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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.

Weak data force bank to take bold approach

2008-01-22T22:07:00.000-08:00

Tuesday’s aggressive move by the Federal Reserve represents an urgent effort to catch up with – and it is hoped get ahead of – the rapid deterioration in the US economic outlook.

It also represents an implicit admission by the US central bank that it had fallen behind the curve on monetary policy.

Policymakers were increasingly concerned that while they had cut interest rates by 100 basis points since the credit crisis began, rates were still far too high, given the state of the economy. In particular, they had cut rates by only 25 basis points since the end of October – a shift officials recognised was not enough to offset the deterioration in financial conditions, never mind provide any insurance against the worst-case risks to growth.

In their defence, the ....

read more:Weak data force bank to take bold approach

Bank of Japan votes unanimously to keep overnight call rate target unchanged

2008-01-22T01:04:00.000-08:00

TOKYO (Thomson Financial) - The Bank of Japan kept its overnight call rate target unchanged at 0.5 percent for the 13th straight meeting Tuesday, as widely expected.

This gives the Japanese central bank time to assess whether the financial market turmoil triggered by the credit crisis in the US will settle down soon, and whether weakness in the US housing market poses further material downside risk to its economy, given that the US is one of Japan's most important trading partners.

The Japanese central bank also needs to ascertain whether the Japanese economy can maintain its recovery momentum despite emerging uncertainty about domestic private demand and the appreciation of the yen.

The Bank of Japan said the nine members of its policy board voted unanimously to leave the rate unchanged.

Euro/Usd: a double top forming?

2008-01-22T00:59:00.000-08:00

The economic situation in the United States should be critical, when Chairman Bernanke calls for the fiscal stimulus package to become immediately effective. A concentric work might be the best solutions to take the economy back on track with stocks tumbling to new lows, housing in a steep decline and consumers prudent over the future. The Federal Reserve will do its job by cutting rates aggressively in the first part of 2008. At the end of January, a rate cut by 50/25 basis points seems to be a possible move, but time may be required to get things going again.

read more:Euro/Usd: a double top forming?

USD Shrugs off Dismal Retail Sales

2008-01-22T00:57:00.000-08:00

The dollar regained its footing by the New York afternoon following earlier selling against the euro, sterling and yen. A sluggish retail sales report for December was the catalyst for the greenback’s drop to multi-year lows versus the yen at 106.62.

read more USD Shrugs off Dismal Retail Sales by Korman Tam

Greenback Woes Linger

2008-01-21T00:47:00.000-08:00

The greenback struggled against the yen and euro at the start of the week amid a dearth of fresh US economic news. The currency also tumbled to a new all-time low against the Swiss franc. Speculation that the Fed may step in to cut interest rates before the next policy meeting at the end of the month dragged the dollar lower. The market is now fully pricing in a 50-basis point rate cut after last week’s dovish tone from Chairman Bernanke, in which he said that the FOMC would adopt “substantive additional action” to prop the economy.

US economic reports and Fed Chairman Bernanke’s Congressional testimony will drive the markets this week. Retail sales will be released on Tuesday, and are expected to report disappointing results from December – with a flat monthly reading in both the headline and ex-autos, down from 1.2% and 1.8%, respectively. Also due out tomorrow are the December PPI figures, both headline and core seen falling to 0.2% m/m. Traders will closely look at the rest of this week’s data – consisting of industrial production, CPI, housing starts, building permits, Fed Beige Book, Philadelphia Fed index, and the University of Michigan consumer sentiment, for further indication of whether a US economic recession is forthcoming.

read more:Greenback Woes Linger

FX Mixed

2008-01-21T00:46:00.000-08:00

The greenback was mixed against the majors in Tuesday trading, rallying against the yen while relinquishing yesterday’s gains versus the sterling. Fears on the stability of financial firms will continue to weigh on the dollar with earlier rumors of Countrywide, the US mortgage lender, seeking bankruptcy protection adding to market jitters.

Economic data released earlier in the session revealed further deterioration in the housing market. US pending home sales fell by 2.6% to 87.6, down from a revised 89.9 reading in October. The key highlight this week will be Thursday’s speech by Fed Chairman Bernanke, in which his comments will be closely scrutinized for clues as to whether another 25-basis point rate cut at the end of the month is forthcoming.

read more:FX Mixed

Volatility Abound in FX

2008-01-21T00:43:00.000-08:00

The major currencies were subjected to choppy and volatile trading in the Wednesday session with the dollar initially plunging to an all-time low against the Swiss franc and a fresh two and a half year low versus the yen. The greenback, however, managed to lick its wounds by the New York afternoon – rebounding from beneath the 106-level versus the yen to 107.90 and recovering above the 1.10-mark against the franc.

The December consumer price index revealed buoyant inflation conditions, at 0.3% m/m and 4.1% y/y. The excluding food and energy figure was unchanged at 2.4% y/y. Industrial output was flat, versus a 0.3% increase a month earlier. The NAHB housing market index for January was unchanged at 19.
read more: Volatility Abound in FX

Asian Currencies: Won, Ringgit and Rupiah Fall on U.S. Slowdown

2008-01-17T23:54:00.000-08:00

Jan. 18 (Bloomberg) -- Asian currencies headed for a weekly decline, with South Korea's won set for its worst week in two months, as overseas investors sold local shares on expectations a U.S. slowdown will cut demand for the region's exports.

The won and South Korea's benchmark stock index reached their lowest since August as central bank Governor Lee Seong Tae said the nation's economy faces intensifying risks from the possibility of a U.S. recession and soaring fuel costs.

``The won is vulnerable to declines in global equities,'' said Yuji Kameoka, a senior economist and currency analyst at Daiwa Institute of Research in Tokyo. ``Concerns cooling U.S. growth will drag global stock markets and the global economy lower encourages investors to sell emerging-market assets.''

The won has fallen 1.1 percent this week to 948.25 against the dollar as of 12:50 p.m. local time, according to Seoul Money Brokerage Services Ltd. It may trade between 945 and 960 in a month, Kameoka said.

The won is the second-worst performer out of the 10 most- active Asian currencies outside of Japan this week. Thailand's baht is the worst, losing 3.5 percent this week offshore.

Malaysia's ringgit headed for its first weekly decline in a month also on concern about a U.S. recession.

The local currency weakened for a third day as global stocks slumped after U.S. reports yesterday showed slowing manufacturing and housing activity and Merrill Lynch & Co. announced larger-than-expected losses. The U.S. is the biggest market for Malaysian exports.

`Safe-Haven Assets'

Yuan Heads for a Sixth Weekly Gain as China Curbs Inflation

2008-01-17T23:51:00.000-08:00

Jan. 18 (Bloomberg) -- The yuan headed for a sixth weekly gain, the longest stretch in seven months, on speculation China is allowing the currency to appreciate to cool the economic expansion and bring inflation down from an 11-year high.

The currency's advance so far this year is the best since China abandoned a link to the dollar in July 2005. The nation has increased interest rates and told banks to set aside more funds as reserves to slow growth that is the fastest of any major economy by reducing the cash available for investment.

``The yuan will remain one of their key tools to fight inflation,'' said Sean Callow, a foreign-exchange strategist at Westpac Banking Corp. in Singapore. ``There will be bursts of strength then periods of slower gains.''

The yuan rose 0.18 percent to 7.2488 against the dollar this week as of 12:22 p.m. in Shanghai, the longest run of weekly gains since June 1. Westpac forecasts the currency will strengthen to 6.98 by year-end.

``While the yuan is treading water short term, I think we will see reacceleration over the next one-two months, unless there is a sharp, unexpected slowdown in China's economy, which virtually no one expects,'' Callow said.

`Some Progress'

Everyone Loves Yen in Subprime World of Slowing U.S.

2008-01-14T20:15:00.000-08:00

Jan. 15 (Bloomberg) -- The poorer the prospects for the U.S. economy, the more attractive Japan's yen is to Alan Eisner.

The hedge fund manager at Millennium Global Investments Ltd. in London says slower growth in the U.S., Japan's biggest export market, will cause Japanese investors to pare their overseas purchases. At the same time, the most volatile exchange rates this decade are forcing traders to buy yen to repay loans denominated in the currency.

``Now is a good time to buy,'' said Eisner, a senior managing director at Millennium, which has $13.3 billion in assets. ``When the world is doing well, then Japanese investors are very happy to invest abroad. When the world is not looking so great, the dynamic works the opposite way.''

Investors and traders are buying Japan's currency even as its broadest rally in eight years threatens to derail the nation's economy. The country relies on exports for most of its growth and has a 50 percent chance of recession, according to Goldman Sachs Group Inc. Automakers Mazda Motor Corp. and Nissan Motor Co. have tumbled more than 10 percent this month on concern that the rising currency will erode earnings.

``We're looking to buy yen,'' said Paresh Upadhyaya, a senior vice president at Putnam Investments LLC in Boston who helps manage $29 billion in currencies. ``The pillar of yen weakness, a buoyant global environment coupled with low volatility, has flipped.''

Best Since 1999 ............

Dollar Trades Near Record Low Versus Euro on Fed Rate-Cut Bets

2008-01-14T20:13:00.000-08:00

Jan. 15 (Bloomberg) -- The dollar traded close to a record low versus the euro before a report that economists expect will show U.S. retail sales growth stalled in December.

The dollar has declined versus 14 of the 16 most-active currencies this year as traders start to price in odds the Federal Reserve will cut benchmark borrowing costs by as much as 0.75 percentage-point this month. The Mortgage Bankers Association yesterday forecast U.S. existing home sales will fall 13 percent this year before recovering in 2009.

``Heightened expectations of the Fed cutting interest rates has been the theme that is the nemesis of the dollar,'' said John Kyriakopoulos, a Sydney-based currency strategist at National Australia Bank Ltd., the nation's largest lender. ``There are some downside risks around the retail sales number.''

The dollar traded at $1.4877 against the euro at 11:42 a.m. in Tokyo compared with $1.4869 yesterday in New York. It reached an all-time low of $1.4967 on Nov. 23 and may weaken to about $1.50 per euro this week, Kyriakopoulos said.

The U.S. currency was at 107.98 yen from 108.16 yen. The euro traded at 160.65 yen from 160.84 yen. The pound bought $1.9560 from $1.9559.

U.S. Rates

Yuan Heads for Fifth Weekly Gain as China Seeks to Cool Economy

2008-01-10T21:50:00.001-08:00

Jan. 11 (Bloomberg) -- The yuan headed for a fifth weekly gain, the longest winning streak since September, on speculation China is seeking faster gains to cool the economy.

The currency also rose as the state-run Xinhua News Agency reported today that the nation's trade surplus surged to a record for 2007, adding to pressure for yuan gains. The World Bank this week forecast China will grow more than 10 percent this year and next, which may fuel inflation already at the fastest in more than a decade.

``The pace of appreciation has been increasing and we're seeing the market raise its expectations over the pace of gains,'' said Thio Chin Loo, a senior currency analyst at BNP Paribas in Singapore. ``They're using a tighter policy to cool things down, and stepping on the brakes some more.''

The yuan gained 0.1 percent to 7.2644 versus the dollar as of 12:46 p.m. in Shanghai, compared with 7.2719 yesterday, according to ....
read more:Yuan Heads for Fifth Weekly Gain as China Seeks to Cool Economy

Bank of England Keeps Benchmark Interest Rate at 5.5%

2008-01-10T21:47:00.000-08:00

Jan. 10 (Bloomberg) -- The Bank of England kept its benchmark interest rate unchanged today as policy makers assessed the effects of last month's reduction on the economy.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, left the bank rate at 5.5 percent, as predicted by 40 of 50 economists in a Bloomberg News survey. The rest forecast a quarter-point cut.

Economists predict the Bank of England will wait until next month before lowering rates again as banks rein in lending, damping consumer spending and deepening a slowdown in the housing market. Officials are weighing those risks against inflation pressures after oil prices rose to a record.

``They don't want to take risks on inflation,'' said Stewart Robertson, an economist at Morley Fund Management in London. ``But they missed a trick here. They could have sent a supportive message in the face of a lot of gloomy news. We'll get a cut next month.''

The pound, which initially rose after the decision, fell to a record low 75.45 pence per euro today. Investors are speculating that the deteriorating economy will prompt the Bank of England to lower borrowing costs as soon as traded at 4.346 as of 5:12 p.m. in London. Minutes of the meeting, including how each member voted, will be published on Jan. 23.

U.S. Recession

U.K. Prime Minister Gordon Brown, lagging behind opposition leader David Cameron in opinion polls, is trying to reassure voters that the economy can weather a global slowdown. Brown, who will decide in the next few weeks whether to reappoint King as governor, said yesterday that ``low interest rates'' and ``low inflation'' will keep growth on track.

Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. say the U.S. may already be in recession and recent economic reports suggest the U.K. economy is cooling.

House prices dropped in the fourth quarter for the first time in seven years and shares in Marks & Spencer Group Plc, the country's largest clothing retailer, yesterday fell the most in at least 19 years after an unexpected decline in holiday sales.

Australian Dollar Rises to Near 4-Week High; N.Z. Dollar Gains

2008-01-10T01:13:00.000-08:00

Jan. 10 (Bloomberg) -- The Australian dollar traded near a four-week high and New Zealand's currency rose for a third day on speculation rising prices in the two economies will prevent the central banks from cutting interest rates.

The two Southern Hemisphere currencies have gained almost 1 percent this year on bets their rate advantage over the U.S. will widen as the Federal Reserve cuts borrowing costs. The currencies may rise ahead of consumer price index reports which are likely to show faster inflation, said Joshua Williamson, senior strategist at TD Securities.

``There are plenty of factors to support the Aussie and kiwi,'' Williams said in Sydney, referring to the currencies by their nicknames. ``The odds are rising for an Australian rate rise.''

The Australian dollar was at 88.28 U.S. cents at 4:54 p.m. in Sydney from 88.42 cents yesterday when it reached 88.58 cents, the strongest since Dec. 13. The currency rose to 96.81 yen from 96.70 late in Asia yesterday and reached 97.39 yen, the highest since Jan. 3.

The New Zealand dollar gained to 77.39 U.S. cents from 77.15 cents late in Asia yesterday. The currency advanced to 84.86 yen and touched 85.24 yen, the highest since Jan. 4.

Australia's dollar may gain to 88.60 cents and New Zealand's may reach 78 cents in the near term, Williamson said.

Yen Rises as Drop in Stocks Spurs Investors to Cut Carry Trades

2008-01-10T01:09:00.000-08:00

Jan. 10 (Bloomberg) -- The yen rose against 15 of the 16 most-active currencies as a decline in Asian stocks spurred investors to cut overseas holdings of higher-yielding assets funded by loans in Japan.

The Japanese currency gained the most versus the British pound and Australian dollar as investors cut so-called carry trades on concern the global economy will cool. The pound also fell against the euro before the Bank of England meets on interest rates today, with a Credit Suisse index showing 61 percent odds of a cut in the benchmark from 5.5 percent.

``With stocks falling sharply, investors' tolerance of risk has been damaged,'' said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly traded lender by assets. ``More than a few investors are selling overseas assets by paring carry trades.''

The yen climbed to 109.81 against the U.S. currency as of 8:13 a.m. in London from 110.04 yesterday in New York. It traded at 161.03 per euro from 161.31. The MSCI Asia Pacific Index of regional shares fell 1.2 percent, snapping two days of gains, and the Nikkei 225 Stock Average dropped 1.5 percent.

Japan's currency may rise to 90 a dollar by March 31, Hayashi forecast.

The euro traded at 74.97 pence after rising to a record high of 75.10 pence, and bought $1.4663 from $1.4659. European Central Bank policy makers also meet today and are forecast to keep borrowing costs at 4 percent. The Bank of England will announce its decision at noon in London and the ECB at 1:45 p.m. in Frankfurt.

2007-12-17T23:11:00.001-08:00

Australian Dollar Climbs From 3-Month Low on Rate Advantage

2007-12-17T00:09:00.000-08:00

The Australian dollar rose from a three-month low as some traders considered its drop too far as the economy expands and the central bank raises interest rates to an 11-year high.

The currency is headed for the biggest annual advance since 2003 as investors bet the Reserve Bank of Australia will increase rates next year, according to a Credit Suisse Group index based on trading in interest rate swaps. Australia's rate advantage over the U.S. is at a more-than-two-year high of 2.5 percentage points as the Federal Reserve cuts borrowing costs.

``The currency was a little bit oversold on Friday so it's rebounding,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. ``The local economy is still strong.''

The Australian dollar climbed to 86.37 U.S. cents at 1:49 p.m. in Sydney after earlier reaching 85.96 cents, the lowest since Sept. 20. It was at 86.07 cents late in New York last week and may rise as high as 88.50 cents this week, Grace said. Australia's dollar gained to 97.78 yen from 97.50 yen late on Dec. 14.

The currency reached a 23-year high last month after the Reserve Bank of Australia raised the cost of borrowing to 6.75 percent. Australian two-year bonds yield 3.50 percentage points more than the equivalent U.S. Treasuries. The spread was 1.40 percentage points at the beginning of the year.

Traders' bets that a rate increase next year is a done deal ``is providing some support to the Australian dollar,'' said John Kyriakopoulos, a currency strategist at National Australia Bank Ltd. in Sydney.

Pound Peak Fuels Pessimism as Currency Mimics Dollar

2007-12-17T00:04:00.000-08:00

Just a month after rising to a 26- year high against the dollar, the British pound is starting to look more like the beleaguered U.S. currency.

The pound weakened against 12 of the world's 16 most actively traded currencies since reaching $2.1161 on Nov. 9. In the U.K., just as in the U.S., policy makers are cutting interest rates to restore calm in credit markets and home prices are declining.

``When we look at economies around the world which are exposed to similar problems as in the U.S., the U.K. is pretty high on our list,'' said Andrew Balls, a global bond fund manager at Newport, California-based Pacific Investment Management Co., which oversees $721 billion. ``Sterling is a good currency to sell.''

The pound depreciated 3.5 percent to $2.0195 after reaching the highest level since May 1981 and fell for a third straight week. It weakened 10 percent versus the Canadian dollar this year and 5.8 percent against the euro. The dollar lost 7.9 percent this year on a trade-weighted basis against a basket of six currencies that make up the Fed's U.S. Dollar Index. It reached a record low in November.

Strategists say there's more pain in store for the pound. Zurich-based UBS AG and Frankfurt-based Deutsche Bank AG, the world's biggest foreign-exchange traders, predict the currency will weaken at least 6 percent against the dollar in 2008. Pimco, a unit of Munich-based insurer Allianz SE, New York-based Merrill Lynch & Co. and Goldman Sachs Group Inc. say sterling may be overvalued by as much as 25 percent, based on the level of trading done between the U.K. and the U.S., and prices for the same goods in the countries.

Yen Advances as Stocks Decline, Investors Reduce Carry Trades

2007-12-17T00:02:00.000-08:00

The yen rose against all of the world's 16 most-active currencies as a slump in Asian stocks prompted investors to cut holdings of higher-yielding assets funded in Japan.

The yen climbed the most against the New Zealand dollar, a favorite of so-called carry trades. Japan's currency also advanced from the lowest level in more than a month against the dollar as Japanese exporters bought yen, betting it will resume a five-month rally.

``Falling share prices are causing risk reduction,'' said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust & Banking Co. Ltd., a unit of Japan's largest brokerage. ``This is buoying the yen.''

The yen rose to 113.02 against the dollar as of 7:00 a.m. in London from 113.27 on Dec. 14, when it fell to 113.60, the lowest since Nov. 7. The Japanese currency also climbed to 163.22 per euro from 163.45 on Dec. 14. Japan's currency may move between 111 and 114.30 per dollar for the rest of the year, Amikura forecast.

Australia Dollar Falls as Investors Sell Higher-Yielding Assets

2007-12-14T02:36:00.000-08:00

Expert Advisor makes money
The Australian dollar fell as investors sold higher-yielding assets on concern that credit- market losses will slow global economic growth.

The currency declined for a third day as the rate Australian banks charge each other for loans rose to the highest in more than a decade, suggesting the cash injection by central banks won't be enough to revive lending. Credit-market turmoil has hurt the Australian dollar as investors became less inclined to buy the nation's stocks and bonds with money borrowed from Japan in so-called carry trades.

``There will be visible signs that financial market stresses will have real economic impact, so this will weigh on'' Australia's dollar, said David Mozina, senior currency strategist in New York at Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm. ``We're negative on the Australian dollar at these sort of levels medium term.''

The Australian dollar declined to 87.77 U.S. cents as of 6 p.m. in Sydney, from 88.03 cents in late Asian trading yesterday. It traded at 87.80 a week ago in New York.

Caltex Australia Ltd., the nation's biggest oil refiner, cut its full-year profit forecast by as much as 13 percent because of a decline in the Australian dollar. The currency has slid 6.6 percent since touching a 23-year high of 94 cents on Nov. 8.

Central banks in the U.S., U.K., Canada, Switzerland and the euro region agreed on Dec. 12 to a coordinated effort to promote lending and restore confidence in money markets. Policy makers are reacting to more than $66 billion of losses tied to U.S. subprime mortgage defaults from banks this year.

Carry Trades

Dollar's Rise May Stall at 114.42 Yen, RBC Capital Markets Says

2007-12-14T02:32:00.000-08:00

Profitable EXPERT ADVISOR

Dec. 14 (Bloomberg) -- The dollar's 1.1 percent advance against the yen this month may stall at 114.42, said George Davis, chief technical analyst at RBC Capital Markets, a unit of Canada's biggest bank in Toronto.

The daily stochastic oscillator chart shows the U.S. currency's gains are excessive, said Davis in a research note yesterday. The dollar's 14-day stochastic oscillator was 96 today, according to data compiled by Bloomberg. A level above 80 suggests the currency has climbed too fast.

``We note that the daily studies are locked at overbought extremes,'' Davis said. Stochastic oscillator charts measure the price of a security relative to its highs and lows during a particular period to try to predict a rise or fall.

The dollar traded at 112.45 yen as of 12:28 p.m. in Tokyo from 112.21 yen late in New York yesterday. It has fallen 5.5 percent versus the yen this year.

Yuan Heads for Weekly Advance as China Signals Further Gains

2007-12-14T02:29:00.000-08:00

Expert Advisor

Dec. 14 (Bloomberg) -- The yuan headed for its biggest weekly advance in more than a month as Chinese officials signaled they're willing to allow faster appreciation to cool economic growth.

U.S. Treasury Secretary Henry Paulson said this week during his fifth visit to China that the Asian nation ``recognizes'' the need for greater currency flexibility. Central bank Governor Zhou Xiaochuan said China will use exchange-rate policy to prevent overheating after reports showed inflation at an 11-year high, a widening trade surplus and rising retail sales.

``China is accelerating the pace of currency gains for their own reasons and it's encouraging,'' said Patrick Bennett, a foreign-exchange strategist at Societe Generale SA in Hong Kong. ``The currency needs to take more of a tightening role.''

The yuan rose 0.43 percent this week to 7.3715 per dollar as of the 5:30 p.m. close in Shanghai, compared with 7.3692 yesterday and 7.4030 a week ago, according to the China Foreign Exchange Trade System. The currency touched 7.3640 yesterday, the strongest since a link to the dollar was scrapped in July 2005.

Stocks in Hong Kong and China fell for a third day on speculation the People's Bank of China will boost interest rates. The central bank increased its lending and deposit rates five times this year and raised the amount of cash banks must set aside 10 times.

`A Drastic Measure'

``A rate hike would be a drastic measure but it's quite reasonable for them to increase again,'' said Carlos Cheung, chief currency dealer at Bank of East Asia Ltd. in Hong Kong. ``I would not be surprised if they hiked today.''

China's consumer prices increased 6.9 percent in November, the statistics bureau said Dec. 11, while the trade surplus rose 15 percent to $26.3 billion, the third-highest monthly total, the custom's bureau said the same day. Gross domestic product expanded 11.5 percent in the third quarter, the fastest pace of the world's 20 biggest economies.

View of the day: Federal Reserve

2007-12-14T02:16:00.000-08:00

Expert Advisor

The Federal Reserve’s new term auction facility – and co-ordinated action with other central banks round the world – addresses the problem of liquidity in the financial system but will do little to alleviate the credit crunch, believes David Rosenberg, North American economist at Merrill Lynch.

He says: “The facility does not do anything to prevent existing credits from going bad and won’t stop credit issues from continuing to surface.”

Mr Rosenberg says: “The size of the auctions are actually fairly small . . . and in no way does this solve . . . the massive writedowns and losses the banking sector is likely going to incur this cycle.”

He also says: “The Fed continues to underestimate the extent of the housing downturn, the heightened prospect of a consumer recession and a spreading credit crunch. In our view, this TAF does not address what is happening in the broad economy, nor does it address issues surrounding bank capital pressures and rising delinquency rates . . . from subprime to prime mortgages, credit cards, auto finance and commercial real estate, and the impact this loan quality deterioration is exerting on the availability of credit.

Central banks boost Kiwi and Aussie

2007-12-12T21:05:00.000-08:00

The carry trade was back in fashion Wednesday following news of co-ordinated action from a number of the world’s biggest central banks to tackle the liquidity squeeze in global capital markets.

High-yielding currencies such as the dollars of New Zealand and Australia were driven sharply higher after the move by the central banks of the US, UK, eurozone, Switzerland and Canada helped equity markets bounce and government bond prices fall.

Charles Diebel at Nomura said the move meant markets would be able to breath a sigh of relief, at least until January. In this more stable and risk-friendly environment, carry trades flourished, sending the yen sharply lower. The trade is characterised by investors borrowing cheaply in the low-yielding Japanese currency to buy higher-yielding assets elsewhere.

The highest yielding currencies, the New Zealand dollar and the Australian dollar, were up across the board.

Forex signals

Dollar peg puts Qatar summit in spotlight

2007-12-12T21:00:00.000-08:00

When the six leaders of the Gulf Co-operation Council member states open their normally unspectacular annual summit in Qatar on Monday, the attention of many in the financial world will be guaranteed.

The ostensible purpose of the meeting in Doha is to discuss plans for monetary union by 2010. But after weeks of heated debate, markets will be studying the minutiae of the GCC leaders’ words for any hint of whether key members of the organisation, including Saudi Arabia and the United Arab Emirates, will retain long-standing pegs to the weak US dollar or look to revalue their currencies.

“This is perhaps the most anticipated meeting this year in the region,” says Mushtaq Khan, economist at Citibank. “So many statements have been made over the past couple of weeks which have really increased the tempo and the market’s expectation that something is likely to happen.”

Bankers from London to Bahrain have already been betting on revaluations, pushing the UAE dirham to a 17-year high and the Saudi riyal to its strongest level since its peg was introduced in 1986, heaping unprecedented pressure on the monetary authorities. The oil-rich GCC region includes Kuwait, Bahrain, Qatar and Oman, key US allies that control more than $1,000bn (€683bn, £486bn) in reserves.

Forex Expert Advisor

China wants stronger dollar, says rapid yuan rise may cause repercussions UPDATE

2007-12-11T22:11:00.000-08:00

BEIJING (Thomson Financial) - A top Chinese official said Wednesday that China is supporting a stronger US dollar and that a sharp appreciation in the local currency, the yuan, would not be in anyone's best interest.

Speaking to reporters during the Strategic Economic Dialogue, the Vice Minister of Commerce,

Chen Deming, said a rapid strengthening of the yuan would "cause repercussions" in China and around the world, and that it would not necessarily lead to a faster reduction of the US's trade deficit with China.

Chen noted that the yuan has already increased in value by more than 11 percent against the dollar, but the US trade gap with China has still grown.

Meanwhile, Chinese Finance Minister Xie Xuren said China's sovereign wealth funds would

operate transparently and would seek long-term investment returns. Xie did not answer specifically whether China supports US efforts to bring greater transparency to the operation of these funds to

ensure they are not used for political purposes.

However, Xie did say China attaches "great importance" to exchanging views on this issue with other governments, adding that China's sovereign funds would follow all laws of recipient countries when investing overseas.

The US proposed in October that International Monetary Fund members work out guidance for sovereign wealth funds (SWFs) to ensure that they focus on investment returns rather than political objectives, and argued that greater transparency in their operation would put many countries at ease.
Read more:China wants stronger dollar, says rapid yuan rise may cause repercussions UPDATE

Forex strategy

Forex - Dollar bounces back slightly after Fed's tame interest rate cut

2007-12-11T22:08:00.000-08:00

HONG KONG (Thomson Financial) - The US dollar gained slightly against the yen and euro in Asian afternoon trade Wednesday after the Federal Reserve announced a 25-basis-point interest rate cut.

While most investors had expected the central bank to lower its fed funds rate by a quarter percentage point, some had been hoping for a deeper half-point reduction to ease the credit crunch and counter a housing and banking slump.

But a 50 bps rate cut would have been negative for the greenback as it would discourage investors from holding on to their dollar-denominated investments.

"The drop in the interest rate is not as much as some people thought" it would be, said Mark Wan, chief analyst at Hang Seng Investment Services Ltd.

"That's why we saw some funds flowing back to US Treasuries."

At 1.00 pm (0500 GMT), the dollar was trading at 110.92 yen, up from 110.735 in Sydney this morning and from 110.62 in late New York trade. The euro was quoted at 1.4658 dollars, down from 1.466 this morning.

Following the Fed rate cut, US Treasury prices rose overnight, pushing down the yields. The benchmark 10-year US Treasury yield fell to 3.973 percent from 4.092 percent shortly before the announcement. Bond prices move inversely with yields.

Also boosting the greenback are moves by some fund managers and hedge funds to trim their holdings as the year-end approaches and hold on to their cash.

"There are some redemptions of investments and investors prefer to keep more cash. And in today's market, the major trading currency is still the US dollar," said Wan.

The dollar's strength against the yen could be short-lived though, as most analysts expect the Japanese currency to strengthen further.

The yen may climb to 109 versus the dollar by year-end, said David Mann, currency strategist at Standard Chartered Bank.

Forex strategy

Is Bernanke the Grinch Who Stole Christmas?

2007-12-11T22:06:00.001-08:00

The Federal Reserve cut interest rates by 25bp today, causing US stocks and carry trades to plummet and the dollar to strengthen significantly. For the traders who were hoping for a larger 50bp rate cut and a strong stock market rally, Bernanke may be the Grinch that stole Christmas. Minutes before the interest rate decision, stocks rallied indicating that more traders were adjusting their positions for the possibility of a larger rate cut. Unfortunately, not only did the Fed fail to cut interest rates by 50bp, but they also only lowered the discount rate by the same amount (25bp). The statement reeked on caution as the Fed acknowledged the slowdown in economic growth, the intensification of the housing market correction and the softening of business and consumer spending. They still feel that inflation could rise, but the upside risks to inflation no longer balance the downside risks to growth. This has caused Rosengren to vote in favor of a 50bp rate cut. Last month’s decision was also not unanimous, but at that time, Hoenig voted in favor of leaving interest rates unchanged. The probability of a recession is at the highest level in more than 3 years according to the latest WSJ.com survey. No problems were solved with today’s quarter point rate cut and that is why fed fund futures are pricing in more easing in 2008. The dollar could rally for the remainder of the week, but we expect weakness to resume as we get closer to the end of the year because the Fed won’t be able to avoid looser monetary policy. Pimco’s Bill Gross is calling for 3 percent interest rates, which means that he expects another 125bp of easing. Wholesale inventories fell to the lowest level ever in relation to sales in the month of October. The trade balance and import prices are due for release tomorrow. We expect both numbers to be stronger as the weak dollar boosts import prices and exports.

Forex Trading

GBPUSD Bearish Below 2.0678 for the Move to 2.0000

2007-12-11T22:03:00.000-08:00

• Euro Tests 21 Day SMA
• Japanese Yen Wave C Nearing Completion?
• British Pound 2.0500 Important Resistance
• Swiss Franc Still In Wave 4
• Canadian Dollar Bullish Bias Warranted With Trendline
• Australian Dollar Breaks Through Moving Average Resistance
• New Zealand Dollar Slowly Trending Upward

Read more:GBPUSD Bearish Below 2.0678 for the Move to 2.0000

Forex Trading

Fed Cuts by 25bp, Move Disappoints Even Though Statement is More Dovish

2007-12-11T21:59:00.000-08:00

The Federal Reserve cut both the Fed funds and discount rate by 25bp to 4.25 percent. Even though the balance of risk statement disappeared making the tone of the FOMC statement more dovish, the move by the Fed was disappointing. Traders were looking for a larger cut of the Fed Funds rate or at least a 50bp discount rate cut. Unfortunately, the Fed’s Christmas present was too stingy.
Stocks are down sharply, carry trades have plummeted and the US dollar has strengthened across the board. The dramatic shift in price action represents a market that is readjusting its expectations. The intraday reversal however may prove to be exaggerated because the statement contained cause for concern. It reeks of caution as the Fed acknowledges the slowdown in economic growth, the intensification of the housing market correction and the softening of business and consumer spending. They still feel that inflation could rise, but the upside risks to inflation no longer balance the downside risks to growth. This has caused Rosengren to vote in favor of a 50bp rate cut. Last month’s decision was also not unanimous, but at that time, Hoenig voted in favor of leaving interest rates unchanged. The probability of a recession is at the highest level in more than 3 years according to the latest WSJ.com survey. Fed fund futures are still pricing in 2 more rate cuts in 2008. The dollar could rally for the remainder of the week, but we expect weakness to resume as we get closer to 2008. The Dow and Carry Trades should also suffer more losses this week.

Forex trading

FOMC Trims 25-bp, USD, JPY Buoyed

2007-12-11T21:56:00.001-08:00

The FOMC, as largely anticipated, cut its benchmark lending rate by 25-basis points to 4.25% while also lowering the discount rate by 25-basis points to 4.75%. Given the reaction by the US equity bourses, markets were hoping for either a more aggressive ease or language from the Fed. The yen strengthened across the board following the decision, rallying on its inverse correlation with equities.

The accompanying Fed statement reiterated slowing economic growth due to “intensification of the housing correction with some softening in business and consumer spending”. However, the FOMC continued to highlight concerns over lingering inflationary pressure – saying “readings on core inflation have improved modestly, but elevated energy and commodity prices may put upward pressure on inflation”.
read more:FOMC Trims 25-bp, USD, JPY Buoyed

forex trading

Inflation concerns lift euro and sterling

2007-12-10T21:29:00.000-08:00

Eurozone and UK inflation concerns were aggravated Monday, pushing the euro and sterling higher against the dollar ahead of Tuesday’s Federal Reserve interest rate decision.

Sterling saw the bigger move after an unexpected surge in producer price inflation cast doubts over future UK interest rate cuts.

Headline output prices rose to a 16-year high of 4.5 per cent, reflecting the increasing pressure on manufacturers to pass on costs to wholesalers. This was driven by a sharp rise in input prices to an annualised 10.2 per cent as fuel prices bit, the UK Office for National Statistics said.

Howard Archer at Global Insight said the data would reinforce concerns that elevated oil and food prices might push up consumer price inflation.

He added: “The Bank of England needs to be confident that slowing growth is diluting underlying inflationary risks before trimming interest rates further.”

The pound rose 0.8 per cent to $2.0480 against the dollar and added 0.9 per cent to Y228.81 against the yen. The euro fell 0.4 per cent to £0.7182.

Speculation that the European Central Bank’s next move on rates may be up was further fuelled after Joaquín Almunia, the European Union’s monetary affairs commissioner, reiterated ECB fears of higher oil and commodity prices feeding into firmer wage demands.

Meanwhile, Jürgen Stark, ECB executive board member, said eurozone inflation could be higher next year than the central bank’s current projections suggest.

Last week, ECB president Jean-Claude Trichet shocked markets by suggesting the central bank’s governing council had discussed an interest rate increase ahead of its decision to keep rates on hold at 4 per cent.

“In our view, economic data are on the verge of justifying a rate hike,” said Niels-Henrik Bjørn at Danske Bank.

Whether this is likely or not, most economists now believe eurozone interest rates will be on hold throughout next year, while the Fed is expected to cut US rates Tuesday by 25 basis points to 4.25 per cent.

EXPERT ADVISOR

Dollar Falls Against Euro, Pound, Yen

2007-12-10T21:25:00.000-08:00

The British pound was a little higher, climbing to $2.0462 from $2.0315. The dollar fell to 111.67 Japanese yen from 111.69 yen Friday.

The Fed meets Tuesday to discuss interest rates, with analysts expecting the U.S. central bank to trim its key rate, now at 4.5 percent, by a quarter of a percentage point. Some have speculated about the possibility of a half-point cut.

The expected cut would be the third amid mortgage problems in the U.S. that have tripped up borrowers and caused a credit crisis among banks -- fueling wider fears about the health of the U.S. economy.

Lower interest rates can jump-start an economy, but they can also weaken a currency as investors transfer funds to countries where they can earn higher returns.

EXPERT ADVISOR

Bini Smaghi Says Money Market Rates `Unjustifiable'

2007-12-10T21:21:00.000-08:00

Dec. 10 (Bloomberg) -- European Central Bank Executive Board member Lorenzo Bini Smaghi said money-market lending rates were too high and central banks would ensure liquidity.

``Money-market rates currently reflect fears of needs for end-year liquidity, but the fears are unjustified,'' Bini Smaghi said today on the sidelines of a banking conference in Florence, Italy. ``The ECB and other central banks will continue to ensure stability in the money markets.''

There's no evidence that fallout from rising mortgage defaults in the U.S. is leading to tighter credit in the 13- nation euro economy, Bini Smaghi said. The cost of borrowing euros for three weeks rose to the highest since at least October 2001 as banks sought funding amid a credit squeeze.

``We can't come to the conclusion that there is a credit crunch currently in course in Europe,'' Bini Smaghi said in a speech. ``That doesn't mean there couldn't be a less favorable evolution going forward. It's important to keep monitoring closely.''

The three-week euro interbank offered rate, the amount banks charge each other for such loans, rose 4 basis points to 4.93 percent, the European Banking Federation said today. That's 93 basis points more than the European Central Bank's benchmark rate.

Bini Smaghi said that the ECB is more concerned about a potential inflation spiral than two years ago because the labor market is tighter than it was then, and because rising inflation may stoke salary increases.

FOREX EXPERT ADVISOR

Swiss Franc Falls on Rate Outlook, Stock Gains Spur Carry Trade

2007-12-10T21:18:00.000-08:00

Dec. 10 (Bloomberg) -- The Swiss franc fell to a month-low against the euro on increased speculation the central bank won't raise interest rates this week.

The franc, the second-worst performer of the 16 major currencies tracked by Bloomberg in the past week, also declined as gains in stocks encouraged traders to resume riskier investments funded by borrowing in Switzerland. The Swiss National Bank will probably keep the benchmark three-month Libor target rate unchanged at 2.75 percent on Dec. 13, according to the median estimate of 28 economists surveyed by Bloomberg News.

``The consensus is pretty much for no change in Swiss rates,'' said Henrik Gullberg, a currency strategist in London at Calyon, the investment-banking division of Credit Agricole SA. ``In times of relatively high confidence in the markets, the franc will stay under pressure.''

Against the euro, the Swiss currency fell to 1.6595 by 5:41 p.m. in Zurich, the lowest since Nov. 8, from 1.6535 on Dec. 7. It was little changed against the dollar, at 1.1276. The franc may trade between 1.63 and 1.65 per euro for the rest of 2007, Gullberg said.

European stocks advanced, with the Dow Jones Stoxx 600 Index gaining 0.6 percent and the MSCI World Index adding 0.7 percent. The benchmark Swiss Market Index gained 1 percent.

European Union Monetary Affairs Commissioner Joaquin Almunia said wage demands sparked by rising energy costs may increase the risk of high inflation at a time of little or no economic growth.

`Spiral'

Second-round effects, such as higher wage increases to compensate for the rising price of oil, ``could set off an inflationary spiral,'' Almunia said in a speech in Madrid today. With that ``we could enter into a period of stagflation.''

ECB Governing Council member Erkki Liikanen also said he sees increasing ``upside'' risks to inflation.

FOREX EXPERT ADVISOR

U.K. Pound Rises After Report Shows Rising Factory Prices

2007-12-10T21:16:00.000-08:00

Dec. 10 (Bloomberg) -- The pound advanced against the dollar and the euro after a report showed U.K. factories raised prices at the fastest annual pace since 1991 in November, adding to inflation pressures.

The U.K. currency was also buoyed versus the dollar on speculation the Federal Reserve will reduce its benchmark interest rate a quarter-percentage point tomorrow. Manufacturing- output prices rose 4.5 percent from a year ago, after a 3.8 percent gain in October, the Office for National Statistics in London said.

``Sterling has gained some attraction today as U.K. economic releases have come in on the strong side,'' said Ian Stannard, senior currency strategist at BNP Paribas SA in London.

The pound rose 0.8 percent to $2.0452 by 5:08 p.m. in London, from $2.0304 on Dec. 7. Against the euro, it climbed 0.4 percent to 71.93 pence, from 72.21 pence.

Bank of England Policy makers cut the benchmark interest rate for the first time in two years on Dec. 6 to curb economic damage from higher credit costs. The central bank said then ``upside risks'' to prices remain as companies absorb higher energy and food costs.

A separate report today showed annual house-price gains accelerated in October.

House Prices

Home values climbed 11.3 percent from a year earlier, compared with 10.8 percent in September, the Department for Communities and Local Government said. Average prices were little changed on the month, rising to 220,195 pounds ($449,000) from 220,111 pounds in September.

Forex expert

FOMC Meeting Set For Tuesday - Economic Preview

2007-12-10T21:13:00.000-08:00

Monday, December 10, 2007 4:41:45 PM - The stock market rallied Monday, with the Dow closing up over 100 points in anticipation for Tuesday's FOMC meeting. The economic event of the week will take place at 2:15 pm ET tomorrow, when the Federal Reserve will announce their last interest rate decision of 2007.

Tuesday morning, data on wholesale inventories will be made public in October. Analysts expect inventories to tick 0.5 percent, less than the 0.8 percent increase in September.

At 2:15 pm ET, the FOMC will announce their decision regarding a potential rate cut. The markets have fully priced in a rate cut of at least 25 basis points, however mostly solid economic data outside of the housing markets have investors uncertain if the cut will be 25 or 50 basis
read more:FOMC Meeting Set For Tuesday - Economic Preview

Forex expert advisor

Swiss Franc, Yen Options Demand Falls as Risk Aversion Declines

2007-12-10T21:10:00.000-08:00

Dec. 11 (Bloomberg) -- Demand is declining for options that protect against gains in the Swiss franc and Japanese yen, suggesting investors will become more comfortable holding higher yielding assets financed with loans from Switzerland and Japan.

The one-month U.S. dollar-Swiss franc option risk-reversal rate had 0.10 percentage points implied volatility premium in favor of franc calls yesterday, about one fifth of the 0.55 premium that held on Nov. 26. In dollar-yen options, the premium on yen calls was 2.18 percentage points, about one half the 4.5 percent premium on Nov. 26. Demand for calls had soared as the fallout from the collapse of the subprime mortgage market drove investor to exit so-called carry trades.

``There's been a reduction in risk-aversion,'' said Neil Jones, head of European hedge-fund sales in London at Mizuho Capital Markets. ``The fact that global stocks have performed well and that volatility has declined has been a positive.''

Switzerland's 2.75 percent interest rate is the lowest among industrialized economies after Japan's 0.5 percent, making the currencies popular funding sources in nations with higher returns. Swings in foreign-exchange rates erode profits from interest-rate differentials.

The franc is the third-worst performer of the 16 major currencies tracked by Bloomberg in the past week, trailing behind losses posted in the Swedish Krona and the Japanese yen.

The franc was little changed at 1.1280 per dollar yesterday, and is down 2.3 percent since Nov. 23. The dollar bought 111.68 yen yesterday, a decline of 3.8 percent since it touched a more than two-year high of 107.23 on Nov. 26.

Volatility Declines

Stock-market volatility as measured by the Chicago Board Options Exchange SPX Volatility Index, or VIX, declined to 20.74 yesterday, from 31.09 on Nov. 12, its highest closing price since March 2003. Volatility has dropped as stocks rallied, with the Dow Jones Industrial Average gaining 5.7 percent since Nov. 12.

Expert Advisor

Yen Falls to One-Month Low Against Dollar as Fed May Cut Rates

2007-12-10T21:05:00.000-08:00

Dec. 11 (Bloomberg) -- The yen declined to a one-month low versus the dollar and the euro on speculation the Federal Reserve will cut interest rates today, encouraging investors to buy higher-yielding assets funded by loans in Japan.

Japan's currency fell the most against the Australian and New Zealand dollars, favorites for so-called carry trades, as global equities advanced and investors bet a rate reduction will support the global economy. Futures contracts show investors see a 100 percent likelihood the Fed will lower its benchmark overnight rate by at least a quarter-percentage point to 4.25 percent to keep a housing slump from sparking a recession.

``Stock markets have shown signs of stabilizing, and that will make investors more comfortable to sell the yen,'' said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan's second- largest publicly traded lender.

The yen declined to 111.94 per dollar, the lowest since Nov. 9, before trading at 111.76 at 12:35 p.m. in Tokyo from 111.71 late in New York yesterday. It may fall to 112.20 today, Ito said. Japan's currency also slipped to 164.66 per euro, the weakest since Nov. 9, before trading at 164.54 from 164.33.

Market reviews FOREX from 5.12.2007

2007-12-10T00:16:00.000-08:00

As well as it was supposed, on Tuesday the decision of Bank Canada under the rate became a source of movements. The Central Bank has decided not to shelve business and to go on softening immediately. Reducing the rate on 25 base items, he has noticed, that at following meeting will consider balance of risks to be advanced with the further direction of a monetary policy. Thus, it has called among investors of excitement concerning meetings of other Central Banks and as from the ECB expect nothing, the basic victim of the folded situation has fallen GBP in connection with magnifying of chances of a similar reduction discount rate Bank of England. All event, by inertia has called Yen strengthening, and on a chain, was passed (the truth already in smaller plotting scales) to vapours of euro/dollar and pound/dollar. Realisation of that in a trouble has got not only the Federal reserve, but also all other Central Banks, helps to strengthen items of dollar which so has too suffered much. Nevertheless, given rally USD should be perceived without delay as corrective action, than change of moods. There are other banks which are completely not ready to fly lower. The bank of Australia, last month dared to go on boosting, has kept this time the rate on a former place. However there is a probability of the next boosting next year. Similar expectations are present and concerning the Reserve bank of New Zealand, and concerning the European Central bank. Being reset by today, we will notice, that the basic attention will be chained to busy lamps. In spite of the fact that streams before the publication of the key report on employment in the USA remain marvellously small, nevertheless it is not necessary to belittle significance of data. Many expect the next reduction of the rate of a FRS already next week, and chances 50-puktovogo softening have grown to 50 %. Thus, indexes of a market position of work can play the basic role in definition of a monetary policy of a Federal reserve. Today there is an occupation level in private sector ADP to which last time show more trust. Furthermore, it is not necessary to forget about a component of employment ISM in a services sector (the similar index in processing sector has left under a marker pip 50). If data appear rather weak, it is possible to expect dollar sales.
read more:Market reviews FOREX from 5.12.2007

Forex Expert Advisor

Recent Hike In Chinese Reserve Ratio Signals Stringent Policy Decisions Ahead

2007-12-10T00:11:00.000-08:00

Monday, December 10, 2007 1:16:12 AM - Stringent preemptive measures were very much in the cards, after the Chinese top policy makers said last week that the government was shifting its monetary policy stance from `prudent` to `tight” to cool an overheating Chinese economy.
Most analysts therefore, believe that the weekend decision by the Peoples Bank of China or PBOC to raise the Reserve requirement ratio or RRR to 14.5% is just the beginning of more such announcements to follow.
The DBS research group said Monday that given the strong economic data, it is likely that POBC would raise the one-year lending rate by 27bps to 7.56% and lift the one-year deposit rate by 36bps to 4.23% before the year-end.
`We continue to expect two hikes of the same magnitude in the first quarter and the second quarter next year,` the Research group said. According to the Group, the persistent cyclical strength of China should warrant a stronger exchange rate and tighter monetary policy.
Instead of the usual 50bps jump on the reserve requirement ratio seen during the course of 2007, the PBOC raised it by 100bps on last Saturday. The move reflects the central bank`s determination to contain credit growth and fight heightening inflationary risks, which persists despite raising RRR by 50bps each nine times earlier this year. The central bank also raised interest rates five times during the same period.
According to DBS research group, the acceleration of monetary tightening suggests that the authorities are not counting on a slower US economy to cool the Chinese economy significantly.
read more:Recent Hike In Chinese Reserve Ratio Signals Stringent Policy Decisions Ahead

Profitable Expert Advisor

Dollar Remains Mixed Ahead Of FOMC

2007-12-10T00:05:00.000-08:00

Monday, December 10, 2007 1:09:40 AM - Early Monday in Asia, the US dollar showed mixed performance against the major currencies. The greenback extended its last week`s gains against the yen but it showed weakness against the British pound. Against the euro and the Swiss franc, the US currency has gained slightly during the session.

In the past week, which was busy with monetary policy announcements by major central banks, the US dollar showed mixed performance against its key counterparts. The greenback closed down against the euro and the franc in the week ended December 7, reversing the previous week`s result. Against the yen and the sterling, the buck extended the gains posted the previous week and fetched new multi-week highs. The US currency also remained higher against its Canadian counterpart and leveled a 2Ѕ -month high during the past week`s deals. While the greenback closed the third straight week down against the New Zealand dollar, it showed strength against the Australian currency.

The Australian and the New Zealand central banks held the rates unchanged at 6.75% and 8.25% respectively, but their counterparts in Canada and the UK unexpectedly cut benchmark interest rate by 25 basis points each, citing downside risks to growth. The BoC set the key interest rate at 4.25% and the BoE lowered it to 5.5%. However, as expected, the European central bank did not alter its monetary policy this time, leaving the cash target at 4%.

The Biggest losers of the week were the pound and the Aussie, the former tracking the interest rate cut, and the latter on the downside risks to growth signaled in the statement released by the Reserve Bank of Australia along with its monetary policy announcement. Some of the market players expect the BoE to come with more cuts in the near future as the sub prime issue stemmed from the US housing market has caused severe damage to the British economy. The statement issued by the RBA, the first such a note from the central bank, highlighted the concern about the weakness of the global economy, and it prompted investors to pare hopes of a rate hike early next year.
read more :Dollar Remains Mixed Ahead Of FOMC

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Dollar Climbed Slightly On Job Report

2007-12-10T00:02:00.000-08:00

Dollar Climbed Slightly On Job Report
The dollar edged up slightly after a report from the Labor Department showed there were more jobs added than expected, easing worries that the impact of subprime mortgage crunch and slowing housing had spread into the broad economy. The dollar rose to 111.77 against the yen, while the euro remained firm above 1.46 versus the dollar.
Non-farm payrolls rose 94k in November, above the estimate of 75k. October¡¯s figure was revised from 166k to 170k, however September¡¯s figure was downwardly revised from 98k to 44k. The unemployment rate remains at 4.7%, and average earnings rose from 0.2% to 0.5%. The better-than-expected job report reinforced the expectations that the Fed may cut interest rates by a quarter-percentage point rather than a half-percentage point at its monetary policy meeting next Wednesday.
read more:Dollar Climbed Slightly On Job Report

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Carry Trade Returned, Focus on 5 Central Banks and NFP

2007-12-07T23:18:00.000-08:00

Yen and Swissy were the major mover last week as carry trade returns, boosted by strength in the global market that's triggered by a serious events including Bernanke's signal of rate cut in Dec. Euro was weighed down by expectation that ECB will be on hold for a while even though inflation accelerated sharply. Sterling was mildly weaker against dollar on rate cut expectation but strengthened against other majors on carry trade. Dollar was generally firm but dropped slightly against Aussie and Kiwi. After all, a Dec rate cut from Fed is like a done deal and further easing is expected down the road in early 08. But before that, market will turn focus to five central banks meetings this week (ECB, BoE, BoC, RBA, RBNZ) and a string of important economic data from US first.

read more:Carry Trade Returned, Focus on 5 Central Banks and NFP

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NFP - Which Way Will The Greenback Sway?

2007-12-07T23:10:00.001-08:00

The JPY continued to weaken against the USD after leading indicator index continues to signal economic contraction. Japan's leading economic indicator index rose to 20, but has been below 50 for the third straight month. A reading above 50 indicates economic expansion in months ahead. Economists are predicting the JPY to remain range bound at the 110 level till the year end.

Today no news is expected from Japan, so the JPY should continue its downward trend, particularly against the high yielders, as long as carry trades are back in action. However it is also important for traders to follow the correlation between U.S equities and carry trades as this could give a strong indication as to the future direction of the JPY. Also it is important to note that the recent currency volatility could once again create risk averse sentiment and discourage carry trades, thereby rallying the JPY.

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Yen Benefited From Credit Stress

2007-12-06T08:40:00.000-08:00

The market is still cautious about the credit tightening issue, which put the dollar under pressure and encourages carry trades.

One of the biggest credit rating agency, Moody’s Investors Service, said last Friday it is preparing to lower credit ratings on 105 billion of debt since the subprime mortgage financial crisis.

read more:Yen Benefited From Credit Stress

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USD Softer, Awaits Data

2007-12-06T08:38:00.000-08:00

The currency market has much to digest this week as traders look ahead to monetary policy decisions from several central banks, including the BoC, RBA, BoE and ECB. The greenback relinquished some of last week’s gains in early Monday trading, slipping against the sterling and yen. The major currency pairs will likely be dictated by a combination of sentiment over global interest rate differentials as well as any new revelations from the subprime debacle and credit crisis.
read more:USD Softer, Awaits Data

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Robust ADP Boosted Dollar, Eyes on BOE ECB

2007-12-06T08:34:00.000-08:00

The dollar extended gains following a surprisingly strong ADP employment report, reducing concern that subprime crunch will impede economic growth. The euro tested the support at 1.46 versus the dollar, and the sterling fell sharply from 2.06 to 2.0250 against the dollar. The yen weakened to near 111 versus the dollar.

As shown in ADP report, 189k jobs were added in private sector in November, far above the estimate of 50k. Besides, ADP revised last month’s figure from 106k to 119k. The greenback was boosted by this robust job report. The market will focus on November employment report to be released by the Labor Department this Friday.
read more:Robust ADP Boosted Dollar, Eyes on BOE ECB

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Yen Benefited From Credit Stress

2007-12-04T03:41:00.000-08:00

USD Softer, Awaits Data

2007-12-04T03:38:00.000-08:00

GBP Pounded by BoE

2007-12-02T04:16:00.000-08:00

The greenback was mixed in the Wednesday session, advancing versus the British pound and the yen while struggling against the euro and Aussie. With the exception of the sterling, the higher yielding currencies rallied against the yen as speculators continued to jump back into the carry trades following the sharp unwinding of recent sessions.

Economic data from the US were largely softer than expectations. The October PPI increased by 0.1% on a monthly basis, down from a 1.1% increase previously while the annualized PPI jumped to 6.1% from 4.4% previously. Core PPI was flat on a monthly basis versus 0.1% previously, but the yearly core PPI jumped to 2.5%, from 2.0%. Meanwhile, retail sales for October were weaker with the headline report inline with estimates at 0.2%, but down from the previous month at 0.6%. The excluding-autos retail sales figure missed expectations, down to 0.2% versus 0.4% a month earlier.
read more:GBP Pounded by BoE

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Data Caps USD Gains

2007-12-02T04:13:00.000-08:00

The greenback posted its largest weekly gain on a trade-weighted basis in a month despite relinquishing its grip in Friday trading. Nevertheless, lingering fears over credit conditions and the credibility of banks’ balance sheets continue to plague the currency. Accordingly, the currency market will continue to be closely correlated with equity market moves – particularly the trajectory of the carry trade pairs, amid times of heightened volatility.

Economic data released earlier in the session derailed the dollar’s rebound against the majors, pushing it toward session lows versus the euro and sterling. Industrial production for October fell by 0.5%, missing expectations for a 0.1% increase and reversing the previous month’s 0.2% increase. The decline in industrial production also marked its largest drop in over two-years, reinforcing fears that the housing slowdown continues to weigh on manufacturing. Capacity utilization was largely inline with expectations at 82.0%, down marginally from the previous month at 82.1%. The September TICs report revealed a net outflow of $14.7 billion versus a downward revised outflow of $150.7 bil
read more:Data Caps USD Gains

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Yen Fall as Global Stocks Surge

2007-12-02T04:09:00.000-08:00

The yen fell versus high-yielding currencies as global stocks rebounded this week. Carry trades came back to the market as investors regained their risk appetite.

The greenback gained as US corporations squared positions to realize profits on financial statements by the end of the month. The euro dipped to lower 1.46 versus the dollar, and the sterling fell to below 2.06.
read more:Yen Fall as Global Stocks Surge

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Forex summary

2007-11-29T00:46:00.001-08:00

Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI

2007-11-29T00:35:00.000-08:00

Dow Jones - "While strong exports and easing import competition will cushion the blow to the durable goods industries, domestic demand for capital equipment is declining. New orders for non-defense capital goods excluding aircraft in the first ten months of this year are down 1.7% from the same period one year ago. The low investment activity indicates businesses remain cautious regarding the outlook for next year."

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FOREX-Dollar hits 1-week highs, firmer tone seen fleeting

2007-11-28T04:28:00.000-08:00

(Changes byline, updates prices, quotes)

By Meg Clothier

LONDON, Nov 28 (Reuters) - The dollar rose to one-week highs versus the euro, the yen and the Swiss franc on Wednesday, as investors took profits on the U.S. currency's recent slump to multi-year lows and thin volumes accentuated market moves. The more positive tone on the dollar was kick-started on Tuesday after news that Abu Dhabi Investment Authority was buying an equity stake in Citigroup Inc (C.N: Quote, Profile, Research), giving confidence to investors rattled by fears of more credit market troubles as the year-end approaches.

Consequent gains in U.S. stock markets overnight [.N] attracted investors into dollar-denominated assets.

However, analysts said dollar strength was likely to be short-lived given the weak tone in U.S. economic data, prospects for further Federal Reserve interest rate cuts and the trickle of bad news from financial companies hit by the credit crunch.

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Blame for strong euro vs yuan lies with U.S.-China

2007-11-28T04:24:00.000-08:00

BEIJING, Nov 28 (Reuters) - The euro's rise against the yuan is largely a reflection of a sharp drop in the dollar, and the European Union should look to Washington to resolve the problem, Chinese Premier Wen Jiabao said on Wednesday.

He told a news conference after a China-EU summit that Beijing would continue to reform its currency regime along market lines with the aim of eventually making the yuan convertible for purely financial transactions.

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Dollar: 1.50 in the Crosshairs?

2007-11-27T02:03:00.000-08:00

There is no doubt that the EUR/USD pair wants to target 1.5000 again and may actually reach that level this week, but it will have to do so with more substantial reasons than mere stop running. Trading in coming days could be well be driven by the housing data upon which the whole dollar arguments rests at the moment. If housing continues to plummet to subterranean depths, putting relentless pressure on the Fed to cut in December, currency traders may well feel emboldened to run the 1.500 barrier once again . However, if housing shows some signs of stabilization, the rest of the economic docket looks relatively dollar friendly.

read more:Dollar: 1.50 in the Crosshairs?

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Yen Gained On Risk Aversion

2007-11-27T00:49:00.000-08:00

The dollar fell below 109 against the yen for the first time since June 2005. The sterling dipped to as low as 222.48 from 227.50 versus the yen, while the euro fell to 160.10 against the yen.

read more Yen Gained On Risk Aversion

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The dollar is testing support

2007-11-27T00:45:00.000-08:00

Surprisely, housing starts increased 3% to an annualize rate of 1.229 million units (1.17 million expected) in October. It has been the first increase of the past four months and was equally distributed among all the U.S. regions with the Midwest showing a move of 21.1%. Multiple houses lead the way by moving up more than 40%, while single homes declined 7.3%. It is difficult to see a bottom, as permits declined 6.6% month over month (down 24.5% year over year) and inventories stays very high.

read more: The dollar is testing support

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Fed to Hold Rates?

2007-11-25T16:05:00.000-08:00

In a recent speech, a prominent Federal Reserve Board governor strongly hinted that the Fed would maintain US interest rates at current levels at the Fed's next meeting. The Fed is caught in the delicate position of trying to balance economic growth with the specter of inflation. While technically the Fed is always trying to meditate between these two outcomes, its current position is especially tenuous since the US economy is trending downward while inflation trends upward. Despite the emphatic claims to the contrary, futures markets are still pricing in a rate cut, setting the stage for a showdown with the Fed. As usual, the Dollar's fate hangs in the balance. The Financial Times reports....

read more: Fed to Hold Rates?

Can China Dump the Dollar?

2007-11-25T15:33:00.000-08:00

I recently read an interview in the Washington Post with Brad W. Setser, the Council on Foreign Relation’s currency expert. One of answers he gave was pretty revealing in terms of what China can and cannot do. First, here is a little background he gives on why China and other export-driven emerging economies do not want currency appreciation against the dollar....

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Sterling touched a 4-1/2 year low against the euro

2007-11-25T15:24:00.001-08:00

Sterling touched a 4-1/2 year low against the euro and fell versus the dollar on Friday as fears of slowing economic growth and expectations of interest rate cuts continued to weigh on sentiment.

The pound has been under pressure versus the euro since the Bank of England last week signalled that interest rates are set to fall, hitting sterling's yield appeal.

Weaker than expected GDP data for the third quarter [ID:nONS003203] gave another reason for investors to sell the pound.

"GDP data was weaker than expected and investors are more worried about the outlook for the UK economy increasing expectations that the Bank of England may cut rates as soon as next month," said Johan Javeus, FX strategist at SEB Merchant Banking in Stockholm.

read more Sterling hits 4-1/2 yr low vs euro

2007-11-25T15:24:00.000-08:00

The dollar teetered close to its all-time lows against the euro on Thursday

2007-11-25T15:16:00.000-08:00

LONDON (Reuters) - The dollar teetered close to its all-time lows against the euro on Thursday as the market waited to see whether the European Central Bank would voice concern about the sharp rally in the single currency.

The ECB is widely expected to announce no change in its 4.0 percent interest rate later on Thursday, so all eyes will be on what President Jean-Claude Trichet says about the conflicting challenges of euro strength and a jump in inflation.

"Although we remain euro/dollar bullish longer term, the risk is a pull-back today as the ECB suggests the exchange rate is back on the policy radar," RBC Capital Markets said in a client note.

Meanwhile investors remained perturbed by expectations that the Federal Reserve could cut rates again next month, further reducing the dollar's yield appeal, with stock futures already pointing to a weak start on Wall Street.

"Euro/dollar is not being driven by more fundamental factors, but by worries about whatever negative news emanates from the U.S., whether it's about industrials or the banking sector," said Michael Hart, currency strategist at Citigroup.

read more Dollar hovers above lows