per dollar, the weakest since April 15.

The euro slid as Greek officials prepare to hammer out deficit-cutting measures they must accept to tap the funds, in talks with the International Monetary Fund, the European Central Bank and the other nations using the euro. Greece’s government needs to raise about 10 billion euros before the end of May and its soaring financing costs are lending urgency to the talks.

Benchmark Currency Rates

2010-04-20T13:47:00.000+03:00

Benchmark Currency Rates

	USD	EUR	JPY	GBP	CHF	CAD	AUD	HKD
HKD	7.7628	10.4839	0.0836	11.966	7.311	7.678	7.2275
AUD	1.0741	1.4505	0.0116	1.6556	1.0116	1.0623		0.1384
CAD	1.011	1.3654	0.0109	1.5585	0.9522		0.9413	0.1302
CHF	1.0618	1.434	0.0114	1.6367		1.0502	0.9886	0.1368
GBP	0.6487	0.8761	0.007		0.611	0.6416	0.604	0.0836
JPY	92.835	125.3755		143.1005	87.4317	91.8204	86.4331	11.9589
EUR	0.7405		0.008	1.1414	0.6974	0.7324	0.6894	0.0954
USD		1.3505	0.0108	1.5414	0.9418	0.9891	0.931	0.1288

Above is a chart designed to display the cross rates of eight major world currencies. Scan across the chart to find the rate of exchange between any two of these currencies.

Currency key



USD:	U.S. Dollar	CAD:	Canadian Dollar
GBP:	British Pound	EUR:	Euro
CHF:	Swiss Franc	AUD:	Australian Dollar
HKD:	Hong Kong Dollar	JPY:	Japanese Yen

Technical Analysis on GBP/USD - 19 April 2010

2010-04-20T06:18:00.002+03:00

Comment: Disappointing as Cable drops last week’s levels. It should now try and base against the lower edge of the Ichimoku ‘cloud’ and the 26-day moving average. Futures volume is almost half March’s peak.

Strategy: Possibly attempt small longs at 1.5235; stop below 1.5130. First target 1.5350/1.5385, then 1.5525/1.5575.

A potential ‘double bottom’ at 1.4800 (61% Fibonacci retracement support) in March needs to be finished off by a weekly close above 1.5600. Until then Cable is likely to struggle with the bottom edge of another big weekly Ichimoku ‘cloud’.

Note how the Lagging Span found support at the ‘cloud’s’ lower edge of October 2009 and how this rallies at a roughly 45 degree angle for the next four months, possibly providing steady upward pressure – momentum is still a long way off being bullish though.

On the Bank of England’s Trade Weighted Index sterling remains close to record lows, as stranded UK tourists know first hand.

Technical Analysis on EUR/USD - 19 April 2010

2010-04-20T05:41:00.003+03:00

Comment: Still struggling under a large Ichimoku ‘cloud’, dipping below horizontal 9 and 26-day moving averages. Expect another attempt at basing against the 1.3400 area.

Strategy: Possibly attempt small longs at 1.3465; stop well below 1.3400. First target 1.3600, then 1.3800/1.3840.

Dollar to Rise Versus Yen, Commerzbank Says: Technical Analysis

2010-04-19T22:51:00.000+03:00

April 19 -- The dollar may advance against Japan’s currency should it remain above a key support level at 90.80 yen, Commerzbank AG said, citing technical indicators.

The U.S. currency slid through “double Fibonacci support” at 92.40 and 92.20 yen, according to Karen Jones, head of fixed- income, commodity and currency technical analysis at Commerzbank in London. The dollar may advance to 95.10 yen, the 61.8 percent Fibonacci retracement from its April high, before reaching 97.80 yen, its August 2009 peak, she said.

“The dollar is coming back to an area where it should hold and recover,” Jones said in a telephone interview today. “The 200-day moving average at 91.37 forms support, but more importantly, it appears to be returning to the point of break- out from its previous three-year downchannel at 90.80.”

The dollar weakened 0.2 percent to 91.98 yen as of noon in London, after slipping earlier to 91.60 yen, the lowest level since March 24.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. A break above resistance or below so-called support indicates a currency may move to the next level.

A resistance level is an area on a chart where technical analysts anticipate orders to sell a currency and a support level is an area there they anticipate orders to buy a currency.

Yen Gains as Goldman Probe, Greece Concern Spurs Safety Demand

2010-04-19T15:28:00.000+03:00

April 19 -- The yen rose for a third day against the euro as concern that probes into Goldman Sachs Group Inc. will widen and Greece’s aid package may falter boosted demand for Japan’s currency as a refuge.

The yen strengthened versus all 16 of its main counterparts after U.K. Prime Minister Gordon Brown yesterday called for an investigation of Goldman Sachs following the U.S. Securities and Exchange Commission’s allegations of fraud. The euro fell to a one-week low against the dollar as International Monetary Fund and European Union officials prepared to lay down conditions on a bailout package for Greece. The pound slid the most in more than three weeks as polls indicated the U.K. election won’t produce a clear winner.

“It’s obviously a correction for the yen that’s been triggered by Goldman Sachs being accused of fraud,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “It has prompted a sell-off in risk assets across the board and the yen strengthens on the back of that.”

The yen appreciated to 123.42 per euro as of 6:26 a.m. in New York, from 124.44 last week, after reaching 123.16, the strongest since March 26. Japan’s currency advanced to 91.92 per dollar, from 92.17. The euro fell to $1.3435, from $1.3503, after reaching $1.3421, the weakest since April 9. The Dollar Index climbed for the third day, rising 0.5 percent to 81.264.

Equities fell after the SEC said last week that Goldman Sachs in early 2007 created and sold a collateralized debt obligation linked to subprime mortgages without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicle. The firm denies any wrongdoing.

‘Moral Bankruptcy’

Brown said he was “shocked” at the “moral bankruptcy” indicated in the suit. The German government “will ask the SEC for information,” said Ulrich Wilhelm, a spokesman for Chancellor Angela Merkel. “Then we will look at the records and consider possible legal steps.”

The euro fell for a third day against the dollar as concern Greece will activate the EU-led 45 billion-euro ($60 billion) emergency-loan package damped demand for the European currency.

Talks on Greece involving the European Commission, the IMF and the European Central Bank have been delayed until April 21 from today because of a volcanic ash cloud disrupting air travel. Initial discussions will be held by phone today, a commission spokesman said.

Greek ‘Rage’

Prime Minister George Papandreou’s decision to call for the talks prompted a reaction of “rage” among 48 percent of Greeks surveyed in a poll in the Eleftheros Typos newspaper yesterday. Nine of 10 people surveyed said they expected the IMF to insist on more belt-tightening. Labor unions have threatened new strikes over the prospect of more budget cuts.

The extra yield offered by Greek 10-year bonds over similar-maturity German bunds, Europe’s benchmark debt securities, widened to 32 basis points to 462 basis points, the most since October 1998. Greece needs to raise 11.6 billion euros by the end of May. A wider gap between the yields indicates perceptions of higher risk for Greece.

The euro slid 5.7 percent against the dollar in the first quarter amid concern Greece’s debt crisis could threaten the economic recovery across the region.

“The spread is as good as any indicator of the level of concern,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “We are moving slowly toward the point where the button is hit to call in the aid. All those things continue to weigh on the euro.”

Short Positions Rise

The yen move may have been exaggerated as investors trimmed bets that the yen will decline against the dollar, after futures traders increased wagers on a drop last week to the most since July 2007, Hardman said.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the yen compared with those on a gain -- so-called net shorts -- was 55,746 on April 13, compared with net shorts of 42,305 a week earlier, figures from the Washington-based Commodity Futures Trading Commission showed on April 16.

“Speculative yen net-short positions have been built up in recent weeks,” Hardman said. “That creates scope for a greater short squeeze.”

The pound slid after a survey showed an increase in support for the Liberal Democrats, boosting concern the U.K. will elect a government too weak to tackle the country’s record budget deficit. The Liberal Democrats overtook the ruling Labour Party and Conservatives, according to a YouGov poll for today’s Sun newspaper.

Hung Parliament

The chances of the May 6 vote producing a so-called hung parliament are 78.9 percent, according to Royal Bank of Scotland Group Plc estimates based on opinion polls data.

The pound lost 1 percent to $1.5204, after earlier slipping 1.1 percent, the most since March 24. It depreciated by 0.6 percent to 88.34 pence per euro.

The Australian dollar’s push to parity with the U.S. dollar is in jeopardy as central bankers signal they may slow the pace of interest-rate increases and China moves closer to revaluing the yuan.

After rallying 28 percent the past 12 months, more than any other currency tracked by Bloomberg, Morgan Stanley predicts the Aussie may tumble 16 percent by year-end because higher borrowing costs will curb growth. Barclays Capital, which in December forecast a peak of $1 in 2010, now expects the Australian dollar to be the biggest loser from what it calls a “significant” yuan revaluation.

The currency is “fully priced,” said Scott Ainsbury, a New York-based money manager who helps invest about $9 billion at FX Concepts Inc., the world’s biggest foreign-exchange hedge fund. “It’s probably time to lighten up,” he said. The Aussie may weaken about 3 percent before rising by year-end.

Australia’s dollar declined 0.7 percent to 91.79 U.S. cents, and slipped 0.9 percent to 84.43 yen.

Yen Rises as China, Greece Speculation Spurs Demand for Safety

2010-04-19T01:13:00.000+03:00

April 17 -- The yen advanced against all of its most-traded counterparts as speculation China may take further steps to slow its economy and Greece may trigger a $61 billion rescue package spurred demand for relative safety.

The dollar dropped for two straight weeks against the yen for the first time since January after Goldman Sachs Group Inc. was charged with fraud, making U.S. stocks less attractive. Canada’s dollar fell against the greenback for the first time in three weeks after touching parity for a second week before the Bank of Canada’s policy meeting on April 20.

“The Greece story isn’t going away soon, and we expect further tightening from China,” said Vassili Serebriakov, a strategist at Wells Fargo & Co. in New York. “That’s triggered some caution in the market, and that’s why you’re seeing the yen doing better.”

The yen gained 1.1 percent to 124.44 per euro yesterday, from 125.79 on April 9. Japan’s currency appreciated 1.1 percent to 92.17 against the dollar, from 93.18. It advanced to 91.91 yesterday, the strongest level since March 25. The euro was little changed at $1.3503, compared with $1.35.

The dollar dropped to the lowest level against the yen in almost a month as Goldman Sachs was sued by the Securities and Exchange Commission for fraud related to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression. The charges “are completely unfounded,” Goldman Sachs said in a statement.

‘Riveted’ on Goldman

“The Goldman news has people riveted,” said Firas Askari, head currency trader in Toronto at Bank of Montreal, Canada’s fourth-largest lender. “Risk off.”

The Standard & Poor’s 500 Index erased its weekly gain, ending the week down 0.2 percent. Crude oil dropped 2.3 percent this week, the most since the five days ended Jan. 22.

New Zealand’s dollar slid 2.1 percent to 65.31 yen this week and Australia’s currency lost 2 percent to 85.18 yen on speculation investors will reduce carry trades, in which they buy higher-yielding assets with amounts borrowed in nations with low interest rates. Japan’s benchmark of 0.1 percent has made the yen popular for funding such transactions.

Twelve-month non-deliverable yuan forwards finished the week at 6.6185 per dollar, indicating traders bet China’s currency may gain 3 percent in the next 12 months. China has pegged the yuan at about 6.83 since July 2008, after allowing it to rise 21 percent in the previous three years.

China’s cabinet raised minimum mortgage rates and down- payment ratios for some home purchases, saying “more forceful” steps are needed to cool speculation after property prices rose at a record pace in March.

‘Prudent Policy’

“It’s what China needs to do and should do,” said Alan Ruskin, head of currency strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “This is prudent policy to achieve sustained growth over the cycle.”

The nation’s economy grew 11.9 percent from a year earlier in the biggest gain since the second quarter of 2007, the statistics bureau said this week.

Singapore’s dollar rallied the most against the greenback in six months, appreciating 1 percent to S$1.3756 as its central bank unexpectedly revalued its currency after the government raised forecasts for economic growth and inflation.

The Monetary Authority said it will seek a “modest and gradual appreciation” in the local dollar and shift to a stronger range for currency fluctuations, the first such combined move in its 39-year history.

Greece Talks

The euro fell for a second straight week versus the yen before talks on Greece involving the European Union, the International Monetary Fund and the European Central Bank that are scheduled to begin on April 19.

European finance ministers offered as much as 30 billion euros ($41 billion) in three-year loans in 2010 at about 5 percent, compared with the three-year Greek bond yield of 7.21 percent. Another 15 billion euros would come from the International Monetary Fund.

“I see Greece doing the sensible thing and turning its back on the bond market,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut. “We say take it at 5 percent.”

Canada’s dollar slid 1 percent to C$1.0128 versus the greenback this week after trading at 99.54 Canadian cents versus the dollar on April 14, the strongest level since June 2008.

The Bank of Canada will meet April 20 to decide on interest rates. Governor Mark Carney signaled last month he’s open to raising the target lending rate as soon as June 1 as inflation and growth outpace forecasts.

South Africa’s rand was the biggest loser versus the dollar, declining 1.8 percent to 7.390 on speculation the nation’s central bank will lower its target lending rate, now at 6.5 percent. The nation’s retail sales unexpectedly contracted for a 13th month in February, a report showed this week.

Yen Rises as U.S. Stocks Drop on Goldman Sachs Fraud Charge

2010-04-17T02:44:00.000+03:00

April 16 (Bloomberg) -- The yen advanced against all of its most-traded counterparts as stocks dropped after Goldman Sachs Group Inc. was charged by U.S. regulators with fraud, deterring demand for higher-yielding assets.

The euro recorded its second week of losses against the yen on speculation Greece would be forced to activate a 45 billion euro ($61 billion) rescue package as it struggles to rein in the euro region’s widest budget shortfall. Australia’s dollar fell against its U.S. counterpart as China raised minimum mortgage rates for some home purchases.

“The Goldman story is pulling the stock market down, and you’re getting a flight to quality into the yen,” said Carol Hurley, a senior market strategist in Chicago at Lind-Waldock & Co., a unit of futures broker MF Global Holdings Ltd. “It’s most definitely weighing on risk sentiment.”

The yen appreciated as much as 1.9 percent to 123.87 per euro in the biggest intraday advance since Feb. 25, before trading at 124.40 at 4:14 p.m. in New York, compared with 126.27 yesterday. The dollar climbed 0.5 percent to $1.3505 per euro, from $1.3573. Japan’s currency gained 1 percent to 92.13 per dollar, from 93.03.

South Africa’s rand slid 2.1 percent to 12.47 yen and Mexico’s peso lost 1.8 percent to 7.51 yen on speculation investors will reduce carry trades, in which they buy higher- yielding assets with amounts borrowed in nations with low interest rates. Japan’s benchmark of 0.1 percent has made the yen popular for funding such transactions.

Goldman Sachs

The Standard & Poor’s 500 Index fell 1.6 percent after Goldman Sachs was accused of fraud related to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression.

The company misstated and omitted key facts about a financial product tied to subprime mortgages as the U.S. housing market was starting to falter, the Securities and Exchange Commission said in a statement today.

“The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation,” Goldman Sachs said in a statement.

Yuan forwards erased losses as President Hu Jintao reiterated that China is moving ahead with a gradual “managed” floating exchange-rate plan.

“We have been proceeding with a managed floating exchange- rate mechanism under the principle of initiative, control and gradualism as always,” Hu said in a speech published on the Web site of the Ministry of Foreign Affairs. “Despite the huge difficulty we faced after the international financial crisis, we have kept the yuan exchange rate relatively steady, which promoted the stability of the international financial system.”

Hu at Summit

Hu made the speech yesterday when he was attending a summit in Brazil involving the leaders of Brazil, Russia, India and China, according to the Web site. Chinese Foreign Ministry spokesman Ma Zhaoxu said today the value of the yuan wasn’t discussed at the meeting in Brasilia.

Twelve-month non-deliverable yuan forwards were little changed at 6.6140 per dollar, reflecting bets the currency will strengthen more than 3 percent from the spot rate of 6.8255, according to data compiled by Bloomberg.

China has pegged the yuan at about 6.83 against the dollar since July 2008, after allowing it to rise 21 percent in the previous three years.

The Australian dollar dropped 0.9 percent to 92.58 U.S. cents as China’s cabinet said “more forceful” steps are needed to cool speculation after property prices rose at a record pace in March. China is Australia’s biggest trading partner.

Yen Versus Euro

The yen posted a second weekly gain versus the euro, advancing 1.1 percent in the longest stretch of increases since the five days ended Feb. 5. Japan’s currency appreciated 1.1 percent against the dollar this week.

European Union finance ministers said Greece doesn’t have an immediate plan to trigger a rescue package even as the country’s bond yields rose this week to the highest level since before the bailout plan was announced.

Spanish Finance Minister Elena Salgado, whose government holds the EU presidency, said ministers won’t decide on any further action at a two-day meeting in Madrid that began today.

“The Greece story is limiting the euro’s capacity to rally,” said Alan Ruskin, head of currency strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “There is still a lack of enthusiasm for euros.”

Brazil’s real, the best-performing emerging-market currency in the past year, will surge more than 9 percent by the end of 2010 even as the central bank seeks to curb gains by purchasing dollars, according to Stone Harbor Investment Partners.

The currency will appreciate to 1.6 per dollar, driven by higher commodities prices, Pablo Cisilino, who manages $12.5 billion in emerging-market debt in New York, said in an interview.

The real declined 0.5 percent to 1.7576 after reaching 1.7320 yesterday, the strongest level since Jan. 11.

source

Philly Fed Index Indicates 8th Straight Month Of Growth In April

2010-04-16T05:55:00.000+03:00

Thursday morning, the Federal Reserve Bank of Philadelphia released its report on regional manufacturing activity in the month of April, showing that the expansion in the manufacturing sector is continuing for the eighth consecutive month.

The Philly Fed said its index of activity in the manufacturing sector rose to 20.2 in April from 18.9 in March, with a positive reading indicating growth in the sector. With the increase, the index came in slightly above economist estimates for a reading of 20.0.

A faster pace of new orders growth contributed to the improvement in the sector, as the new orders index rose to 13.9 in April from 9.3 in March.

On the other hand, the shipments index slipped to 5.6 in April from 13.6 in the previous month, although it remained positive.

The report also showed a notable increase by the inventories increase, which rose to a positive 2.0 in April from a negative 11.0 in March, indicating a turnaround in inventories. The inventories index has now recorded positive readings in two of the last three months.

The Philly Fed also said that firms' responses continue to suggest that labor market conditions are improving, although the number of employees index slipped to 7.3 in April from 8.3 in March.

With regard to inflation, the report showed that the prices paid index rose to 42.7 in April from 38.6 in March, while the prices received index edged up to a positive 1.0 in April from a negative 0.4 in the previous month.

Looking ahead, the future general activity index fell to 44.2 in April from 52.0 in March, but it remained positive for the sixteenth consecutive month.

"Bottom line," said Peter Boockvar, equity strategist for Miller Tabak, "manufacturing remains the key source of strength in this recovery and today's data confirms that."

Earlier in the day, a report released by the New York Federal Reserve showed that conditions for New York State manufacturers improved at a rapid pace in April, with the regional index of activity in the sector rising by much more than economists had expected.

The New York Fed said its general business conditions index jumped to 31.9 in April from 22.9 in March, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting a much more modest increase to a reading of 24.0.

Yen, Dollar Rise as Renewed Greece Concerns Spur Safety Demand

2010-04-16T05:47:00.001+03:00

April 16 -- The yen and the dollar strengthened as prospects Greece will struggle to rein in the euro region’s widest budget deficit spurred demand for safer assets.

The common currency was set for its second week of losses against the yen as the extra yield investors demand to hold Greek 10-year bonds over German bunds widened to the most since Greece won a 45 billion euro ($61 billion) bailout package on April 11. The yen and Singapore’s dollar were poised for weekly gains versus the dollar on speculation China will scrap the yuan’s peg to deal with accelerating economic growth.

“Risk appetite is being tempered by a flaring up of concerns over European sovereign risk,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “This may limit near-term gains in the euro, and underpin demand for ‘safe haven’ currencies like the dollar and the yen.”

The dollar was at $1.3553 per euro as of 10:23 a.m. in Tokyo from $1.3573 yesterday in New York. The yen traded at 125.65 per euro from 126.27 yesterday. The yen was at 92.69 per dollar from 93.03, heading for a 0.5 percent advance this week.

The Singapore dollar rose 0.9 percent this week to S$1.3767.

Greek Prime Minister George Papandreou yesterday asked for a meeting with the European Union, the International Monetary Fund and the European Central Bank. Talks will begin in Athens on April 19.

Greece Concerns

The government’s request came after the yield on Greece’s benchmark 10-year government bond surged to as high as 7.381 percent yesterday, higher than the level before the rescue package was announced on April 11.

The premium investors demand to buy Greek debt over comparable German bonds has more than doubled since Dec. 1 on concern that Greece would struggle to trim the deficit and fund its rising debt. The prospect of a euro-region country defaulting or needing a bailout contributed to the euro declining more than 5 percent this year and raised the borrowing costs for other EU nations with large deficits.

The euro region is aiming to prevent the first default of a member nation and offered to put up two-thirds of the package to sustain Greece and protect the single currency. Greece needs to raise 11.6 billion euros by the end of May, and Papandreou has said borrowing at current market interest rates is “unsustainable.”

“It appears just a matter of time before the backstop packages turn into bailout ones for Greece,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. “Markets hang on every announcement around this and the euro is eventually likely to be hung because of it.”

Yuan Policy

Asian currencies rose against the dollar this week as traders bet the yuan may rise more than 3 percent in the next 12 months after China’s economy expanded at the fastest pace in almost three years.

Yuan forwards were at 6.6125 per dollar, compared with 6.6130 yesterday. China has pegged its currency at about 6.83 against the dollar since July 2008, after allowing it to rise 21 percent in the previous three years.

Speculation about China’s currency policy intensified after U.S. Treasury Secretary Timothy F. Geithner had an unscheduled meeting with Chinese Vice Premier Wang Qishan in Beijing on April 8 and delayed a report which could brand the nation a currency manipulator. In Singapore, the central bank this week announced a one-time revaluation.

“China may revalue the yuan sooner rather than later as part of its ongoing exit from stimulus policies,” said Toshiya Yamauchi, senior foreign-exchange analyst in Tokyo at online currency trading company Ueda Harlow Ltd. “This will also fuel some upward pressure on the yen.”

The Chinese economy grew 11.9 percent from a year earlier, the biggest gain since the second quarter of 2007, the statistics bureau said in Beijing yesterday.

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Euro Will Drop to $1.19 by Next Year on Greece Crisis, BNP Says

2010-04-15T07:38:00.000+03:00

The euro will drop by the middle of next year to $1.19, a level last seen in March 2006, as government debt forces the European Central Bank to keep benchmark rates at record lows, according to BNP Paribas SA.

The 16-nation currency has fallen 4.6 percent versus the dollar this year on concern Greece will be unable to finance a budget deficit that is more than four times the European Union’s limit of 3 percent of gross domestic product. The median forecast of analysts in a Bloomberg survey is for the euro to trade at $1.33 in 2011.

“A program of severe fiscal consolidation is required, which will result in significant deflationary pressure,” currency strategists at BNP Paribas wrote in a note to clients today. “The ECB is still a long way from hiking interest rates, with a rise in the refinancing rate from the current 1 percent unlikely until the second half of 2011.”

The common currency rose to a three-week high of $1.3692 on April 12 after European governments offered Greece over the weekend a rescue package worth as much as 45 billion euros ($61 billion).

Germany’s parliament will probably be given a vote on any financial aid for Greece, the Finance Ministry said today, risking a showdown with lawmakers. Greek Prime Minister George Papandreou may be forced to activate the emergency-aid package within two weeks, Fitch Ratings Director Christopher Pryce said.

“We expect any euro recovery to remain limited,” the BNP analysts wrote. “Many uncertainties regarding the aid package for Greece remain, which is likely to keep international investors cautious about committing funds to European asset markets.”

The ECB will raise its benchmark interest rate by a quarter-percentage point to 1.25 percent during the first quarter of 2011, according to the weighted average of economists in a Bloomberg survey. The Federal Reserve will boost its target by the same amount in the third quarter of 2010, according to the weighted average in a separate Bloomberg survey.

Yen Drops for Sixth Day Versus Euro on Recovery, Risk Appetite

2010-04-15T07:34:00.000+03:00

April 15 -- The yen fell for a sixth day versus the euro, the longest drop since January, as signs the global economy is gaining traction boosted demand for riskier assets.

The yen weakened versus all 16 major counterparts after China’s economy grew at the fastest pace in three years and before data forecast to show manufacturing in the Philadelphia region expanded. The greenback was near a 22-month low versus Canada’s dollar on bets Federal Reserve officials will reiterate they expect to keep interest rates near zero. South Korea’s won rose to its highest since the September 2008 collapse of Lehman Brothers Holdings Inc. as investors bought the nation’s stocks.

“With the slew of economic data signaling the expansion of the global economy and with liquidity remaining ample, risk trades will remain in vogue,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “This trade will encourage capital flows into riskier assets and away from funding currencies such as the yen.”

The yen dropped to 127.49 per euro as of 12:58 p.m. in Tokyo from 127.29 in New York yesterday, when it reached 127.68, the weakest level since April 5. The dollar was at $1.3649 per euro from $1.3653 yesterday. It reached $1.3692 on April 12, the weakest level since March 18.

The U.S. currency traded at 93.41 yen from 93.23 yen. The greenback fetched C$0.9974 from C$0.9986 yesterday, when it declined to C$0.9954, the lowest level since June 2008.

The MSCI Asia Pacific Index advanced 0.7 percent and the Nikkei 225 Stock Average gained 0.9 percent.

China’s Economy

China’s gross domestic product grew 11.9 percent in the first quarter from a year earlier, the statistics bureau said at a briefing in Beijing today. That was more than the median 11.7 percent estimate in a Bloomberg News survey of 24 economists. Consumer prices rose 2.4 percent in March from a year earlier, today’s data showed, after a 2.7 percent gain in February. Economists forecast a 2.6 percent increase.

“Stronger economic growth and lower inflation in China are very supportive of investor risk appetite and commodity prices,” said John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd. “The Australian dollar is likely to strengthen, while ‘safe haven’ currencies such as the dollar and the yen will probably weaken.”

Australia’s dollar advanced to 87.28 yen from 87.17 yen yesterday, and fetched 93.46 U.S. cents from 93.51 cents.

U.S. Data

The Federal Reserve Bank of Philadelphia’s general economic index rose to 20.0 in April from 18.9 in the previous month, according to a separate survey before figures today. Readings greater than zero signal growth.

The Dollar Index traded near a four-week low on prospects that Fed officials will maintain borrowing costs near zero.

Fed Chairman Ben S. Bernanke said in testimony to Congress’s Joint Economic Committee yesterday that policy makers have “stated clearly” that interest rates will be very low for an “extended period.” Atlanta Fed President Dennis Lockhart and San Francisco Fed President Janet Yellen speak today. Fed Governor Kevin Warsh speaks tomorrow.

“Fed policy makers, particularly Bernanke, are reiterating that extremely low rates will be needed for an extended period,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Given this view, the dollar is likely to weaken.”

Futures on the CME Group Inc. exchange showed a 52.1 percent chance the U.S. central bank will raise its target rate for overnight bank lending by at least a quarter-percentage point by November, down from 54.4 percent a week earlier.

Dollar Index

The Dollar Index, which tracks the dollar against those of six major U.S. trading partners, bought 80.206 from 80.190 yesterday when it declined to 80.031, the lowest level since March 18.

South Korea’s won gained for a second day and the Kospi index of shares climbed to a 21-month high as funds based abroad bought more local equities than they sold on all but two days since the end of February. Moody’s Investors Service yesterday raised Korea’s sovereign credit ratings as a report showed the unemployment rate declined in March by the most in more than 10 years. The Bank of Korea also said it will maintain its accommodative policy for the time being.

“We’re seeing investors having a bullish view on Korea’s economic data, which has been consistent with the recovery,” said Mitul Kotecha, Hong Kong-based head of global currency at Credit Agricole CIB. “The question now is what happens in terms of policy, whether we will see a move in interest rates. I see that potentially happening in June.”

The won appreciated 0.3 percent to 1,108.50 per dollar, according to data compiled by Bloomberg. It reached 1,107.60, the highest level since Sept. 15, 2008.

Benchmark Currency Rates

2010-04-15T07:33:00.000+03:00

Benchmark Currency Rates

	USD	EUR	JPY	GBP	CHF	CAD	AUD	HKD
HKD	7.761	10.5914	0.0831	12.0337	7.3793	7.7806	7.2483
AUD	1.0707	1.4612	0.0115	1.6602	1.0181	1.0734		0.138
CAD	0.9975	1.3613	0.0107	1.5466	0.9484		0.9316	0.1285
CHF	1.0517	1.4353	0.0113	1.6307		1.0544	0.9822	0.1355
GBP	0.6449	0.8801	0.0069		0.6132	0.6466	0.6023	0.0831
JPY	93.413	127.4807		144.8415	88.8193	93.649	87.2421	12.0363
EUR	0.7328		0.0078	1.1362	0.6967	0.7346	0.6844	0.0944
USD		1.3647	0.0107	1.5506	0.9508	1.0025	0.9339	0.1289

Above is a chart designed to display the cross rates of eight major world currencies. Scan across the chart to find the rate of exchange between any two of these currencies.

Currency key



USD:	U.S. Dollar	CAD:	Canadian Dollar
GBP:	British Pound	EUR:	Euro
CHF:	Swiss Franc	AUD:	Australian Dollar
HKD:	Hong Kong Dollar	JPY:	Japanese Yen

Unless indicated otherwise: intraday data is at least 15 minutes delayed; mutual fund NAVs are updated at the close of every market day; all prices are in the local currency; Time is ET.

Dollar’s First Monthly Gain Since June Trims 2009 Loss to 4.2%

2010-01-01T21:06:00.000+02:00

Jan. 1 -- The dollar posted its first monthly gain since June versus the currencies of major U.S. trading partners as the Federal Reserve moved closer to withdrawing stimulus measures that helped cause the greenback to fall 4.2 percent for the year.

The dollar advanced to a three-month high against the yen and rallied versus the euro after the Fed said at the conclusion of its Dec. 16 meeting that job losses are “abating.” The greenback pared its annual decrease against the Australian dollar and Norwegian krone as a surge in Treasury yields made the U.S. currency less attractive as a funding vehicle for the purchase of higher-yielding assets.

“We are seeing the dollar recover probably into the first quarter of next year,” said Thanos Papasavvas, who helps manage more than $5 billion in London, in an interview on Bloomberg Radio. “We would expect the unemployment rate to start to stabilize.”

The trade-weighted Dollar Index, which the ICE futures exchange uses to track the greenback against currencies including the euro, yen and pound, increased 4 percent in December to 77.860 yesterday. It was the first monthly advance in six months and the biggest gain since January 2009.

The index finished the decade down 24 percent as U.S. dominance of the global economy diminished and emerging markets grew. The introduction of the euro in January 1999 created an alternative to the dollar as a global reserve currency.

Foreign Reserves

The U.S. currency’s share of foreign reserves held by global central banks dropped to 61.6 percent during the quarter ended Sept. 30, the lowest on record, from 71 percent a decade ago, the International Monetary Fund reported on Dec. 30. The euro’s share rose to 27.7 percent, from 17.9 percent.

“You might get periodic episodes of a little bit of dollar strength,” said Tom Fitzpatrick, chief technical analyst at Citigroup Inc. in New York, in an interview on Bloomberg Radio, “But we really don’t feel any of the underlying parameters for dollar weakness has changed that much.”

The dollar appreciated 4.8 percent to $1.4321 per euro on Dec. 31, from $1.5005 at the end of November, paring its loss in 2009 to 2.5 percent. The U.S. currency advanced 7.7 percent to 93.02 yen, from 86.41, and gained 2.6 percent for the year. It touched 93.15 yesterday, the highest level since Sept. 7. The euro increased 2.7 percent to 133.20 yen in December and advanced 5.1 percent in 2009.

Barclays’s View

Barclays Plc, the world’s third-largest currency trader, raised its three-month forecast for the dollar against the euro on Dec. 10 to $1.45 from $1.52 and its six-month outlook to $1.40 from $1.45.

The median forecast of 43 economists surveyed by Bloomberg News is for the dollar to trade at $1.51 by the end of March and $1.49 by June 30. The dollar will trade at 90 yen by the end of March and 93 in six months, according to economists.

The yen was the only major currency to fall against the dollar for the year, weakening on speculation the Fed will phase out stimulus measures while the Bank of Japan steps up efforts to fight deflation.

The yield premium on 10-year Treasury notes over similar- maturity Japanese bonds rose yesterday to the highest level in more than two years, making U.S. assets more attractive than Japan’s securities.

The Brazilian real, South African rand, the Australian and New Zealand dollars and the Norwegian krone were the best performers against the greenback in 2009 among major currencies, rising at least 20 percent as signs of global recovery spurred investors to sell dollars and buy higher-yielding assets.

2009 Returns

Buying the five currencies with funds borrowed in the dollar and yen would have returned 34 percent in 2009, according to Bloomberg data. The same trade would have lost 26 percent in 2008.

The Aussie and krone fell in December against the dollar after the U.S. Labor Department reported the fewest monthly job losses since before the recession, fueling speculation the Fed will remove stimulus measures and prepare investors for higher interest rates in 2010.

The Fed held the target rate for overnight lending between banks at zero to 0.25 percent on Dec. 16 while saying “economic activity has continued to pick up.”

Futures trading in Chicago showed yesterday a 62 percent chance that the Fed will raise its target lending rate by at least a quarter-percentage point by its June meeting, up from 31 percent odds a week ago.

U.S. employers eliminated 1,000 jobs in December after cutting 11,000 in the previous month, according to the median forecast of 58 economists in a Bloomberg News survey. The report from the Labor Department is due on Jan. 8.

“The surge in growth can continue for a while,” said David Tien, senior quantitative researcher at Fischer Francis Trees & Watts in New York, which has $27 billion in assets. “The key question is against which currency the dollar’s gain can be the most pronounced. We think it’s the yen.”

Dollar Rises to Three-Month High on Recovery Signs, Fed Outlook

2009-12-30T19:22:00.000+02:00

Dec. 30 -- The dollar climbed to a three-month high against the yen on speculation the Federal Reserve will withdraw stimulus measures as the economy recovers, pushing bond yields higher.

The dollar rose versus the euro and headed for its first monthly advance since June as an index of U.S. business strength reached the highest level in almost four years. Currencies of raw-material producers including the Canadian and Australian dollars weakened as commodity companies led declines by stocks.

“The massive monetary easing is beginning to show up in terms of an improved economy,” said Joseph McAlinden, a fund manager at Catalpa Capital LLC in New York, in an interview on Bloomberg Television. “The foreign-exchange market should begin to look ahead to a better return on dollar assets. The dollar is a strong currency for 2010.”

The dollar gained 0.6 percent to 92.52 yen at 10:10 a.m. in New York, from 92 yesterday. It touched 92.56, the highest level since Sept. 9. The dollar appreciated 0.4 percent to $1.43 per euro, from $1.4354. It reached $1.4291, the strongest since Dec. 23. The euro increased 0.2 percent to 132.29 yen, from 132.05.

The Canadian currency declined 1 percent to C$1.0540 per U.S. dollar, and the Australian currency weakened 0.2 percent to 89.31 U.S. cents. The MSCI World Index fell 0.5 percent, with the materials sub-index declining 1 percent, the biggest drop among the 10 groups that make up the benchmark stock gauge.

Dollar Versus Euro

The dollar has appreciated 4.9 percent versus the euro this month, trimming its 2009 decline to 2.3 percent. The greenback has fallen 30 percent against the euro in the past 10 years.

The Institute for Supply Management-Chicago Inc. said today its business barometer increased this month to 60, the highest level since January 2006. The median estimate of 53 economists in a Bloomberg survey was for a reading of 55.1. Readings above 50 signal expansion.

The dollar rose as the yield premium offered by 10-year Treasury notes over similar-maturity Japanese bonds stayed near the widest in more than two years, making U.S. debt more appealing than Japan’s securities. It reached 2.53 percentage points on Dec. 24, the highest level since December 2007 based on closing prices, and was at 2.50 percentage points today.

“The markets are anticipating that the Fed will raise rates,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “There’s little chance of Japanese monetary authorities shifting their policy towards tightening. That’s positive for the dollar.”

Demand for the yen waned as Reuters reported that Standard & Poor’s said Japan’s AA credit rating could be threatened if policies fail to stabilize and gradually reduce the nation’s huge debt burden.

S&P is focusing on Japan’s medium-term fiscal trajectory and the feasibility of the government’s policy for fiscal consolidation, Takahira Ogawa, director for sovereign ratings at S&P in Singapore, said two weeks ago. The deteriorating trend for Japan’s credit quality doesn’t warrant a change in the nation’s rating outlook or a downgrade, he said.

Dollar May Extend Gain Versus Canadian Dollar on Oil Decline

2009-08-26T01:25:00.000+03:00

Aug. 26 -- The dollar may extend its gain versus the Canadian dollar, the Norwegian krone and the Brazilian real after a drop in oil prices reduced demand for the currencies of commodity producers.

The greenback pared its decline versus the euro yesterday as the Treasury’s sale of two-year notes received higher demand from a group including foreign central banks. The yen appreciated against all of its major counterparts including the real and South African rand as U.S. stocks pared increases, encouraging investors to take refuge.

“We saw the Canadian dollar under a little bit of pressure in the early afternoon here as the U.S. dollar was posting some decent gains,” said JP Blais, vice president of foreign- exchange sales at BMO Capital Markets in Toronto. “With the equity market losing a little bit of the steam that it had, oil is having a harder time making some new highs.”

The dollar was little changed at $1.4298 per euro at 6:15 a.m. in Tokyo. The U.S. currency traded at 94.19 yen after dropping 0.4 percent. The yen was at 134.67 per euro following an increase of 0.5 percent.

The Canadian dollar declined for the first time in six days, weakening 1 percent to C$1.0868 per U.S. dollar. The drop this week will probably be capped at C$1.0975 versus the greenback, according to Blais.

The currency known as the loonie also fell as Timothy Lane, deputy governor of the Bank of Canada, said in a speech in Kingston, Ontario, that the strength of the currency presented an “important risk” to growth. The Canadian dollar advanced 20 percent from a four-year low reached in March.

Weaker Krone

The krone dropped 0.7 percent to 6.0501 versus the dollar, while the real lost 1.1 percent to 1.8410. Crude oil for October delivery decreased 3.5 percent to $71.76 a barrel, paring its rally this year to 60 percent. Norway is the fifth-largest oil producer, and oil is Canada’s biggest export. Commodities account for two-thirds of Brazil’s exports.

The yen appreciated 1.5 percent to 50.66 versus the real and 0.5 percent to 12.05 against the rand as U.S. stocks pared gains, reducing demand for higher-yielding assets. Japan’s target lending rate of 0.1 percent compares with 8.75 percent in Brazil and 7 percent in South Africa.

The euro rose earlier versus the dollar on speculation a German report today will show the fifth monthly expansion in business confidence. Government spending helped lift Germany out of its worst recession since World War II, according to a Federal Statistics Office report yesterday confirming a 0.3 expansion in the second quarter.

‘European Recovery’

“I’m more interested in what’s happening in Europe,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The U.S. is going to settle for the next few months. The European recovery is coming more quickly than people expected.”

The dollar declined to near the lowest level versus the euro in two weeks on reduced demand for safety as U.S. economic reports showed a gain in consumer confidence and slower drop in home prices. The dollar traded within a fifth of a cent of $1.4376 reached on Aug. 21, the weakest since Aug. 7.

“This data was firm,” said Meg Browne, a currency strategist at Brown Brothers Harriman & Co. in New York. “The euro got to that $1.4360 level, it wasn’t really able to break to new highs.”

The S&P/Case-Shiller index of property values in 20 U.S. metropolitan areas decreased 15.4 percent in June from a year earlier after a 17 percent drop in the 12 months ended in May. The median forecast of 31 economists in a Bloomberg News survey was for a 16.4 percent reduction.

The New York-based Conference Board reported that its consumer confidence index increased to 54.1 in August from 47.4 in the previous month. The median forecast of 67 economists in a separate Bloomberg News survey was for an advance to 47.9 from a previously reported 46.6.

Indirect bidders, which include foreign central banks, bought 49.4 percent of the $42 billion in two-year Treasury notes auctioned today, up from 33 percent in July.

Dollar Rises as Stocks Erase Gains, Reviving Demand for Safety

2009-08-25T00:04:00.001+03:00

Aug. 24 -- The dollar advanced against the euro for the first time in five days as U.S. stocks erased gains, reviving demand for relative safety.

The pound declined to an 11-week low versus the euro as two-year gilts yielded near the least relative to comparable- maturity German notes since January. The euro earlier gained versus the yen as a report showed European industrial orders climbed the most in 19 months.

“People are seeing negative equities and running back to the safe-haven guys,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “This market’s thin enough that you could move the market” just by closing some trades.

The U.S. currency appreciated 0.2 percent to $1.4296 per euro at 4:09 p.m. in New York, from $1.4326 on Aug. 21. The yen traded at 135.14 against the euro, compared with 135.21. The dollar rose 0.2 percent to 94.55 yen, from 94.38.

Stocks erased advances as financial institutions slumped after SunTrust Banks Inc. said lenders face more credit losses and commercial real estate may falter through 2010. The Standard & Poor’s 500 Index was little changed after rallying 2.2 percent last week.

Sterling dropped against 14 of the 16 most-traded counterparts tracked by Bloomberg on speculation the Bank of England will depress yields on gilts, making the U.K.’s assets less attractive to foreign investors.

The U.K. two-year note yielded 44 basis points less than the equivalent German security. The spread reached 48 basis points on Aug. 21, the widest since Jan. 2.

Pound Versus Euro

Sterling dropped as much as 0.6 percent to 87.28 pence per euro, the weakest level since June 8. The pound dropped 0.6 percent to $1.6411.

The euro erased its gains versus the yen today as Treasury yields fell and the European Central Bank Governing Council member Yves Mersch warned against “succumbing to optimism” with regard to the economic situation, Luxembourg’s Wort reported, citing an interview to be published tomorrow. fxisforex.blogspot.com

Orders at industrial companies rose 3.1 percent in June from the prior month, the biggest increase since November 2007, the European Union’s statistics office said. The production and income category of the Chicago Fed’s National Activity Index increased last month, a report showed.

German business confidence probably advanced in August for a fifth month, according to the median forecast of 41 analysts in a Bloomberg News survey before the Munich-based Ifo institute’s report on Aug. 26.

‘Key’ Ifo Data

“We’ve got Ifo coming out this week, and that’s going to be quite key,” said Lauren Rosborough, a currency strategist in London at Westpac Banking Corp. “I get the feeling that improvement in Europe has not been completely priced in.”

The euro will probably gain versus the dollar, approaching $1.4450 in a month, she predicted.

Speaking at the annual central bankers’ symposium in Jackson Hole, Wyoming, last week, Bernanke and ECB President Jean-Claude Trichet said the global economy is pulling out of its deepest recession since the 1930s.

“Prospects for a return to growth in the near term appear good,” while “critical challenges remain,” including possible further losses for financial firms, Bernanke said Aug. 21.

Trichet said at the conference the following day there are signs confirming that the economy “is starting to get out of the period of freefall.” This “does not mean at all that we do not have a very bumpy road ahead of us,” he said.

“Bernanke was the cheerleader of growth, Trichet expressed cautiousness on the growth outlook,” Hans-Guenter Redeker, the London-based global head of currency strategy at BNP Paribas SA, France’s biggest bank, wrote in a note today.

The global economy is showing “clear” signs of a rebound, and interest rate policies are likely to stay accommodative for many months, John Lipsky, the International Monetary Fund’s first deputy managing director, wrote on the Washington-based lender’s Web site today.

Euro Rises Against Yen as German Confidence Beats Estimates

2009-08-18T17:21:00.000+03:00

Aug. 18 -- The euro rose for the first time in three days against the yen as a report showed German investor confidence jumped to the highest level in more than three years, adding to evidence an economic recovery is taking shape.

The pound increased from near a one-month low versus the dollar after a report showed the U.K. inflation rate was higher in July than forecast as the nation’s recession eased. The dollar erased its loss against the euro as a report showed U.S. housing starts unexpectedly dropped, reviving demand for the greenback’s safety.

“The German confidence report is a positive for the euro, suggesting Europe is coming out of recession,” said Sacha Tihanyi, a currency strategist at Scotia Capital Inc. in Toronto. “Then the currency market took some negative tone after the housing data, keeping dollar selling much restrained. You get a feeling the market is questioning whether there will be a further sustained move in risky assets on the upside.”

Europe’s currency increased 0.2 percent to 133.31 yen at 9:58 a.m. in New York, from 133.08 yesterday. The euro was little changed at $1.4081 after earlier rising as much as 0.5 percent. It touched $1.4046 yesterday, the lowest level since July 30. The yen weakened 0.1 percent to 94.63 per dollar, from 94.50 yesterday, when it reached 94.21, the strongest level since July 29.

The Mannheim-based ZEW Center for European Economic Research said its index of investor and analyst expectations for Germany increased this month to 56.1 from 39.5 in July. The median forecast of 35 economists in a Bloomberg News survey was for the index to rise to 45.

Germany’s Growth

Germany’s economy grew 0.3 percent in the second quarter, bringing a halt to the worst recession since World War II sooner than forecasters expected, a report showed last week.

“Recent data shows Europe can benefit from the global economic recovery,” said Marcus Hettinger, a foreign-exchange strategist in Zurich at Credit Suisse Group AG, Switzerland’s largest bank by market value. The common currency may advance to $1.50 in three months, Hettinger said.

The dollar pared its gain versus the yen after the Commerce Department reported that U.S. housing starts unexpectedly declined to an annual rate of 581,000 last month from a revised 587,000 pace in June. The median forecast of 70 economists surveyed by Bloomberg News was for an increase to 599,000 from a previously reported 582,000.

“We’ve been used to a bit more positive surprises on the housing front,” said Brian Kim, currency strategist at UBS AG in Stamford, Connecticut. “You’re seeing some rotations following that, potentially away from the euro and into Treasuries. It’s an environment where people are still skittish, and the summer liquidity just causes more knee-jerk reactions than usual.”

U.S. Treasuries

Treasuries pared losses on the housing data, with the yield on the benchmark 10-year note little changed at 3.47 percent and the rate on the two-year security at 1.02 percent.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the dollar against currencies of six major U.S. trading partners such as the euro and yen, was little changed at 79.291 after earlier falling as much as 0.3 percent.

Construction of single-family houses, which account for 75 percent of the industry, rose 1.7 percent to a 490,000 rate, today’s Commerce Department report also showed.

Prices paid to U.S. producers decreased 0.9 percent in July after rising 1.8 percent in the previous month, the Labor Department said. The median forecast of 70 economists surveyed by Bloomberg News was for a decrease of 0.3 percent.

Stronger Pound

Sterling advanced versus the dollar and euro after a U.K. Office for National Statistics report showed the inflation rate unexpectedly held at 1.8 percent in July, exceeding the median forecast for a reduction to 1.5 percent. The rate will probably drop below 1 percent later this year and may miss the central bank’s goal in three years, Bank of England projections show.

The pound appreciated 0.6 percent to $1.6451 after reaching $1.6276 yesterday, the lowest level since July 17. Sterling reduced its decline since Aug. 5 to 3.2 percent. The currency slumped after policy makers said on Aug. 6 that the recession was deeper than anticipated. The euro fell 0.6 percent to 85.64 British pence today.

The dollar is in a downtrend after falling below 94.76 yen, a key price based on the Fibonacci sequence of numbers, according to Yoh Nihei, trading group manager at Tokai Tokyo Securities Co. That level is a 50 percent retracement from a two-month high of 97.79 reached on Aug. 7 to a six-month low of 91.74 reached on July 13.

The next level of support will be 94.05, which represents a 38.2 percent retracement of the decline, Nihei said. Support is where buy orders are clustered.

“That’s the support level the dollar failed to break in late July,” Tokyo-based Nihei said yesterday.

Yen May Extend Gains as Risk Appetite Drops on U.S. Services

2009-08-06T02:29:00.001+03:00

Aug. 6 -- The yen may rise further as demand for higher-yielding currencies fell after reports showed U.S. service industries contracted last month at a faster pace and companies eliminated more jobs than economists forecast.

The pound increased yesterday to its highest level against the dollar in more than nine months as U.K. services industries grew in July by the most in 1 1/2 years. The Bank of England and the European Central Bank will probably keep their benchmark lending rates at record lows at their policy meetings today, according to economists surveyed by Bloomberg News.

“The desire for risk is so high that it just needs a pause,” said John Taylor, chief executive officer in New York at FX Concepts LLC, in an interview on Bloomberg Television. “People looking for jobs may find it difficult for years.” Taylor’s firm has $9 billion under management.

The yen traded at 136.77 against the euro at 6:04 a.m. in Tokyo, after rising 0.3 percent yesterday. Japan’s currency was at 94.93 per dollar, following a 0.3 percent increase yesterday. The dollar was little changed at $1.4410 per euro after touching $1.4447, the weakest level since Dec. 18.

Japan’s currency increased 1.1 percent to 11.99 against the South African rand and gained 0.6 percent to 13.30 versus the Swedish krona on bets yesterday’s U.S. economic reports will discourage Japanese investors from buying higher-yielding assets overseas. Japan’s 0.1 percent target lending rate compares with 7.5 percent in South Africa and 0.25 percent in Sweden.

U.S. Stocks

The Standard & Poor’s 500 Index fluctuated between a gain and a loss after a four-day rally that pushed the gauge of U.S. stocks above 1,000 on Aug. 3 for the first time since November. The dollar touched the weakest level this year versus the euro as U.S. stocks trimmed losses.

Mexico’s peso strengthened yesterday beyond 13 versus the dollar for the first time since June 1 after Moody’s Investors Service affirmed the government’s bond ratings and stable outlook, damping speculation the nation will suffer its first downgrade since 1995. Moody’s kept Mexico’s foreign debt rating at Baa1, the third-lowest investment-grade level, saying the government’s commitment to fiscal discipline offset concern growth is weak.

Morgan Stanley recommended yesterday that its clients add to their bets that the peso will advance versus the dollar, saying the Moody’s affirmation “adds to the positive momentum.” Morgan Stanley expects a “longer-term” move to 12 per dollar, strategists wrote in a research note. The peso gained as much as 1 percent to 12.9981.

Stronger Pound

The pound climbed as much as 0.6 percent to $1.7043, the highest level since Oct. 21, as a report showed U.K. services industries grew last month by the most in 1 1/2 years.

An index of services rose to 53.2 last month from 51.6 in June, Markit said yesterday in London. Factory output climbed 0.4 percent in June, the U.K.’s statistics office said.

Sterling gained 16 percent versus the dollar and 13 percent against the euro this year.

Eight of 12 primary dealers surveyed by Bloomberg said the U.K. central bank will end a five-month program of bond purchases after announcing a pause at its policy meeting today. Four -- BNP Paribas SA, RBC Capital Markets, Merrill Lynch and UBS AG -- predict policy makers will increase purchases after the bank spent 125 billion pounds ($212 billion) of the 150 billion pounds authorized by the Treasury in March.

The Bank of England will keep its main rate at 0.5 percent, while the ECB will probably maintain its benchmark at 1 percent, according to the median forecast of economists in separate Bloomberg News surveys.

U.S. Services

The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which make up almost 90 percent of the economy, fell to 46.4 in July from 47 in the previous month, according to the Tempe, Arizona-based group. Fifty is the dividing line between expansion and contraction.

U.S. companies cut an estimated 371,000 workers from payrolls last month after a revised reduction of 463,000 in June, ADP Employer Services reported yesterday. The median forecast of 30 economists in a Bloomberg News survey was for a drop of 350,000.

The Labor Department’s data on U.S. initial jobless claims for last week are due today, and its July payroll report will come tomorrow.

“It appears investors are positioning for a pullback in risk appetite,” said Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon Corp., the world’s largest custodial bank. “We haven’t seen concrete signs of a sustainable recovery.”

Yen, Dollar Advance as Lloyds Says Bad-Debt Provisions Increase

2009-08-05T12:25:00.000+03:00

Aug. 5 -- The yen and the dollar rose after Lloyds Banking Group Plc posted a first-half loss and increased the size of bad-debt provisions, boosting demand for the safety of the Japanese and U.S. currencies.

The Japanese currency rose against 14 of its 16 most-traded peers. London-based Lloyds said its total impairments in the first half were “significantly” higher at 13.4 billion pounds ($22.7 billion). The yen gained for a second day against the euro as Asian shares dropped and on speculation Japanese exporters took advantage of the yen’s 1.3 percent drop versus Europe’s currency this month to bring home funds.

“Banks in Britain and in the euro-zone probably still have a lot of bad loans, so this is a big risk to long positions in the euro,” said Michiyoshi Kato, senior vice president of foreign-currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest bank by assets. “It’s a situation where the euro” is easy to sell and the yen and the dollar to buy, he said. A long position is a bet an asset will rise.

Japan’s currency rose to 95.20 per dollar as of 9:48 a.m. in London, from 95.23 yesterday in New York. It advanced to 137 per euro, from 137.21. The dollar climbed to $1.4391 per euro, from $1.4408.

Lloyds, RBS

Lloyds reported a first-half proforma loss of 3.12 billion pounds. Royal Bank of Scotland Group Plc on Aug. 7 will report 6.4 billion pounds in provisions, up from 1.48 billion pounds a year earlier, according to analysts surveyed by Bloomberg.

RBS posted 31.9 billion pounds of writedowns and credit market losses from mid-2007 through March 31 and Lloyds reported 33 billion pounds, data compiled by Bloomberg show. Lloyds had 2.5 billion pounds of loan provisions in the first half of 2008.

The MSCI Asia Pacific Index of shares declined 1.1 percent in its second day of losses. Standard & Poor 500 Index futures dropped 0.3 percent.

“Players are looking at equity markets for direction so when stocks fall, the yen rises,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There’s a strong inverse relationship between the two. Some of this yen buying could also be from exporters.”

The euro-yen had a correlation of 0.9 with the MSCI Asia- Pacific excluding Japan Index in the past year, according to data compiled by Bloomberg. A value of 1 would mean the two move in lockstep.

U.S. Jobs Report

The Dollar Index traded near a 10-month low before payroll data by ADP Employer Services, the first of several U.S. jobs reports scheduled for the next three days.

U.S. companies cut an estimated 350,000 workers from payrolls in July after a reduction of 473,000 in June, according to a Bloomberg survey before the ADP report today. Data on U.S. initial jobless claims for last week will be announced on Aug. 6, and the Labor Department’s July jobs report is due Aug. 7.

“If this week’s events don’t dent expectations for a global economic recovery and risk appetite is sustained then the U.S. dollar will likely remain under pressure,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a note today.

The Dollar Index, which the ICE uses to track the dollar against currencies of six major U.S. trading partners, was at 77.711 from 77.765 yesterday. It reached 77.451 on Aug. 3, the least since Sept. 29.

Australian Dollar

The Australian dollar may fall against the yen this month, snapping its longest stretch of monthly gains since 2004, as Japanese trusts expect to raise less cash to buy foreign securities, RBC Capital Markets said.

Japanese mutual funds that aim to attract cash from investors to buy foreign securities, also known as Toshin, are likely to raise 50 billion yen ($525 million) in August, down from 200 billion yen on average between March and July, Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney, wrote in a note to clients today. Toshin issuance in February was 47 billion yen, she said.

“The rally in the Australian dollar versus the yen from its March lows coincided with a resurgence in Toshin issuance,” Trinh wrote. “Based on the pitiful issuance we expect for August, it suggests the Australian dollar could pull back sharply from current levels” toward 73 yen, she wrote.

Australia’s dollar weakened 0.5 percent to 79.98 yen. The so-called Aussie has strengthened 30 percent against the yen since March 1.

Yen Falls, Pound Advances as Banks Rally, Greenspan Optimistic

2009-08-03T15:22:00.000+03:00

Aug. 3 -- The yen declined and the pound rose after HSBC Holdings Plc posted an unexpected profit and former Federal Reserve Chairman Alan Greenspan said the most severe recession in at least five decades may be ending.

Japan’s currency fell against all its 16 most-traded counterparts on increased demand for higher-yielding assets as HSBC reported its results. U.S. manufacturing shrank in July at the slowest pace in almost year, a report from the Institute for Supply Management is forecast to show today.

“HSBC’s results were good compared to expectations, so that’s proven supportive to the pound and is dragging on the yen,” said Geoffrey Yu, a foreign-exchange strategist in London at UBS AG, which Euromoney Institutional Investor Plc ranks as the world’s second-biggest currency trader “Clients are skeptical about this rally but can’t afford not to be in it.”

The yen weakened 1 percent to 159.76 per pound at 7:12 a.m. in New York, from 158.23 on July 31. Japan’s currency dropped 0.5 percent to 135.70 per euro and slid 0.3 percent to 94.97 per dollar. The U.S. currency declined 0.2 percent to $1.4290 per euro, compared with $1.4257.

Economic growth may resume at a rate faster than most economists foresee, Greenspan said in an interview yesterday on ABC’s “This Week” program, predicting 2.5 percent in the current quarter.

The MSCI World Index of shares rose 1 percent, while Europe’s Dow Jones Stoxx 600 Index gained 1.7 percent.

The Institute for Supply Management’s U.S. factory gauge increased last month to 46.5, from 44.8 in June, according to the median forecast of 62 economists surveyed by Bloomberg. Readings less than 50 signal contraction. The report from the Tempe, Arizona-based institute is due at 10 a.m. New York time.

Pound Versus Euro

The pound rose for a sixth day against the euro, gaining to 84.89 pence as the U.K.’s Chartered Institute of Purchasing and Supply and Markit Economics said today manufacturing expanded in July for the first time in more than a year.

A gauge based on a survey of factories climbed to 50.8 from a revised 47.4 in June. The median forecast of 25 economists surveyed by Bloomberg News was for a reading of 47.8. Readings above 50 show expansion.

The FTSE 350 Banks Index rose 5.3 percent, the most since May 5, on HSBC’s results and as Barclays, the U.K.’s second- largest lender, said first-half earnings rose 10 percent and profit from investment banking almost doubled.

‘Economy Is Stabilizing’

“There are signs that the economy is stabilizing, and the market is right to feel reassured,” said Jane Foley, research director in London at Forex.com, an online currency trader.

The Dollar Index, which the ICE uses to track the U.S. currency against those of six major U.S. trading partners including the euro, reached 77.98, the lowest level since Dec. 18, on reduced demand for safety.

The U.S. economy shrank at a 1 percent annual pace in the second quarter, the Commerce Department reported July 31, better than economists forecast. Stabilization of housing markets and consumer spending, a lessening of financial turmoil and increased government spending all suggest the longest recession since the 1930s may be close to ending.

Currencies sensitive to raw material prices, including the Australian dollar, advanced as Nouriel Roubini, the New York University economist who predicted the financial crisis, told a mining conference in Australia that commodities may extend their rally in 2010 as the global recession abates.

Chinese Factories

China’s manufacturing expanded in July, a report showed today. The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 52.8, the highest level in a year, from 51.8 in June, CLSA Asia-Pacific Markets said. A government-backed index, released Aug. 1, also showed an expansion.

Futures traders trimmed bets the euro will gain against the dollar last week, figures from the Washington-based Commodity Futures Trading Commission showed. Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of July 28.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 20,287 on July 28, compared with net longs of 34,772 a week earlier.

Foreign-exchange traders are losing faith that Mexican President Felipe Calderon will push through the tax increases needed to rein in the budget deficit and stem a rout that has made the peso the worst-performing major currency against the dollar in the past year.

Options traders are more bearish on the peso over the next six months than 12 of the other 16 most-traded currencies against the U.S. dollar tracked by Bloomberg, according to derivatives known as risk-reversals. Morgan Stanley strategists say Mexico’s economy is headed for “unsustainable” deficits as oil output declines while RBC Capital Markets advises investors to sell the currency.

The peso was little changed at 13.1880 versus the dollar today after gaining 3.7 percent this year.

Dollar Weakens to Year Low as U.S. Economic Contraction Slows

2009-07-31T19:49:00.000+03:00

July 31 -- The dollar declined to the lowest level this year against six major U.S. trading partners after a report showed the U.S. economy shrank less than economists forecast, reducing the demand for the greenback as a refuge.

The Swedish krona advanced against the euro to the strongest level since December after a government report showed the economic contraction in the Scandinavian country slowed in the second quarter. The U.S. currency headed for a fifth month of declines against the pound, its longest run in five years, after a U.K. survey showed consumer confidence held at the highest level since April 2008.

“The typical pattern is that good economic news is bad for the dollar,” said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. “Equities are marching up. We had a better than expected GDP, which set the stage for all this.”

The dollar fell 1.4 percent 1.4271 per euro as of 12:29 p.m. in New York, from $1.4075 yesterday, and was at 94.58 yen from 95.56 yen. The Japanese currency weakened 0.3 percent to 134.95 per euro.

The Dollar Index, which the ICE futures exchange uses to track the currency against counterparts including the yen, pound and Swedish krona, touched 78.22, the lowest since Dec. 18.

The dollar’s decline versus the yen accelerated after running into stops, or pre-set orders, to sell the greenback, above 95 yen, according to Shaun Osborne, a currency strategist at TD Securities Inc. in Toronto.

‘Some Restraint’

U.S. gross domestic product contracted at a less-than- projected 1 percent annual rate after shrinking 6.4 percent in the prior three months, the most in 27 years, Commerce Department figures showed. Inventories dropped at a record $141.1 billion annual pace, after a $113.9 billion decline.

“The inventories data shows stunning drawdowns in both Q1 and Q2,” wrote Alan Ruskin, head of international currency strategy in North America at RBS Securities Inc. in Greenwich, Connecticut. “This bodes very well for H2 GDP data since the change in the change of inventories should be very positive. Obviously there will be some restraint to this trade because of month-end flows, but I expect players will buy risk trades again early next week.”

The Swedish krona touched 10.3 per euro, the strongest since Dec. 1 after Statistics Sweden said the country’s gross domestic product contracted an annual, work-day adjusted 6.2 percent, from a decline of 6.5 percent in the previous quarter.

The krona has gained 4.8 percent against the euro this month and 5.6 percent against the dollar. It is the second best performer among the 16 major currencies after the Canadian dollar, which rose 7.6 percent against the dollar in July.

‘Ahead of Fundamentals’

Canada’s dollar traded at C$1.081 against the greenback, near the strongest since October, even after a government report showed the nation’s economy shrank a more-than-forecast 0.5 percent in May. The currency, known as loonie, touched C$1.075 on July 28, the strongest level since Oct. 3.

“There’s disconnection between market optimism and numbers on the ground,” said Steven Englander, chief U.S. currency strategist at Barclays Plc in New York. “The Canadian dollars running ahead of fundamentals. We had some pretty nasty number out of Canada recently.”

The Canadian currency will decline to C$1.13 in a month, according to Barclays.

Sterling gained 0.4 percent to $1.6557 after GfK NOP said that an index of consumer sentiment in the U.K. was unchanged in July at minus 25. The reading is up from minus 39 a year earlier, adding to signs that the U.K.’s worst slump in a generation is easing. The currency was up 0.5 percent in July.

Implied Volatility

The Polish zloty advanced a record 8 percent this month to 2.93 per euro, as the country posted the only positive first- quarter growth rate among European Union’s 10 eastern members. The currency was the biggest gainer among 26 emerging-market counterparts tracked by Bloomberg.

The dollar dropped against 14 of 16 most actively traded currencies this month, losing 1 percent against the euro. The yen gained 1.2 percent versus the dollar and 0.2 percent against the European currency.

The euro-dollar exchange rate swung less than 3 cents above and below $1.40 this month. Implied volatility on seven major currencies against the dollar dropped to 12.73 today, the lowest since October, indicating traders expect less price frustration in the foreign-exchange market in coming months.

Moving Sideways

“We are moving to sideways until September when gradual improvement in macro data adds to fresh momentum for dollar shorts,” said Mike Moran, a senior currency strategist at Standard Chartered in New York. A short position is a bet a currency will decline.

Investors should buy the U.S. currency against the yen, with a target above 105 per dollar, as Japan’s trade and investment flows deteriorates, Goldman Sachs Group Inc. said today in an e-mailed note.

The yen is the most overvalued currencies in the Group of 10 major currencies, and “neutral” market positioning allows investors to add more bets against the Japanese currency, according to Goldman. Trade and investment flows to Japan have turned from a surplus of 6 percent of its GDP, to a deficit of 5 percent of the economy, according to Goldman.

“We could be getting closer to the tipping point for the yen,” Mark Tan, a Goldman analyst in New York wrote.

Dollar Rises as Chinese Stocks, U.S. Orders Prompt Haven Demand

2009-07-29T17:27:00.000+03:00

July 29 -- The dollar rose versus the euro for a second day as China’s stocks plunged the most in eight months and a report showed orders for U.S. durable goods fell last month, bolstering demand for the greenback as a safe haven.

The U.S. currency advanced versus the Australian dollar and South African rand as China led a decline in emerging-market stocks on speculation the government will curb inflows. The Swiss franc declined to the weakest level versus the euro this month after a central bank official said policy makers will halt any appreciation of the currency.

“With equities softer, risk currencies are coming off,” said Daragh Maher, deputy head of global foreign-exchange strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “Anything that suggests expectations for growth in China are lower today than yesterday is going to hit the risk currencies.”

The dollar advanced 0.4 percent to $1.4116 per euro at 8:34 a.m. in New York, from $1.4167 yesterday. It earlier traded at $1.4091, the strongest level since July 17. The yen traded at 133.95 against the euro, compared with 133.95. The dollar increased 0.3 percent to 94.86 yen from 94.55.

Australia’s currency fell 1 percent to 81.87 U.S. cents after China’s Shanghai Stock Exchange Composite Index dropped 5 percent, the most since Nov. 18. The Aussie touched 83.38 cents yesterday, the highest level since Sept. 29.

Weaker Rand

South Africa’s rand fell a fourth day, dropping 0.9 percent to 7.9312 per dollar. It touched 7.9488 earlier, the weakest level since July 20.

The franc declined as much as 0.2 percent to 1.5271 per euro, the weakest level since June 30, as Thomas Jordan, a Swiss National Bank governing board member, said in an article in the Swiss economic magazine Die Volkswirtschaft that policy makers will continue to intervene in the foreign-exchange market to prevent the currency from strengthening.

Orders for durable goods in the U.S. fell 2.5 percent in June, the first retreat in three months, the Commerce Department reported today in Washington. The median forecast of 73 economists surveyed by Bloomberg News was for a decrease of 0.6 percent.

Federal Reserve Bank of San Francisco President Janet Yellen said in a speech in Coeur d’Alene, Idaho, that the U.S. economy’s recovery is likely to be “painfully slow” as consumers spend less and save more. The U.S. is showing the “first solid signs” of emerging from recession, she said.

Japanese Investors

The yen was headed for a 1.6 advance versus the dollar in July on speculation Japanese investors will bring back funds from redemption payments as 18 billion euros ($25.5 billion) in European government bonds mature.

“Talk of sizeable Eurobond redemptions are weighing on the euro-yen,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney.

South Korea’s won fell 0.3 percent to 1,239.95 against the dollar as the MSCI Asia Pacific Index of shares ended its longest winning streak in more than five years, falling 1.2 percent.

Bank of America Merrill Lynch Securities raised its forecasts for the euro against the dollar and the yen, citing rising purchases of the common currency by emerging market central banks seeking to they diversify their reserves.

The European currency will strengthen to $1.45 and 145 yen by September and $1.50 and 158 yen by year-end, strategists led by Steven Pearson in London wrote in a report yesterday. The bank previously forecast $1.32 and 139 yen for end-September and $1.38 and 152 yen for the end of the year.

‘Capital Inflows’

“Although the allocations of many investors to emerging markets are already at record levels relative to benchmark, we think their popularity as an investment destination will support growth at a pace sufficient to sustain strong capital inflows for perhaps another quarter or so,” Bank of America said. “In turn, this is likely to trigger another significant wave of reserve-manager flow diversification demand for euro-dollar.”

The 16-nation currency traded in July in a range of $1.3833 to yesterday’s high of $1.4304, the strongest level since June 3.

Dollar Trades Near 7-Week Low on Stocks Rally, U.S. Home Prices

2009-07-28T09:08:00.000+03:00

July 28 -- The dollar traded near the lowest level in seven weeks against the euro as Asian stocks extended a global rally, adding to evidence investors are shifting to higher-yielding assets.

The Australian dollar rose for a third day against the greenback after the Reserve Bank of Australia said the South Pacific nation’s economy may rebound faster than it forecast six months ago. The yen rose against the dollar on speculation Japanese exporters are taking advantage of the currency’s drop in the past week to repatriate funds.

“Rising share prices will make it easier for investors to take more risks,” said Toshiya Yamauchi, manager of the foreign-exchange margin trading department in Tokyo at Ueda Harlow Ltd. “Under such circumstances, the dollar and the yen will weaken, especially against the currencies of resource-rich nations and emerging markets.”

The yen fell to 135.54 per euro as of 6:07 a.m. in London from 135.48 in New York yesterday, when it reached 136.10, the lowest since July 2. Japan’s currency advanced to 95.06 per dollar from 95.18. It touched 95.38 yesterday, the weakest since July 7. The dollar traded at $1.4258 per euro from $1.4232.

MSCI’s Asia Pacific index of regional shares rose for an 11th day, the longest winning streak since January 2004, boosting demand for higher-yielding assets in carry trades. The index rose 0.7 percent today.

Dollar Index

The Dollar Index was near the lowest level this year before a report that economists said will show U.S. home prices fell at a slower pace in May, indicating the American economy may be recovering, trimming demand for safe haven currencies.

The S&P/Case Shiller index of 20 major metropolitan areas, scheduled for release today, will show property values fell 17.9 percent in May from a year earlier, according to a Bloomberg News survey of economists. The measure was down 18.1 percent in the 12 months ended April.

The Dollar Index, which the ICE uses to track the greenback against currencies including the yen, pound and Swedish krona, was at 78.546 from 78.626 yesterday, near this year’s low of 78.334 on June 2

The Australian dollar climbed after RBA Governor Glenn Stevens said it appears “that the downturn we are having may turn out not to be one of the more serious ones of the post-War era, in contrast to the experiences of so many other countries.”

Upside Risks

“We can much more easily imagine upside risks to the outlook, to balance out the downside ones, than was the case six month ago,” the Reserve Bank chief said in Sydney today.

Stevens left the benchmark lending rate at 3 percent on July 7 for a third month amid signs the lowest borrowing costs in half a century and government spending helped the nation skirt a recession.

“With Australia’s economy apparently doing well, there may be no more scope for interest-rate cuts,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest publicly traded bank. “Higher-yielding currencies such as Australia’s dollar will likely be popular, with demand from people in countries with low yields such as Japan.”

Benchmark interest rates of 8.75 percent in Brazil and 0.25 percent in Sweden compare with 0.1 percent in Japan and as low as zero in the U.S.

The Australian dollar rose to 82.81 U.S. cents from 82.27 cents yesterday.

Exporter Selling

Losses in the yen were tempered amid speculation Japanese exporters sold the dollar to bring back overseas earnings before the month-end.

“Exporters are prone to buy the yen, given that the end of the month is near,” said Yuji Saito, head of the foreign- exchange group in Tokyo at Societe Generale, France’s third- largest bank. “There’s talk that a lot of euro government bonds are maturing this week, so we may see some yen repatriation.”

Japanese companies forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released July 1.

Adding to pressure on the dollar, China’s Assistant Finance Minister Zhu Guangyao said on the first day of bilateral talks with U.S. officials that his government remains “concerned” about the value of its U.S. assets.

Zhu’s remarks come after repeated public assurances by Treasury Secretary Timothy Geithner that the U.S. is committed to reining in a record budget deficit once an economic recovery is secured. China is the biggest foreign investor in U.S. government debt, and any decline in demand could push up borrowing costs.

‘Massive Holdings’

“China has massive holdings of Treasuries, so it is obviously worried,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Any diversification away from the dollar could be gradual, and the greenback may weaken a bit.”

A rising number of derivative bets that the dollar will fall may indicate that the currency is poised to rebound, according to Bank of Tokyo-Mitsubishi UFJ Ltd. Futures positions, when they reach an extreme, are viewed as a contrarian indicator because traders often rush to reduce positions when momentum in a currency shifts.

The large dollar net short position “could make further headway on dollar selling more slow going and frustrating,” wrote Derek Halpenny, head of global-currency research in London at Bank of Tokyo-Mitsubishi, in a note yesterday. A short position is a bet an asset will decline.

The bank predicts the euro’s gains versus the dollar will stall in the $1.45 to $1.5 range, and then be followed by a move to $1.3 in 2010.

Yen May Advance on Concern U.S. Firms to Report Weaker Earnings

2009-07-23T04:10:00.000+03:00

July 23 -- The yen may rise for a third day versus the euro on speculation U.S. companies including CIT Group Inc. and American Express Co. will report weaker earnings today, reviving demand for the safety of Japan’s currency.

The yen gained for a fourth day against the dollar yesterday after Morgan Stanley reported a larger second-quarter loss than analysts predicted and Wells Fargo & Co. said bad loans jumped. The yen and dollar may also rise before a U.S. report that economists said will show jobless claims increased, adding to concern the global recession will be prolonged.

“Risk aversion is likely to stay prominent, given earnings announcements by companies including CIT,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “The bias is for haven currencies such as the yen to be bought.”

The yen traded at 132.87 per euro as of 8:55 a.m. in Tokyo from 133.18 yesterday in New York. Japan’s currency was at 93.56 versus the dollar from 93.68. The dollar was at $1.4202 per euro from $1.4220.

The yen typically strengthens during times of financial turmoil because Japan’s trade surplus means the nation doesn’t have to rely on overseas lenders.

Morgan Stanley said yesterday it made a loss from continuing operations of $159 million last quarter compared with earnings of $689 million in the same period a year earlier. Wells Fargo said assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter.

CIT Earnings

CIT said on July 21 it expected to post a loss of more than $1.5 billion for the second quarter, renewing concern the New York-based lender may have to file for bankruptcy.

The number of Americans filing claims for unemployment benefits rose to 557,000 last week from 522,000 the previous week, according to a Bloomberg News survey of economists. The Labor Department will release the report today in Washington.

The yen was little changed after Japan’s Finance Ministry said today the nation’s exports declined 35.7 percent in June from a year earlier. Economists predicted a decrease of 35.1 percent, according to a Bloomberg News survey. From a month earlier, shipments rose 1.1 percent.

Treasuries, Yen Rise as Bernanke Details Plan to Curb Inflation

2009-07-21T08:44:00.000+03:00

July 21 -- Treasuries, the yen and the dollar rose after Federal Reserve Chairman Ben S. Bernanke said the central bank will be able to stem inflation once it begins to raise interest rates.

Ten-year notes advanced for a second day and the yen strengthened against all of the 16 most-traded currencies after Bernanke said in an opinion article in the Wall Street Journal that the Fed was “confident we have the necessary tools to withdraw policy accommodation, when that becomes appropriate.”

Bernanke’s comments are “likely to be supportive for the U.S. debt market,” said Kenny Borowicz, a senior vice president at MF Global Singapore Ltd., part of the world’s largest broker of exchange-traded futures and options contracts.

The yield on the 10-year note fell two basis points to 3.59 percent as of 1:51 p.m. in Tokyo, according to data compiled by Bloomberg. The price of the 3.125 percent security due May 2019 rose 1/8, or $1.25 per $1,000 face amount, to 96 5/32.

The yen rose to 133.37 versus the euro from 134.05 in New York yesterday, when it fell to 134.76, the lowest level since July 3. Japan’s currency gained to 93.87 per dollar from 94.19. The greenback climbed to $1.4205 per euro from $1.4231.

The Fed will maintain “accommodative policies” aimed at reviving the U.S. economy for an “extended period,” including holding its benchmark interest rate near zero, Bernanke wrote. Yields indicate investors cut bets inflation will quicken.

The Fed chief is scheduled to begin his semiannual monetary-policy testimony to Congress today amid speculation he will seeking to reassure investors that policy makers will contain consumer prices as the economy recovers.

‘We Will Buy’

“I don’t expect inflation,” said Shun Totani, senior fund investor for Tokyo-based Asahi Life Asset Management Co., which handles the equivalent of $1.33 billion in debt. “If Treasury yields rise, we will buy.”

Yields in the range of 3.75 percent to 4 percent would be enough to purchase, Totani said. The 10-year note will yield 3.67 percent by year-end, according to a Bloomberg News survey of economists, with the most recent forecasts given the heaviest weightings.

Bernanke outlined a number of ways the central bank will be able to prevent the record reserves banks have accumulated from causing money supply and inflation to surge. Officials will use the interest rate on banks’ deposits with the Fed as a principal tool, which they can supplement with other means, including reverse-repurchase agreements and term deposits, he wrote.

Spread Narrows

The difference between rates on 10-year notes and Treasury Inflation Protected Securities, which reflects the outlook among traders for consumer prices, narrowed to 1.87 percentage points from 1.89 percentage points yesterday, the first decline in a week. The spread has averaged 2.21 percentage points over the past five years.

The difference between two- and 10-year yields narrowed by one basis point to 2.62 percentage points, suggesting investors are willing to accept less to make long-term loans to the government as inflation concerns ease.

The yen and dollar rose against higher-yielding currencies after Bernanke signaled the central bank may eventually have to withdraw its expansionary policy to prevent inflation.

“A premature exit from the unorthodox monetary policy by central banks across the globe may drag down higher-yielding currencies,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co., a unit of France’s third-largest bank. “The strength of these currencies was partly liable to the inflow of excessive liquidity that global central banks have been generating.”

Australian Dollar

Australia’s dollar fell 0.7 percent to 76.35 yen, New Zealand’s currency dropped 0.7 percent to 61.49 yen, and South Africa’s rand weakened 1.1 percent to 11.8989 yen.

Benchmark interest rates are 2.5 percent in New Zealand, 3 percent in Australia and 7.5 percent in South Africa compared with 0.1 percent in Japan and as a low as zero in the U.S., making the first three nations’ assets attractive to investors.

Japan’s currency also advanced from near a two-week low against the dollar on speculation Japanese exporters bought the currency after its 1.8 percent decline last week.

“Yen buying by Japanese investors, including exporters, picked up as the yen fell closer to the level they budgeted in their business plans,” said Soichiro Mori, manager of the foreign-exchange business promotion department at FXOnline Japan Co., a margin-trading company. “Such selling may become stronger as the yen approaches 95 yen.”

Japanese companies forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released July 1.

Financial Crisis

The financial crisis, which started with the collapse of the U.S. property market in 2007, has triggered $1.51 trillion of writedowns and credit losses at banks and other institutions and sent the global economy into its first recession since World War II, according to Bloomberg data.

The Fed reduced its target for overnight bank lending to a range of zero to 0.25 percent in December, and it is buying $300 billion of Treasuries in a six-month plan that commenced in March. The central bank is scheduled to purchase notes due from May 2016 to May 2019 today as part of the program, according to its Web site.

Consumer prices tumbled 1.4 percent in June from a year earlier, the Labor Department said July 15. That means 10-year Treasuries offer a so-called real yield, or what investors get after accounting for costs in the economy, of 4.99. The real yield was 5.25 percent on June 10, the highest since 1994.

Yen Rises as CIT Outlook, Factory Drop Reduce High-Yield Demand

2009-07-16T20:40:00.001+03:00

July 16 -- The yen advanced against the euro for the first time in four days after the commercial lender CIT Group Inc. said bailout talks failed and a gauge of U.S. manufacturing fell, reducing demand for higher-yielding assets.

New Zealand’s dollar decreased the most in two weeks against the greenback after Fitch Ratings cut the outlook for the nation’s long-term credit rating. The Canadian dollar dropped from near a one-month high as crude oil prices retreated and U.S. stocks fluctuated.

“CIT put pressure on equities and boosted the yen,” said Jack Spitz, managing director of foreign exchange at National Bank in Toronto. “Volatility in stocks is driving the valuation of currencies.”

The yen appreciated 0.6 percent to 132.13 per euro at 12:06 p.m. in New York, from 132.95 yesterday, when it declined to 133.40, the weakest level since July 7. The dollar traded at $1.4116 per euro, compared with $1.4107. The yen gained 0.7 percent to 93.60 per dollar from 94.23.

New Zealand’s dollar fell as much as 1.5 percent to 63.88 U.S. cents in its biggest intraday drop since July 2 as Fitch said the nation’s deficit is large and a “stronger fiscal adjustment than currently planned” may be needed.

The Canadian dollar slid 0.4 percent to C$1.1173 after crude oil, the nation’s largest export, dropped 0.2 percent to $61.43 a barrel. The currency, known as the loonie, reached C$1.1118 yesterday, the strongest level since June 12, and gained more than 1 percent in each of the past three days as oil prices surged.

Commodity Currencies

The loonie and other commodity-linked currencies including the Australian and New Zealand dollars are among the best performers against the greenback this year as signs the global recession may be ending encourage investors to buy assets related to growth. The loonie gained 9 percent, the Aussie advanced 14 percent and the kiwi, as the New Zealand dollar is known, climbed 11 percent.

Commodity currencies will gain further in the next several months as global growth resumes and investors demand a hedge against inflation and a weaker U.S. dollar, according to Steve Englander, New York-based chief currency strategist at Barclays Capital.

“The world is rebounding probably faster than is still priced into most forecasts,” said Englander in an interview on Bloomberg Television. “There’s still the underlying concern that you want alternatives to the U.S. dollar because of the uncertainty over the policy framework the U.S. has, and the Aussie and kiwi protect you against those shocks.”

Yen Versus Euro

The yen dropped 1.8 percent yesterday versus the euro, the biggest loss since May 28, as the Standard & Poor’s 500 Index rallied 3 percent in its biggest gain in two months. The 60-day correlation between the euro-yen exchange rate and the S&P 500 Index increased to 0.67 from 0.48 at the end of February. A reading of 1 would indicate the two always move in a lockstep.

“Over the last few days, equities rallied and risk sentiment improved,” said John McCarthy, director of currency trading at ING Financial Markets LLC in New York. “It looked as if the market has got ahead of itself. For the time being, equities are calming down, and risk is being taken in. You have to respect the range we’ve been in.”

International demand for long-term U.S. financial assets fell in May as Russia, Japan and Caribbean banking centers trimmed their holdings even as China stepped up its purchases.

International Demand

Total net sales of long-term equities, notes and bonds were $19.8 billion, compared with buying of $11.5 billion the month before, the Treasury said today. China, the biggest foreign holder of U.S. debt, increased its holdings of government notes and bonds by $38 billion to $801.5 billion.

China’s foreign-exchange reserves rose by a record $178 billion in the second quarter to top $2 trillion for the first time, the People’s Bank of China said yesterday.

“China’s reserves allow the U.S. to run a higher fiscal deficit than other nations,” said Bilal Hafeez, the London- based global head of currency strategy at Deutsche Bank AG, the world’s biggest foreign-exchange trader. “Their rhetoric suggests they do want to diversify their reserves, but the data suggests they are doing it in a measured way. There is no dumping dollars.”

The yen rose from near a one-week low against the euro after New York-based CIT said in a statement yesterday “there is no appreciable likelihood of additional government support being provided over the near term.” The company faces bankruptcy if no federal aid emerges, Standard & Poor’s said this week.

Factory Decline

The Federal Reserve Bank of Philadelphia’s gauge of regional manufacturing dropped to minus 7.5 this month from minus 2.2 in June, the bank said today. The median forecast of 53 economists surveyed by Bloomberg News was for a decrease to minus 4.5. Negative numbers signal contraction.

Japan’s currency typically rises during times of financial turmoil because its trade surplus means the nation doesn’t have to rely on overseas lenders.

The yen earlier pared its gains as profit at JPMorgan Chase & Co. rose for the first time since 2007 and a report showed U.S. first-time unemployment claims fell last week to the lowest level since January.

“Right now, data is inconsistent,” said Sophia Drossos, chief currency strategist at Morgan Stanley in New York. “Our six-month view is that the rebound in the global economy is taking shape. The key consequence of a global recovery is a weaker dollar.”

Dollar’s Fall Versus Yen May Stall, Reverse: Technical Analysis

2009-07-14T15:00:00.000+03:00

July 14 -- The dollar’s decline against the yen may stall before it reaches so-called support at 91.30, Standard Chartered Plc said, citing trading patterns.

The 91.30 yen support level is the dollar’s high set on Jan. 19, according to a chart compiled by Standard Chartered. The Jan. 19 high is a previous level of resistance, which has become support since it has been breached. Support is where buy orders may be clustered. Resistance is where there may be sell orders.

“The dollar-yen breakdown is expected to be short-lived ahead of 91.30 support,” Callum Henderson, global head of currency strategy at Standard Chartered in Singapore, wrote in a research note yesterday. “Clients should close short dollar-yen positions and look to buy into this dip ahead of 91.30.” A short position is a bet an asset will fall.

The dollar traded at 93.12 yen as of 7:55 a.m. in Tokyo after weakening to 91.74 yen yesterday, the lowest level since Feb. 17. The U.S. currency slumped 3.6 percent against the yen last week, the biggest drop since the five days ended Oct. 24.

“Look for a push back above 95 to follow,” Henderson wrote. Should the greenback rise beyond “congestive resistance” at 95 yen, the dollar may extend its rally to 99 and then to 101.45 or higher, he said.

The 95 yen level was last seen on July 7, 99 yen is near the June 5 high of 98.89 yen, and 101.45 yen represents the April 6 high, according to data compiled by Bloomberg.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

Yen Falls From Four-Month High on Importer Sales, Chart Signals

2009-07-09T09:30:00.001+03:00

July 9 -- The yen fell from a four-month high against the dollar on speculation Japanese importers sold the currency and as technical charts signaled its 3 percent gain in the past five days was excessive.

The yen weakened versus all of the 16 major counterparts after a Japanese government official said excessive currency movements were undesirable and as Asian stocks trimmed losses, encouraging investors to buy higher-yielding assets. The yen and the dollar also declined after the International Monetary Fund said the global recovery next year will be stronger than it forecast in April as the financial system stabilizes, sapping demand for the safety of the two currencies.

“The yen’s surge was very fast, so a correction of this is under way,” said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. “There’s also talk of importers and bargain hunters who are selling the yen.”

The yen declined to 93.13 versus the dollar as of 6:57 a.m. in London from 92.88 in New York yesterday, when it rose to 91.81, the highest level since Feb. 17. Japan’s currency dropped to 129.57 per euro from 128.95, after climbing to 127.02 yesterday, the strongest since May 18. The euro rose to $1.3920 from $1.3884.

The Dollar Index, which tracks the U.S. currency against those of six major trading partners including the euro, yen and pound, fell 0.4 percent to 80.442.

Technical Indicator

The dollar’s 14-day stochastic oscillator against the yen was at 19.9 yesterday, below the 20 level that signals it may have fallen too quickly and is poised to rise. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a currency.

Japan’s government is closely watching market moves after the yen climbed to a four-month high against the dollar, Chief Cabinet Secretary Takeo Kawamura said at a news conference today, according to a Reuters report.

The MSCI Asia-Pacific excluding Japan Index of shares trimmed its loss to 0.2 percent after earlier dropping as much as 0.5 percent. Standard & Poor’s 500 futures gained 0.4 percent.

Higher-yielding currencies advanced as signs that stocks are stabilizing encouraged investors to purchase riskier assets.

Australia’s dollar climbed 0.3 percent to 72.54 yen and rose to 77.91 U.S. cents from 77.86 cents. New Zealand’s dollar rose 0.4 percent to 58.37 yen and climbed to 62.71 U.S. cents from 62.60 cents.

Carry Trades

Japan’s benchmark interest rate of 0.1 percent compares with 3 percent in Australia and 2.5 percent in New Zealand. That attracts investors to carry trades in which they borrow funds in countries with lower interest costs and buy assets in nations with higher rates, allowing them to pocket the difference.

The world economy will expand 2.5 percent in 2010, compared with an April projection of 1.9 percent growth, the IMF said yesterday in a revised forecast.

“The firm undertone of stocks in Asia means the global economy is not falling apart, even if it is not recovering at the strong pace the market had hoped for,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co. “Given the assumption that the global economy will continue to grow, albeit at a slow pace, there is no reason to keep buying the yen as a haven.”

Indonesia’s rupiah, the best-performing Asian currency over the past three months, rose for a third day as exit polls pointed to a landslide victory for President Susilo Bambang Yudhoyono, paving the way for more pro-growth policies.

Yudhoyono is leading his rivals with 61 percent of votes, according to a preliminary count by the Indonesia Survey Institute. The $433 billion economy may expand as much as 4 percent this year, the fastest pace in Asia after India and China, the IMF estimates.

‘Best Case’

“It was the best-case scenario,” said Tim Condon, Singapore-based head of Asia research at ING Groep NV. “The rupiah will rally to 10,000 to the dollar. I see any dollar strength right now from global risk aversion as a chance to sell dollars and buy rupiah.”

The rupiah rose 0.6 percent to 10,185 per dollar, extending its gains to 11 percent in the past three months.

South Korea’s won declined for a fourth day against the dollar after the central bank left its benchmark rate unchanged at a record low for a fifth month.

The Bank of Korea held the seven-day repurchase rate at 2 percent, as expected by all economists surveyed by Bloomberg News. The bank slashed rates by 3.25 percentage points between October and February, the steepest cuts since it began setting a policy rate a decade ago.

The won fell 0.2 percent to 1,278.95 per dollar, after declining to 1,282.25, the weakest level since June 30.

G-8 Meeting

The yen strengthened earlier after Group of Eight leaders said yesterday the global economic recovery is too fragile to withdraw stimulus efforts, bolstering demand for the currency as a refuge from the slump.

U.S. President Barack Obama called for the door to remain open to more stimulus measures as a renewed stock-market drop stirred concern that $2 trillion spent worldwide so far hasn’t jolted consumers and businesses back to life.

“The rebound of the dollar will come to a halt at around 93.50 yen as people become less optimistic about the prospects of the global economic recovery,” said Hiroshi Maeba, deputy general manager of foreign exchange trading at Nomura Securities Co. in Tokyo.

The yen typically strengthens during times of financial turmoil because Japan’s trade surplus means the nation doesn’t have to rely on overseas lenders.

Euro Near Two-Week Low Against Swiss Franc on Risks to Recovery

2009-07-07T08:33:00.001+03:00

July 7 -- The euro traded near a two-week low against the Swiss franc on speculation European finance ministers will today reiterate the global economic recession is far from over and risks to the region’s recovery remain.

The euro dropped to the lowest in two weeks versus the yen yesterday as Luxembourg Finance Minister Jean-Claude Juncker said at a meeting of euro-area counterparts in Brussels that “we are still in the middle of the crisis.” The dollar pared gains versus the pound today on speculation Group of Eight leaders will call into question the greenback’s status as the international reserve currency when they meet tomorrow.

“It’s natural that European policy makers aren’t confident in their economic recovery as the region is nowhere near that stage yet,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The trend to avoid risk is likely to persist. It’s a positive for the yen and a negative for the euro.”

The euro traded at 1.5168 francs as of 6:01 a.m. in London from 1.5165 yesterday in New York, when it fell to 1.5152 francs, the weakest level since June 24. Europe’s currency was little changed at 133.29 yen from 133.34, and traded at $1.3981 from $1.3984. The dollar bought 95.33 yen from 95.35, and was at $1.6281 per pound from $1.6286.

The yen may advance to 132.50 per euro and 94.60 versus the dollar today, Ishikawa said.

Forecast Cut

Juncker’s comments in Brussels yesterday came after the Organization for Economic Cooperation and Development said last month signs of a recovery in the 16-nation euro area were not clear. The OECD cut its 2009 forecast for the region’s economy to a contraction of 4.8 percent, from a decline of 4.1 percent projected in March, and said the ECB should lower its benchmark interest rate from 1 percent.

European Union finance ministers meet again today in Brussels. The Eonia overnight index average, the market rate that European banks charge each other, fell to 0.332 percent yesterday from 0.381 a week ago, below the ECB’s benchmark.

“It’s not only lingering worries about the prospect of the eurozone economy that are hurting sentiment toward the euro, the narrowing yield advantage, as evident by declines in Eonia are also weakening demand for the single currency,” said Akira Takei, a fund manager in Tokyo at Mizuho Asset Management Co., a unit of Japan’s second-largest bank.

‘Remain Weak’

Euro-area economic activity this year “is likely to remain weak, but should decline less strongly than was the case in the first quarter,” European Central Bank President Jean-Claude Trichet said July 2, when policy makers left the benchmark rate at a record low.

Demand for the dollar was tempered on speculation its role as the world’s reserve currency may be questioned at the G-8 meeting starting in L’Aquila, Italy, tomorrow.

“We need to be alert to the possibility of the G-8 actually making this issue an official agenda item,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest banking group. “This will keep a cap on the dollar.”

Russia said the world economy is overly reliant on the dollar and called for changes in how $6.5 trillion in currency reserves are managed. “The dollar system or the system based on the dollar and euro have shown that they are flawed,” Russian President Dmitry Medvedev said in an interview with the Italian newspaper Corriere della Sera, repeating his proposal for a new international reserve currency.

Reserve Currency

Emerging-markets policy makers aren’t a near consensus on a plausible alternative to the dollar as the world’s reserve currency. Chinese Deputy Foreign Minister He Yafei said on July 2 that the dollar will reign supreme for “many years to come.”

Australia’s dollar was little changed against the yen and the dollar after the Reserve Bank of Australia left interest rates unchanged today for a third month.

Central bank Governor Glenn Stevens was forecast to hold the benchmark rate at 3 percent by all 20 analysts surveyed by Bloomberg News.

The Australian dollar traded at 76.11 yen from 76.06 yen yesterday, and was at 79.81 U.S. cents from 79.77 cents.

Dollar, Yen Rise as Economic View Encourages Demand for Safety

2009-07-06T17:04:00.001+03:00

July 6 -- The dollar and yen advanced against the euro on speculation the global economic recovery will be slow, encouraging demand for a refuge.

The U.S. and Japanese currencies rose as stocks around the world tumbled, with the MSCI World Index sliding as much as 0.9 percent. The dollar dropped versus the yen after Russian President Dmitry Medvedev said the world is too reliant on the U.S. currency and French Finance Minister Christine Lagarde called for increased global coordination of foreign exchange.

“We might be heading into an environment where the U.S. dollar can actually be much stronger than many people think,” said Hans-Guenter Redeker, head of global currency strategy at BNP Paribas SA in London, in an interview on Bloomberg Television. “You have to get a clear judgment how the economy is developing globally. The risk is pretty much skewed to the downside.” http://fxisforex.blogspot.com/

The dollar advanced 0.6 percent to $1.3903 per euro at 8:39 a.m. in New York, from $1.3980 on July 3. The yen gained 1.4 percent to 132.44 per euro from 134.26 last week after earlier reaching 132.18, the strongest level since June 23. The yen appreciated 0.8 percent to 95.25 versus the dollar from 96.04.

The U.S. currency dropped against the yen after Russia and India said the global economy is too dependent on the U.S. currency and called for revisions to how $6.5 trillion in foreign-exchange reserves are managed. Their comments came as Group of Eight leaders prepared to meet in Italy this week.

‘Flawed’ System

“The dollar system, or the system based on the dollar and euro, have shown that they are flawed,” Medvedev said in an interview with the Italian newspaper Corriere della Sera, repeating his proposal for a new international reserve currency.

Authorities “must explore better coordination of exchange- rate policy,” Lagarde told reporters yesterday at a conference in Aix en Provence, France. India should diversify its $264.6 billion in foreign-exchange reserves and hold fewer dollars, Suresh Tendulkar, an economic adviser to Prime Minister Manmohan Singh, said in a July 3 interview.

Stocks around the world extended losses, with Europe’s Dow Jones Stoxx 600 Index sinking 1.6 percent. The MSCI Asia-Pacific Index of regional shares slipped 0.9 percent, and the Nikkei 225 Stock Average dropped 1.4 percent. Equities fell last week as the U.S. unemployment rate rose to 9.5 percent, a 26-year high.

Vice President Joe Biden said yesterday on the ABC news program “This Week” that the administration of President Barack Obama “misread the economy” when it forecast unemployment would peak at 8 percent if Congress enacted a $787 billion fiscal stimulus.

U.S. Jobs Report

“The aftereffects on risk appetite of the weak June U.S. employment report continue to be felt,” Steven Pearson, a foreign-exchange strategist at Bank of America Corp. in London, wrote in a report today. “Additionally, a larger-than-expected loss from a German banking group has served as a reminder that the financial outlook in Europe remains challenging.”

The euro fell against the dollar after IKB Deutsche Industriebank AG, Germany’s first victim of the subprime- mortgage crisis, said on July 4 it lost 580 million euros ($807 million) in the fiscal year ended March 31.

The 16-nation currency is unlikely to get support from fundamental data this week, with technical signals suggesting declines, according to Helaba Landesbank Hessen-Thueringen.

Outlook for Euro

If the euro drops below a range of $1.3950 to $1.3925, the next so-called support levels will be $1.3890, $1.3829 and $1.3806, Ralf Umlauf, head of floor research at Helaba in Frankfurt, wrote in a research report today.

Currency investors that use computer models to spot trends are suffering as markets are pulled in opposing directions. FX Concepts Inc., the world’s largest currency hedge fund, said it lost 5.4 percent in this year’s first five months. John W. Henry & Co.’s foreign-exchange fund told investors it lost 2 percent, after 2008’s 76 percent gain.

Deflationary pressure from the first global recession since World War II is being countered by the inflationary forces of record stimulus spending and currency printing across the globe.

Commerzbank AG is skeptical the yen will emerge as the “winner” against the dollar and euro because the economic slump in Japan is as severe as it is in Europe and the U.S.

“In the current situation, this makes particularly little sense,” a Commerzbank team led by Ulrich Leuchtmann in Frankfurt wrote today in a report. “The fundamental situation in Japan is at least as depressed as in the U.S. and in the euro zone. The green shoots in Japan are much more fragile.”

Dollar Rises Versus Euro on Signs Economic Rebound Is Faltering

2009-07-04T04:22:00.001+03:00

July 4 -- The dollar rose against the euro this week as speculation the economic recovery is faltering boosted demand for the safety of the U.S. currency.

The Dollar Index, which tracks the currency against six major U.S. trading partners, advanced to near the highest in a week after a report showed U.S. employers cut more jobs last month than economists forecast. The pound had its first weekly loss in a month after a report showed U.K. service industries were little changed in June as the recession persisted.

“We had a disappointing jobs figure and data has generally tended to underwhelm,” said Steven Barrow, head of Group of 10 currency research in London at Standard Bank Plc, who forecast the dollar may gain to $1.38 per euro next week. “Risk aversion is increasing a little bit and that’s helped the dollar.”

The dollar advanced 0.5 percent to $1.3984 per euro as of 2:08 p.m. in New York yesterday, from $1.4056 at the end of last week. It reached $1.3929 yesterday, the strongest level since June 25. The yen was at 134.27 per euro, from 133.85 a week earlier. The U.S. currency rose 0.9 percent to 96.00 yen.

The pound was at $1.6328, for a weekly decline of 1.2 percent. The U.K. currency declined 0.3 percent in the week to 156.77 yen, after reaching the weakest level since June 25.

Job Losses

U.S. employers cut 467,000 jobs in June, after losing a revised 322,000 positions the previous month, the Labor Department said in Washington on June 2. The unemployment rate increased to 9.5 percent from 9.4 percent. Europe’s service industry contracted at a faster pace in June, London-based Markit Economics said yesterday.

“As feared, the poor jobs report prompted a sizeable paring of risk appetite across foreign-exchange markets,” UniCredit Markets & Investment Banking analysts including Roberto Mialich in Milan wrote in a client note yesterday. “The euro was obviously dragged down.”

The dollar was also buoyed this week after a Chinese Foreign Ministry official said he was “not aware” of a plan to discuss a new reserve currency at next week’s Group of Eight meeting. China hoped that “as the main reserve currency, the exchange rate of the U.S. dollar will be stable,” China’s Vice Foreign Minister He Yafei told reporters in Beijing July 2.

The U.S. currency strengthened most against the New Zealand dollar and the pound in the week as European stock markets declined. Europe’s Dow Jones Stoxx 600 fell for a third consecutive week, its longest losing run since the period through March 6.

Dollar Index

The Dollar Index increased 0.3 percent to 80.403, bringing its gain this week to 0.7 percent. It reached 80.578 on July 2, the highest level since June 25. The index rebounded from 78.334 on June 2, the weakest level this year.

The pound weakened against 15 of the 16 most-actively traded currencies this week. Growth in U.K. service industries slowed in June, giving the Bank of England more reason to keep its key interest rate at a record low of 0.5 percent. Gross domestic product shrank in the first quarter by the most since 1958, the Office for National Statistics said June 30.

An index based on a U.K. survey of about 700 service companies by the Chartered Institute of Purchasing and Supply fell to 51.6 in June, from 51.7 in May, a report showed yesterday.

Investors should sell the pound on speculation the central bank will expand asset purchases when it meets to set monetary policy next week, strategists led by Hans-Guenter Redeker, global head of foreign-exchange strategy at BNP Paribas SA, wrote in a client note yesterday.

Yen Falls

The yen weakened against the New Zealand dollar yesterday after Kyodo News reported Japan may consider investing about 10 percent of its public pension-reserve funds in assets with “high risks and high returns.”

Japan’s pension-reserve balance was 123 trillion yen ($1.28 trillion) as of March 2009, Kyodo said, citing Health Minister Yoichi Masuzoe.

“If the government wants to buy more foreign bonds for its public pension reserve funds, that’s yen negative,” said Masaki Fukui, a senior market economist in Tokyo at Mizuho Corporate Bank Ltd., Japan’s second-largest publicly traded lender.

The losses cut the yen’s weekly gain against the New Zealand dollar to 1.6 percent. Japan’s currency climbed 0.2 percent against the Australian dollar this week to 76.72 yen.

Dollar, Yen May Extend Gains as U.S. Job Cuts Pare Yield Demand

2009-07-03T02:15:00.000+03:00

July 3 -- The dollar and yen may extend their advances against the euro after a U.S. government report showed employers cut more jobs last month than economists forecast, paring demand for higher-yielding assets.

The euro also dropped versus the dollar yesterday as European Central Bank President Jean-Claude Trichet said a “phase of recovery” for the region will probably start in the middle of 2010. The dollar earlier climbed versus the euro after China renewed its call for a stable greenback and damped speculation the nation is seeking talks on a new international currency at next week’s Group of Eight meeting.

“There was some enthusiasm and relief recently for all of us, and now we have to be aware things will take some time to recover,” said Benedikt Germanier, a currency strategist in Stamford, Connecticut, at UBS AG, the world’s second-largest currency trader. “Risk appetite has gone a little far. Risk aversion could well be back.”

The dollar traded at $1.4001 per euro at 6:07 a.m. in Tokyo, after advancing 1 percent yesterday. The U.S. currency was at 95.91 yen following a decrease of 0.7 percent. The euro fetched 134.26 yen after depreciating 1.7 percent.

U.S. employers eliminated 467,000 jobs in June after a revised decrease of 322,000 in the previous month, the Labor Department reported yesterday in Washington. The median forecast of 79 economists surveyed by Bloomberg News was for a reduction of 365,000. The unemployment rate increased to 9.5 percent.

Dollar Index Rises

The Dollar Index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, gained 1.6 percent on June 5, the most in more than four months, after the payrolls report showed job losses in the previous month slowed.

The trade-weighted measure climbed the most in more than a week yesterday, advancing 0.8 percent to 80.26. The level was 0.5 percent higher compared with June 26.

The U.S. currency gained earlier yesterday versus the euro as China’s Vice Foreign Minister He Yafei renewed a call for a “stable” dollar and said in Beijing he’s “not aware” of any effort by China to challenge the greenback’s status as the world’s main reserve currency at next week’s G-8 meeting.

The dollar declined beyond $1.42 versus the euro on July 1 after Reuters cited G-8 sources as saying the Asian nation asked to debate proposals for a new global reserve currency at next week’s summit. China is the biggest foreign holder of Treasuries, with $763.5 billion as of April.

European Central Bank

The ECB kept its benchmark interest rate unchanged at 1 percent yesterday. The central bank lent financial institutions last week a record 442 billion euros ($621 billion) for 12 months to encourage them to extend cheaper credit to companies and households. The ECB will also start buying 60 billion euros of covered bonds this month.

Europe’s 16-nation currency will probably fall to $1.33 by the end of September as economic data globally will strengthen arguments for a weaker recovery, according to Lauren Rosborough, a foreign-exchange strategist at Westpac Banking Corp. in London.

“We all know the euro should weaken,” said Rosborough, citing Westpac’s forecast for no growth in the euro area in 2010. “We are not talking about a rapid recovery and certainly not a strong one.”

Sweden’s krona declined as much as 2.6 percent to 7.7837 against the dollar, the biggest intraday drop since June 15, after the Riksbank unexpectedly cut its target lending rate by a quarter-percentage point to 0.25 percent, saying the economy required a “somewhat more expansionary monetary policy.”

The reduction was forecast by only one economist, UBS’s Sunil Kapadia, of 17 surveyed by Bloomberg News, with the rest predicting no change.

Swedish ‘Surprise’

“That was a big surprise for most people,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, the largest foreign-exchange trader. “They continue to be one of the most dovish central banks around, and this will stall an appreciation of the krona.”

The krona advanced on July 1 to 7.5410 against the dollar, the strongest level since June 3.

The Swiss franc slid yesterday as much as 0.3 percent to 1.5247 against the euro after a Swiss National Bank governing board member, Thomas Jordan, said the institution remains ready to act to prevent further appreciation of the currency.

“The SNB will continue to weaken the Swiss franc,” said Paul Robson, a currency strategist in London at Royal Bank of Scotland Group Plc. “You always have to take the SNB seriously on the franc. They’ve backed it up with fiscal intervention, and we would expect them to continue.”

The franc dropped as much as 2.4 percent on June 24 on speculation policy makers intervened to support the economy.

Analysis and forecasts - Thursday 07.02.2009

2009-07-02T14:30:00.000+03:00

EURUSD

Yesterday's boost to as high as 1.4200 - above last month's top at 1.4140 is seen as a bullish confirmation of current trend and the overnight pullback to 1.4100 is corrective, so far, support being formed at.14100 by the 50% retracement of yesterday's move from 1.4000 to 1.4200. The euro attempts to stabilize above the 1.4100 mark at the time of this writing. In case 1.4100 holds, upside targets could be challenged first at 1.4200 - yesterday's top, then higher - at 1.4250 - interim resistance on the way towards the yearly top at 1.4340. Upside is favored for now, while above 1.4100. Below that, extended losses may extend to 1.4000. Current quote is 1.4117 @06:00 GMT

Support levels: 1.4100, 1.4000, 1.3950 and 1.3900/10
Resistance levels: 1.4150, 1.4200 and 1.4250
Market sentiment: long-term : bearish, mid-term : bullish, short-term : slightly bullish

Yesterday recommended trade: stand aside

AUDUSD

The Aussie dollar has given back yesterday's gains as the US dollar is slightly stronger across the board. Minor resistance is now seen at .8100 followed by .8140/50 and the recent top into the .8230-.8260 zone. Intra-day sentiment is bearish due to the overnight 70 points pullback. Extended losses may reach lows around .7930/50 where first notable support is seen, backed lower by .7850. Daily momentum is positive. Current quote is .8042 @06:00 GMT

Support levels: .8000, .7930 and .7840/50
Resistance levels: .8100, .8155/85, .8235 and .8260
Market sentiment: long-term : bearish, mid-term : bullish, short-term : slightly bullish

Yesterday recommended trade: stand aside

EURCHF

Initial support at 1.5235 has been cleared out and the euro continues to lose ground versus the swiss franc, testing bids around the 1.5200 handle at the time of this report. 1.5150 is the next bearish objective and it may limit the downside for now. Current quote is 1.5200 @06:00 GMT

Support levels: 1.5190/00, 1.5140/50 and 1.5100
Resistance levels: 1.5285, 1.5325 and 1.5380/00
Market sentiment: long-term : bearish, mid-term : bearish, short-term : bullish

Yesterday recommended trade: stand aside

Dollar Gains as China Says ‘Not Aware’ of Reserve Currency Talk

2009-07-02T08:43:00.000+03:00

July 2 -- The dollar rose from a three-week low against the euro and erased losses versus the yen after a Chinese official said he was “not aware” of a plan to discuss a new reserve currency at a Group of Eight meeting next week.

The greenback also gained versus 13 of the 16 major currencies after Chinese Vice Foreign Minister He Yafei said he hopes the dollar will “remain stable,” easing concern it will lose its reserve status. The yen rose from near a two-week low against the euro on speculation a U.S. report today will show the world’s biggest economy lost jobs for an 18th month, spurring demand for the relative safety of Japan’s currency.

“The minister’s remarks are definitely supportive of the dollar,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “It’s extremely difficult to move to a new reserve currency. For China, the value of their U.S. holdings would drop.”

The dollar climbed to $1.4109 per euro as of 1:25 p.m. in Tokyo from $1.4142 in New York yesterday, when it declined to $1.4201, the lowest since June 5. The dollar was at 96.60 yen from 96.65 yen. The yen advanced to 136.31 per euro from 136.70 yesterday, when it fell to 136.89, the weakest since June 15.

The U.S. currency dropped beyond $1.42 versus the euro yesterday after Reuters, citing G-8 sources, reported that China asked to debate proposals for a new global reserve currency at next week’s summit in Italy.

Chinese officials have sought a greater role over time for the International Monetary Fund’s unit of account, known as Special Drawing Rights, or SDRs, in an effort to reduce the dollar’s dominance.

Dollar Index

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, rose 0.2 percent to 79.794.

The yen strengthened versus all of the 16 major currencies as today’s U.S. employment report may show the jobless rate increased to the highest level since 1983, suggesting the global recession will be prolonged.

U.S. employers cut 365,000 jobs last month after reducing them by 345,000 in May, according to a Bloomberg News survey of economists before the Labor Department report. The unemployment rate climbed to 9.6 percent, a separate Bloomberg survey showed.

“I will certainly expect the yen to strengthen if the payroll data comes in worse than expected because of risk- appetite flow,” said Katie Dean, a senior economist in Melbourne at Australia & New Zealand Banking Group Ltd., Australia’s fourth-biggest lender.

U.S. Jobs

The U.S. lost more jobs than forecast last month, an industry report showed yesterday. The 473,000 drop in the ADP Employer Services gauge in June was higher than the forecast of 394,000 in a Bloomberg survey of economists, and it followed a revised reduction of 485,000 workers in May.

The Japanese currency typically strengthens in times of financial turmoil as the nation’s trade surplus makes the currency attractive because the nation does not rely on overseas lenders.

Gains in the yen may be tempered after a government report today showed Japanese investors purchased the most overseas debt in four years.

Japanese investors bought 1.53 trillion yen ($15.9 billion) more foreign bonds than they sold in the week ended June 27, the most since the period ended June 24, 2005, the Finance Ministry said in a report.

“Investors, especially individuals, are increasing their purchases of higher-yielding bonds,” said Yoshisada Ishide, who oversees $2.4 billion as a fund manager at Daiwa SB Investments Ltd. in Tokyo. “They feel more reassured about investing abroad. This trend is likely to persist in the third quarter. The bias is for yen weakness.”

Japan’s benchmark interest rate of 0.1 percent compares with 3 percent in Australia and 2.5 percent in New Zealand, making the South Pacific nations’ assets attractive to investors seeking higher returns.

IMF Board Set to Authorize $150 Billion in Bond Debut

2009-07-01T14:36:00.000+03:00

July 1 -- The International Monetary Fund’s board of directors plans to approve authorization to issue as much as $150 billion of bonds for the first time as it seeks new sources of funds, an IMF official said.

The board is scheduled to vote on the matter today, the official said on condition of anonymity. The bonds are part of a wider effort to seek new funding as the lender helps countries from Iceland to Pakistan combat the global financial crisis.

The securities, the culmination of months of talks between the fund and its members, will offer the largest emerging-market nations a new way of making IMF contributions while they seek greater say at the fund. China, Brazil and Russia have favored the bonds instead of regular contributions as they wrangle with other members over redistributing the IMF’s voting power.

“The emerging market economies want to call the shots a little bit more,” said Simon Johnson, a former chief economist at the IMF who is now a senior fellow at the Peterson Institute for International Economics in Washington. “It’s all part of a longer evolution of the IMF.”

Leaders from the Group of 20 industrial and emerging nations agreed in April to boost IMF coffers by $750 billion to help the Washington-based agency shore up nations roiled by the credit crunch. The U.S. last month agreed to boost its contribution for the IMF by more than $100 billion.

Rates, Currency

Today’s vote likely will address details such as how to set the interest rates for the bonds and their currency.

Chinese officials have sought a greater role over time for the IMF’s unit of account, called Special Drawing Rights or SDRs, in an effort to reduce the U.S. dollar’s dominance in the global economy.

China’s government has also said it will buy $50 billion in notes. Russia and Brazil in June month announced plans to each buy $20 billion of bonds from the IMF.

India has indicated it would contribute to an IMF bond program. Montek Singh Ahluwalia, deputy chairman of the nation’s Planning Commission, wasn’t available to comment today.

IMF Managing Director Dominique Strauss-Kahn said last month there will be a “little” secondary market for the bonds. Strauss-Kahn said June 13 in Lecce, Italy, that they could be traded between “bondholders, either government or central banks.”

The IMF is also considering making them tradable between all central banks from countries that are IMF members, said a G- 8 official, who spoke on condition of anonymity. It would stop short of allowing them to trade on the open market, he said.

Budget Deficit

Treasury yields climbed this year and the dollar fell in part on concern that foreign central banks would reduce holdings of U.S. financial assets just as the Obama administration sells a record amount of debt to finance a growing budget deficit and pull the economy from the deepest recession since the 1930s.

China’s central bank last month renewed its call for a new global currency and said the IMF should manage more of members’ foreign-exchange reserves, triggering a decline in the U.S. dollar. IMF First Deputy Managing Director John Lipsky said on June 6 it’s possible some day to take the “revolutionary” step of making SDRs a reserve currency.

SDRs were created by the IMF in 1969 to support the Bretton Woods exchange-rate system that collapsed in 1971. They act as a unit of account rather than a currency. The cash is disbursed in proportion to the money each member nation pays into the fund.

Yen Falls Against Euro, Dollar as Chinese Manufacturing Expands

2009-07-01T14:31:00.000+03:00

July 1 -- The yen declined to a two-week low against the euro after a report showed China’s manufacturing expanded for a fourth month, increasing demand for higher- yielding assets amid confidence the global recession is easing.

The yen also fell against the dollar, Swiss franc and the pound as China’s Federation of Logistics and Purchasing said the official Purchasing Managers’ Index rose in June. The Australian dollar gained versus the yen after a report showed the nation’s retail sales climbed for a third month. The euro strengthened against the dollar as every stock market in Europe advanced.

“The China news has created, or at least catalyzed, yen selling,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “There’s more of a chance that we’ll continue to see stocks and risk markets rally, and Japanese investors may go abroad again.”

The yen weakened to 136.33 per euro as of 6:11 a.m. in New York, from 135.21 yesterday. It earlier traded at 136.45, the lowest level since June 15. The yen depreciated to 96.90 per dollar from 96.36. The currency has lost 7.1 percent against the euro and 6.5 percent versus the dollar this year.

Japan’s currency may decline to 100 per dollar and 140 against the single European currency by the end of August as signs of an economic recovery create fewer “reasons to be long yen,” Jones said. A long position is a bet that the price of a currency or security will rise.

The euro advanced to $1.4066 from $1.4033. The won strengthened to 1,267.65 against the U.S. currency, and gained to 13.083 per yen, from 13.218.

Rising Stocks

Europe’s Dow Jones Stoxx 600 Index added 1.1 percent, after gaining 17 percent in the three months through June 30, for its biggest quarterly rally since 1999. Futures on the Standard & Poor’s 500 Index increased 0.7 percent.

The euro also gained against the dollar as a government report showed retail sales in Germany, Europe’s largest economy, unexpectedly rose for a third month in May, strengthening the case for the European Central Bank to keep interest rates unchanged tomorrow. Manufacturing in the euro area contracted for a 13th month in June, Markit Economics said today.

The likelihood that the world’s biggest economies won’t start growing anytime soon is keeping central banks from raising borrowing costs. ECB member Axel Weber, who heads the Bundesbank, said last week policy makers have used up their scope to cut rates. The prospect that the benchmark U.S. rate will stay near zero for several years is “not outside the realm of possibility,” Federal Reserve Bank of San Francisco President Janet Yellen told reporters yesterday.

Chinese Manufacturing

China’s Federation of Logistics and Purchasing said its Purchasing Managers’ Index rose to 53.2 in June from 53.1 in May. A reading above 50 indicates an expansion. Asia’s second- biggest economy may keep improving, enabling the nation to meet its 8 percent growth target this year, central bank Governor Zhou Xiaochuan said this week.

Australia’s retail sales increased by twice as much as economists estimated, the statistics bureau said today in Sydney. Sales gained 1 percent in May from April, when they climbed 0.3 percent, the bureau said. Australia’s dollar was at 78.11 yen, from 77.70 yesterday.

The benchmark interest rate is 0.1 percent in Japan, compared with 1 percent in the 16-nation euro region, 3 percent in Australia and 2.5 percent in New Zealand.

The Korean won added to its best quarterly gain in more than four years on optimism the worst of the nation’s economic slump is ending.

‘Definitely Bullish’

“We are definitely bullish on the won,” said Thomas Harr, a currency strategist at Standard Chartered Plc in Singapore. “The external balance has improved a lot, and it seems that the economy has probably bottomed out in the first quarter.”

The yen also fell after the Bank of Japan’s quarterly Tankan survey showed sentiment among the largest manufacturers rose less than economists expected. The index of sentiment among large makers of electronics, cars and other products climbed to minus 48 in June from minus 58 in March, the central bank said in Tokyo. Economists surveyed by Bloomberg News predicted minus 43. A negative number means pessimists still outnumber optimists.

“The Tankan report is something that’s really weighed on the yen,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “It’s as good a reason as any to remain cautious on the Japanese economy.”

The dollar gained for a third day against the yen on speculation a report will show manufacturing in the U.S. shrank in June at the slowest pace in 10 months.

The Institute for Supply Management’s factory index advanced to 44.6, the highest level since August, according to a Bloomberg News survey of economists before the Tempe, Arizona- based group releases the data today. Readings lower than 50 signal contraction.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, was little changed at 80.026.

Dollar May Extend Advance as U.S. Sentiment Spurs Safety Demand

2009-07-01T02:23:00.001+03:00

July 1 -- The dollar may extend its gain versus the euro after a report showed an unexpected drop in U.S. consumer confidence for June, increasing demand for the safety of the world’s main reserve currency.

South Africa’s rand advanced yesterday to the strongest level versus the dollar since August after the nation posted its first trade surplus in more than two years. The Canadian dollar dropped to a six-week low and Norway’s krone declined as crude oil tumbled, reducing the revenue of commodity exporters.

“In the medium term, the dollar will probably trade higher,” said Jessica Hoversen, a foreign-exchange analyst in Chicago at MF Global Ltd., the world’s largest broker of exchange-traded futures. “From March until now, markets were pricing in a very robust economic recovery. We’re considering whether the recovery that’s been priced in is viable.”

The U.S. currency traded at $1.4035 versus the euro at 6:03 a.m. in Tokyo, following a 0.4 percent gain yesterday. The euro was little changed at 135.25 yen after reaching 135.96, the highest level since June 15. The dollar fetched 96.35 yen following a 0.3 percent advance.

The Dollar Index, which the ICE uses to track the greenback against the currencies of six major U.S. trading partners including the euro and yen, increased 0.4 percent to 80.149.

The Conference Board’s index of U.S. sentiment decreased last month to 49.3 from a revised 54.8 in May, the New York- based research group said yesterday. The median forecast of 70 economists surveyed by Bloomberg News was for a gain to 55.3 from a previously reported 54.9.

Quarterly Losses

The dollar and yen were the biggest losers among major counterparts in the second quarter as signs that the global recession is abating encouraged investors to sell the two currencies they accumulated when financial turmoil mounted.

The U.S. currency declined 5.9 percent against the euro in the three months ended yesterday, its first quarterly drop since March 2008, pushing the greenback 0.4 percent lower in 2009. The yen fell 3 percent versus the euro in the second quarter.

“The dollar acted as a safe haven during the crisis, appreciating notably,” Ulrich Leuchtmann, head of foreign- exchange research in Frankfurt at Commerzbank AG, Germany’s second-largest lender, wrote in a client note yesterday. “So it’s to be expected that this situation would change once things returned to normal.”

Australia’s dollar posted record gains in the second quarter, rising 18 percent against the U.S. currency. New Zealand’s dollar strengthened 15 percent since March 31, the most since 1985.

Tankan Survey

The Bank of Japan’s Tankan survey today will probably show large manufacturers consider the worst of the recession to be over. An index of sentiment among large makers of electronics, cars and other goods will rise to minus 43 from a record low of minus 58 in March, according to the median forecast of 22 economists surveyed by Bloomberg News. A negative number means pessimists outnumber optimists.

The share of dollars in global foreign-exchange reserves increased to 65 percent in the first three months of this year, the highest level since 2007, from 64.1 percent in the fourth quarter of last year, the International Monetary Fund said in a statement yesterday. The euro’s share dropped to 25.9 percent from 26.5 percent, while the pound’s fell to 4 percent from 4.1 percent, the Washington-based lender said. The yen’s share of global reserves decreased to 2.9 percent from 3.2 percent.

The rand appreciated as much as 2 percent to 7.6722 against the dollar, the strongest level since Aug. 29, as South Africa posted a trade surplus of 2 billion rand ($258 million) in May following a deficit of 1.5 billion rand in the prior month. The rand gained 23 percent in the second quarter, the best performance among the 16 most-traded currencies tracked by Bloomberg.

Canadian Dollar

The Canadian dollar slid as much as 0.6 percent to C$1.1640, the weakest level since May 19, and the Norwegian krone declined as much as 0.9 percent to 6.4678 per dollar as crude oil for August delivery fell 2.1 percent to $70.02 a barrel. Norway is the world’s fifth-largest crude-oil supplier, while raw materials such as oil and gold account for half of Canada’s exports.

Goldman Sachs Group Inc. exited a bet that the Canadian dollar would strengthen versus the Mexican peso after the trade lost about 5 percent.

“Recent data points have gone against our fundamental views of continued stabilization in Canada and a lagging recovery in Mexico, relative to the global cycle,” analysts at the firm wrote yesterday in a note, citing worse-than-expected Canadian retail sales and employment figures as well as a less- than-forecast drop in Mexican industrial production.

The firm entered the trade on June 8 and was “stopped out” when the peso strengthened beyond 11.40 per Canadian dollar, the Goldman Sachs analysts wrote. A long position refers to a bet that a currency will rise. Traders place “stops” on trades to limit losses. The Canadian currency fell 0.7 percent to 11.3269 pesos yesterday. http://fxisforex.blogspot.com/

Dollar Rises Versus Euro as U.S. Sentiment Spurs Safety Demand

2009-06-30T19:37:00.001+03:00

June 30 -- The dollar gained versus the euro for the first time in four days as a report showed U.S. consumer confidence unexpectedly dropped in June, increasing demand for the safety of the world’s main reserve currency.

South Africa’s rand advanced to the strongest level versus the dollar since August after the nation posted its first trade surplus in more than two years. The Canadian dollar and Norway’s krone declined after crude oil dropped from an eight-month high, reducing the revenue of commodity exporters.

“It’s a classic risk-aversion trade following the dreadful consumer-confidence number,” said Jacob Oubina, a currency strategist at FOREX.com, a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey. “That’s a dramatic surprise. The dent of confidence doesn’t bode well for consumer spending.”

The dollar climbed 0.4 percent to $1.4026 versus the euro at 12:06 p.m. in New York, from $1.4083 yesterday. The euro traded at 135.23 yen, compared with 135.31 yen, after earlier increasing to 135.96, the highest level since June 15. The dollar appreciated 0.4 percent to 96.47 yen from 96.06.

The Conference Board’s sentiment index decreased this month to 49.3 from a revised 54.8 in May, the New York-based research group said today. The median forecast of 70 economists surveyed by Bloomberg News was for a gain to 55.3 from a previously reported 54.9 in the prior month.

The rand appreciated as much as 2 percent to 7.6722 against the dollar, the strongest level since Aug. 29, as South Africa posted a trade surplus of 2 billion rand ($258 million) last month following a deficit of 1.5 billion rand in April. The rand gained 23 percent in the second quarter, the best performance among the 16 most-traded currencies tracked by Bloomberg.

Dollar This Quarter

The dollar and yen were the biggest losers among major currencies in the second quarter as signs that the global recession is abating encouraged investors to sell the two currencies they accumulated during the financial turmoil.

The U.S. currency declined 5.6 percent against the euro in the three months ended today, its first quarterly drop since March 2008, pushing the greenback 0.3 percent lower in 2009. The yen was down 6.3 percent versus the euro this year, compared with a 2.6 percent decline in the first six months of 2008.

“The dollar acted as a safe haven during the crisis, appreciating notably,” Ulrich Leuchtmann, head of foreign- exchange research in Frankfurt at Commerzbank AG, Germany’s second-largest lender, wrote in a client note today. “So it’s to be expected that this situation would change once things returned to normal.”

U.K. Sentiment

The pound earlier rose as much as 1.1 percent to $1.6743, the highest level since Oct. 21, as the market researcher GfK NOP said U.K. consumer confidence increased in June to the highest level in 14 months and Nationwide Building Society said house prices climbed 0.9 percent.

Sterling later dropped 0.7 percent to $1.6454 after the government said Britain’s economy shrank 2.4 percent in the first quarter, more than previously estimated and the biggest contraction since 1958.

The Canadian dollar fell 0.6 percent to C$1.1631 and the Norwegian krone dropped 0.5 percent to 6.4388 per dollar after crude oil for August delivery fell 3.2 percent to $69.24 a barrel. Norway is the world’s fifth-largest crude-oil supplier, while raw materials such as crude oil and gold account for half of Canada’s exports.

Three other commodity currencies, the Brazilian real and the Australian and New Zealand dollars, were among the best performers this quarter, rising at least 15 percent.

The currencies’ gains may slow in the second half on waning risk appetite, according to Royal Bank of Scotland Group Plc.

Outlook for Aussie

“We remain skeptical that the Australian dollar and commodity currencies have all that much further to run,” Greg Gibbs, a strategist in Sydney at RBS, wrote today in a report. “As we head into the second half of the year, global data disappointments are expected to increase. Asset markets will appear to have run out of upside potential, and risk of a correction in global risk appetite will increase.”

BNP Paribas said “the current rise of risk appetite will not be sustainable into the fourth quarter,” which may eventually weaken the euro.

Loans to households and companies in Europe rose 1.8 percent from a year earlier, the smallest annual increase since records began in 1991, the European Central Bank said today. M3 money-supply growth, which the ECB uses as a gauge of future inflation, slowed to 3.7 percent from 4.9 percent.

‘Negative Implications’

“The failure to address problems in the banking sector will eventually have broader negative implications for the economy and the euro,” currency strategists led by Hans-Guenter Redeker at BNP in London wrote in a note today. “This process appears to have started with the continued collapse of the euro- zone money supply data, which suggests that the weakness of European bank balance sheets is already having an impact.”

Asian currencies headed for quarterly gains versus the dollar as speculation the worldwide economic slump is easing fueled demand for emerging-market securities.

The rupiah advanced today on speculation Indonesian President Susilo Bambang Yudhoyono will win re-election next month and introduce policies to support growth in Southeast Asia’s largest economy. The won gained as the Kospi Index of equities posted its best quarter in two years.

“Most countries are moving along with a refreshing recovery trend that should be good for markets,” said Yeo Chin Tiong, head of treasury at OSK Investment Bank Bhd. in Kuala Lumpur. “The economies are chugging along, not fantastic, but stock and currency markets are trading on feel-good sentiment.”

The rupiah rose 0.3 percent to 10,208 per dollar, increasing this quarter’s gain to 15 percent. The South Korean won appreciated 1 percent to 1,273.70 for an 8.6 percent advance since March 31.

Dollar to Rise Most Since 1981, Best Predictor Says

2009-06-29T11:11:00.001+03:00

June 29 -- Strategists who came closest to predicting the dollar’s value against the euro so far this year see it strengthening as much as 17 percent in the second half as the U.S. recovers from the recession faster than Europe.

CIBC World Markets Plc, Deutsche Bank AG, Bank of America Corp. and Wells Fargo & Co. estimate the U.S. currency will rise more than 4 percent by Dec. 31 after May ended with its sharpest three-month fall since 2002. At the start of the year, all had second-quarter forecasts within a penny or two of the $1.4056- per-euro close on June 26, Bloomberg’s currency survey shows.

“I’m reasonably bullish on the dollar,” said Henrik Gullberg, a currency strategist in London at Frankfurt-based Deutsche Bank, which Euromoney Institutional Investor Plc ranks as the world’s biggest foreign-exchange trader. “If you look at the data over the past few weeks, it has been consistent with the situation where the U.S. is a quarter or two ahead” of the 16-country euro region in rebounding, he said. http://fxisforex.blogspot.com/

At the start of the year, after 2008 closed with the euro worth $1.3971, Deutsche Bank said it would weaken to $1.40 by June 30, just shy of where it was two trading days before the quarter’s end. Now the bank predicts a 17.1 percent gain to $1.20 per euro by year’s end, which would be the greenback’s best two-quarter performance against the euro or a basket of predecessor currencies since 1981.

Emerging from Turmoil

Little changed so far in 2009, the dollar is down 5.5 percent this quarter to trade at $1.4027 as of 11:19 a.m. in Tokyo. Against the yen, which has declined against all 16 major currencies tracked by Bloomberg this year, the dollar has gained 5.3 percent since Dec. 31 to 95.40 yen.

Pro-dollar predictions reflect signs that the U.S. economy is emerging from the worst turmoil since World War II. Orders for American-made durable goods unexpectedly jumped in May, the Commerce Department said June 24. Median forecasts in Bloomberg’s economist survey predict the U.S. will grow 1.9 percent next year after shrinking 2.7 percent in 2009 as the euro economy contracts 4.3 percent before expanding 0.5 percent.

The Federal Reserve on June 24 said that “the pace of economic contraction is slowing.” The Organization for Economic Cooperation and Development last week urged the European Central Bank to cut interest rates further to speed the recovery there.

“In Europe, there’s a lot of headwinds, so the bullish- dollar story is based on what’s going on elsewhere,” said Adam Fazio, a CIBC currency strategist in New York. “We are bullish dollar in the near term.” Toronto-based CIBC predicts a 4.1 percent increase in the next two quarters.

Wide Range

Forecasts for the currency are the most scattered in two years, with fourth-quarter predictions ranging from $1.16 to $1.55 per euro, Bloomberg data show. The median of 48 forecasts sees the year ending at $1.40, near the current level.

Aletti Gestielle SGR SpA, an asset-management unit of Italy’s Banca Popolare di Verona, had the same second-quarter prediction at the start of the year as Deutsche Bank and now is among the most bearish, seeing $1.52 per euro by Dec. 31.

“There’s a lot of disillusion about growth in the U.S.,” said Fabrizio Fiorini, who helps manage $12 billion for Aletti Gestielle in Milan. “The U.S. will suffer from high debt and low consumption for quarters to come.”

Market uncertainty is driving up foreign-exchange swings. Fluctuations in Group of Seven currencies have risen to more than double what they were in the year before the credit crunch started in mid-2007; the G7 Volatility Index closed at 14.4 percent on June 26.

Winning Streaks

In the past six quarters, just two forecasters in Bloomberg’s survey -- Danske Bank A/S in Copenhagen and Royal Bank of Canada’s London-based strategists -- were among the five most accurate half-year-hence dollar-euro prognosticators twice in a row. Only London-based HSBC Holdings Plc did so three straight times. The rankings are based on forecasts in Bloomberg’s database on each quarter’s first day.

Robert Minikin, a Standard Chartered Plc currency strategist in London, said forecasting is difficult because governments are committing record sums to battle the recession.

“There’s profound uncertainty about the impact of the non- conventional measures,” on foreign-exchange markets, Minikin said. “It’ll be difficult” for policy makers “to unwind what they’ve done,” he said. There will be “heavy downward pressure” pushing the dollar to $1.55 per euro by year-end, he added.

HSBC has gone from positive to negative on the currency following three straight quarters in the ranks of the most accurate. After foreseeing $1.25 per euro by this quarter’s end, HSBC predicts $1.50 by Dec. 31.

‘Vulnerable Position’

“The dollar is in a vulnerable position because of the quantitative-easing policy,” said Paul Mackel, a HSBC currency strategist in London.

The greenback fell against the euro from early 2002 until the economic crisis exploded in mid-2008, when it strengthened to a two-year peak of $1.2330 per euro on Oct. 28 as investors fled to the perceived safety of Treasuries. It’s been a rollercoaster since -- $1.4719 on Dec. 18, $1.2457 on March 4 and then an 11.4 percent decline as investors returned to riskier investments and pushed the Standard & Poor’s 500 Index up 29 percent.

The legal tender fell as much as 0.9 percent on June 26, after policy makers at the People’s Bank of China renewed calls for a new global currency “delinked from sovereign nations.” Despite such talk, investors aren’t deserting dollar assets. The Fed’s custodial holdings of Treasuries for foreigners rose to a record $1.96 trillion this month as central banks and others abroad bought $15.2 billion worth the week ended June 24.

‘Risk Rally’

The dollar rose today for the first time in three days against the euro after China said it will not alter its foreign- currency reserves suddenly. China’s “foreign exchange reserve policy is always quite stable,” central bank Governor Zhou Xiaochuan told reporters yesterday in Basel, Switzerland.

“The recovery is going to take time, and that puts pressure on the risk rally,” said Geoffrey Yu, a strategist in London at UBS AG, the second-biggest currency trader. Renewed demand for havens is “going to be dollar supportive,” he added, predicting it will strengthen to $1.35 per euro in three months.

“You don’t have to bet on the recovery to be bullish on the dollar,” said Christoph Kind, who manages $20 billion as head of asset allocation in Frankfurt at Frankfurt-Trust Investment GmbH. “If the situation stays as bad as it is, the dollar is a safe haven. And if the economy turns the corner, the U.S. will be the first to get out of the recession. On that basis, the dollar looks like a good investment. We are buying the dollar against the yen and the euro.”

Analysis and forecasts Friday 06.26.2009

2009-06-26T15:05:00.001+03:00

EURUSD

The euro challenges the interim top side as it managed to breach above the 1.4 handle. Intra-day sentiment is bullish and won't be affected as long as potential pullbacks won't extend much below 1.4000. Resistance is clustered into the 1.4110-1.4175 region - formed by a downward trend-line at 1.4110 and also the 61.8% of the last down leg from 1.4340 to 1.3750, current week's top at 1.4140 and 1.4175, the high of June 11. Below 1.4000, next important support is formed by a rising trend-line extended through recent lows, now coming around 1.3900. Short-term sentiment is slightly positive but a breach above 1.4140 would confirm the uptrend. Current quote is 1.4031 @05:50 GMT

Support levels: 1.4000, 1.3950, 1.3900, 1.3830 and 1.3750/75
Resistance levels: 1.4060, 1.4140 and 1.4175/80
Market sentiment: long-term : bearish, mid-term : bullish, short-term : slightly bullish

Yesterday recommended trade: stand aside

AUDUSD

Current break above the downward trend channel's upper band at .8030 suggests that a potential reversal is underway, ending the corrective cycle. The Aussie dollar should now hold gains above support at .8000/10 - above the mentioned channel. While above the .8000 mark, intra-day sentiment will remain positive and rallies may target .8115 which is the first bullish target, followed by .8235 higher. Current quote is .8043 @05:50 GMT

Support levels: .8000/10, .7950, .7885/00, .7860 and .7800
Resistance levels: .8070, .8100/15 and .8235
Market sentiment: long-term : bearish, mid-term : bullish, short-term : slightly bullish

Yesterday recommended trade: long at .7760, initial stop at .7710, objective at .7860. Adjust stop to breakeven on +30 pips (at .7790) if reached : 0 (entry not reached)

EURCHF

Resistance starts at 1.5370/80 and could remain under pressure as the euro doesn't pullback yet. Above 1.5370/80, next objective emerges at 1.5425/45 - yearly top. Both short-term and intra-day studies are bullish. Potential pullbacks will probably be limited by the 1.5235 support. Current quote is 1.5322 @05:50 GMT

Support levels: 1.5300, 1.5235/50, 1.5150/60 and 1.5100
Resistance levels: 1.5380/00, 1.5425/45 and 1.5500
Market sentiment: long-term : bearish, mid-term : bearish, short-term : bullish

Yesterday recommended trade: long at 1.5160, initial stop at 1.5110, objective at 1.5230. Adjust stop to breakeven on +30 pips (at 1.5190) if reached : 0 (entry not reached)

Dollar Heads for Weekly Decline Against Euro on Yield Demand

2009-06-26T05:02:00.000+03:00

June 26 -- The dollar fell, heading for its biggest weekly loss against the euro in a month, on speculation U.S., European and Chinese central banks’ efforts to stabilize the global economy will boost demand for higher-yielding assets.

The yen slid for a fourth day against the Australian dollar after gold and crude oil rose yesterday, adding to optimism the South Pacific nation’s economy is recovering. The Swiss franc traded near a three-month low against the euro on bets the country’s central bank boosted sales of the currency to support the economy.

“We had a strong performance in commodity prices,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “Equities also performed very well, which is very supportive of investors’ sentiment generally” to seek higher- yielding currencies.

The dollar traded at $1.4035 versus the euro at 9:18 a.m. in Tokyo from $1.3988 yesterday in New York. The yen was at 134.33 per euro from 134.22. The dollar fetched 95.71 yen from 95.95 yen. Australia’s currency bought 80.62 U.S. cents from 80.25 cents yesterday, and traded at 77.17 yen from 77.00 yen.

Gold futures for August delivery yesterday rose $5.10, or 0.5 percent, to $939.50 an ounce on the New York Mercantile Exchange’s Comex division. Crude oil for August delivery rose $1.56, or 2.3 percent, to settle at $70.23 a barrel.

Gold is Australia’s third-most valuable raw material export, and crude oil is its fourth-most valuable.

Weaker Yen

Japan’s currency slid 1.7 percent to 49.44 versus the Brazilian real yesterday and the dollar declined 0.5 percent to 8.0169 South African rand as central banks’ actions encouraged investors to borrow in nations with low interest rates and buy assets where returns are higher. The Bank of Japan’s 0.1 percent target lending rate compares with 9.25 percent in Brazil and 7.50 percent in South Africa.

The dollar rose earlier yesterday against the yen after the Federal Open Market Committee said in its statement on June 24 that the central bank doesn’t plan to increase its $1.75 trillion bond-buying program and the pace of economic contraction is slowing.

“The Fed sounded a slightly more hawkish note than expected,” analysts led by David Woo, London-based global head of currency strategy at Barclays Capital, wrote in a research note yesterday. “The FOMC statement led to dollar gains. There may be some further upside in the short term.”

Federal Reserve

The U.S. central bank held the target rate for overnight lending between banks in a range of zero to 0.25 percent for a fourth consecutive meeting.

The Fed said yesterday it will let one of its emergency programs expire and trim two others in a sign that improving financial markets allow a first step toward ending its unprecedented interventions.

U.S. consumer spending increased 0.3 percent in May after declining 0.1 percent in the previous month, according to the median forecast of 76 economists surveyed by Bloomberg News. The report from the Commerce Department is due later today.

The European Central Bank said on June 24 it will lend banks 442 billion euros ($619 billion) for 12 months, the most it ever allotted in an auction. In China, the People’s Bank said yesterday it will maintain a “moderately loose” monetary policy to support economic recovery.

Weaker Franc

The franc traded at 1.5302 against the euro two days after traders said the Swiss National Bank intervened twice to weaken its currency. The franc declined as much as 2.4 percent on June 24 to 1.5380, the weakest level since March 19. The franc traded at 1.0928 per dollar after reaching 1.1023 two days ago, the weakest level since May 21.

The yen dropped yesterday as figures from the Ministry of Finance in Tokyo showed Japanese investors bought 336.1 billion yen ($3.5 billion) more in foreign bonds, stocks and short-term securities than they sold in the week ended June 20. The yen lost 2.3 percent versus the euro this quarter.

“Their domestic opportunities are much less attractive than many other parts of the world,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “At the first sign of stability, they’re always going to be more likely to send money overseas than any other country.”

Dollar Gains as Fed Refrains From Boosting Debt Purchases

2009-06-24T22:54:00.000+03:00

June 24 -- The dollar rose against the yen for the first time in four days and advanced versus the euro after the Federal Reserve left its $1.75 trillion bond-purchase program unchanged.

The yen dropped against the South African rand and Norwegian krone as orders for U.S.-made durable goods unexpectedly jumped in May, encouraging demand for higher- yielding assets. The Swiss franc fell against all of its most- traded counterparts on speculation the central bank sold the currency to support the economy.

“The Fed is not standing in the way of rising yields,” said Todd Elmer, currency strategist at Citigroup Global Markets in New York. “For the time being, this provides knee-jerk support to the dollar. The dollar is more sensitive to relative interest-rate differentials recently than to pure swings of risk appetite.”

The greenback gained 0.5 percent to 95.74 yen at 2:42 p.m. in New York, from 95.22 yen yesterday. The dollar appreciated 1.2 percent to $1.3913 against the euro from $1.4077. The euro dropped 0.6 percent to 133.21 yen from 134.04.

The Fed held the target rate for overnight lending between banks in a range of zero to 0.25 percent for a fourth straight meeting.

“Substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time,” the Federal Open Market Committee said in its statement after a two-day meeting in Washington.

Interest-rate futures contracts showed a 40 percent chance policy makers would raise the target lending rate by at least a quarter-percentage point to 0.5 percent by December, down from 45 percent odds a week ago.

Quantitative Easing

The dollar plunged a record 3.4 percent against the euro on March 18, when the Fed announced its plan to buy up to $300 billion Treasuries to lower borrowing costs. The strategy, known as quantitative easing, raised concern that it would flood the market with dollars and debase the currency.

The greenback gained 1.3 percent versus the yen when the Fed refrained on April 29 from increasing the amount of assets it plans to purchase.

Since then, borrowing costs rose. Rates on U.S. 10-year Treasury notes and 30-year mortgages increased to 4 percent and 5.59 percent, respectively, on June 11, the highest this year.

“Problems in the U.S. remain whether they announce additional quantitative easing or not,” said Camilla Sutton, director of currency strategy at Scotia Capital Inc. in Toronto, before the Fed’s statement. “Fundamentals are not particularly good for the dollar.”

Weakening Franc

The franc depreciated as much as 2.4 percent to 1.5380 versus the euro and slid as much as 3.2 percent to 1.1023 against the dollar on speculation the Swiss National Bank intervened less than a week after Chairman Jean-Pierre Roth said policy makers will act to restrict “irrational appreciation.”

The declines in the franc were the biggest since March 12, when the SNB said it would buy currencies in its first solo intervention in foreign-exchange markets since 1992. Against the currencies of major trading partners, the franc appreciated yesterday to the highest level since March 11, according to data compiled by the Bank of England.

The Swiss currency extended its drop on speculation the central bank intervened for a second time today. An SNB spokesman, Werner Abegg, said, “We don’t comment on that.”

The yen dropped as much as 2.4 percent to 11.90 versus the rand and slid as much as 1.6 percent to 14.93 versus the Norwegian krone as the gain in U.S. durable goods orders prompted investors to borrow where interest rates are low and buy assets where returns are higher.

Target Lending Rates

The target lending rate of 0.1 percent in Japan compares with 7.5 percent in South Africa and 1.25 percent in Norway.

Bookings for U.S. goods meant to last several years gained 1.8 percent in May, matching the previous month’s increase, the Commerce Department reported. The median forecast of 75 economists surveyed by Bloomberg was for a 0.9 percent drop.

The combined economy of the world’s most-industrialized countries will shrink 4.1 percent this year and grow 0.7 percent in 2010, the Paris-based Organization for Economic Cooperation and Development reported. The new projections compare with March forecasts for contractions of 4.3 percent and 0.1 percent.

The U.S. currency will emerge from this week’s Fed policy meeting “better biased to weaken,” according to Credit Suisse Group AG.

“The dollar’s immediate problem is market concern about the Fed’s inflation-fighting credibility,” a team of Credit Suisse currency strategists led by Ray Farris in London wrote in a note yesterday, referring to the Fed’s purchases of assets. “We see ways for the Fed to salve some of these concerns, but we doubt the Fed will turn hawkish enough to support the dollar,” Credit Suisse said.

Dollar Drops Most in June as Fed Seen Damping Rate Expectations

2009-06-23T20:43:00.001+03:00

June 23 -- The dollar dropped the most this month against the euro on speculation the Federal Reserve will temper expectations for an interest-rate increase this year in an attempt to lower borrowing costs.

The central bank will probably keep its benchmark rate close to zero and continue its $300 billion program of Treasury purchases, according to a Bloomberg News survey of 58 economists before tomorrow’s statement. The pound fell versus the euro by the most in almost three weeks after Bank of England Chief Economist Spencer Dale said a weaker currency was a “key channel” to spur economic growth.

“A later rate hike by the Fed, or a lack of a rate hike in the near term, would be somewhat negative for the dollar just from a relative interest rates perspective,” said Vassili Serebriakov, a strategist at Wells Fargo & Co. in New York.

The U.S. currency weakened as much as 1.58 percent to $1.4085 per euro, the most since May 29. It traded at $1.4076 at 12:21 a.m. in New York, from $1.3865 yesterday. The greenback dropped 0.8 percent to 95.13 yen. Japan’s currency depreciated 0.8 percent to 133.97 per euro.

Rates on U.S. 10-year notes and 30-year mortgages rose to 4 percent and 5.59 percent, respectively on June 11, the highest this year. The increase threatens the Fed’s plans to free up lending in credit markets by purchasing debt ranging from government notes to mortgage-backed securities.

‘Damper on Yields’

“The market is worried that the Fed will put a damper on yields and that will take away support from the dollar,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, the world’s biggest foreign-exchange trader. “That’s the main reason the dollar looks vulnerable right now.”

Sterling fell 1.2 percent to 85.87 pence per euro after Bank of England’s Dale said in a speech that the central bank’s buying gilts from foreign investors can benefit the economy through a weaker exchange-rate. The U.K. currency has gained 9 percent versus the euro and 12 percent against the dollar in the last three months on signs the U.K.’s recession is abating.

“The BOE’s comments have been used as an excuse to sell sterling,” said Daragh Maher, deputy head of global foreign- exchange strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. “The market has been looking for an argument to sell sterling and Dale’s comments fit the bill.”

The Australian and New Zealand dollars gained, after losing more than 2 percent yesterday. The Aussie rose 1 percent to 798.37 U.S. cents and the New Zealand’s dollar added 1.5 percent to 63.86 cents.

FOMC Meeting

The U.S. currency dropped versus the yen for a third day as the Federal Open Market Committee’s two-day meeting started. Futures traders cut bets the Fed will raise interest rates by at least a quarter-percentage point to 0.5 percent by December, lowering the odds to 40 percent from 49 percent a week ago.

U.S. households may take 15 years to rebound from their losses of wealth during the recession, Edmund Phelps, a professor at Columbia University and winner of the 2006 Nobel Prize for economics, told Bloomberg Television yesterday.

The dollar will emerge from this week’s Fed policy meeting “better biased to weaken,” said Credit Suisse Group AG.

“The dollar’s immediate problem is market concern about the Fed’s inflation-fighting credibility,” a team of Credit Suisse currency strategists led by Ray Farris in London wrote in a note today, referring to the Fed’s purchases of assets. “We see ways for the Fed to salve some of these concerns, but we doubt the Fed will turn hawkish enough to support the dollar,” Credit Suisse said.

Home Resales

Manufacturing activity in the central Atlantic region accelerated this month and U.S. home resales climbed in May, according to data published today by the Fed and National Association of Realtors. The Richmond Federal Reserve Bank’s index of current activity climbed to six from four and existing home sales advanced 2.4 percent to an annual rate of 4.77 million, less than the 4.823 million economists had forecast.

The European Central Bank has already used up the extra space it had to cut interest rates after the “dramatic worsening” in the economy and decline in inflation risk, council member Axel Weber said at an event in Munich today.

The central bank kept its benchmark rate at a record low of 1 percent this month and plans to offer banks 12-month loans for as much as they want in a new auction this week to help credit start flowing again.

The currencies of Asia’s developing nations will strengthen over the next 12 months as accelerating economic growth helps attract funds, according to Citigroup Inc.

The Indian rupee will gain 8 percent in a year’s time on “increased capital flows,” while China’s yuan won’t resume its appreciation until next year as policy makers use a stable currency to aid exporters, analysts including Jeremy Hale, the bank’s London-based head of macro strategy, wrote in a report published yesterday.

Yen May Extend Gain as Economic Outlook, Oil Spur Safety Demand

2009-06-23T02:01:00.001+03:00

June 23 -- The yen and dollar may extend their advance versus the euro after the World Bank said the global recession will be deeper than it predicted in March, encouraging safety demand for the currencies.

The Canadian dollar and Norway’s krone were among the biggest losers against the dollar and yen yesterday as prices of crude oil and copper tumbled. The Japanese and U.S. currencies also strengthened after Iran’s government said at least 17 people were killed during protests over a disputed election.

“The possibility for further correction is there,” said Steven Englander, chief U.S. currency strategist at Barclays Capital in New York. “What you don’t want to do is going short dollar prematurely. It makes sense to wait for the market to sort itself out and for the correction to run its course.” A short position is a bet a currency will drop.

The yen traded at 132.87 per euro at 6:06 a.m. in Tokyo, after climbing 0.9 percent yesterday. The dollar was at $1.3856 per euro, following a 0.5 percent gain. The yen fetched 95.86 per dollar, after rising 0.4 percent.

Japan’s currency advanced 1.9 percent yesterday to 83.21 versus the Canadian dollar and gained 2.6 percent to 14.65 against the krone as the World Bank’s economic outlook and the drop in commodities discouraged carry trades, in which investors borrow in a nation with low interest rates and buy assets where returns are higher.

The Federal Reserve’s target lending rate of zero to 0.25 percent and the Bank of Japan’s 0.1 percent benchmark compare with 3 percent in Australia and 1.25 percent in Norway.

Commodity Currencies

Against the dollar, the Canadian currency lost 1.5 percent to C$1.1523 and the krone weakened 2.2 percent to 6.5472. Crude oil for July delivery fell 3.8 percent to $66.93 a barrel, while copper tumbled to a three-week low. Norway is the world’s fifth- largest oil supplier. Raw materials, such as oil and copper, account for half of Canada’s exports.

The Standard & Poor’s 500 Index lost 2.8 percent yesterday. While the S&P 500 is still up 33 percent since reaching a 12- year low on March 9, the index fell 4.7 percent since June 12.

“In the short term, I won’t be surprised by a dollar rally,” said Venkatraman Anantha-Nageswaran, global chief investment officer in Singapore at Bank Julius Baer & Co., in a Bloomberg Television interview.

In the “medium to long term,” the greenback will depreciate because U.S. domestic demand is so fragile that it requires a weaker currency to stimulate exports to revive the economy, said Anantha-Nageswaran, whose firm has about $252 billion in assets under management.

Fed’s Policy

Investors reduced their positions in foreign exchange before the Fed’s policy statement tomorrow, according to Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York.

“In a Fed week, it doesn’t inspire much interest to put on fresh positions,” said Kassel.

The greenback may reverse its advance and weaken on speculation the Fed will craft its statement to keep interest rates down, some analysts said.

“We expect the statement to give a very clear signal over its commitment to maintain the current ultra-loose monetary stance,” Derek Halpenny, London-based European head of global currency research at Bank of Tokyo-Mitsubishi UFJ Ltd., wrote in a note yesterday. “The dollar is vulnerable.”

Dollar Index

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, gained 0.7 percent yesterday to 80.83.

The global economy will contract 2.9 percent this year, the World Bank forecast in a report yesterday, compared with a previous estimate of a 1.7 percent decline.

The dollar also advanced as Iranian police massing in force broke up a demonstration in Tehran over the disputed presidential election just hours after the Revolutionary Guards said they would crush further protest.

Data may show today the global recession is abating. The National Association of Realtors will probably report that existing home sales in the U.S. climbed 3 percent to an annual pace of 4.82 million last month, the highest level since October, according to the median forecast of 70 economists surveyed by Bloomberg News.

In Europe, a contraction in manufacturing and service industries slowed in June, according to the median forecast of 12 economists surveyed by Bloomberg News before Markit Economics releases its report.

Euro Trades Near 1-Week High Versus Dollar Before German Report

2009-06-22T03:35:00.000+03:00

June 22 -- The euro traded near a one-week high against the dollar before a German report that may show business confidence rose to the strongest level in seven months, adding to signs the global economy is emerging from recession.

The yen ended three days of losses versus the euro on concern the political situation in Iran may deteriorate following one week of clashes between police and protestors, spurring demand for safer assets. The Dollar Index was close to the lowest in more than a week on speculation the Federal Reserve will this week signal it plans to keep borrowing costs low, damping demand for U.S. investments.

“German sentiment is expected to improve, implying the European Central Bank may leave rates unchanged next month,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-biggest bank. “The euro will probably strengthen.”

The euro traded at $1.3935 as of 8:44 a.m. in Tokyo from $1.3937 last week in New York. It climbed to $1.4033 on June 15. European currency fell to 133.90 yen from 134.18. The dollar dropped to 96.14 yen from 96.27.

The Ifo institute in Munich will say today its business climate index, based on a survey of 7,000 executives, increased to 85 this month from 84.2 in May, according to a Bloomberg News survey, showing signs the recession in Europe’s largest economy is easing. The index reached a 26-year low of 82.2 in March.

Rate Futures

Interest-rate futures indicated a 44 percent chance the U.S. central bank will boost its target rate to at least 0.5 percent by December, down from 55 percent odds a week ago.

The greenback will remain “on defensive” before the Federal Open Market Committee’s policy meeting this week, wrote Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi Ltd. in London, in a research note last week.

“It is notable that between August 2003 to January 2004, when the Fed committed to maintaining policy accommodation for a ‘considerable’ period, the Dollar Index trended lower,” Hardman wrote. “The adoption of a similar approach by the FOMC next week to dampen tightening expectations before year-end will ultimately prove a similarly bearish development for the dollar this time around.”

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, lost almost 10 percent from August 2003 to January 2004. The gauge of the dollar was little changed at 80.394.

BOJ’s Rate

Speculation the worst is over doesn’t mean the Bank of Japan is preparing to raise the key overnight lending rate, which was kept at 0.1 percent at a meeting last week.

The BOJ should consider whether to stop pumping extra cash into the banking system by evaluating trends in corporate financing and the economy, according to minutes of the May meeting released June 19.

They said whether to keep buying corporate debt from banks and providing them with unlimited loans after Sept. 30 “should be determined based on close examination of developments in financial markets and corporate financing,” according to minutes of the May 20-21 meeting.

Splits within Iran’s ruling elite deepened, with police arresting family members of an ex-president and a former nuclear negotiator saying most Iranians questioned President Mahmoud Ahmadinejad’s electoral victory.

Security forces detained five relatives of former President Ali Akbar Hashemi Rafsanjani, one of the most influential politicians in the country, state media said yesterday.

Dollar Falls Most Against Yen in Month on Fed Rate Outlook

2009-06-21T19:16:00.000+03:00

June 20 -- The dollar dropped the most versus the yen in a month as traders pared bets that the Federal Reserve will increase its target lending rate, making U.S. assets less attractive.

The yen gained this week versus all of its major counterparts, rallying against Sweden’s krona and Brazil’s real as the Bank of Japan raised its assessment of the economy for a second month. The dollar weakened as Fed officials considered using their June 24 policy statement to suppress speculation they’re prepared to raise interest rates as soon as this year.

“The Fed will try to tell the market that they won’t withdraw monetary stimulus unless they see a sustained recovery,” said Alan Kabbani, a senior currency trader at Wachovia Corp. in Charlotte, North Carolina.

The dollar fell 2.2 percent this week to 96.27 yen, from 98.43 yen on June 12. It was the biggest decrease since the five days ended May 15, when the greenback slid 3.3 percent. The yen gained 2.7 percent to 134.18 per euro from 137.89 a week earlier. The dollar appreciated 0.6 percent to $1.3937 versus the euro from $1.4016.

Interest-rate futures indicated a 44 percent chance the central bank will boost its target rate to at least 0.5 percent by December, down from 55 percent odds a week ago.

Fed staff examined the Bank of Canada’s public intention of forgoing an increase until 2010 without concluding the statement proved effective, said a person familiar with the matter.

The greenback will remain “on defensive” before the Federal Open Market Committee’s policy meeting next week, wrote Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi Ltd. in London, in a research note yesterday.

‘Bearish Development’

“It is notable that between August 2003 to January 2004, when the Fed committed to maintaining policy accommodation for a ‘considerable’ period, the Dollar Index trended lower,” wrote Hardman. “We believe that the adoption of a similar approach by the FOMC next week to dampen tightening expectations before year-end will ultimately prove a similarly bearish development for the dollar this time around.”

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, lost almost 10 percent from August 2003 to January 2004. The gauge of the dollar increased 0.2 percent to 80.264 this week.

The yen gained 4.9 percent to 12.18 versus the krona and 4.5 percent to 48.86 against the real as the Bank of Japan said this week the world’s second-largest economy has “begun to stop worsening.”

BOJ’s Target Rate

Speculation the worst is over doesn’t mean the Bank of Japan is preparing to raise the key overnight lending rate, which stayed at 0.1 percent after this week’s meeting.

The Bank of Japan should consider whether to stop pumping extra cash into the banking system by evaluating trends in corporate financing and the economy, some policy board members said last month.

They said whether to keep buying corporate debt from banks and providing them with unlimited loans after Sept. 30 “should be determined based on close examination of developments in financial markets and corporate financing,” according to minutes of the May 20-21 meeting published in Tokyo yesterday.

Brazil, China, Russia and India said in a joint statement on June 16 after conducting a summit, in Yekaterinburg, Russia, that emerging economies should have a “greater voice and representation in international financial institutions.”

The first BRIC summit was held after the nations announced plans in recent weeks to shift some foreign reserves into International Monetary Fund bonds, causing the dollar and U.S. Treasuries to fall. The BRIC nations have combined reserves of $2.8 trillion and are among the biggest holders of U.S. government debt.

Aussie Versus Yen

The Australian dollar increased 0.6 percent to 77.48 yen and the New Zealand currency advanced 1 percent to 61.96 yen yesterday as bets the global recession is easing prompted investors to sell assets where interest rates are low and buy where returns are higher. The gains pared the Aussie’s weekly loss to 3.1 percent and the kiwi’s to 2.1 percent.

The Fed’s target lending rate of zero to 0.25 percent and the Bank of Japan’s benchmark compare with 3 percent in Australia and 2.5 percent in New Zealand.

European Union leaders saw the first signs of a “sustainable” economic recovery, making additional stimulus unnecessary, according to a statement from yesterday’s summit in Brussels. The World Bank raised on the previous day its growth forecast for China this year.

‘Positive’ Picture

“The broader picture is turning more positive, and risk appetite is returning,” said Ian Stannard, a foreign-exchange strategist in London at BNP Paribas SA. “This is providing support for the pro-cyclical currencies such as the Australian dollar, while the yen is coming under pressure.”

Chile’s peso was the biggest winner against the dollar among all of the world’s currencies after the government announced plans to extend its dollar sales in the foreign- exchange market to fund an additional $4 billion in stimulus spending.

The peso jumped 5.1 percent this week to 535.75 per dollar, its biggest gain since February. It advanced to 534.70 yesterday, the strongest level since Sept. 24.

Euro Advances as EU Leaders Say Economy on Course for Recovery

2009-06-19T09:36:00.000+03:00

June 19 -- The euro rose against the dollar and the yen after European Union leaders said the 16-nation region is on course for a “sustainable economic recovery.”

Europe’s currency pared a weekly loss versus the greenback after the EU leaders said “further budgetary stimulus would not be warranted,” in the draft of a statement to be approved today. The Australian and New Zealand dollars and the Norwegian krone rose the most against the yen and the U.S. currency as Asian stocks headed for their biggest advance in a week after U.S. reports yesterday showed an index of leading economic indicators rose for a second month and a regional factory gauge increased.

“We have seen some encouraging news about the global economy in the last 24 hours,” said Danica Hampton, a currency strategist in Wellington at Bank of New Zealand Ltd., the nation’s third-largest bank. “There’s been some relatively promising data out of the U.S. This is helping underpin” currencies against the yen.

The euro advanced to $1.3944 as of 6:46 a.m. in London from $1.3900 in New York yesterday. The European currency climbed to 134.79 yen from 134.17. The yen fell to 96.68 per dollar from 96.47. It dropped 0.9 percent to 77.69 against Australia’s dollar and lost 0.5 percent to 61.84 to the New Zealand dollar.

The Federal Reserve Bank of Philadelphia said yesterday its general economic index climbed to minus 2.2 from minus 22.6 in May. The Conference Board’s index of U.S. leading economic indicators rose more than forecast in May for the second month.

Dollar Trades Near Two-Week Low Versus Yen on Fed Rate Outlook

2009-06-18T02:31:00.000+03:00

June 18 -- The dollar traded near the lowest level versus the yen in two weeks as slower-than-forecast monthly inflation in May led traders to reduce bets the Federal Reserve will boost the target lending rate.

The yen rose against the Swedish krona and South African rand on speculation Japanese investors are selling foreign assets to buy shares of domestic banks. The pound fell against the euro as Bank of England minutes indicated policy makers voted unanimously this month to extend asset purchases to keep interest rates low.

“The Fed is concerned about the talk of inflation expectations,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank. “They very much want to squelch and curb that talk.”

The dollar traded at 95.82 yen at 6:21 a.m. in Tokyo, after falling 0.7 percent yesterday and reaching 95.52, the lowest level since June 3. The U.S. currency was at $1.3947 per euro, following a 0.8 percent decline. The euro was little changed at 133.65 yen.

U.S. central bank officials are considering using next week’s policy statement to suppress any speculation they’re prepared to raise interest rates as soon as this year. Fed staff examined the Bank of Canada’s public intention of forgoing an increase until 2010 without concluding the statement proved effective, according to a person familiar with the matter.

Rate Expectations

“Policy markers are likely to be getting concerned about the extent to which markets are now building in rate-hike expectations,” analysts led by Hans-Guenter Redeker, London- based global head of currency strategy at BNP Paribas SA, wrote in a note yesterday. “We are once again switching back to our core long currency recommendations against the dollar.” A long position is a bet a currency will rise.

Interest-rate futures indicated yesterday a 45 percent chance the Fed will boost its target rate of zero to 0.25 percent for overnight lending between banks to at least 0.5 percent by December, down from 64 percent odds a week ago.

Consumer prices increased 0.1 percent in May, after no change in the prior month, the Labor Department reported yesterday. The median forecast of 75 economists surveyed by Bloomberg News was for a 0.3 percent increase. In the 12 months ended in May, costs fell 1.3 percent, the biggest decline in almost 60 years.

‘Dollar to Weaken’

“Folks last week talked about the Fed hiking, which is nonsense,” said Jack Iles, who oversees $2.5 billion in assets at MFC Global Investment Management in Boston. “The underlying U.S. economy is extremely weak. In the currency market, we are moving into a more reasonable range, but the longer-term trend is for the dollar to weaken.”

The yen gained 1.1 percent to 12.17 versus the Swedish krona and 0.9 percent to 11.85 against the rand as Sumitomo Mitsui Financial Group Inc., Japan’s second-biggest bank by market value, planned to raise as much as 923 billion yen ($9.4 billion) in the biggest share sale in Japan since 2001.

Sumitomo and its two largest rivals announced plans to raise more than 4.6 trillion yen since November as souring investments and bad loans forced them to book a combined loss of 1.22 trillion yen in the year ended March 31.

“There are tremendous retail clients bailing out of yen shorts on the back of banks’ new issues,” said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York. A short is a bet a currency will fall.

Weaker Pound

The pound dropped the most in almost two weeks against the euro after minutes of the Bank of England’s June 4 meeting showed policy makers said it was too early to assess the impact of the plan to spend 125 billion pounds ($206 billion) of new money on assets to promote economic growth.

BOE Governor Mervyn King said in a speech in London yesterday that Britain’s banking system may need to raise more capital to finance the economic recovery as officials keep printing money.

Sterling weakened as much as 1.2 percent to 85.36 pence per euro yesterday, the biggest decline since June 4. The pound was little changed at $1.6405.

Norway’s krone rose 0.7 percent to 6.3776 versus the dollar and was little changed at 8.8943 against the euro as Norges Bank said the overnight deposit rate will rise to 1.5 percent by 2010 after policy makers cut the benchmark by a quarter-percentage point to 1.25 percent yesterday.

UBS AG, the world’s second-largest currency trader, advised clients to buy the krone versus the euro after Norges Bank became “the first central bank globally to predict rate hikes at the end of this down cycle.”

The krone will advance to 8.54 per euro, London-based UBS currency strategists Geoff Kendrick and Geoffrey Yu wrote in a research note yesterday.

Russia’s Kudrin Signals No Alternative to Dollar

2009-06-16T03:16:00.001+03:00

June 15 -- Russian Finance Minister Alexei Kudrin said the dollar is in “good shape,” further affirming that there’s no substitute for the world’s reserve currency.

Kudrin rushed to reassure investors of Russia’s confidence in the dollar just days after his boss, President Dmitry Medvedev, questioned its global status, joining China’s central bank Governor Zhou Xiaochuan in suggesting the world may need another benchmark for settling international debts.

“It’s too early to speak of an alternative,” Kudrin said in an interview two days ago in Lecce, Italy, after meeting officials from the Group of Eight nations.

Kudrin’s comments underscore the dependence of Brazil, China, Russia, and India on the currency of the U.S., the world’s largest economy and a $2.5 trillion export market. Even as some of their leaders questioned the dollar’s status, the four nations increased foreign reserves by more than $60 billion in May to limit their currencies’ gains and support their exports. They now have combined reserves of $2.8 trillion and are among the largest holders of Treasuries.

“At this point there’s no alternative to the U.S. dollar in terms of deep liquid markets and trading 24-7 globally,” Michael Woolfolk, senior currency strategist at the Bank of New York Mellon in New York, said yesterday in a telephone interview. “Nothing even comes close to the dollar in terms of reserve status.”

Stronger Dollar

The dollar rose today against all 16 of the most traded currencies expect for the yen, climbing 1.2 percent against the euro to trade at $1.3854 at 2:27 p.m. in London. Treasuries climbed for a third day and the yield on the U.S. 10-year note fell seven basis points to 3.72 percent.

At the end of 2008 the dollar accounted for 64 percent of central bank reserves, up from 62.8 percent in June 2008, according to the International Monetary Fund in Washington. The currency has underpinned exchange rates since the 1971 collapse of the Bretton Woods system, which linked their value to gold.

The Dollar Index, which tracks the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, has dropped 10.6 percent to 80.142 from its high this year of 89.624 on March 4, when the global financial crisis sent investors to the relative safety of U.S. debt.

Summit

Leaders of the so-called BRICs nations -- Brazil, Russia, India and China -- may use their first summit this week to press the case that their 15 percent share of the world economy and 42 percent of global currency reserves should give them more influence over global financial policies.

Among the topics in the Ural Mountains city of Yekaterinburg will be the global financial crisis, reshaping the IMF, climate change and the future of dialogue among the BRIC countries, He Yafei, a vice minister at China’s Ministry of Foreign Affairs, said last week. The leaders probably won’t discuss alternative reserve currencies, Medvedev aide Sergei Prikhodko told reporters in Moscow yesterday.

Developing countries say their votes in the IMF, founded at the end of World War II to promote global trade, don’t reflect the shift in economic power. Brazil, the world’s 10th-largest economy, has 1.38 percent of the IMF board’s votes, less than the 2.09 percent for Belgium, an economy one-third the size.

Record Debt

The real rallied 11.2 percent last month, the ruble gained 6.9 percent and the rupee 6.4 percent. The yuan appreciated 21 percent between July 2005, when the government allowed it to trade, and July 2008. China has prevented the currency from strengthening since then as the economy slowed.

Emerging-market currencies gained as international investors fled the dollar on concern record debt sales by the U.S. government to finance a mounting budget deficit will sap demand for American financial assets.

International holdings of long-term U.S. equities, notes and bonds rose at a slower pace in April, the Treasury said today, with total net purchases climbing a net $11.2 billion. That’s down from $55.4 billion in March.

Ten-year Treasury note yields reached 4 percent on June 11, the highest since October, a day after Russia and Brazil announced plans to buy $20 billion of bonds from the IMF and diversify foreign-currency reserves. China will purchase $50 billion and India may announce similar funding, according to Brazilian Finance Minister Guido Mantega.

Mix of Currencies

China and Brazil said last month they may look at ways of dropping the dollar for trade between the two countries. Medvedev on June 5 proposed that nations use a mix of regional reserve currencies to reduce reliance on the dollar, which he said “is not in a spectacular position.”

China’s central bank Governor Zhou suggested using the International Monetary Fund unit of account, known as special drawing rights, as an alternative in March.

The dollar got some support last week when Japanese Finance Minister Kaoru Yosano said his country’s confidence in U.S. Treasury securities is “unshakeable,” signaling the second- biggest foreign holder of the securities will keep buying them.

“We have complete trust in the fact that the U.S. views its strong-dollar policy as fundamental,” Yosano, 70, said in an interview in Tokyo on June 10 before attending the G-8 meeting of finance ministers in Italy. “So our trust in U.S. Treasuries is absolutely unshakable.”

Maintaining Dollar’s Value

Yosano’s comments, which sent the dollar higher against the euro and yen, show how Japan and other holders of dollar reserves have an interest in maintaining the value of the currency and avoiding any abrupt move toward an alternative, said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York.

“They want to protect the value of the assets they already have in terms of Treasuries,” Bennenbroek said. “If there’s going to be a move away from the dollar, it’s going to be very gradual, very cautious.”

China is the largest U.S. creditor, holding $767.9 billion of U.S. debt as of March, according to Treasury Department figures. Japan is second with $686.7 billion. Brazil holds $126.6 billion, while Russia has $138.4 billion.

Nations such as China are also dependent on the U.S. as a market for their exports, so they seek to suppress the value of their currencies with purchases of dollars. China’s exports to the U.S. last year rose to $337.7 billion from $321.4 billion in 2007.

“They can’t have their cake and eat it, too” said Woolfolk at Bank of New York Mellon. “These countries want to perpetuate this system of accumulating foreign currencies to hold down the value of their own, but they want someone else to bear the risk of holding those dollars.”

G-8 Plans to Reverse Stimulus as Rebound Signs Grow

2009-06-15T15:57:00.001+03:00

June 15 -- Group of Eight finance ministers began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.

Officials meeting in Lecce, Italy, over the weekend said it’s prudent to consider what exit strategies to deploy once global growth is secured and asked the International Monetary Fund to examine how to do so without reigniting the two-year crisis. At the same time, they said it’s premature to rein back more than $2 trillion in stimulus packages.

“Growth should remain the principal focus of policy,” U.S. Treasury Secretary Timothy Geithner said after the meeting ended on June 13. “It is too early to shift toward policy restraint.”

Policy makers trod a fine line in the knowledge that withdrawing stimulus measures too soon could choke the recovery before it starts, and allowing them to last too long might push up borrowing costs. They are also trying to reassure markets after the yield on the 10-year U.S. Treasury note rose last week to the highest since October.

“Markets aren’t looking for specific exit strategies now, but want governments to start thinking about them,” said Bill Witherell, chief global economist at Cumberland Advisors Inc. in Vineland, New Jersey, which oversees $1 billion in assets. “They worry that inflation is going to build up if nothing is done to withdraw the stimulus.”

Dollar Support

The G-8’s statement made no reference to currencies or interest rates given the absence of central bankers from the meeting.

Treasuries rose for a third day and the dollar gained the most in a week against the euro today after Russian Finance Minister Alexei Kudrin told Bloomberg Television he has full confidence in the U.S. currency. Russia’s central bank drove U.S. bonds and the dollar lower on June 10 by saying it may shift some reserves from Treasuries, pushing the yield on the 10-year security above 4 percent.

“It’s too early to speak of an alternative” to the dollar, Kudrin said in Lecce. IMF Managing Director Dominique Strauss- Kahn said he didn’t see a “weak dollar.”

German Finance Minister Peer Steinbrueck also said he wasn’t concerned by the euro’s 10 percent climb against the dollar in the past four months.

Upbeat Reports

The G-8 ministers delivered their most upbeat outlook since the collapse of Lehman Brothers Holdings Inc. in September amid mounting evidence that the deepest global recession in six decades is moderating.

Economists expect reports on U.S. housing and German investor sentiment to back that case in coming days.

Home Depot Inc., the world’s largest home-improvement chain, said June 10 that fiscal 2009 profit may decline less than it had projected. Virgin America Inc., an airline partly owned by billionaire Richard Branson, said June 12 its first-quarter net loss narrowed as it filled more seats on planes.

Still, data last week showed the situation is fragile. European industrial production dropped by a record in April and Volkswagen AG, Europe’s largest automaker, said June 12 that “very weak” global car markets aren’t yet recovering.

There are “signs of stabilization,” though “the situation remains uncertain” as climbing unemployment and volatile commodity prices present obstacles, the ministers said in their statement.

No Exit Talk

Geithner and U.K. Chancellor of the Exchequer Alistair Darling were among the most vocal in warning officials not to move too soon. Steinbrueck sought a “credible exit strategy” to avoid inflation.

“We’re not there yet,” Darling told reporters. “No one is talking about exiting yet.”

The officials argued over whether Europe is endangering the rebound by refusing to follow the U.S. and subject its banks to individual and public stress tests. European governments have preferred to examine their financial system as a whole, arguing banks are too diverse to evaluate by a single standard and that publishing results could rekindle the crisis.

“We want stress tests, but stress tests of the system, not related to individual banks,” Steinbrueck told reporters in Lecce. “The European banking sector, and the German one in particular, is a lot more heterogeneous than the North American one.”

Canadian Critic

Such resistance drew criticism before the talks from Canadian Finance Minister Jim Flaherty, who said it risked impeding a worldwide revival.

The G-8’s statement made no mention of the topic. Flaherty said later that he was “much less frustrated” with Europe’s stance after the talks. Italian Finance Minister Giulio Tremonti said the continent may start discussing its approach.

“The uncomfortable truth for Europe is that, however flawed it might have been, the U.S. stress test exercise has so far proved effective in bolstering confidence and helping banks to raise capital,” said Marco Annunziata, chief economist at UniCredit Group in London.

The G-8 is composed of the U.S., Japan, Germany, France, U.K., Canada, Italy and Russia. Its ministers met to shape an agenda for their leaders’ meeting on July 8-10 in L’Aquila, the Italian town destroyed by an earthquake in April.

Dollar Rises as Russia Sees No Alternative to U.S. Currency

2009-06-15T15:55:00.000+03:00

June 15 -- The dollar rose the most in a week against the euro after Russia’s Finance Minister Alexei Kudrin said the nation has full confidence in the U.S. currency.

The greenback advanced against 14 of its 16 major counterparts as Kudrin said in an interview after meeting officials from the Group of Eight nations two days ago that it was too early to speak of an alternative to the world’s main reserve currency. The euro extended losses after Britain’s Telegraph newspaper cited Germany’s top industrial group as saying the nation’s credit conditions are worsening.

“The U.S. Treasury is persuading key partners to provide supportive comments arguing that they shouldn’t shoot themselves in the foot if they hold large dollar positions,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “Whether the talk is backed up by action remains to be seen. I’m still a dollar bear.”

The dollar advanced as much as 1.2 percent to $1.3844 per euro before trading at $1.3845 at 7:03 a.m. in New York, compared with $1.4016 on June 12. The U.S. currency appreciated 0.7 percent to $1.6337 per pound from $1.6443 and climbed 1.1 percent to 1.0906 Swiss francs from 1.0791.

The U.S. currency may gain about another 1.5 percent to about $1.3670 per euro in the next week before declining to a level as weak as $1.45 within a month, Derrick said.

Ten-year Treasury notes rose, extending their run of gains to the longest in a month, on speculation a U.S. government report will show overseas demand for the nation’s assets increased in April. The yield on the security fell 0.07 percentage point to 3.74 percent.

Dollar Index

The yen increased 0.2 percent to 98.21 per dollar from 98.43 and advanced 1.3 percent to 136.04 versus the euro from 137.89 yen as European and Asian stock markets slipped, discouraging investors from buying higher-yielding assets financed by loans in Japan.

The Dollar Index gained for a second day after Russia’s Kudrin said the fundamentals of the U.S. currency are still in “good shape.” He spoke following a meeting with finance ministers from the Group of Eight nations in Lecce, Italy.

Central bank diversification “has been a burden for the U.S. currency for the last couple of weeks,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt, in an interview on Bloomberg Television. “But there is no immediate alternative for the dollar.”

G-8 Statement

The dollar fell 9.8 percent against Brazil’s real and 2.9 percent versus the euro in the past month partly on speculation record U.S. budget deficits will undermine the currency as a store of value.

Kudrin’s comments came just days after President Dmitry Medvedev questioned the dollar’s global status, joining the Chinese central bank’s Governor Zhou Xiaochuan in indicating the world may need another benchmark for settling international debts.

The G-8 finance ministers said in a statement on June 13 they will start planning exit strategies for when sustainable growth returns. It’s still too soon to roll back budget deficits and bank bailouts, they said.

The Dollar Index, which the ICE uses to track the currency against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, gained 0.7 percent to 80.730 today.

International investors bought $57.5 billion more in long- term U.S. equities, notes and bonds than they sold in April, up from net purchases of $55.8 billion in March, according to a Bloomberg News survey of economists before the Treasury Department’s report today.

German Outlook

The euro fell after the Telegraph cited Hans Heinrich Driftmann, president of the German Chamber of Commerce and Industry, as saying funding conditions for German businesses are tougher now than they were at the peak of the global crunch months ago.

“From such a high authority in the Germany industry, it’s clearly negative for the euro and it puts extra pressure on the European Central Bank to take further action,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., Australia’s biggest lender by market value. “It’s a further reason to be selling the euro on the day.”

The chamber’s survey of German industry, to be released this week, found that more than a third of all large companies faced tightening credit conditions, if they can borrow at all, the Telegraph said.

New Zealand’s currency dropped versus the U.S. dollar for the first time in three days, paring its gain in the past three months to 21 percent.

The South Pacific nation’s farmers face at least a 12 percent drop in milk prices as the nation’s currency rises at its fastest pace since 1985, according to Auckland-based Fonterra Cooperative Group Ltd.

Similar concerns are besetting Canada and Australia, two other commodity-rich economies. All three countries’ dollars are close to posting their strongest quarters against the greenback since at least 1971.

Kudrin Says Russia Has Full Confidence in Dollar

2009-06-15T02:48:00.000+03:00

June 13 -- Russia has full confidence in the dollar and there are no immediate plans to switch to a new reserve currency, Finance Minister Alexei Kudrin said.

“It’s too early to speak of an alternative” to the dollar, Kudrin said in Lecce, Italy, in a television interview today after meeting with finance chiefs from the Group of Eight nations. The fundamentals of the dollar are still in “good shape.”

Russia’s central bank said on June 10 some reserves may be moved from U.S. Treasuries into International Monetary Fund debt, reiterating comments made last month by Kudrin. That drove Treasuries and the dollar lower. Kudrin said yesterday that Russia’s announcement on May 26 to buy $10 billion of IMF bonds did not represent “a significant change” in his country’s stance on the dollar.

The dollar declined against a majority of the most-traded currencies as Brazil and Russia joined China in saying they would shift some $70 billion of reserves from U.S. Treasuries into multicurrency bonds. The dollar’s drop also reflected concern that record debt sales and deficits will erode the value of the U.S. currency.

The dollar dropped 0.4 percent to $1.4016 per euro yesterday, from $1.3968 on June 5. The U.S. currency fell 0.2 percent to 98.43 yen, from 98.64 yen a week earlier. The euro was little changed at 137.89 yen, from 137.81 yen.

BRIC Summit

Leaders of Brazil, Russia, India and China, the so-called BRIC countries, are scheduled to meet on June 16 in Russia to discuss their economies.

Asked about the global economic outlook, Kudrin said “uncertainties are still there” and any change in the future stance on the dollar “will depend on the state” of the global economy. It was too early to talk about stability in oil prices, he said.

Crude for July delivery tumbled as much as 2.6 percent to $70.80 a barrel on the New York Mercantile Exchange.

Dollar Rises as Yosano’s Comments Ease Diversification Concern

2009-06-13T05:53:00.000+03:00

June 12 -- The dollar advanced against the euro and the yen after Japanese Finance Minister Kaoru Yosano said his nation’s confidence in U.S. debt is “unshakable” and that the currency’s global status is safe.

The Canadian dollar and Norwegian krone declined versus the greenback after crude oil dropped from a seven-month high. The Latvian lats was poised for its best week in more than five years as the Baltic state moved closer to securing International Monetary Fund financing needed to avert bankruptcy.

“They try to provide some verbal support for the dollar; try to make sure the yen doesn’t get too strong because that economy is in quite a lot trouble right now,” said Nick Bennenbroek, head of currency strategy at Wells Fargo & Co. in New York, in an interview on Bloomberg Television. “They want to protect the value of the assets they already have in terms of Treasuries. If there’s going to be a move away from the dollar, it’s going to be very gradual, very cautious.”

The dollar strengthened 0.8 percent to $1.3997 per euro at 4:07 p.m. in New York, from $1.4108 yesterday. The U.S. currency rose 0.8 percent to 98.40 yen, from 97.63 yen. The euro was little changed at 137.73 yen, from 137.74 yen.

For the week, the dollar is down 0.3 percent versus the yen and 0.2 percent against the euro. The yen was little changed versus the euro this week.

The Canadian currency dropped 1.5 percent to C$1.1187 per U.S. dollar, heading for a second weekly decline, after crude oil dropped as much as 2.6 percent to $70.80 a barrel. The krone fell 0.3 percent to 6.3396 per U.S. dollar.

Latvian Bailout

Bank of Canada Governor Mark Carney repeated yesterday that he’ll keep interest rates low until the middle of 2010, and that the Canadian dollar’s appreciation could impede growth in the world’s eighth-largest economy. The currency has gained 13 percent over the past three months. Oil is the biggest export of Canada and Norway.

Latvia’s parliament may sign budget-spending cuts required by its 7.5 billion euros ($10.4 billion) international bailout into law as early as June 15, Prime Minister Valdis Dombrovskis said today.

The lats added 1.7 percent this week against the euro, after trading little changed today at 0.697. The currency is pegged to the euro around a 1 percent target mid-point of 0.702804.

The dollar rose against 15 of the 16 most-traded currencies today after Japan’s finance minister signaled that the second- biggest foreign holder of Treasuries will keep purchasing U.S. government securities. China is the largest U.S. creditor. The Brazilian real was the only currency to gain today versus the greenback.

‘Absolutely Unshakable’

“We have complete trust in the fact that the U.S. views its strong-dollar policy as fundamental,” Yosano said in an interview in Tokyo on June 10 before attending the G-8 meeting of finance ministers in Italy. “So our trust in U.S. Treasuries is absolutely unshakable.”

Brazil and Russia joined China this week in saying they would shift some $70 billion of reserves into multicurrency bonds issued by the International Monetary Fund, raising concern central banks are diversifying away from dollars. Leaders of Brazil, Russia, India and China, the so-called BRIC countries, are scheduled to meet on June 16 in Russia to discuss their economies.

A 30-year Treasury auction yesterday showed overseas demand for U.S. government securities remains robust. Indirect bidders, a class of investors that includes foreign central banks, bought 49 percent of the $11 billion in bonds, the biggest percentage since the Treasury reintroduced the 30-year security in 2006.

‘Difficulty of Transitioning’

“You cannot ask for an alternative to the dollar without offering that alternative,” said Daniel Tenengauzer, head of foreign-exchange and emerging-market debt strategy at Bank of America-Merrill Lynch, in New York, in an interview on Bloomberg Television. “They understand the difficulty of transitioning out of the dollar.”

Treasury Secretary Timothy Geithner said in China on June 1 that the U.S. is committed to a strong dollar, while promising to bring down the country’s fiscal deficit. Luxembourg Finance Minister Jean-Claude Juncker, who leads euro-area finance chiefs, said on June 4 a further increase in the euro against the dollar would be unwelcome.

The dollar also pared a weekly decline after the Wall Street Journal reported the Federal Reserve will resist pressure to increase bond purchases, avoiding adding to the supply of the currency.

‘Under Pressure Again’

The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, has lost 9 percent in the past three months amid concern the Fed’s purchase of government bonds will flood the market with dollars.

“The market is cautious, and the dollar regains some ground,” said Ian Stannard, a currency strategy at BNP Paribas SA in London. “The overall move toward improving risk appetite remains in place. With the G-8 meeting out of the way next week, the dollar will come under pressure once again.”

Ten-year note yields reached 4 percent yesterday, the highest since October.

Rising yields are more a reflection of investors’ concern of U.S. fiscal deficit, than an indication of a strong economic recovery, suggesting the dollar may weaken, according to Camilla Sutton, co-head of currency strategy at Scotia Capital Inc. in Toronto.

“We are in the dollar bear camp,” said Sutton. “We are waiting for the new catalyst for the dollar to break out of the range.”

Dollar, Yen Weaken as Optimism Over Recovery Spurs Yield Demand

2009-06-11T08:21:00.001+03:00

June 11 -- The dollar and the yen declined against the euro as speculation the global recession is easing prompted investors to buy higher-yielding assets.

The New Zealand and Australian dollars were the biggest gainers of the 16 most-active currencies after New Zealand’s central bank left interest rates unchanged for the first time in a year and Australia reported a smaller-than-expected drop in jobs for last month. The euro rose against the dollar on speculation a European Central Bank official may indicate a reluctance to cut rates, maintaining the currency’s appeal.

“Capital flight from the dollar and the yen continues,” said Minoru Shioiri, a senior currency dealer in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest banking group. “The receding worries about the credit crunch and the recession also weaken the need for holding onto safe-haven currencies.”

The dollar dropped to $1.4030 per euro as of 12:54 p.m. in Tokyo from $1.3984 yesterday in New York. The U.S. currency also weakened to 97.90 yen from 98.12 yen. Japan’s currency dropped to 137.36 per euro from 137.21.

New Zealand’s dollar climbed 1.6 percent to 63.59 U.S. cents and advanced 1.3 percent to 62.26 yen. Asian stocks rose, with the Nikkei 225 Stock Average Index climbing above 10,000 for the first time since October.

Net Buyers

Japanese investors bought 476.7 billion yen ($4.9 billion) more overseas bonds than they sold in the week ended June 6, according to data released today by the Ministry of Finance in Tokyo. They were also net purchasers of 148.6 billion yen in foreign equities.

“Investors in Japan are selling the yen to buy some higher-yielding currencies,” said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York. “Carry trades will last for a while.” Carry trades involve buying higher-yielding assets funded with loans made in countries with lower borrowing costs, such as Japan.

The Federal Reserve said yesterday the U.S. recession may be slowing in almost half of its regions and the outlook at some companies is improving. Five of 12 Fed districts “noted that the downward trend is showing signs of moderating,” the Fed said in its Beige Book business survey.

‘Begin Growing’

The New Zealand dollar strengthened as the central bank said the country’s worst recession in at least three decades may be nearing the end.

“We expect the New Zealand economy to begin growing again toward the end of this year, but the recovery is likely to be slow and fragile,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today after leaving the official cash rate unchanged. “It’s likely to be some time before monetary policy support can be withdrawn.”

Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets.

U.S. retail sales probably increased in May for the first time in three months, according to the median forecast of 76 economists surveyed by Bloomberg News. The report from the Commerce Department is due today.

The Australian dollar reached 79.61 yen today, the highest level since Oct. 6, after the number of people employed in the nation fell 1,700 from April, Australia’s statistics bureau said in Sydney. The median estimate of 20 analysts surveyed by Bloomberg News was for a 30,000 decline.

Bets on Higher Rates

Urban fixed-asset investment in China rose 32.9 percent in May in response to the government’s 4 trillion yuan ($585 billion) stimulus package, the country’s statistics bureau said today. The median forecast was for a rise of 31 percent, according to a Bloomberg News survey of economists.

Signs of a pickup in the global economy prompted investors to increase bets that Australia’s benchmark interest rate will be higher in 12 months, according to a Credit Suisse Group AG index based on swaps trading.

The euro advanced against the dollar on speculation European Central Bank Executive Board member Juergen Stark may reiterate a hawkish stance on the prospect of interest rates in the 16-nation zone when he speaks today.

Rate Advantage

The current interest-rate level is “appropriate,” Stark said on June 8. “The ECB is well prepared to take appropriate action and also to exit from its non-standard monetary policy and liquidity management measures in a credible manner once the macroeconomic environment improves,” he said.

“The mere fact that the euro-zone still has a rate advantage over major counterparts is still offering a good reason for investors to buy into the euro,” said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank.

European Central Bank Governing Council member Axel Weber said yesterday central banks may have to raise interest rates before inflation risks materialize to prevent future crises. The comments don’t refer to current ECB policy, Weber said.

The ECB has lagged the Federal Reserve and the Bank of England, which have cut their key rates close to zero and started buying government and corporate bonds to pump money into their economies. At 1 percent, the ECB’s benchmark rate is the highest among Group of Seven countries.

Reserve Reshuffling

The Dollar Index, used by the ICE to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, dropped 0.4 percent to 80.003. The Russian central bank’s first deputy chairman, Alexei Ulyukayev, said yesterday in Moscow that the country may switch some of its reserves from Treasuries to IMF bonds.

The dollar fell 6.6 percent versus the euro in May, the biggest monthly drop this year, on speculation the quadrupling of the U.S. budget deficit and the Fed’s increase of the money supply will undermine the greenback.

Analysis and forecasts

2009-06-10T15:34:00.000+03:00

EURUSD

The corrective cycle to as low as 1.3805 seem over and the euro returned on the upside zone, trying to breach above the 1.4100 mark at the time of this writing. Positive momentum regained strength on yesterday's 250 points climb. Intra-day support is now formed at 1.4050/60 backed by 1.4000 and 1.3950/60. Upside barriers are emerging at 1.4135 - 61.8% of 1.4340-1.3805 and 1.4175/00. More notable barrier is set by the recent top side at 1.4340. Current quote is 1.4095 @06:15 GMT

Support levels: 1.4050/60, 1.4000 and 1.3950/60
Resistance levels: 1.4135/50, 1.4175/00, 1.4250 and 1.4340
Market sentiment: long-term : bearish, mid-term : bullish, short-term : bullish

Yesterday recommended trade: short at 1.4035, initial stop at 1.4085, objective at 1.3965. Adjust stop to breakeven on +30 pips (at 1.4005) if reached : 0 (closed at breakeven)

AUDUSD

The Aussie dollar is approaching the minor resistance at ..8120 - the single one which stands in between until the recent top at .8260, therefore a breach above .8120 will most likely open .8260 for a test within the upcoming sessions. Both daily and hourly studies are bullish and the upside is favored as long as the support levels at .7990/00 and .7900 are intact. Current quote is .8078 @06:15 GMT

Support levels: .8050, .7990/00 and .7900
Resistance levels: .8120, .8200 and .8260
Market sentiment: long-term : bearish, mid-term : bullish, short-term : bullish

Yesterday recommended trade: long at .7765, initial stop at .7715, objective at .7825. Adjust stop to breakeven on +30 pips (at .7795) if reached : 0 (entry not reached)

EURCHF

Flat movement continues as the pair keeps trading into an extended "holiday range", establishing a fresh multi-week low daily range on yesterday - 35 points. Current quote is 1.5169 @06:15 GMT

Support levels: 1.5145/50, 1.5100/10, 1.5050 and 1.5000/10
Resistance levels: 1.5225/30, 1.5300 and 1.5350
Market sentiment: long-term : bearish, mid-term : bearish, short-term : neutral

Yesterday recommended trade: stand aside

Dollar Falls as Optimism Slump Is Ending Erodes Safety Demand

2009-06-10T05:32:00.001+03:00

June 10 -- The dollar extended declines against the higher-yielding currencies of Australia and South Korea as speculation the global recession is ending reduced demand for the greenback as a refuge.

The U.S. dollar weakened against 14 of the 16 most-traded currencies after Goldman Sachs Group Inc. recommended clients buy euros versus the dollar, citing a recovery in world growth expectations. The Australian and New Zealand dollars rose for a second day against the U.S. currency after crude oil reached a seven-month high and Asian equities gained. The Swedish krona climbed against the dollar and the euro on speculation plans to cut state spending in Latvia will trigger an international bailout, easing concerns that Swedish banks would face losses.

“When optimism about the global economy is out there, people feel less need to hold the dollars which they have accumulated for a rainy day,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co. “The dollar is likely to remain under pressure.”

Australia’s dollar rose 0.3 percent to 80.42 U.S. cents at 10:50 a.m. in Tokyo, from yesterday in New York. It climbed to 78.25 yen from 78.04 yen. New Zealand’s dollar traded at 62.92 U.S. cents and 61.24 yen from 62.71 cents and 61.08 yen.

The U.S. currency traded at $1.4073 against the euro from $1.4065 yesterday in New York. The yen was at 136.95 against the euro from 136.98 yesterday. The dollar bought 97.31 yen from 97.38. The Korean won climbed 0.9 percent, the most in a week, to 1,254.10 per dollar as overseas investors added to their holdings of the nation’s shares for a fourth straight day.

Crude oil for July delivery gained $1.92 to $70.01 a barrel on the New York Mercantile Exchange, the highest settlement since Nov. 4. Prices have risen about 60 percent this year.

‘Encouraging Sign’

The trade-weighted Dollar Index fell 0.1 percent today to 79.742 after the U.S. government approved 10 banks to buy back $68 billion of government shares. Treasury Secretary Timothy Geithner said in a statement the repayments are an “encouraging sign of financial repair.”

The index, used by the ICE to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, reached this year’s low of 78.334 on June 2.

The Bank of Japan may say in its June economic report that the economy isn’t worsening as fast as in previous months, Nikkei English News reported, without saying where it got the information. The central bank may elevate its view of the Japanese economy when the policy board meets next week as production and export declines stop and economic stimulus programs help, Nikkei said.

Beige Book

Losses in the dollar were tempered as traders cut some holdings of higher-yielding currencies before the Federal Reserve releases later today its Beige Book commentary on current economic conditions. The Commerce Department publishes retail sales data tomorrow. China will report tomorrow on investments and exports and release factory orders data June 12.

“Labor market conditions were weak and reports of layoffs, reductions in work hours, temporary factory shutdowns, branch closures and hiring freezes remained widespread across Districts,” the Federal Reserve said April 15 in its previous Beige Book regional business survey covering five weeks through early April. “Wage and salary pressures eased as labor markets weakened.”

‘Very Important’

“This week’s data in the U.S. and China are very important to assessing the prospects of the global economy,” said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. “If they turn out to be unsatisfactory, the euphoria may be called into question and inflows into higher-yielding currencies may take a breather.”

Sales at U.S. retailers increased in May for the first time in three months as demand for cars picked up, according to a Bloomberg News survey before the government report on June 11. Retail sales climbed 0.5 percent, according to the survey.

China’s urban fixed-asset investment probably surged 31 percent in May in response to the government’s 4 trillion yuan ($586 billion) stimulus package following a 30.5 percent increase in April, according to a separate Bloomberg News survey of economists. China’s statistics bureau will announce the data at 11 a.m. tomorrow.

Goldman on Euro

Goldman Sachs in a research note yesterday said the euro will rise to $1.45 and the Federal Reserve will refrain from raising the target rate for overnight lending between banks “for a considerable period of time.”

“The timing is now opportune,” Goldman Sachs wrote. “We think the level of growth will remain below trend, and U.S. rates will be kept low for a considerable period of time.”

The dollar rose the most against the euro in five weeks on June 5 after the Labor Department reported that U.S. job cuts slowed to 345,000 in May, the lowest level in eight months.

The employment report raised speculation that the Fed will boost the target lending rate to at least 0.5 percent by the end of the year. Fed funds futures contracts showed median forecast for the yesterday a 45 percent chance of a rate increase by November, compared with 27 percent odds a week ago.

The krona gained versus the dollar after Swedish Finance Minister Anders Borg said the Latvian government should do “what is necessary” to present a responsible economic policy. Norway’s krone also rose as crude oil snapped two days of declines.

“Baltic stress is manageable for Sweden’s economy and banking system and the krona remains attractive,” analysts including London-based Ray Farris at Credit Suisse Group AG wrote in a note yesterday. “If conditions in the Baltics were to improve, the krona should rally notably.”

The krona rose 0.1 percent to 10.7945 per euro and strengthened 0.1 percent to 7.6744 against the dollar.