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

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

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

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.''

read more:Aussie, Kiwi, Real Rally as Yield Lures Putnam, Daiwa

Weak data force bank to take bold approach

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

Euro/Usd: a double top forming?

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?

Greenback Woes Linger

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

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

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

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'

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View of the day: Federal Reserve

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.

read more:View of the day: Federal Reserve

Central banks boost Kiwi and Aussie

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.

read more:Central banks boost Kiwi and Aussie

Forex signals

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

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

Is Bernanke the Grinch Who Stole Christmas?

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.

Read more:Is Bernanke the Grinch Who Stole Christmas?

Forex Trading

GBPUSD Bearish Below 2.0678 for the Move to 2.0000

• 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

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.

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

Forex trading

FOMC Trims 25-bp, USD, JPY Buoyed

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

Dollar Falls Against Euro, Pound, Yen

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.

Read more:Dollar Falls Against Euro, Pound, Yen

EXPERT ADVISOR

FOMC Meeting Set For Tuesday - Economic Preview

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

Market reviews FOREX from 5.12.2007

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

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