Mid-Day Report: Yen Sold off again after US Durables

Market Overview | Written by ActionForex.com | Jul 25 08 13:12 GMT |

US Jun durable goods orders came in much stronger than expected. Headline orders rose for the second consecutive months by 0.8% versus expectation of -0.3% fall. Ex-transport orders is even more impressive, rising strongly by 2.0%, largest monthly increase since last Dec, versus expectation of -0.2% fall. The Japanese yen reversed earlier gains this week and is sold off sharply across the board as investors' sentiment flipped to positive again. Technically speaking, in spite of earlier pull back, recent rise is yen crosses remains intact. Even though GBP/JPY retreated sharply before, it's still being contained by mentioned 211.53 near term support. More upside is now expected in yen cross to retreat this week's high. Dollar recovers mildly but remains bounded in range against major currencies. U of Michigan consumer sentiment final reading and new home sales will be featured next. (Quick update: Dollar rises further against yen after U of Michgan sentiments revised sharply higher to 61.2. New home sales dropped -0.6% to 530k, above exp 504k) Sterling recovers strong today after Q2 GDP came in as expected by 0.2% qoq, 1.6% yoy. Germany import price climbed 1.5% mom, 8.9% yoy in Jun. Eurozone M3 monthly supply growth slowed sharply to 9.5% yoy, below expectation of 10.3%. Japan national CPI beat expectation and climbed 2.0% yoy in Jun. Corporate Service Price Index rose 1.2%, much stronger than expectation of 0.6%. GBP/JPY Mid-Day Outlook Daily Pivots: (S1) 212.05; (P) 213.93; (R1) 215.10; More GBP/JPY's retreat from 215.87, though steep, was contained by mentioned 211.53 support as expected and rebounds strongly in early US session. Break of 213.46 minor support indicates that fall from 215.87 has completed and flip intraday back to the upside. Further rise is now expected to be seen to 100% projection of 192.60 to 208.99 from 199.78 at 216.17 first. On the downside, while the consolidation from 215.87 might extend further, downside is still expected to be contained by 211.53 support and bring rally resumption. In the bigger picture, a medium term bottom is in place at 192.60. Rebound from there is confirmed to have resumed after GBP/JPY takes out 213.91 resistance. Further rally should now be seen to 61.8% retracement of 241.35 to 192.60 at 222.75. On the downside, though, break of 207.98 will now be an important alert that rebound from 192.60 has completed and put focus back to 199.78 support in such case.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:30	JPY	Japan National CPI Y/Y Jun	2.00%	1.90%	1.50%
23:30	JPY	Japan Tokyo CPI Y/Y Jul	1.60%	1.60%	1.30%
23:50	JPY	Japan CSPI Jun	1.20%	0.60%	0.50%	0.70%
08:00	EUR	Eurozone M3 Y/Y Jun	9.50%	10.30%	10.50%	10.00%
08:00	EUR	Eurozone M3 3mth Jun	9.90%	10.40%	10.40%
08:30	GBP	U.K. GDP Q/Q Q2	0.20%	0.20%	0.30%
08:30	GBP	U.K. GDP Y/Y Q2	1.60%	1.60%	2.30%
12:30	USD	U.S. Durable goods Jun	0.80%	0.20%	0.00%	0.10%
12:30	USD	ex. Transport Jun	2.00%	-0.20%	-0.80%	-0.50%
13:55	USD	U.S. U. Michigan survey Final Jul	61.2	56.4	56.4
14:00	USD	U.S. New home sales Jun	530k	503K	512K	533k
14:00	USD	U.S. New home sales M/M Jun	-0.6%	-1.80%	-2.00%	-1.7%

Read more...

US Confidence And Housing Numbers Surprisingly Strong

Daily Forex Fundamentals | Written by DailyFX | Jul 25 08 14:39 GMT |

University of Michigan (JUL F) Actual: 61.2 Expected: 56.4 Previous: 56.6 US New Home Sales (JUN) (Sales) (MoM) Actual: 530K -0.6% Expected: 503K -1.8% Previous: 533K (R+) -1.7% (R+) With fears that the US recession is a near certainty for the second half of the year, today's data has supports two of the economy's most important and hardest hit sectors - the consumer and housing sectors. Little was expected from the University of Michigan's sentiment report as it was a revision for July's preliminary reading. However, the drop in gas and food prices as well as the stabalization in equities and jobless claims clearly had an impact in leading the indicator to a sharp upside change to 61.2 from the 56.6 reading initially reported. This was a significant reversal from an intially reported 28-year low and three-month high in its own right; but the true improvement comes from the details. The economic outlook component of the indicator hit a five momth high while the one-year outlook for inflation pulled back from the initially reported recent record 5.3 percent forecast was instead left at 5.1 percent to match June. From the severely depressed housing market, the new home sales report outperformed expectations of a steady decent into the residential market's worst recession in decades. However, the numbers were better than what was initially suggested with the forecasts. While purchases of previously unoccupied homes slipped 0.6 percent, the contract ion was far less than expected and was further produced by a strong, positive revision to the previous month. Overall sales through June ran at a 530,000 annualized pace - much better than the 503,000 expected and the 512,000 of the intial reading from May. Further boosting confidence was the biggest drop in inventories in nearly 40 years thanks to inventives and steadily reduced prices. In fact, the median home price actually fell 2.0 percent on an annual pace to $230,900. On the other hand, optimism from this data should be restrained as sales have contracted 10 of the past 12 months. What's more, the new home sales report - while considered a leading indicator - is not a good barometer for the overall housing market as it accounts for only 15 percent of the overall market and largely reflects the influences of short-term factors like discounts and incentives. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

Read more...

Better than Expected US Data Boost the dollar

Daily Forex Fundamentals | Written by Crown Forex | Jul 25 08 14:33 GMT |

The US session came to support the dollar as the economic data beat expectation with a surge in durables, better confidence and finally less than expected fall in new home sales all helped the dollar and marked the rise. The euro is now flat trading back near is opening levels, as after it neared the target we set in the previous report at 38.2% Fibonacci level it couldn't though break above setting the high short slightly at 1.5752, reversing from there with the dollar strength to 50.0% levels again as it's currently now trading around 1.5670s, while now we need to pay attention to the weekly close for closing below that level might provide stronger bearish signals for the pair in the coming week. Sterling peaked today at 1.9977 retreating from there in the US session though still now trading above 1.99 level and so for as far as sterling manages to withhold its gains to above 1.9850 it will be strong support for the pounds upside wave, while though as long as trading remains above 1.9820s we will still favor the upside for the pound. The USDJPY pair totally reversed its downside wave and breached into 107 levels and currently trading at good resistance levels where it set the high of 107.89 which open the door directly to the coming strong level at 108.20s which I say unlikely to see a successful breach and a close above it. Crown Forex disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

Read more...

U.S. Durable Goods Orders Beat Market Expectations in June

Daily Forex Fundamentals | Written by TD Bank Financial Group | Jul 25 08 14:06 GMT |

U.S. durable goods orders rose by a fairly strong 0.8% M/M, with orders excluding transportation advancing by a more substantial 2.0% M/M. Core capital goods orders rose by 1.4% M/M, with the 3-month annualized pace rising to a whopping 10.4% clip. The details of this report were fairly strong, as most industries posted gains on the month. U.S. durable goods orders rose by a stronger than expected 0.8% M/M in June, beating the market consensus for a 0.3% M/M drop. The increase follows the upwardly revised 0.1% M/M advance in May (previously reported as a flat print). On a year ago basis, however, durable goods order are still down 1.3%. Excluding transportation, orders are up by a much stronger 2.0% M/M, which is the biggest monthly increase in this indicator since December last year. The more important core capital goods orders were also strong, posting a robust 1.4% M/M gain, following the 0.1% M/M drop in May. The 3-month annualized trend in core capital goods orders rose to a whopping 10.4% clip from 0.4% in May. The details of the report were quite strong, with only one industry posting a drop in the value of new orders during the month. In particular, there were strong gains in orders for electrical equipment (up 5.0% M/M), machinery (up 2.3% M/M), primary metals (up 5.1% M/M) and fabricated metals (up 1.7% M/M). However, orders for computers and electronics dropped by 0.5% M/M. Shipments also advanced during the month, rising by 0.5% M/M, following the 1.2% M/M drop in May. However, despite the increase in shipments, the inventory to shipments ratio remained unchanged at 1.57 in June. There is no doubt that this is a very strong report, as it suggests that the U.S. manufacturing sector continues to hang in there despite the considerable headwind of a slowing domestic economy that it continues to faces. However, we believe that this momentum is unlikely to be sustained in the coming months as the weight of sagging domestic demand outweighs the crucial support provided by strong export demand. TD Bank Financial Group The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.

Read more...

Durable Goods Orders Up, Signs of Strength in Q2 Business Spending

Daily Forex Fundamentals | Written by Wachovia Corporation | Jul 25 08 13:31 GMT |

Orders for durable goods were up 0.8 percent in June, despite expectations of a slowdown. Stripping out the volatile transportation component, orders were up 2.0 percent - the strongest monthly gain of the year. Non-defense orders ex-aircraft were up 1.4 percent, a sign business spending may not be as weak as many expected in the second quarter. Orders Up, Ex-Transport Orders Looking Less Weak Businesses scaled back in the second quarter but maybe not as much as first reported. Last month's flat number for durable goods was revised to slightly positive, while this month's solid gain suggest signs of strength. Ex transportation, orders were up 2.0 percent, the three month moving average shows solid positive momentum. Ex Aircraft Orders Strengthening Non-defense capital goods orders ex-aircraft were up 1.4 percent in June. Business spending may be more additive to GDP than initially expected. While obviously a volatile series, electrical equipment orders show a sector that is doing well right now. Spending by utilities combined with strong global demand fuel this growth. Wachovia Corporation http://www.wachovia.com Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.

Read more...

DailyFX Analysts Bullish Australian Dollars

Daily Forex Technicals | Written by DailyFX | Jul 25 08 14:37 GMT |

Top Pick: Australian Dollars There have been big moves in the Australian and New Zealand dollars. DailyFX Analysts are bullish Aussies and bearish Kiwis. Read on to find out why: Chief Currency Analyst - Kathy Lien My picks: Long AUD/NZD Expertise: Combining Fundamentals with Technicals Average Time Frame of Trades: 1-3 Days As per my Daily Fundamentals from yesterday, the currency that I am most bearish is the New Zealand dollar. One of the currencies that it has done the worst against is its counterpart, the Australian dollar. Fundamentally, the trade balance report is due for release on Sunday and I expect the number to continue to be kiwi bearish. Technically, AUD/NZD is still trading above its most recent breakzone at 1.2800 and its uptrend remains intact. Senior Currency Strategist - Boris Schlossberg My picks: Long AUDNZD Expertise: Fundamental Average Time Frame of Trades:6-24 hours Kiwi trade balance comes our sunday night and i am bearish the number. With RBNZ lowering rates the pressure on the kiwi continues. So my trade of the day is Long AUDNZD with 1.2915 stop Technical Currency Analyst - Jaime Saettle My picks: Short NZDUSD (from last week), stop .7761, target below .5927 Expertise: Technical Average Time Frame of Trades: 1 month (this one should be longer) Last week: "Expectations are for price to plunge later this year and eventually test the .5927. This NZDUSD short is setting up as one of the best opportunities in recent years. Longer term traders can short now against .7921" This week: Kiwi has tanked as expected. Risk can be moved to .7761. The best thing to do here is sit tight and enjoy the ride. If you've been following my longer term counts, you know that I expect wave C of a long term expanded flat to end below .5927 in the next several months. As the decline from .7761 matures, I'll be better able to pinpoint areas to add to (or initiate if late to the game) short positions. Currency Analyst - David Rodriguez My picks: AUD/JPY Long Expertise: System Trading Average Time Frame of Trades: 2-10 weeks Last week I wrote "If you're willing to allow for sizeable pullbacks, I would look to go long the AUDJPY at or near current market levels, placing max risk below a recent double-bottom at 101.50, with profit targets set at previous highs of 107.90." That trade is about 50 points in the hole right now, but my AUDJPY-bullish bias remains. The Aussie has been able to withstand a bearish onslaught from a clear sell-off in commodities, and continued demand for its high yields will (in my opinion) continue to drive it higher against the Japanese Yen. As such, I'd like to go long (or stay long) at current market levels, and place max risk below previous intraday lows of 102.13. Any standing positions from last week should have their stops adjusted accordingly. Currency Analyst - John Kicklighter My picks: Long AUDUSD Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week The high yielders seem to be in flux. A surprise 25-basis point rate cut from the RBNZ has shaken carry trade convictions for the kiwi dollar and its aussie counterpart seems to have been caught in the wave. However, looking at interest rate expectations, the market is still pricing in a hawkish bias from the the RBA through the coming year (though it is modest) while the New Zeland central bank is still looking at a cumulative 135 basis points of easing through the next 12 months. This would suggest a clear fundamental trade for long AUDNZD (which is technically strong as well); however the mature trend isn't where I'm looking today. Instead, AUDUSD is showing an attractive setup now after a four-session selloff to a rising trendline that is nearly a year in the making. Support is noted around 1.9525/35 where the aforementioned formation meets another short-term trendline and a confluence of fibs. In trading this, an entry as near to 0.9525 as possible would be ideal. For additional support though, there is a notable pivot level that has acted as a floor and ceiling to price action around 1.95. I will place my stops below this level (though not so far away to make the risk too great as this has been a momentous reversal and has a chance of turning into a major trend change). My position will comprise two lots, the first target will equal the risk taking on that lot; and the second will be more aggressive for around 150 points - though depending on how price action unfolds, I may allow the second lot to run as a confirmation of the dominate trend could push spot to new multi-decade highs. This optimal scenario aside, the fundamentals for a sustained rally may be in jeopardy. Already at such great heights, interest rate change expectations are certainly turning in favor of an aggressive Fed; there is a lot of premium built into a US recession and ongoing 18th year of Aussie growth; and event risk is growing. To avoild unscalable volatility, I'll be move up my stops very tight before Thursday's US 2Q GDP numbers and Friday's NFPs. Currency Analyst - Ilya Spivak My picks: Short NZDUSD on close below 0.7424 Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months NZDUSD has been trading lower in a downward sloping channel since mid-March. The most recent decline began as the pair showed a Hanging Man candlestick at channel resistance near 0.77. The bearish move accelerated sharply lower when the RBNZ surprised the markets by cutting interest rates for the first time since 2003. Price action has now found support at 0.7424, the 50% Fibonacci retracement of the 08/17/07-02/27/08 rally. A break here opens the door for significantly more downside mometum to the 61.8% Fib at 0.7238. Strategy: Short NZDUSD (or add to existing short position) on a daily close below 0.7424, targeting 0.7238. Currency Analyst - John Rivera My picks: Short NZD/USD Expertise: Fundamentals Combined with Technicals Average Time Frame of Trades: 5-10 Days I am bearish the Kiwi as the country heads steadfast into a recession, expectations are that the RBNZ will have to cut rates several times over the next years to provide a soft landing for the economy. Considering that rates were at a record high the chances are strong that they will meet expectations. I expect the pair to fall until it meets support at 0.7241 the 61.8% Fibo of 0.6636-0.8205. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

Read more...

The Buck Does NOT Stop Here

Daily Forex Technicals | Written by DailyFX | Jul 25 08 13:47 GMT |

The dollar rally to this point has been impressive. A continuation of the rally is expected. EUR/USD We turned bearish at 1.57 yesterday, mentioning that the drop from 1.5944 was awfully deep for a correction. Although 1.5611 has been the bullish ‘line in the sand’, the alternate count treated the advance from 1.5283 as a B wave flat and the drop from 1.6039 is wave C of the flat and will not end until below 1.5283. Additionally, if we are correct in our flipping to bearish, then the strongest part of the decline should be upon us and price should remain below 1.58. For the first time in a long time, bulls are on the defensive. STRATEGY: Bearish, against 1.5797, target below 1.5283 USD/JPY Preferred count: The advance from 95.72 is wave W in a W-X-Y complex correction and the drop from 108.57-103.76 is wave X. Wave Y is underway towards 116 (equality with wave W). Alternate: price action from 108.57 is forming a triangle in wave X. The best strategy is to play a bullish break. GBP/USD The GBPUSD tested and held the trendline drawn off of the 6/13, 7/7, and 7/8 lows. Still, it is likely that wave D of the triangle is underway towards 1.9550/1.96. This is our stance as long as price is below 2.0075. USD/CHF A major reason that we have switched to a generally USD bullish bias is the USDCHF. The pair has broken above a channel that has held since early May. Under this count, the 3 wave rally from .9647 was wave W in a complex correction. The choppy decline from above 1.06 serves as wave X and wave Y is underway now. Expect the advance to reach 1.10 (former 4th wave). USD/CAD The USDCAD continues to advance off of what we perceive to be the wave E low at .9974. Expectations are for a bullish break above 1.0378 in the next few weeks. We’ll discuss objectives when warranted. Price ideally remains above 1.0077. STRATEGY: Bullish, against .9818, target above 1.0378 AUD/USD The weekly chart of the AUDUSD puts into perspective just how significant of a top may have formed at .9849. Price spiked through the upper channel line last week and is now testing a resistance line drawn off of the August 2007, January 2008, and June 2008 lows. Expect a bearish break. NZD/USD Kiwi is a bit ahead of the AUDUSD in terms of its longer term structure. The decline is clearly more mature but still has a ways to go. The break of .7445 signals makes it likely that price will remain below .7761 going forward. Watch the longer term trendline drawn off the June 2006 and August 2007 lows. This level should provide at least interim support. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

Read more...

Morning Market Recap: Equities Open Higher; Fixed Income Selling Off

News Recap | Written by CEP News | Jul 25 08 14:07 GMT |

(CEP News) - North American fixed income markets are declining and equities are up with yields on U.S. 10-year Treasury notes up 6.9 bps to 4.07% and Canadian 10-year CGBs up 3.2 bps to 3.83%. Futures on the Dow Jones industrial average are up 64 points to 11,415. The Canadian dollar is down 0.0005 to 0.9850 USD and the euro is down 0.0004 to 1.5673 USD. U.S. two-year yields are up 6.4 bps to 2.67%, with five-year yields up 8.0 bps to 3.40%, 10-year yields up 6.9 bps to 4.07% and 30-year yields up 5.6 bps to 4.66%. Yields on two-year Canadian government bonds are flat at 3.14%, with five-year yields up 2.2 bps to 3.40%, 10-year yields up 3.2 bps to 3.83% and 30-year yields up 2.2 bps to 4.15%. The Canadian 10-year note is yielding 23.94 bps less than the U.S. 10-year note. In Germany, returns on two-year German bonds are flat at 4.43%, with five-year yields up 1.9 bps to 4.53%, 10-year yields up 2.1 bps to 4.59% and 30-year yields up 2.8 bps to 4.85%. Yields on UK two-year bonds are flat at 4.96%, with five-year yields flat at 4.94%, 10-year yields down 0.8 bps to 4.97% and 30-year yields flat at 4.61%. Toronto's S&P/TSX composite index is up 43 points to 13,249, the Dow Jones industrial average up 89 points to 11,438, the S&P 500 up 10 points to 1262 and the Nasdaq up 22 points to 2,303. European stock markets are lower, with the Eurostoxx down 1 point to 2,859, the UK FTSE 100 down 9 points to 5,354 and the German DAX down 3 points to 6,438. Toronto's S&P/TSX composite index closed up 43 points to 13,249, the Dow Jones industrial average up 89 points to 11,438, the S&P 500 up 10 points to 1262 and the Nasdaq up 22 points to 2,303. European stock markets closed in negative territory with the Eurostoxx down 1 point to 2,859, the UK FTSE 100 down 9 points to 5,354 and the German DAX down 3 points to 6,438. The Canadian dollar is down 0.0004 to 0.9850 against the U.S. dollar (1.0152 USD/CAD) and up 0.51 to 106.27 against the yen. The U.S. dollar is up 0.56 to 107.89 against the yen and the Dollar Index is down 0.098 to 72.835. The euro is down 0.0004 to 1.5673 against the U.S. dollar, up 0.0002 to 1.5912 against the Canadian dollar, down 0.0019 to 0.7873 against the pound sterling and is higher by 0.83 to 169.11 against the yen. The pound sterling is up 0.0041 to 1.9910 against the U.S. dollar and up 0.0048 to 2.0211 against the Canadian dollar. WTI crude oil is down $1.98 to $123.51. The front month gold contract at the Chicago Board of Trade is down $1.70 to $920.10 per ounce. All data taken at 10 a.m. EDT. Generated by CEP Newswires, edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News. A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.

Read more...

New-Home Sales in the U.S. Drop Less Than Forecast

By Timothy R. Homan

July 25 (Bloomberg) -- Sales of new homes in the U.S. dropped less than forecast last month as builders offered incentives to reduce a glut of unsold properties.

Purchases decreased 0.6 percent to a 530,000 pace from 533,000 in May, a reading higher than previously estimated, the Commerce Department said today in Washington. A separate report showed orders for durable goods unexpectedly rose in June.

The number of properties on the market dropped by the most in four decades, today's report showed, indicating builders are making some headway in clearing out inventories.

``We may have not touched bottom yet in the housing market, but we're clearly not in any freefall,'' Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report.

Stocks climbed and Treasuries slid after today's reports eased concern that the economic slowdown will worsen. The Standard & Poor's 500 Stock Index gained 0.8 percent to 1,261.96 at 10:10 a.m. in New York. Benchmark 10-year note yields rose to 4.06 percent from 4 percent late yesterday.

Economists forecast sales would decline to a 503,000 pace, from a previously reported 512,000 for May, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from 480,000 to 530,000.

Durable Goods

Orders for long-lasting goods climbed 0.8 percent in June, Commerce also reported today. May orders were revised to show a 0.1 percent gain, better than previously estimated. Excluding demand for transportation equipment, which tends to be volatile, orders jumped 2 percent, the most this year.

Purchases of new houses reached a low of 513,000 at an annual pace in March.

The median sales prices last month decreased 2 percent from June 2007 to $230,900. These figures can be influenced by changes in the mix of sales at the regional level. For that reason, economists prefer price measures that track the same home over time.

The supply of homes at the current sales rate fell to 10 months' worth from 10.4 months in May. There were 426,000 homes for sale at the end of June at an annual pace, the fewest since December 2004. The figure was down 5.3 percent from the prior month, the biggest decline since November 1963.

A report yesterday from the National Association of Realtors showed existing home sales fell 2.6 percent to a 4.86 million annual rate, the lowest level in a decade. The median home price dropped 6.1 percent from June of last year.

Fannie, Freddie

Concern over the ability of Fannie Mae and Freddie Mac, the largest U.S. purchasers of mortgages, to survive the meltdown in subprime lending has heightened the credit crisis and may push up mortgage rates and further curtail access to loans.

U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth.

One in every 171 households was foreclosed on, received a default notice or was warned of a pending auction. That was an increase of 121 percent from a year earlier and 14 percent from the first quarter, RealtyTrac Inc. said today in a statement.

Lawmakers in Washington, trying to alleviate the worst housing recession in 25 years, are working on passing legislation designed to stem mortgage defaults.

Today's Commerce report showed that compared with a year earlier sales of new homes were down 33 percent.

Cutting Back

Builders are scaling back on projects to get inventories more in line with demand. Housing starts have fallen 53 percent from a peak rate of 2.27 million at an annual rate in January 2006 and residential investment dropped at a 26 percent annual pace in the first quarter.

Confidence among U.S. homebuilders dropped to a record low this month, the National Association of Home Builders/Wells Fargo said July 16.

Pulte Homes Inc., the third-largest U.S. homebuilder, this week reported a second-quarter loss of $158.4 million. ``We see no immediate signs of this housing downturn relenting,'' Pulte Chief Executive Officer Richard Dugas said yesterday on a conference call with analysts.

While sales of previously owned homes account for about 85 percent of the housing market, new home sales are considered a timelier indicator because they are based on contract signings.

New-home purchases fell in two of four regions. They dropped 2 percent in the South and 0.9 percent in the West. Sales rose 5.3 percent in the Northeast and 2.5 percent in the Midwest.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net



Read more...

Paulson's Fannie-Freddie Deal Scraps Free-Market Push

By John Brinsley and Rebecca Christie

July 25 (Bloomberg) -- In October 2003, Treasury Secretary John Snow told Congress ``we need to be on guard'' against the ``perception'' that the U.S. government stood behind the stocks and bonds of Fannie Mae and Freddie Mac.

This week his successor, Henry Paulson, has seen a plan to make such a guarantee explicit to the brink of passage, getting a presidential veto threat withdrawn and reversing years of Republican-led efforts to unhook the companies' fortunes from the government's finances.

The Fannie-Freddie legislation -- it cleared the House July 23 and the Senate may vote as soon as today -- is the result of circumstances and personality. A lame-duck White House is struggling to revive the economy and prevent a further meltdown in the housing market that would demolish the centerpiece of President George W. Bush's ``ownership society.'' Meanwhile, Paulson's desire to get a deal through the Democratic-majority Congress outweighed the administration's free-market orthodoxy.

``Paulson has been able to use a lot of leverage on the White House,'' said Vince Reinhart, who used to head the Federal Reserve's monetary-affairs division and is now at the American Enterprise Institute in Washington. The former chairman of Goldman Sachs Group Inc. ``has authority associated with his previous job, and events are such that if policy makers have to do something, they ultimately do it.''

Stock Purchases

Once Bush signs the legislation into law, the Treasury will have the right to buy unlimited stock in Fannie Mae and Freddie Mac, the government-chartered corporations that account for almost half of the U.S.'s $12 trillion mortgage market. The measures give a government backstop for their $5.2 trillion of debt outstanding, allowing them to borrow at a cheaper rate than private companies.

Largely missing from the bill are provisions the Bush administration and other Republicans have pursued for years: powers comparable to those over commercial banks that would limit the mortgage giants' lines of new business and their investment portfolios.

``This should have been a perfect opportunity'' for Republicans to ``demand real accountability and reform,'' Richard Armey, the former Republican leader in the U.S. House of Representatives, wrote in an opinion piece in the Wall Street Journal today. ``Having repeatedly called for Fannie and Freddie restructuring in the past, Mr. Paulson now fights to defend them in their current form.''

Treasury spokeswoman Michele Davis didn't immediately respond to a request for comment.

Bush Concession

The final concession on this week's deal came when Paulson persuaded the president to drop a veto threat over $3.9 billion in housing grants to communities pushed by Democrats.

``Congress knew it had the Bush administration over a barrel,'' said Peter Wallison, a Washington-based former Treasury general counsel and an author of a book on Fannie Mae and Freddie Mac. ``Paulson has had to make the best of a bad job.''

Snow told Congress in October 2003: ``We don't believe there is any government guarantee,'' for Fannie and Freddie. ``It's not in our view a reality, but it's a perception of an implied guarantee.''

The companies' lobbying efforts in Congress fended off Snow's effort to form a new, tougher regulator with power to approve new products and set capital requirements, two areas critical to their growth. That success came even as company officials came under scrutiny for accounting errors.

Taking Charge

When Paulson, 62, replaced Snow in July 2006, he took up the charge for tougher monitoring of the firms, calling on Congress to set up a new regulator.

The effort got caught up by the turmoil that engulfed Fannie Mae and Freddie Mac. Their shares slid to their lowest levels in more than 17 years as investors doubted whether they had enough capital to offset writedowns and losses.

Fannie Mae today fell 13 percent to $10.43 at 9:39 a.m. in New York trading, compared with $10.25 before Paulson announced his rescue plan July 13. Freddie Mac dropped 7.4 percent to $8.16, compared with $7.75 on July 11.

Because the companies now finance more than two-thirds of new U.S. mortgages, legislators said the government couldn't let them fail and bring down the home-loan market. That would have sent the economy into a deep recession, economists said.

Emergency Announcement

Officials discussed a range of options and consulted with congressional leaders over the weekend of July 12-13. Paulson announced his proposed rescue on the Sunday evening before Asian markets opened.

The legislation now before the Senate may even allow the companies to pay dividends and their officials to keep their current compensation levels if they tap the government for funding.

``The GSEs got what they wanted again,'' said Paul Miller, an analyst with Friedman Billings Ramsey & Co. in Arlington, Virginia. ``They got a big backstop and they got language that the Treasury doesn't necessarily have to stop them from paying dividends or cap compensation.''

Shares of Fannie Mae increased seven-fold and Freddie Mac stock multiplied eight times during the 1990s -- twice the gain during that decade of the Standard & Poor's 500 stock index.

The firms sell debt to invest in mortgages and package home loans into securities. Their federal charter and access to U.S. taxpayers' credit gave investors confidence that they had implicit government backing.

It's not the first time the Bush administration's free- market ideology was put aside to avoid a deeper crisis. Bush's first Treasury chief, Paul O'Neill, backed International Monetary Fund loans to Argentina and Turkey as the countries struggled with sliding currencies.

``O'Neill and Snow had headwinds to deal with,'' said Rob Nichols, a former Treasury official under O'Neill and Snow who is president of the Financial Services Forum, a Washington-based trade group for the nation's biggest banks. ``Paulson has had gale-force winds.''

To contact the reporters on this story: John Brinsley in Washington at jbrinsley@bloomberg.net; Rebecca Christie in Washington at Rchristie4@bloomberg.net




Read more...

U.S. Durable Goods for June: Statistical Summary (Table)

By Kristy Scheuble

July 25 (Bloomberg) -- Following is a summary of the June durable goods report from the Commerce Department. ===============================================================================

June May April March Feb. Jan. Dec.

2008 2008 2008 2008 2008 2008 2007 YOY% =============================================================================== NEW ORDERS 0.8% 0.1% -1.0% -0.2% 1.1% -4.7% 4.1% -1.3% Ex-transportation 2.0% -0.5% 1.9% 1.8% -1.2% -0.9% 2.0% 5.9% Ex-defense 0.1% -0.6% -0.8% 0.1% 0.3% -3.8% 1.6% -4.2% ------------------------------------------------------------------------------ Capital goods -0.9% 1.7% -1.9% -0.3% 2.4% -8.5% 9.8% 0.0% Non-defense -3.2% 0.2% -2.4% 1.4% 1.6% -6.3% 3.5% -6.2% ex-aircraft 1.4% -0.1% 3.1% -1.0% -0.9% -0.8% 4.5% 4.6%

3-mo. annualized 10.4% 0.4% 1.3% 4.7% 11.8% 4.5% -3.2% n/a Defense 15.8% 14.1% 3.3% -13.2% 9.2% -23.0% 89.5% 81.9% ------------------------------------------------------------------------------ Transportation -2.6% 1.9% -8.3% -5.1% 7.2% -13.2% 9.3% -17.3% Vehicles and parts 1.8% -3.6% -3.4% -4.9% -2.3% -0.4% -3.5% -19.0% Nondefense aircraft -25.1% 6.0% -24.6% 8.7% 12.4% -28.7% 5.7% -43.5% ===============================================================================

June May April March Feb. Jan. Dec.

2008 2008 2008 2008 2008 2008 2007 YOY% =============================================================================== Computers, electronics -0.5% 2.7% -2.0% 0.9% 1.5% -1.4% 2.1% 4.3% Electrical equipment 5.0% 2.0% 18.1% -18.8% 2.5% 5.5% -0.4% 8.7% Machinery 2.3% -3.7% 4.8% 8.5% -8.3% -1.1% 8.9% 10.9% Primary metals 5.1% -1.8% 2.5% 2.5% 1.4% 0.7% -0.4% 22.9% Fabricated metals 1.7% -0.3% -2.4% 5.2% 0.3% -4.1% 1.9% 1.4% ------------------------------------------------------------------------------ SHIPMENTS 0.5% -1.2% 1.8% -0.9% -1.9% 2.2% -0.8% -0.9% Ex-transportation 0.2% -0.3% 2.1% 0.2% -1.4% 1.8% -0.3% 2.2% Ex-defense 0.6% -1.2% 1.6% -1.0% -2.4% 1.9% -0.7% -2.3% ------------------------------------------------------------------------------ Capital goods 0.5% -0.5% 2.4% 0.6% -3.4% 2.5% 0.6% 3.8% Non-defense cap goods 0.5% -0.3% 1.8% 0.3% -3.6% 1.7% 0.9% 2.0% ex-aircraft 0.7% 0.2% 1.0% 0.8% -1.3% -0.4% 1.1% 2.9%

3-mo. annualized 5.9% 2.0% -1.5% -0.4% 1.0% 2.2% 2.3% n/a Defense Shipments 0.3% -2.3% 6.9% 2.8% -1.6% 9.6% -2.4% 20.9% ------------------------------------------------------------------------------ Transportation 1.4% -3.8% 0.9% -4.1% -3.2% 3.3% -2.0% -9.3% ===============================================================================

June May April March Feb. Jan. Dec.

2008 2008 2008 2008 2008 2008 2007 YOY% =============================================================================== Vehicles and parts 1.6% -3.7% -3.1% -6.0% -2.4% 0.2% -2.8% -19.6% Nondefense aircraft 0.3% -5.1% 9.3% -3.7% -17.4% 13.9% 0.5% -1.8% Computers, electronics -3.9% -2.8% 5.9% -0.8% -8.8% 9.4% -1.7% -2.6% Semiconductors -15.6% -21.6% 35.3% -5.5% -31.2% 43.5% -8.2% -23.7% Electrical equipment -0.4% 0.4% 1.1% -0.1% -1.5% 2.2% -0.6% 0.7% Machinery 2.4% 0.1% -0.8% -0.6% 4.1% -3.2% 3.0% 6.0% Primary metals 2.8% 1.4% 3.0% 1.6% 1.3% 1.1% 0.3% 14.4% Fabricated metals 0.6% -0.4% 2.0% 1.6% -0.8% 1.5% -1.8% 2.3% ------------------------------------------------------------------------------ INVENTORIES 0.5% 0.5% 0.6% 1.0% 0.5% 0.5% 1.0% 5.9% 3-mo. annual change $20.7 $26.5 $26.1 $25.2 $25.2 $26.9 $24.5 n/a Non-defense cap goods 0.5% 0.7% 0.8% 2.0% 0.8% 1.4% 1.0% 10.3% ex-aircraft 0.4% 0.1% 0.4% 1.3% 0.6% 0.5% 0.4% 5.5% ------------------------------------------------------------------------------ UNFILLED ORDERS 0.9% 0.9% 0.7% 1.3% 1.2% 0.6% 2.3% 15.4% Non-defense cap goods 0.7% 1.3% 1.2% 1.9% 1.8% 1.0% 2.4% 21.6% ex-aircraft 1.2% 1.0% 1.0% 0.4% 0.9% 0.8% 1.0% 9.1% Inventory/Shipments 1.57 1.57 1.54 1.56 1.53 1.49 1.52 1.34 =============================================================================== NOTE: All figures are seasonally adjusted, except year-over-year, which is non-seasonally adjusted. Percent changes are month over month unless otherwise noted. Three month annualized calculations are the latest three months average compared to the previous three months average.

SOURCE: U.S. Commerce Department. http://www.census.gov/m3

To contact the reporter on this story: Kristy Scheuble in Washington at kmckeaney@bloomberg.net

Read more...

U.S. Michigan Consumer Index Unexpectedly Increased

By Shobhana Chandra

July 25 (Bloomberg) -- Confidence among U.S. consumers unexpectedly rose in July from the lowest level since 1980, a sign that tax rebates and a rally in the stock market may have improved Americans' moods.

The Reuters/University of Michigan final index of consumer sentiment increased to 61.2 in July from 56.4 in June. The measure averaged 85.6 in 2007 and is up from a preliminary reading of 56.6 in early July.

The tax rebates are putting extra cash in Americans' pockets, helping their budgets overcome the drag from gasoline at more than $4 a gallon, lower home values, fewer jobs and less access to credit. Consumer spending may falter after the lift from the stimulus fades.

``It's probably more of a blip in a weak trend,'' said James O'Sullivan, senior economist at UBS Securities LLC in Stamford, Connecticut. ``Confidence is still at a level that's consistent with fairly weak consumer spending.''

The confidence index was forecast to register 56.4, according to the median estimate of 58 economists surveyed by Bloomberg News. Estimates ranged from 54 to 57.9.

New-Homes Sales

A government report today showed more new homes than forecast were sold in the U.S. in June and the number of properties on the market dropped by the most in four decades, indicating builders are making some headway in clearing out inventories.

Purchases decreased 0.6 percent to a 530,000 pace, from an upwardly revised 533,000 in May, the Commerce Department said today in Washington. Economists had forecast a drop to a 503,000 pace.

A separate report showed orders for U.S. durable goods unexpectedly increased in June, easing concern that companies would limit spending as raw-material costs soared. The 0.8 percent gain in bookings for goods meant to last several years followed a revised 0.1 percent increase in May.

Today's University of Michigan report showed the index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, increased to 53.5 from 49.2 in the prior month.

A gauge of current conditions, which reflects Americans' perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, rose to 73.1 from 67.6.

Inflation Expectations

Consumers said they expect an inflation rate of 5.1 percent over the next 12 months, the same as in the June survey. They expect the inflation rate over the next five years to be 3.2 percent, down from a forecast of 3.4 percent in June.

The final Reuters/University of Michigan consumer confidence report reflects about 500 responses, compared with 300 households for the preliminary survey.

The Federal Reserve this week said five of its 12 regional bank districts indicated ``a weakening or softening'' in their economies, and consumer spending was ``sluggish or slowing'' in every region, according to its economic survey, known as the Beige Book for the color of its cover.

Regular unleaded gasoline prices have risen this month after crossing $4 a gallon at the pump in June. They have jumped by about a third since the beginning of the year, according to AAA.

Under the government's plan to support consumers, $91.8 billion in rebates was sent out as of July 11, according to the Treasury Department. Recent Commerce Department figures showed retail sales rose less than forecast in June, signaling the boost from the tax rebates may already be fading.

Supermarkets are among companies getting hurt as cash- strapped consumers buy cheaper brands or slow spending. Supervalu Inc. this month said annual profit will rise less than it forecast, while Safeway Inc. revised down its 2008 sales projection for existing stores.

``I don't think any of us feel the economy is going to improve any time soon, at least not consumer confidence,'' Safeway Chief Executive Officer Steven Burd said on a July 17 conference call with investors.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net



Read more...

Oil Falls to Seven-Week Low on Signs Fuel Demand Will Decline

By Mark Shenk

July 25 (Bloomberg) -- Crude oil fell to a seven-week low on signs that global fuel consumption will drop because of a slowing economy, and Saudi Arabia boosts output to lower prices.

Oil prices have slipped more than $24 a barrel from the $147.27 record on July 11 on signs of declining demand in the U.S. Saudi Arabia, the world's largest oil exporter, increased output by 200,000 barrels a day in July, according to preliminary estimates from PetroLogistics Ltd.

``There's more concern about the economy seeping into the oil market,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``We are getting signals that the slowdown will be longer and deeper than previously forecast.''

Crude oil for September delivery fell $2.74, or 2.2 percent, to $122.75 a barrel at 10:05 a.m. on the New York Mercantile Exchange. The contract is down 5.2 percent this week. Futures touched $122.50 a barrel, the lowest price for a contract closest to expiration since June 5.

New-home sales in the U.S. in June decreased 0.6 percent to a 530,000 pace, from an upwardly revised 533,000 in May, the Commerce Department said today in Washington. A separate report showed orders for durable goods unexpectedly rose in June.

``The durable goods report was surprisingly strong, but that's just one number in a big constellation of bearish numbers,'' Mueller said. ``The housing sector is still very weak, and that's hurting the entire economy.''

OPEC Output

The 13 members of the Organization of Petroleum Exporting Countries will provide 32.9 million barrels a day this month, up 200,000 barrels from June, PetroLogistics founder Conrad Gerber said in an e-mail from Geneva. Saudi Arabia accounts for the entire gain.

``It looks like the market has shifted from focusing on geopolitical concerns to macroeconomic concerns,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Iran, which produced about 3.85 million barrels of oil a day last month, has warned it may blockade the Strait of Hormuz, the export channel for a quarter of the world's crude, if it's attacked. The country has the second-biggest proved oil reserves.

Brent crude oil for September settlement declined $2.95, or 2.3 percent, to $123.49 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.



Read more...

Canada's Dollar Poised for Weekly Fall on Oil Drop, Sales Data

By Jamie McGee

July 25 (Bloomberg) -- Canada's dollar is poised for a weekly decline after oil dropped and a report showed a rise in retail sales was less than forecast.

The Canadian dollar depreciated versus 12 of the 16 most- actively traded currencies, falling 0.8 percent against its U.S. counterpart since July 18. It is the first weekly drop since the five days ended July 4. The currency is little changed today.

``There was no reason to buy the Canadian dollar this week,'' said David Watt, a senior currency strategist at RBC Capital Markets in Toronto, a unit of Canada's biggest bank by assets. ``We've got oil prices coming back down and soft economic numbers. It's basically a one-two punch to cause people to be more cautious about pushing the Canadian dollar through parity.''

The currency strengthened 0.1 percent today to C$1.0142 per U.S. dollar at 8:13 a.m. in Toronto, from C$1.0148 yesterday. It has declined from C$1.0057 on July 18. One Canadian dollar buys 98.59 U.S. cents.

Oil prices have fallen more than $20 a barrel from a $147.27 record on July 11. Alberta has the largest crude reserves outside the Middle East. It gained 0.6 percent today to $126.26.

The Bank of Canada Commodity Price Index declined for a third week from a record 318.13 on July 2. It reached 290.57 on July 23.

Retail sales rose 0.4 percent in May, compared with the 0.6 percent median forecast of 22 economists surveyed by Bloomberg News. Statistics Canada released the report on July 22.

The yield on the two-year government bond declined 2 basis points, or 0.02 percentage point, to 3.12 percent. The price of the 3.75 percent security due in June 2010 rose 3 cents to C$101.14.

To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net



Read more...

Brazilian Real Strengthens to Nine-Year High on Yield Advantage

By Carlos Caminada

July 25 (Bloomberg) -- Brazil's real strengthened to a nine-year high for a second consecutive day as rising interest rates lure investors to the nation's fixed income securities.

The real advanced 0.4 percent to 1.5716 per dollar at 9:12 a.m. New York time, from 1.5781 yesterday. The currency touched 1.57, the strongest since January 1999. The real has gained 13 percent this year, the biggest advance against the dollar among the 16 most-actively traded currencies.

Brazil's central bank raised the overnight lending rate 0.75 percentage points to 13 percent on July 23, the most in five years. The increase boosted the attractiveness of the investment-grade country's bonds and interest-rate futures, said Gerson de Nobrega of Banco Alfa.

``The conditions are excellent for foreign investors,'' said Nobrega, head of the bank's treasury desk in Sao Paulo. ``The inflows have been very positive.''

Brazil's consumer prices rose 0.63 percent in the month through mid-July, pushing the annual inflation rate to a 32- month high, the government's statistic agency said yesterday in Rio de Janeiro.

Inflation as measured by the benchmark IPCA-15 index quickened to 6.30 percent in mid-July from 5.89 percent the previous month. Brazil's central bank targets 4.5 percent inflation, plus or minus two percentage points.

The yield on Brazil's interest-rate futures contract for January 2009 delivery fell 3 basis points to 13.68 percent yesterday.

The yield on the government's zero-coupon bonds due in January 2010 fell 12 basis points to 14.79 percent, according to Banco Votorantim.

To contact the reporter on this story: Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net



Read more...

Yen Falls as Orders for U.S. Durable Goods Unexpectedly Gained

By Ye Xie and Candice Zachariahs

July 25 (Bloomberg) -- The yen weakened against all of the other major currencies as an unexpected increase in orders for U.S. durable goods last month bolstered speculation that investors will buy higher-yielding assets funded in Japan.

The dollar extended its gain versus the yen and erased its loss against the euro as reports showed sales of new homes in the U.S. fell in June less than forecast and consumer confidence unexpectedly increased this month.

``Risk appetite is on the rise,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon, the world's largest custodial bank, with more than $23 trillion in assets. ``The yen has further room to fall.''

Japan's currency fell 0.4 percent to 107.79 versus the dollar at 10:09 a.m. in New York, from 107.33 yesterday. It may drop to 115 against the dollar in the next couple of months, Woolfolk said. The yen dropped 0.4 percent to 168.99 per euro, from 168.28, after reaching a record low of 169.96 on July 23. The dollar traded at $1.5676 per euro, compared with $1.5677.

India's rupee and the Philippine peso led a weekly advance against the dollar among Asian currencies on speculation oil prices near the lowest in seven weeks will reduce demand for dollars from importers. The rupee gained 1.2 percent this week to 42.265 per dollar, while the peso rose 1 percent from last week to 43.945.

The yen depreciated 1.7 percent to 14.19 versus South Africa's rand and 0.9 percent to 68.55 against the Brazilian real today as the report on durable goods encouraged carry trades in which investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's target lending rate of 0.5 percent compares with 12 percent in South Africa and 13 percent in Brazil.

Dollar Versus Euro

The U.S. currency was headed for a 1 percent increase against the euro this week, the biggest since mid-June, and advanced 0.7 percent versus the yen. Japan's currency has decreased 0.3 percent against the euro.

``We are bullish on the dollar,'' said Steven Englander, a currency strategist at Lehman Brothers Holdings Inc. in New York. ``The U.S. economy continues to surprise on the upside, while the rest of the world surprises on the downside.''

The Commerce Department reported that orders for durable goods, products that last several years, rose 0.8 percent in June. The median forecast of 78 economists surveyed by Bloomberg News was for a decrease of 0.3 percent. There was a revised 0.1 percent advance the previous month.

Housing Data

Purchases of new homes decreased 0.6 percent to a 530,000 pace in June, from an upwardly revised 533,000 in the prior month, the Commerce Department said.

The Reuters/University of Michigan final index of consumer sentiment increased to 61.2 this month from 56.4 in June. The measure averaged 85.6 in 2007 and is up from a preliminary reading of 56.6 in early July.

European Central Bank policy makers still have scope to raise interest rates, according to council member Klaus Liebscher. The Frankfurt-based central bank increased its main refinancing rate to 4.25 percent on July 3, citing the need to control inflation.

``We haven't exhausted our room for maneuver,'' said Liebscher, who also heads Austria's central bank, in an interview in his Vienna office yesterday. ``I'm not that surprised'' by the latest economic data, he added. ``We expected a weaker second and maybe third quarter.''

The Ifo institute said yesterday that its German business climate index, based on a survey of 7,000 executives, dropped to 97.5 this month from 101.2 in June. The 3.7-point decrease was the biggest since the Sept. 11, 2001, terrorist attacks.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net.



Read more...

European Stocks Decline; Munich Re, Hannover Re, UBS Retreat

By Adria Cimino

July 25 (Bloomberg) -- European stocks fell for the third day this week on concern losses in financial services may worsen and slowing economies will stifle profit growth.

Munich Re slumped the most in five years after the world's second-biggest reinsurer warned of ``substantial'' writedowns on its stock investments. Hannover Re fell the most since January. UBS AG slipped after New York sued the bank on allegations its promotion of auction-rate securities was fraudulent. PagesJaunes SA led media companies lower after cutting its sales forecast because of ``a more difficult economic environment.''

The Dow Jones Stoxx 600 Index declined 0.3 percent to 281.38 at 2:56 p.m. in London, trimming this week's gain to 0.2 percent this week. The Stoxx 50 slipped 0.3 percent today, and the Euro Stoxx 50, a measure for the euro zone, lost 0.4 percent.

``What makes investors so uncertain is the question: which financial firms have more skeletons in the closet,'' said Juergen Meyer, a Frankfurt-based fund manager at SEB Asset Management, with the equivalent of $2.2 billion under management.

Stocks pared losses after a report showed orders for U.S. durable goods unexpectedly rose in June and consumer confidence increased in July.

Financial stocks have led the rout that has erased more than $13 trillion from equities worldwide since October as accelerating inflation and $468 billion in writedowns and credit-related losses threaten to push the U.S. into recession.

``There are still risks on bank finances,'' said Nathalie Pelras, a Paris-based fund manager at Richelieu Finance, which oversees $6.3 billion. ``Growth for companies will weaken as the economy slows.''

Except for Canada, all of the 23 developed markets in the MSCI World Index experienced bear market plunges of at least 20 percent this year.

Munich Re, Hannover Re

Analysts estimate earnings for companies in the Stoxx 600 will drop 2.4 percent in 2008, Bloomberg data show. That's down from 11 percent growth predicted at the start of the year.

National benchmark indexes fell in all of the 18 western European markets except France. The CAC 40 gained 0.1 percent. Germany's DAX lost 0.7 percent, while the U.K.'s FTSE retreated 0.6 percent.

Munich Re sank 9.6 percent to 105.30 euros. The company cut its forecast for earnings this year after second-quarter profit declined 48 percent.

Hannover Re, Germany's second-biggest reinsurer, plunged 7.3 percent to 29.95 euros. The company said it has become more difficult to reach its full-year targets because of capital- market turbulence.

Storebrand, UBS

Storebrand ASA, Norway's largest publicly traded insurer, sank 9.4 percent to 35.35 kroner.

U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth, according to RealtyTrac Inc.

Home sales slid more than forecast a report yesterday showed and investor Bill Gross predicted the housing slump will cost banks and brokerages $1 trillion.

UBS tumbled 6.7 percent to 21.46 francs. The European bank hardest hit by subprime contagion was sued yesterday by New York Attorney General Andrew Cuomo, alleging the bank's promotion of auction-rate securities as safe, money market-like investments was fraudulent.

UBS spokeswoman Karina Byrne in an e-mailed statement said the bank will ``vigorously defend'' itself against the allegations in the suit, and ``categorically rejects any claim that the firm engaged in a widespread campaign'' to shift auction-rate debt off its books and into client accounts.

PagesJaunes, Rentokil

PagesJaunes slumped 5.9 percent to 8.74 euros. The French yellow-pages company bought by Kohlberg Kravis Roberts & Co. said sales this year will rise 3 percent to 4 percent, down from a previous target of 5 percent growth. PagesJaunes cited ``a more difficult economic environment.''

Rentokil Initial Plc tumbled 32 percent to 69.5 pence. The world's largest pest-control provider cut its forecast for annual profit after margins at its washroom services division shrank.

Groupe Danone SA gained 6.2 percent to 47.64 euros. Europe's biggest maker of baby food said first-half profit rose 5.7 percent after the purchase of Royal Numico NV last year boosted sales of infant formula in Asia and the Middle East. Net income from continuing operations climbed to 701 million euros. That surpassed analysts' estimates.

YIT Oyj plunged 23 percent to 10.50 euros. Finland's biggest builder, said second-quarter profit fell 19 percent to 42.6 million euros, missing analysts' estimates, on a slowing Baltic real estate market and delays to a Russian project.

Cie. de Saint-Gobain SA, Europe's biggest supplier of building materials, added 6 percent to 38.87 euros after cutting its 2008 forecast and announcing 4,000 job cuts because of the construction slowdown.

To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.



Read more...

Russian Stocks Plunge on Concern Putin Rebuke Destroys `Haven'

By William Mauldin

July 25 (Bloomberg) -- Russia's RTS Index fell the most in six months, plunging it into a bear market, after Prime Minister Vladimir Putin said OAO Mechel will be investigated for overcharging for raw materials.

The 50-stock RTS index sank for a fourth day, dropping 5.1 percent to 1,960.67 at 5:15 p.m. in Moscow, or 21 percent below its May 19 high. A drop of 20 percent from a peak within a year is the common definition of a bear market.

Putin rebuked Mechel's billionaire shareholder Igor Zyuzin for not attending a meeting with steelmakers yesterday and said prosecutors will investigate whether the Russian coal and steel producer sold raw materials in Russia at twice the price as abroad. The company's American depositary receipts fell 38 percent yesterday in New York.

``It seems that Russia has decided to control everything with centralized oversight,'' said Zina Psiola, who manages $1.1 billion in Russian equities at Clariden Leu AG in Zurich. ``This is the way that Venezuela already took, and we know the outcome: It's bad for investors and bad for the country.''

Putin is seeking to curb inflation, which quickened to an annual 15.1 percent in June, the most since December 2002. He is also pushing his Cabinet to investigate instances of price collusion among oil refiners and food producers.

The Micex Index tumbled 5.2 percent today to 1,492.32, its lowest since November 2006 and the biggest retreat today among equity markets included in global benchmarks.

Censure

Putin's censure of Mechel, combined with falling oil prices, has ``finished'' Russia's reputation among some investors as a ``safe haven'' in the global equity market this year, according to Roland Nash, chief strategist at Moscow-based Renaissance Capital. Mechel said it would release a statement later today on the allegations.

Some brokers compared the Mechel turmoil with the assault on OAO Yukos Oil Co., which was bankrupted in Putin's presidency after the government claimed more than $30 billion in back taxes. The company's founder, Mikhail Khodorkovsky, is serving eight years in a Siberian labor camp, while some of his company's oil assets were transferred to state-controlled OAO Rosneft.

Investors ``fear something worse to come,'' wrote Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow, in a note to investors today.

``Russia's institutional framework is still a work in progress,'' said Daniel Salter, emerging-markets strategist at ING Groep NV in Russia. ``The corporate sector remains subservient to the whims of the state.''

Sberbank

TNK-BP, BP Plc's joint venture in Russia, fell 2.3 percent today to $1.925 on the RTS exchange a day after Chief Executive Officer Robert Dudley left Russia, citing ``sustained harassment'' amid a shareholder dispute.

Stocks of steelmakers and coal producers fell after Putin's comments. Evraz Group SA, Russia's second-biggest steelmaker, dropped 9.9 percent to $82 in London trading. OAO Severstal, the biggest steelmaker, fell 51 rubles, or 11 percent, to 407 rubles.

OAO Sberbank, Russia's biggest bank, slumped 5.9 rubles, or 7.8 percent, to 69.80 rubles. The bank said net income in the first quarter climbed 16 percent to 31.1 billion rubles ($1.33 billion), or less than the mean estimate of seven analysts surveyed by Bloomberg News.

Rosneft declined 4.8 percent today to 228.60 rubles, heading for a weekly loss of 9.8 percent. Oil prices have declined 15 percent from their July 3 high.

The RTS climbed as high as 2,487.92 on May 19, after Putin, who became prime minister under President Dmitry Medvedev, said oil producers would get tax breaks.

To contact the reporter on this story: William Mauldin in Moscow at wmauldin1@bloomberg.net.



Read more...

Juniper Climbs After Raising Profit, Revenue Forecast

By Vivek Shankar

July 25 (Bloomberg) -- Juniper Networks Inc., the second- largest maker of networking equipment, rose the most in more than four years in Nasdaq trading after boosting its annual profit and sales forecasts, bolstered by rising orders from phone companies.

Sales this year will climb to as much as $3.62 billion, compared with a previous estimate of as much as $3.55 billion, Chief Executive Officer Scott Kriens said yesterday. Profit, excluding stock-based compensation costs, will be $1.14 to $1.17 a share, up from a previous estimate of as much as $1.13.

Juniper is winning orders from phone and cable companies, which are upgrading networks to compete for customers wanting packages of phone, Internet and television service. The report reassured investors concerned that the slowing U.S. economy would crimp spending by communications service providers.

``The service provider business is a very good one,'' Kriens said in a telephone interview yesterday. Cable, phone, wireless and content companies are all expanding their systems, said Kriens, 50.

Juniper rose $2.19, or 9.7 percent, to $24.76 at 9:35 a.m. New York time on the Nasdaq Stock Market after earlier climbing as much as 15 percent, the biggest jump since January 2004. The stock had dropped 32 percent this year before today.

Second-quarter net income climbed 40 percent to $120.4 million, or 22 cents a share, Sunnyvale, California-based Juniper said yesterday. Revenue jumped 32 percent to $879 million, beating the $849.7 million estimated by analysts in a Bloomberg survey.

Third-quarter revenue will be $925 million to $935 million, Kriens said on a conference call. Analysts on average projected $887.1 million. Profit, excluding some costs, will be 29 cents to 30 cents share. Analysts predicted 29 cents.

Last year, Juniper had about 16 percent of the $11.6 billion worldwide market for routers, which help direct Internet traffic, according to Redwood City, California-based researcher Dell'Oro Group. Cisco captured 65 percent.

To contact the reporter on this story: Vivek Shankar in San Francisco at vshankar3@bloomberg.net



Read more...

Celestica, Thomson Reuters, Teck Cominco: Canada Equity Preview

By Katherine Greene and Lynn Thomasson

July 25 (Bloomberg) -- The following companies may have unusual price changes in Canadian trading. Stock symbols are in parentheses, and share prices are from the last close in Toronto.

The Standard & Poor's/TSX Composite Index fell the most in two weeks, losing 2.3 percent to 13,206.14.

Celestica Inc. (CLS CN): The maker of electrical parts said third-quarter profit may be 17 cents to 23 cents a share, compared with the 20-cent estimate from analysts in a Bloomberg survey. The stock rose 2.6 percent to C$8.63.

CE Franklin Ltd. (CFT CN): The maker of oil drilling equipment reported second-quarter profit of 5 cents a share. Analysts at Capstone Investments predicted the company would post earnings of 2 cents a share. CE Franklin shares dropped 1.2 percent to C$9.93.

Thomson Reuters Corp. (TRI CN): The news and data company formed by Thomson Corp.'s $15.9 billion purchase of Reuters Group Plc opened a television studio to bolster its multimedia operations. The shares fell 2.8 percent to C$31.66.

Teck Cominco Ltd. (TCK/B CN): Canada's largest diversified mining company may use wind or natural gas to power its biggest zinc facility, located in Alaska, as rising diesel costs curb profit from the unit. The shares fell 1.3 percent to C$38.66, their lowest value since March.

To contact the reporter on this story: Katherine Greene in New York at kgreene8@bloomberg.net.



Read more...

Affymetrix, Crocs, Netflix, Western Digital: U.S. Equity Movers

By Jeff Kearns

July 25 (Bloomberg) -- The following companies are having unusual price changes in U.S. trading. Stock symbols are in parentheses, and share prices are as of 9:40 a.m. in New York.

Affymetrix Inc. (AFFX US) plunged 23 percent, the most since April 15, to $8. The maker of tools to analyze genes said revenue will be lower this year than previously forecast because of weak pharmaceutical sales.

Crocs Inc. (CROX US) had the biggest drop since its February 2006 initial public offering, losing 47 percent to $4.79. The company forecast earnings lower than its previous prediction, raising concerns that it may not be able to sell its colored foam clogs profitably.

Interactive Brokers Group Inc. (IBKR US) fell the most since March 17, sliding 14 percent to $27.83. The firm that handles 14 percent of equity options worldwide said second-quarter profit rose less than analysts expected because of smaller gains from market making.

Juniper Networks Inc. (JNPR US) rose the most in a year, adding 9.3 percent to $24.66. The second-largest maker of networking equipment increased its annual profit and revenue forecasts, bolstered by rising orders from phone companies.

Netflix Inc. (NFLX US) advanced the most since June 19, gaining 4.5 percent to $27.94. The largest U.S. mail-order movie service posted its sixth straight quarter of profit growth, beating estimates by 11 percent, as the number of customers increased and the cost of adding them fell.

Reliance Steel & Aluminum Co. (RS US) gained 8.5 percent, the most since April 2007, to $62.07. The U.S. distributor of more than 100,000 metals products canceled a sale of 6.75 million shares because of ``market conditions.''

Tiffany & Co. (TIF US) lost 2.2 percent to $37.84, the lowest since July 15. The world's second-largest luxury-jewelry retailer was cut to ``sell'' from ``neutral'' at Bank of America Corp. Airlines' reductions in flights to New York and other tourist destinations are likely to hurt sales at Tiffany's, analyst Dana Cohen wrote in a report.

Western Digital Corp. (WDC US) fell 8 percent, the most in three months, to $30.93. The world's second-largest maker of hard-disk drives forecast profit that missed analysts' estimates after an industry glut put pressure on prices.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.



Read more...

U.S. Stocks Rise on Durable Goods, Home Sales, Confidence Data

By Elizabeth Stanton

July 25 (Bloomberg) -- U.S. stocks gained on growing speculation the economy will avert a recession after better-than- forecast reports on durable goods orders, consumer confidence and new home sales.

Freeport-McMoRan Copper & Gold Inc. led commodity producers higher after the Commerce Department reported a 0.8 percent increase in bookings for goods meant to last several years. All 15 homebuilders in Standard & Poor's indexes advanced on a report showing that home purchases decreased at a third the forecast rate. Juniper Networks Inc. rallied to a six-week high after the computer-networking equipment maker raised its forecasts.

The Standard & Poor's 500 Index rose 7.81 to 1,260.35 at 10:20 a.m. in New York. The Dow Jones Industrial Average climbed 73.2, or 0.6 percent, to 11,422.48. The Nasdaq Composite Index added 21.47, or 0.9 percent, to 2,301.58. Five stocks advanced for every two that fell on the New York Stock Exchange.

The S&P 500 erased a weekly drop a day after the biggest retreat in bank shares since 2000 sent the index to a 2.3 percent drop. The S&P 500 is little changed this week and the Dow average has declined 0.7 percent. The Nasdaq Composite Index is up 0.8 percent.

Freeport-McMoRan, the largest publicly traded copper producer, climbed 1.6 percent to $96.06 and led a 0.8 percent advance in the S&P 500 Materials Index as the durable-goods report boosted copper prices.

Economists in a Bloomberg survey had forecast a 0.3 percent drop in durable goods orders in June. The Commerce Department also revised its data on durable goods orders for May to reflect an increase of 0.1 percent, up from an unchanged reading.

Homebuilders Rally

Pulte Homes Inc. rallied 10 percent to $12.17, leading homebuilders to a 5.9 percent rally as a group.

New-home sales in the U.S. in June decreased 0.6 percent to a 530,000 pace, from an upwardly revised 533,000 in May, the Commerce Department said. Economists had forecast a 1.8 percent slide. The number of properties on the market dropped by the most in four decades, indicating builders are making some headway in clearing out inventories.

Retailers rose 1.4 percent as a group, led by a 3.4 percent gain in Macy's Inc., after the unexpected gain in consumer confidence. The Reuters/University of Michigan final index of consumer sentiment increased to 61.2 in July from 56.4 in June. The measure averaged 85.6 in 2007 and is up from a preliminary reading of 56.6 in early July. Economists had forecast a reading of 56.4 in July.

Juniper Climbs

Juniper Networks climbed $2.29, or 10 percent, to $24.86. The second-largest maker of networking equipment reported a 40 percent jump in profit. Third-quarter revenue will be $925 million to $935 million, Chief Executive Officer Scott Kriens said on a conference call. Analysts on average projected $887.1 million. Profit, excluding stock-based compensation costs, will be 29 cents to 30 cents share. Analysts predicted 29 cents.

Cisco Systems Inc., the largest maker of networking equipment, rose 2.7 percent to $22.35.

Delta added 7.2 percent to $7.29. Merrill, which upgraded the shares to ``buy'' from ``neutral,'' also said the stock is attractive because the airline has less debt than competitors.

Foreclosures Rise

Stocks rallied even after U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth.

One in every 171 U.S. homeowners lost their house to foreclosure, received a default notice or was warned of a pending auction, an increase of 121 percent from a year earlier and a 14 percent rise from the first quarter, RealtyTrac Inc. said today.

All of the 23 developed nations in the MSCI World Index except for Canada experienced bear-market plunges of 20 percent or more since September as credit losses surged and record commodity prices stoked inflation. Brazil became the 23rd out of 25 developing countries in the MSCI Emerging Markets Index to enter a bear market yesterday. Only Jordan and Morocco avoided such slumps.



Read more...

South African Rand Rises Against Dollar, Snapping Two-Day Slide

By Garth Theunissen

July 25 (Bloomberg) -- South Africa's rand strengthened against the dollar for the first day in three on speculation interest rates at a 5 1/2-year high are stoking demand for the currency in so-called carry trades.

The currency was poised for a sixth-weekly advance as prices for gold and platinum, the nation's biggest exports, rose. The rand offered the best carry-trade return of its 16 most-actively traded counterparts monitored by Bloomberg today. It was one of only four currencies to provide a positive return against the Swiss franc, often used for carry trades.

``South Africa's high interest rates are helping the rand from two angles,'' said George Glynos, the managing director in Johannesburg of Econometrix Treasury Management, which advises clients on bond and foreign-exchange transactions. ``On the one hand they boost carry-trade purchases, but they also make it very expensive to speculate against the rand.''

The currency rose as much as 1.6 percent to 7.5678 per dollar and traded at 7.5898 by 12:52 p.m. in Johannesburg, from 7.6873 yesterday and 7.6047 at the end of last week. Investors should sell the rand at about 7.60 per dollar and buy back at about 7.72, Glynos said.

The rand has climbed 7.4 percent since June 12, when the central bank raised the benchmark interest rate by a half-point to 12 percent, the highest level since June 2003, when it was at 13.5 percent. Since the latest increase in borrowing costs, the currency has offered the best carry-trade return against the dollar, euro and yen over that period.

Interest-Rate `Protection'

``The rand is outperforming other high-yielding currencies at the moment,'' said Robert Beange, an emerging-market currency strategist at JPMorgan Chase & Co. in London. ``High interest rates do offer it some protection.''

When carry-trade appetite picks up, traders borrow lower- yielding currencies such as the franc to buy higher-yielding assets, such as those denominated in rand, sending it higher. Conversely, when carry trades decrease, investors would sell the rand to repurchase so-called safe-haven assets, including the franc.

South Africa's interest rates compare with borrowing costs of 0.5 percent in Japan and 2.75 percent in Switzerland.

The South African Reserve Bank, led by Governor Tito Mboweni, has increased the key rate 10 times since June 2006 to curb inflation that has exceeded its 3 percent to 6 percent target range for 14 straight months. Price growth quickened to an annual 10.9 percent in May, the fastest pace since November 2002.

Monetary policy will have to ``tighten at a global level,'' Mboweni said yesterday in an interview with CNBC Africa, adding that he didn't know the magnitude of the increases that would be required.

The rand is the worst performer of the 16 most-traded currencies tracked by Bloomberg this year, falling almost 10 percent versus the dollar and more than 16 percent against the euro.

South African government bonds gained for a fourth day, with the yield on the benchmark 13.5 percent security due September 2015 falling 3 basis points to 9.68 percent. The yield lost 21 basis points this week. Yields move inversely to bond prices.

To contact the reporter on this story: Garth Theunissen in Johannesburg gtheunissen@bloomberg.net



Read more...

Euro Rises Against Dollar as Liebscher Says ECB Can Raise Rates

By Kim-Mai Cutler and Stanley White

July 25 (Bloomberg) -- The euro rose against the dollar after European Central Bank council member Klaus Liebscher said policy makers have room to raise interest rates for a second time this year even as economic growth falters.

The dollar also weakened before government reports forecast to show U.S. durable-goods orders and new-home sales dropped in June and after crude oil rose for a second day.

``A lot of people doubted that the poor economic data was going to spell the end of the tightening cycle'' in Europe, said David Woo, global head of currency strategy in London at Barclays Capital. ``The fact that the ECB is still talking tough and oil prices are starting to stabilize is psychologically supportive for the euro.''

The euro increased 0.4 percent to $1.5735 at 8:02 a.m. in New York, from $1.5677 yesterday. It also advanced 0.4 percent to 169 yen, from 168.28, after rising to a record high of 169.96 on July 23. The dollar was little changed at 107.40 yen, compared with 107.33.

The 15-nation euro was headed for a 0.7 percent decline against the dollar this week, its second consecutive decrease. The currency dropped 0.3 percent versus the yen. The dollar advanced 0.4 percent against the yen.

The euro was supported as Liebscher said ECB policy makers still have scope to raise borrowing costs. The Frankfurt-based central bank raised its main refinancing rate to 4.25 percent on July 3, citing the need to control inflation.

`Room for Maneuver'

``We haven't exhausted our room for maneuver,'' said Liebscher, who also heads Austria's central bank, in an interview in his Vienna office yesterday. ``I'm not that surprised'' by the latest economic data, he said. ``We expected a weaker second and maybe third quarter.''

Crude oil for September delivery rose for a second day, increasing as much as $1.02 a barrel, to $126.33 a barrel, on concern supply in Iran and Nigeria may be disrupted. The euro- dollar exchange rate and oil have moved in the same direction 90 percent of the time during the past year, according to Bloomberg calculations based on the correlation of their value changes.

Orders for U.S. durable goods, products that last several years, fell 0.3 percent in June, according to the median forecast of 78 economists surveyed by Bloomberg News. There was no change the previous month. The Commerce Department is due to release its report at 8:30 a.m. in Washington.

The department will report at 10 a.m. today that sales of new houses dropped to an annual pace of 503,000 last month, from 512,000 in May, according to a separate survey of economists.

The dollar was still headed for a weekly advance against the euro after Federal Reserve Bank of Philadelphia President Charles Plosser said on July 23 that interest rates should rise ``sooner rather than later'' to quell inflation.

To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net.



Read more...