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Asian currencies have yet to feel

2008-07-30T22:23:00.002-07:00

Asian currencies have yet to feel the full force of the ``oil shock'' and will decline even if the price of crude falls to $100 per barrel, Morgan Stanley says.

Record fuel import costs have sent the current-account balances of South Korea, India and Thailand into deficit, posing ``tremendous headwinds'' for the economies, said Stephen Jen, chief currency economist at Morgan Stanley in London. The impact on inflation and consumer spending has been limited because of fuel subsidies that aren't sustainable, he said.

``The biggest shock to Asia is not the U.S. housing crisis but the oil shock,'' Jen said in an interview. ``Asia was not built on $100 per barrel oil. Even if oil prices stabilize at $100, Asia will have a lot of work to do.''

Crude fell 15 cents to $126.62 a barrel as of 11:20 a.m. Singapore time on the New York Mercantile Exchange, 75 percent higher than a year ago.

Indonesia's rupiah, the Philippine peso and India's rupee will be ``first to go'' as these countries' governments are the least able to maintain subsidies, Jen said.

The rupiah will slide 2.6 percent to 9,367 per dollar this year, the peso 3.4 percent to 45.82, and the rupee 6.4 percent to 45.23, he predicts. South Korea's won will decline 6 percent to 1,076 a dollar and Malaysia's ringgit 3.5 percent to 3.38 per dollar, he added.

Crude prices this week fell to 12-week lows on speculation that global demand will wane as housing slumps and tighter credit curbs economic growth in the U.S. and Europe. Crude is down 14 percent from the record $147.27 reached July 11.

The dollar traded near a one-month high

2008-07-30T22:23:00.001-07:00

The dollar traded near a one-month high against the euro before a government report that is forecast to show the pace of U.S. economic growth doubled in the second quarter.

The U.S. currency was also near a one-month high versus the yen after a report from ADP Employer Services yesterday showed companies unexpectedly added jobs this month. The industry report is a leading indicator of tomorrow's Labor Department data on nonfarm payrolls. The pound fell toward a three-week low after U.K. consumer confidence slid to the weakest on record.

``The dollar is forming a solid base and further downside moves are limited,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Economic growth data are forecast to show quite good numbers. ADP data underpins sentiment.''

The dollar traded at $1.5582 per euro as of 12:27 p.m. in Tokyo, after touching $1.5522 yesterday, the strongest since June 24. The U.S. currency was at 108.01 yen after reaching 108.33 yesterday, the highest since June 25. The euro traded at 168.30 yen from 168.41 yesterday. The dollar may rise to $1.5520 per euro and 108.30 yen today, Ishikawa forecast.

The pound declined to $1.9802 from $1.9817 yesterday, when it reached $1.9746, the lowest since July 10. GfK NOP's index of consumer confidence fell to minus 39 in July, the lowest since the data began in 1974, the market research organization said today in London.

Australian Dollar

Australia's dollar fell toward its lowest in six weeks after a government report showed retail sales dropped the most since 2002, adding to signs the economy is slowing. The currency slid to 94.37 U.S. cents from 94.71 cents in Asia late yesterday as a Reserve Bank of Australia report showed loans to businesses and consumers rose at the slowest pace in almost six years.

U.S. gross domestic product rose at an annual rate of 2.3 percent in the second quarter after growing 1 percent in the first three months of the year, according to a Bloomberg News survey of economists before the Commerce Department releases the report at 8:30 a.m. in Washington.

``We're waking up to the fact that we will have solid GDP numbers,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon, the world's largest custodial bank.

Payrolls Report

The U.S. dollar strengthened yesterday after ADP Employer Services reported that companies added 9,000 jobs in July after cutting a revised 77,000 positions in June. The Labor Department may report tomorrow that non-farm payrolls fell 75,000 this month following a decline of 62,000 in June, according to the median forecast in a Bloomberg News survey.

The U.S. payroll report, which includes government hiring, has shown a reduction in jobs each month this year, while ADP has recorded only two declines.

``The dollar may have hit a major bottom already,'' said Kosuke Hanao, head of foreign exchange in Tokyo at HSBC Bank, Europe's biggest bank by market value. ``But it needs further bullish factors to break through the key 108.60 yen level. Good GDP numbers are not strong enough to push up the dollar above it, especially before important jobs data tomorrow.''

The so-called resistance level of 108.60 yen is near the dollar's four-month high set on June 16. A resistance level marks the point where sellers are expected to outweigh buyers.

The dollar fell to an all-time low of $1.6038 per euro on July 15 on concern losses at financial firms and record fuel prices may prolong the U.S. economic slowdown.

Dollar Gains as Fed's Hoenig Says Inflation May Spur Rate Rise

2008-05-06T22:07:00.000-07:00

The dollar rose against the euro as Federal Reserve Bank of Kansas City President Thomas Hoenig said ``serious'' inflation pressures may spur the central bank to raise interest rates.

The U.S. currency halted two days of losses versus the euro as the yield spread between Treasuries and German bunds narrowed to the least in two months after Hoenig said the economy would recover later this year. The British pound dropped against the dollar and euro after an industry survey showed U.K. consumer confidence fell in April to the lowest in at least four years.

``Some traders are looking at Hoenig's comments and pushing up the dollar,'' said Hiroshi Yoshida, a foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's sixth-largest lender. ``This is a very hawkish tone that highlights the Fed's concern that inflation may get out of hand. A rise in Treasury yields is also supporting the dollar.''

The dollar climbed to $1.5504 against the euro as of 12:49 p.m. in Tokyo, from $1.5532 in New York yesterday, when it fell to $1.5594, the lowest level since May 1. The U.S. currency was little changed at 104.77 yen. The euro fell to 162.43 yen from 162.71. The dollar may advance to $1.5420 per euro today, Yoshida forecast.

The U.S. currency rose to $1.9697 to the pound from $1.9738 and strengthened to 1.0530 versus the Swiss franc from 1.0521.

The pound fell after Nationwide Building Society said an index of sentiment taken from the responses of 1,000 people declined seven points to 70, the lowest since the survey began in May 2004. The U.K. currency dropped to 78.74 pence per euro from 78.69 yesterday.

`Significant Risk'

The dollar has rebounded 3.2 percent since April 22, when it sank to a record low of $1.6019. The Fed said rate reductions to date were ``substantial'' after lowering its benchmark last week by a quarter-percentage point to 2 percent, its seventh cut since September.

``There is a significant risk that higher inflation will become embedded in the economy and require significant monetary policy tightening to reduce it,'' Hoenig, a non voting member of the Fed this year, said in a speech in Denver yesterday.

The yield advantage of the euro over the dollar has decreased as the spread between two-year German notes and equivalent U.S. Treasuries narrowed to 1.36 percentage points from 1.5 percentage points a week earlier.

The Dollar Index traded on ICE futures in New York, which tracks the currency against those of six trading partners, rose to 73.088 from 72.999 yesterday. It dropped to a record of 70.698 on March 17.

Housing Report

Gains in the dollar may be limited by speculation an industry report today will show a housing slump is slowing the U.S. economy.

The National Association of Realtors' index of pending home resales fell 1 percent in March after a 1.9 percent decline in February, according to the median forecast of 30 economists surveyed by Bloomberg News. The report is due at 10 a.m. New York time.

Fannie Mae, the biggest financier of U.S. home loans, reported larger-than-expected losses and the price of crude oil surged past $122 a barrel for the first time.

``The dollar will remain weak,'' said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd., Japan's third-largest bank by assets. ``The U.S. slowdown, led by a housing slump and credit losses, is far from over. Hefty oil prices are adding to the dollar-bearish sentiment, especially against the euro.''

The dollar may fall to $1.5560 a euro and 104.30 yen today, Kato forecast.

Record Oil Prices

Crude oil rose yesterday to a record $122.73 a barrel in New York on threats to supply in Nigeria and Iraq and growing global fuel consumption. The price may go as high as $200 a barrel within two years, Goldman Sachs Group Inc. analysts led by Arjun N. Murti said in a May 5 report. The euro versus the dollar has had a correlation of 0.96 with the price of crude oil in the past 12 months. A reading of 1 would mean they move in lockstep.

Bank of America Corp. lowered its forecast for the yen against the dollar as risk appetite among investors has improved. The second-largest U.S. bank predicts the currency will trade at 102 per dollar by the end of June, compared with a previous estimate of 99. It also expects the yen to decline to 105 by the end of September, a change from a previous forecast of 103.

The European Central Bank will leave the main refinancing rate at 4 percent tomorrow, according to all 53 economists surveyed by Bloomberg News.

Bank of China Raises Fees for Hong Kong Dollar Trades Sevenfold

2008-05-06T22:05:00.000-07:00

Bank of China Ltd., the only yuan clearing bank in Hong Kong, said it raised transaction costs for conversions between the Hong Kong dollar and the yuan more than sevenfold.

Bank of China widened the spread between the cost of buying and selling Hong Kong dollars for the Chinese currency to 0.75 percentage points from 0.10 points on May 5, said Clarina Man, spokeswoman at Bank of China's Hong Kong branch.

China Foreign Exchange Trading System, the country's trading platform, increased foreign-exchange transaction fees with the Hong Kong branch of Bank of China on the same day, according to Man. She wouldn't disclose the amount of increase.

Most Hong Kong lenders said they would pass on the additional cost of converting currencies to customers, Singtao Daily reported today. Residents of the city are transferring their Hong Kong dollar deposits into the Chinese yuan to benefit from higher interest and currency appreciation, the newspaper said.

N.Z., Australian Dollars Rise; Fed Measures Buoy Risk Appetite

2008-03-12T05:24:00.000-07:00

The New Zealand and Australian dollars rose after the U.S. Federal Reserve said it will boost liquidity by making loans in exchange for debt, encouraging investors to return to higher-yielding currencies.

The local dollars surged the most in more than six weeks against the yen, as the plan to pump $200 billion into the financial system to avert a credit crunch spurred demand for so- called carry trades. The New Zealand and Australian currencies pared a loss this month against the U.S. dollar as investors were lured by the nations' interest rates of 8.25 percent and 7.25 percent respectively.

``Risk appetite had a shot in the arm from the liquidity measures,'' said Michael Gordon, currency strategist at Westpac Banking Corp. in Wellington. ``It's a positive move for riskier currencies like the'' New Zealand and Australian dollars.

New Zealand's dollar, also known as the kiwi, bought 80.38 U.S. cents at 6:42 p.m. in Wellington, from 79.88 cents in late Asian trading yesterday. The currency surged as much as 2.2 percent to 83.30 yen before trading at 82.76.

The Australian dollar climbed to 93.17 U.S. cents from 92.37 cents late in Asia yesterday. It jumped as much as 2.2 percent to 96.31 yen before buying 95.92.

The Fed coordinated the effort with central banks in Europe and Canada, which plan to inject up to $45 billion into their banking systems. Australia's central bank yesterday injected A$1.7 billion ($1.58 billion) into the financial system via so- called repurchase agreements to encourage bank lending, almost double the daily average for this year.

Higher-Yielding Currencies

The Australian and New Zealand dollars are considered higher-yielding currencies because their nation's benchmark interest rates compare with a 3 percent rate in the U.S. and 0.5 percent in Japan.

The currencies also gained as U.S. stocks rallied the most in five years, giving investors' confidence to get funds in a country with low borrowing costs and invest in another with higher rates, earning the spread between the two.

Dollar Declines on Speculation Fed Rescue Package Won't Succeed

2008-03-12T05:18:00.000-07:00

The dollar fell against the euro and the yen on speculation the Federal Reserve's plan to provide funds to banks won't be enough to break the gridlock in money- market lending and stem credit losses.

``Read the need for such new measures as being a symptom of what ails the world and not a panacea for its problems,'' said David Simmonds, the London-based global head of currency research at Royal Bank of Scotland Plc, the world's fourth-biggest foreign-exchange trader. ``Stay short dollars.''

The U.S. currency also declined as traders wagered the Fed will cut rates by as much as three quarters of a percentage point to prevent a recession, while the European Central Bank keeps borrowing costs unchanged. The yen advanced against the dollar and the euro after a government report showed Japan's economy grew faster than forecast in the fourth quarter.

The dollar fell to $1.5469 per euro by 7:47 a.m. in New York, from $1.5338 yesterday, when it declined to $1.5495, the weakest level since the European single currency's debut in 1999. It slipped to 102.49 per yen from 103.42 yen. The euro was at 158.59 yen from 158.61.

The U.S. currency also dropped to $2.0168 against the U.K. pound from $2.0064 before Chancellor of the Exchequer Alistair Darling delivers his first budget statement to Parliament at noon in London today.

The yen climbed as a revised Japanese government report showed gross domestic product increased an annualized 3.5 percent in the three months through December, faster than the 2.3 percent median forecast of 27 economists surveyed by Bloomberg News.

European Industry

The euro extended its gains against the dollar after a European Union report showed industrial production in the region increased for the first time in three months in January. It rose 0.9 percent from January, more than twice the rate forecast by economists surveyed by Bloomberg.

The U.S. currency was also weighed down by speculation that Gulf central bankers will consider dropping the dollar peg when they meet next week. A Qatari official denied in a telephone interview that the meeting will discuss currency revaluation.

Dollar Falls to Record Versus Euro, Three-Year Low Against Yen

2008-02-29T00:38:00.000-08:00

The dollar fell to a record low against the euro and the weakest in almost three years versus the yen after Federal Reserve Chairman Ben S. Bernanke highlighted risks to the economy and credit-market losses spread.

The currency declined for a seventh day against the euro after Bernanke told a Senate panel that a housing slump may cause smaller U.S. banks to fail and unemployment to increase. The yen rose against the South African rand and Australian dollar as Asian stocks declined, prompting investors to reduce holdings of higher-yielding assets funded with loans in Japan.

``This is the Bernanke shock, causing much faster dollar depreciation than expected,'' said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded lender by assets.

The dollar slumped to 104.28 yen, the weakest since May 2005, before trading at 104.33 as of 7:53 a.m. in London, from 105.37 late in New York yesterday and 107.17 a week ago. It fell to $1.5239 per euro, the lowest since the 13-nation currency was formed in 1999, from $1.5193 yesterday.

The U.S. Dollar Index, which tracks the currency against six major counterparts, yesterday touched 73.63, the lowest since its start in 1973. The index, traded on ICE Futures in New York, traded at 73.815. The euro is 30 percent above its debut level against the dollar, and up 84 percent from a record low of 82.30 U.S. cents in October 2000.

Euro Rises After Ifo Survey Shows German Confidence Improved

2008-02-26T02:20:00.000-08:00

The euro rose against the dollar and the yen, reversing earlier declines, after a private report showed German business confidence unexpectedly strengthened for a second month in February.

The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, increased to 104.1, from 103.4 in January. Economists had forecast a drop to 102.9, according to the median of 45 estimates in a Bloomberg News survey.

``Markets have this sense that while the euro zone has been hit by the slowdown in the U.S., thing are not quite as bad as they seem,'' said Steve Barrow, chief currency strategist in London at Bear Stearns Cos., the fifth-largest U.S. securities firm. ``That's proven positive as far as the euro is concerned.''

Euro Rises After Ifo Survey Shows German Confidence Improved

Asian Currencies Rise, Led by Taiwan Dollar, as Stocks Rally

2008-02-19T03:00:00.000-08:00

Asian currencies rose, led by the Taiwan dollar and South Korea's won, on speculation rising stocks will lure overseas investors to the region's assets.

Taiwan's currency traded near its highest in 20 months as overseas investors bought NT$6.21 billion ($196 million) more of the island's stocks than they sold today, compared with NT$2.42 billion yesterday, according to Stock Exchange. The won rose after a government report yesterday showed unemployment fell to the lowest rate in more than five years last month.

``There were quite a lot of foreign fund inflows,'' said Henry Lin, a currency trader at Shin Kong Commercial Bank in Taipei. ``The foreign-exchange market has been quite clearly taking cues from stocks.''

Taiwan's dollar rose 0.2 percent to NT$31.698 as of 4:31 p.m. local time, from NT$31.746 yesterday, according to Taipei Forex Inc. The won climbed to 943.85, compared with 945.30 yesterday, according to Seoul Money Brokerage Services Ltd.

Asian Currencies Rise, Led by Taiwan Dollar, as Stocks Rally

Dollar Falls as Housing Reports May Bolster Case for Fed Cuts

2008-02-19T02:57:00.000-08:00

The dollar fell against 15 of the 16 most-active currencies on concern industry and government reports will show the housing recession in the U.S. is deepening.

The U.S. currency declined to a two-week low against the euro on speculation the Federal Reserve will keep cutting its benchmark interest rate from 3 percent. Australia's dollar rose to a three-month high after the nation's central bank said it considered a larger increase when raising borrowing costs to an 11-year high of 7 percent this month.

``We think there's a chance we'll break $1.48 against the euro on the expectation the U.S. will cut rates,'' said Chris Furness, head of currency strategy in London at 4Cast Ltd., a research company that counts central banks among its subscribers. ``We still have a problem. We don't know whether it's going to be recession or not.''

The dollar fell to $1.4742 per euro, the lowest since Feb. 5, and traded at $1.4726 as of 8:45 a.m. in London, from $1.4658 in New York yesterday. It weakened to 107.86 yen from 108.23 yen. The euro was at 158.90 yen, from 158.63.

Japan's currency also advanced against the dollar, or greenback, on speculation that China's central bank will raise borrowing costs and seek a stronger exchange rate to curb the fastest inflation in more than 11 years.

The U.S. currency fell 0.7 percent to 91.97 cents versus Australia's dollar, reaching the lowest since Nov. 9. The U.S. greenback also declined against the New Zealand dollar to 79.79 U.S. cents, near the lowest since July 26, from 79.52 yesterday.

Australian Dollar

The Australian dollar rose versus all 16 major currencies after central bank Assistant Governor Malcolm Edey said inflation may accelerate.

Minutes from the Reserve Bank of Australia's Feb. 5 meeting published today showed Governor Glenn Stevens and his colleagues discussed raising the benchmark rate by 50 basis points to cool the fastest inflation in almost two decades.

``The discussion about monetary policy in the minutes had a much sharper sting in the tail as far as the near-term rate outlook is concerned,'' wrote David de Garis, senior markets economist at National Australia Bank Ltd. in Sydney, in a note to clients. ``We still expect a 25 basis-point increase in March and a 40 percent chance of another.''

The yield advantage on Australian two-year bonds over similar-maturity U.S. Treasuries increased to 5.09 percentage points, the widest since December 1990.

The U.S. dollar dropped 5.1 percent versus the euro since the Federal Reserve started to cut interest rates on Sept. 18, the fourth-worst performer among the 16 most-active currencies.

`Sense of Vigilance'

``The markets have a heightened sense of vigilance before the U.S. housing data and are selling dollars,'' said Kenichiro Fujita, manager of derivatives-marketing in Tokyo at Aozora Bank Ltd., Japan's ninth-largest publicly traded lender by assets. ``The Fed will cut rates to 2 percent to support the economy and to avoid criticism that it always falls behind the curve.''

Dollar Falls as Housing Reports May Bolster Case for Fed Cuts

Yuan to Rise Versus Major Currencies, Researcher Says

2008-02-17T22:36:00.000-08:00

China will shift focus to managing the yuan's exchange rate against currencies of its biggest trading partners and not just the dollar, allowing for a broader appreciation, former central bank adviser Li Yang said.

China's currency has fallen 6 percent against the euro since a link to the dollar was scrapped in 2005, prompting calls from European officials including French President Nicholas Sarkozy to allow faster gains. Some U.S. lawmakers also claim the yuan is kept undervalued to make exports competitive, and have threatened sanctions unless it extends a 15 percent gain versus the dollar since the peg ended.

There's a ``shift in how the central bank will be watching the rate and the focus of its policy target,'' Li, head of financial research at the Chinese Academy of Social Sciences in Beijing, said in a Feb. 14 interview. The central bank will focus on a trade-weighted ``effective'' exchange rate, he said.

Gains in the yuan against more currencies may help China slow growth in its trade surplus, which has flooded the economy with cash and driven inflation to an 11-year high. Gross domestic product grew 11.4 percent in 2007 from a year earlier, the fastest pace in 13 years, driven by exports and investment.

The yuan fell as much as 0.6 percent against the dollar in the first day of trading after a week-long holiday on Feb. 13, the biggest loss since the peg ended. The currency rebounded as the China Securities Journal cited unnamed experts on Feb. 14 saying the yuan will rise against major currencies this year.
read more:Yuan to Rise Versus Major Currencies, Researcher Says

Dollar feels weight of rate talk

2008-02-17T22:33:00.000-08:00

The dollar suffered against the euro this week after comments from Ben Bernanke, chairman of the Federal Reserve, cemented expectations for further cuts in US interest rates.

In testimony before US Congress on Thursday, Mr Bernanke reiterated the downside risks to US economic growth and said the Fed stood ready to take action in response, underlining the central bank’s willingness to loosen US monetary policy further.

Mr Bernanke said a significant worsening in financial conditions or in credit availability “would certainly be a warning bell that we need to take further action”.

But Mr Bernanke also said he expected a stronger pace of US growth to start later this year as the effects of recent monetary and fiscal stimuli began to be felt.

Ashley Davies at UBS said he believed the dollar would likely benefit in the longer run, although currency markets chose to focus on the prospects for imminent rate cuts rather than a US recovery in the short term.

“With downside risks to growth in the US already largely priced into the dollar, but eurozone data deteriorating and therefore justifying monetary easing, we look for euro/dollar to trade down to $1.43 over the next three months,” he said.

Dollar May Rebound to 110 Yen Options Show, MUFG's Miki Says

2008-02-14T01:35:00.000-08:00

Currency options show the dollar may rebound to around 110 yen in the next few weeks, said Takeharu Miki, currency options manager in Tokyo at Bank of Tokyo- Mitsubishi UFJ Ltd.

The spread between the one-month and one-year risk reversal rate has started to narrow, showing options traders are speculating less on a decline in the U.S. currency, Miki said. Risk reversals are the difference between the cost for call options, which grant the right to buy a currency at a fixed price, and puts, which allow sales.

``I'm watching this term structure because it's all about sentiment,'' Miki from the unit of Japan's biggest publicly traded lender, said in an interview in Tokyo. ``This spread will narrow when the dollar starts to recover. I see the potential for a rise in the currency.''

The dollar traded at 108.24 yen at 6:05 a.m. in London from 108.33 late yesterday in New York, when it rose to a one-month high of 108.38. The U.S. currency has gained 1.6 percent against the yen since the start of this month. It fell 10.5 percent over the past year.

The one-year 25-delta risk reversal rate for dollar-yen options was 1.275 percentage points more than the one-month rate today, down from an almost four-year high of 2 percentage points on Dec. 7. Delta measures the change in the price of an option relative to moves in the underlying currency.

Australian Dollar Rises, Bonds Decline as Jobs Beat Forecasts

2008-02-14T01:32:00.000-08:00

The Australian dollar rose and bonds declined after a government report showed the unemployment rate fell to the lowest since 1974, spurring traders to add to bets the Reserve Bank of Australia will raise interest rates in March.

The local dollar, known as the Aussie, climbed against all of the 16 most-traded currencies on prospects higher borrowing costs will encourage investors to funnel funds into Australian dollar-denominated assets. The yield advantage on Australia's two-year government notes over similar-maturity U.S. Treasuries widened to 4.99 percentage points, the most since 1990.

``The data highlights a very high risk that the RBA will be forced to follow up its February rate hike with one in March,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``There's a bias to play a long Aussie'' versus New Zealand's dollar, she said. A long position is a bet on an asset price's gain.

The Australian dollar rose to 90.28 U.S. cents as of 5:19 p.m. in Sydney from 89.78 cents immediately before the report was issued and 89.86 cents in late Asian trading yesterday. It climbed to NZ$1.1481 versus NZ$1.1422.

The local dollar may advance to as high as 93 cents and NZ$1.20 within three months, Trinh forecast.

The Bureau of Statistics said in Sydney the number of people employed climbed 26,800 in January, beating estimates of economists surveyed by Bloomberg News for 15,000 new jobs. The jobless rate fell to 4.1 percent from 4.3 percent.

``The economy seems to be doing pretty well,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``I'd like to see the Aussie on the upside.''

Yen Rises as AIG Losses Prompt Investors to Trim Carry Trades

2008-02-11T21:16:00.000-08:00

The yen rose against 13 of the world's 16 most-active currencies as widening credit-market losses spurred investors to reduce holdings of higher-yielding assets financed in Japan.

The currency gained against the New Zealand dollar and the Norwegian krone as traders reduced so-called carry trades. American International Group Inc., the world's largest insurer by assets, said it may have underestimated a decline in the value of derivative holdings. The euro traded near a three-week low versus the dollar before a report that will probably show the weakest German investor confidence in 15 years.

``I am quite yen-bullish,'' said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded lender by assets. ``Subprime debt problems are far from over. The markets will remain shaky, buoying the yen.''
read more:Yen Rises as AIG Losses Prompt Investors to Trim Carry Trades

Australia bucks world trend with rate rise

2008-02-05T20:35:00.000-08:00

Australia’s strong economic growth, driven by commodity exports to China and other fast-growing economies, was underlined on Tuesday when interest rates were pushed to their highest in nearly 12 years in an effort to contain inflation.
The Reserve Bank of Australia’s 25 basis point rise in the benchmark cash rate to 7 per cent, the third rise in six months, comes as many developed nations are cutting rates as economies slow.
Australia, now in its 17th year of uninterrupted growth, is out of alignment with the US. Gross domestic product is forecast to grow more than 4 per cent this year, spurred by commodities sales and a rebound in agricultural exports.
Australia’s growing reliance on its nearest neighbours in Asia was emphasised on Tuesday in comments by Yang Jiechi, China’s foreign minister, who was visiting Canberra to mark the start of annual talks on regional strategic issues.

Euro May Weaken to $1.4310 on Technical Charts, Citigroup Says

2008-02-05T20:12:00.000-08:00

The euro may weaken to $1.4310 against the dollar after it fell below so-called support at about $1.4670, according to Citigroup Global Markets Inc.

The euro yesterday dropped below $1.4670, which represents the currency's 55-day moving average and is an area where buy orders are likely to be placed. The next target of $1.4310 was the previous lower range of euro-dollar levels in December.

``The fall through the 55-day moving average adds further strength to the bearish outlook here and opens the way for the pair to fall to the base of the range at $1.4310 in the short term,'' analysts led by New York-based global head of currency strategy Tom Fitzpatrick wrote in a research note yesterday.

The 15-nation currency was at $1.4639 per dollar at 10:12 a.m. in Tokyo, from $1.4647 late yesterday in New York. It fell to $1.4311 on Dec. 20, and last dropped below $1.4310 on Oct. 25.

The euro yesterday fell below the 55-day moving average, at $1.4665 today, for the first time since early September. That signaled the euro is likely to remain weak in the short term.

Traders often look for signs of a currency's short-term trend by viewing the five-day moving average, and forecast longer-term trends with the 21-day and 55-day moving average. They use moving averages to identify levels of support, where buying is expected, or resistance, where selling is forecast.

Canada's Dollar Falls on U.S. Economy Outlook, Commodity Demand

2008-02-05T19:50:00.000-08:00

Canada's currency fell the most in a month on concern that a U.S. recession will reduce demand for Canadian commodity exports.

Traders sold currencies of commodity-exporting countries as the U.S. economy falters and data from Europe suggested the international economy may face a slowdown.

``A fear of a possible U.S. recession is taking its toll on commodity currencies,'' said Andrew Chaveriat, a technical foreign-exchange strategist at BNP Paribas Securities SA in New York. ``The U.S. dollar is going to continue this rally as people avoid risky bets, and we may see some weakness in the Canadian dollar.''

Canada's currency, known as the loonie after the image of the bird on its one-dollar coin, fell 1.3 percent, the most since Jan. 4, to C$1.0068 per U.S. dollar at 4:30 p.m. in Toronto. One Canadian dollar buys 99.33 U.S. cents.

Prices of the nation's commodity exports also declined. Crude oil for March delivery fell $1.61, or 2 percent, to $88.41 a barrel. Gold for immediate delivery dropped $14.20, or 1.6 percent, to $895.20 an ounce. Commodities account for about half of Canada's exports.

The currency is lower today against 12 of the 16 major currencies, led by the Brazilian real and the Taiwanese dollar. It extended its losses after a report from the U.S. showed service industries unexpectedly shrank in January at the fastest pace since the last recession, as the housing slump deepened and consumer spending cooled. The U.S. consumes about 80 percent of Canada's exports.

Damage Assessment

``The Canadian dollar may be an underperformer for the short run,'' said Steve Butler, a director of foreign exchange trading at Scotia Capital Inc. in Toronto. ``The market is trying to figure out how much damage the U.S. recession is going to have on the Canadian economy.''

Canadian bonds rose and yields fell as declining equity prices worldwide encouraged investors to buy safe-haven government securities. The yield on the two-year Canadian bond is close to its lowest since 2005.

Earlier, reports from the euro zone showed service industries grew at the slowest pace in more than four years and retail sales dropped the most since 1995.

Bank of England May Cut Interest Rate a Quarter Point to 5.25%

2008-02-04T00:54:00.000-08:00

The Bank of England will probably cut its key interest rate for the second time in three months this week, setting aside concern that inflation will accelerate as economic growth slows, a survey showed.

The nine-member Monetary Policy Committee will lower the rate by a quarter point to 5.25 percent on Feb. 7, according to 58 of the 61 economists in a Bloomberg News survey. Two expect a half-point cut and one forecasts no change.

Falling house prices and higher market lending rates have put the U.K. economy on course for its worst performance since the end of the last recession in 1992. At the same time, Governor Mervyn King has indicated inflation pressures will keep the bank from following the Federal Reserve and slashing rates further in coming months.

``There is clearly a sense at the bank that rates are restrictive and need to come down,'' said Matthew Sharratt, an economist at Bank of America Corp. in London. ``Worries about inflation mean there won't be the same kind of aggressive easing as we've been seeing from the Fed.''
read more:Bank of England May Cut Interest Rate a Quarter Point to 5.25%

Yen Falls as Stock Gains Spur Investors to Seek Higher Yields

2008-02-04T00:51:00.000-08:00

The yen fell against all 16 of the most-active currencies as a rally in Asian stocks prompted investors to purchase higher-yielding assets funded in Japan.

The currency dropped the most versus Norway's krone, a favorite for so-called carry trades, before a U.S. government factory orders report that may show business spending is holding up in the world's biggest economy. The euro rose on speculation the European Central Bank will keep interest rates at a six-year high this week.

``The U.S. probably won't fall into a recession, supported by a strong corporate sector,'' said Koji Fukaya, a senior currency strategist at Deutsche Securities, the Tokyo unit of Deutsche Bank AG, the world's largest currency trader. ``There are expectations stocks have already bottomed out. This is leading to yen-selling.''

The yen declined to 158.22 per euro as of 7:52 a.m. in London from 157.67 late in New York on Feb. 1. It was at 106.76 versus the dollar from 106.49. The currency may fall to 110 per dollar by the end of March, Fukaya said.

The yen slumped to a three-week low against the Australian dollar, weakening 0.5 percent to 96.76. It dropped 0.7 percent to 19.7005 versus the Norwegian krone and declined 0.6 percent to 210.47 to the British pound.
read more:Yen Falls as Stock Gains Spur Investors to Seek Higher Yields

Canada's Dollar Exceeds Par on the Outlook for Rate Advantage

2008-01-29T21:50:00.000-08:00

The Canadian dollar rose above par against the U.S. currency for the first time in three weeks on speculation Canada's interest-rate advantage over the U.S. may widen.

Canada's dollar strengthened versus 14 of the 16 most- traded currencies before the Federal Reserve decision tomorrow. Policy makers may cut the U.S. benchmark lending rate by 50 basis points to 3 percent, according to futures prices quoted on the Chicago Board of Trade. That would widen the rate gap to 1 percentage point, with Canada's borrowing costs at 4 percent.

``It's a part of a broad-based U.S. dollar weakness before the rate meeting,'' said Matthew Strauss, a senior currency strategist in Toronto at RBC Capital Markets. ``Currencies linked to commodity exports are generally gaining in this environment.''

The currency, known as the loonie after the image of the bird on its one-dollar coin, rose 0.4 percent to 99.95 Canadian cents per U.S. dollar at 4 p.m. in Toronto, from C$1.0035 yesterday. It touched 99.44 Canadian cents, the strongest since Jan. 4. One Canadian dollar buys $1.0007.

The U.S. dollar declined against 10 of the 16 most-traded currencies. The Canadian dollar gained the most, 0.8 percent, against the Swiss franc today.

The Canadian dollar gained 1.9 percent last week, wiping out losses it suffered earlier this month.

Interest-rate futures traded on the Chicago Board of Trade show 78 percent odds the Fed will lower borrowing costs a half- percentage point tomorrow and a 22 percent chance of a quarter- percentage point cut. The odds were 80 percent and 20 percent, respectively, on Jan. 22.

Yen Rises as Credit-Market Losses Sap Demand for Higher Yields

2008-01-29T21:46:00.000-08:00

The yen gained against 15 of the 16 most-active currencies on speculation credit-market losses will prompt investors to sell higher-yielding assets.

The currency rose the most versus Australia's dollar after U.S. regulators started probing the finance industry over the collapse of the subprime mortgage market. The dollar snapped two days of gains versus the yen on speculation the Federal Reserve will cut interest rates by 50 basis points today, reducing the allure of U.S. debt.

``The subprime problems don't seem to be fully resolved yet,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``Investors are still very averse to taking on risk. It's a factor for buying the yen.''

The yen climbed to 106.73 against the dollar at 1:48 p.m. in Tokyo from 107.11 late in New York yesterday. It also rose to 157.62 per euro from 158.27. It will advance to 106.70 versus the dollar and 157.50 against the euro today, Ishikawa forecast.

The currency rose 0.5 percent to 94.79 per Australian dollar from 95.25. Declines in higher-yielding currencies accelerated after the MSCI Asia-Pacific Index fell 1 percent, reversing an earlier rally.

The yen is set for a monthly gain versus all 16 of the most-active currencies, rising 9.5 percent this month versus the South African rand to 14.8738, and 5.6 percent against the South Korean won to 8.84041.

Aussie, Kiwi, Real Rally as Yield Lures Putnam, Daiwa

2008-01-28T00:18:00.000-08:00

Jan. 28 (Bloomberg) -- The best bets in the currency market may be Australia, New Zealand and Brazil, where economists predict central bankers will keep interest rates unchanged, or even raise them, while growth continues unabated on rising exports to China.

Kokusai Asset Management Co., Pacific Investment Management Co. and Putnam Investments LLC are investing in southern hemisphere countries to benefit from the highest bond yields relative to U.S. debt this decade. Australia's two-year government bonds yield 4.4 percentage points more than Treasuries of similar maturity. In New Zealand, the gap is 5.1 percentage points, and in Brazil, it's 9.1 percentage points.

Australia, New Zealand and Brazil are best positioned to weather a slowdown in the U.S. because a rising percentage of their goods are headed to China, where growth may average 10.3 percent this year, said investors such as Masataka Horii at Kokusai in Tokyo. China has overtaken the U.S. as Australia's largest export market after Japan, and the nation increased imports from Brazil fivefold over the last six years. Brazil kept its target rate at 11.25 percent last week and New Zealand left its at 8.25 percent. The Reserve Bank of Australia meets next week.

``We're very bullish on Australia,'' said Horii, who helps manage the $50.2 billion Kokusai Global Sovereign Open fund, the world's second-biggest managed bond fund. ``The countries that are expected to hike rates are limited. They have good relations with Asian economies, especially China.''

Yen Rises as Stock Slump Spurs Sales of Higher-Yielding Assets

2008-01-28T00:14:00.000-08:00

The yen rose against all 16 of the most-active currencies as Asian stocks slumped, prompting investors to sell higher-yielding assets outside of Japan.

The currency gained the most against the South African rand as China's benchmark stock index declined almost 7 percent, adding to concern global economic growth will slow. The pound dropped against the dollar after an industry report showed U.K. house prices fell for a fourth month.

``Asian stocks, especially in China, are really performing badly,'' said Kenichi Yumoto, senior dealer in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``This is causing risk aversion among investors, prompting yen- buying.''

The yen gained to 106.61 per dollar at 8:07 a.m. in London from 106.72 in New York Jan. 25. The currency climbed to 156.38 per euro from 156.68. Against the euro, the dollar was at $1.4670 from $1.4681. Japan's currency may rise to 105.80 per dollar and 155 a euro today, Yumoto said.

Japan's currency jumped 0.7 percent to 14.8266 versus the rand and rose 0.4 percent to 210.76 per pound from 211.66. It climbed 0.2 percent to 105.63 against the Canadian dollar. The MSCI Asia-Pacific Index of regional shares fell 3.2 percent, as China's CSI 300 Index slumped 6.8 percent.

Britain's currency weakened against all 16 of the most- active counterparts tracked by Bloomberg and fell to $1.9767, from $1.9831. The average cost of a home in England and Wales fell by 0.3 percent in January, according to Hometrack Ltd., a London-based research group.

Alarm bells send dollar falling

2008-01-22T22:22:00.000-08:00

The dollar plummeted on Tuesday after an emergency cut in the US federal funds rate set alarm bells ringing over the health of the country’s economy.

The dollar – which traded strongly on Monday as US investors repatriated funds in the face of the sell-off in global equities – sold off aggressively.

By midday in New York, the dollar was down 1.3 per cent to $1.4630 against the euro, had lost 1 per cent to SFr1.0980 against the Swiss franc and dropped 0.9 per cent to $1.9610 against the pound.

Analysts said the dollar could fall more, given that the Fed’s 75bp cut risked being seen as a panic move.

They said this implied that the central bank could be in possession of specific information which had increased its concerns over the health of the US financial sector.