Canada's Inflation Remains High at 3.4%; Core Rate Holds Steady at a Moderate 1.7%

Daily Forex Fundamentals | Written by RBC Financial Group | Oct 24 08 13:19 GMT |

Canada's all-items inflation rose 0.1% in September, sending the year-over-year rate down slightly to 3.4% from 3.5% in August. The Bank of Canada's core measure, which excludes the eight most volatile components and the effects of changes in indirect taxes, rose 0.4% in the month and 1.7% over the year. Although overall prices rose modestly in September, this followed a 0.2% drop in August. This reversal in direction of prices largely reflected a pause in the downward slide in gasoline prices, which rose 0.9% in the month after a 6.6% drop in August. The gain in core prices largely reflected sizeable seasonal increases in a couple of components. For example, tuition fees are only reflected in the CPI once a year in September with the increase this year of 4% up from 3% a year ago. Similarly clothing and footwear prices generally move higher in September. With crude oil prices plummeting and refinery capacity restored, gasoline prices are poised to move lower going forward. As well, with growth in Canada likely to be further restrained by continuing tight credit conditions and the U.S. economy falling into recession, growing slack in the system should put downward pressure on all prices that will likely result in third-quarter inflation marking a near-term peak. The Bank of Canada's economic forecast released this week shared this view that inflation is poised to trend dramatically lower through next year. Thus, it is the downside risks to growth, rather than upside risks to inflation, that have assumed priority consideration and prompted the central bank to concede that “some further monetary stimulus will likely be required.” Our forecast assumes that the overnight rate will be cut by further 25 basis points before the end of the year to 2.00%. However, even greater easing may be necessary if there is any intensification of either the factors currently weighing on economic growth. RBC Financial Group http://www.rbc.com The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.

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Deleveraging Continues as US Stock Market Futures Limit Down, European Shares Down Nearly 9%

Daily Forex Fundamentals | Written by DailyFX | Oct 24 08 13:15 GMT |

Deleveraging continues as funds flow away from stocks, commodities, and carry trades into the US dollar, Japanese yen, and Treasuries. Indeed, the US dollar has rocketed versus most of the majors, but the Japanese yen has proven to be even stronger as the low-yielder has surged nearly 5 percent against the greenback and over 10 percent versus high-yielders like the New Zealand dollar and Australian dollar. Why? Risk aversion remains high as UK GDP figures signaled recession while OPEC cut production by 1.5 million barrels. This has also triggered massive losses for European stock markets, which are down nearly 9 percent at the time of writing. Even worse, DJIA and S&P 500 futures have stopped trading limit down, with the former down 550 points and the latter down 60 points. This does not bode well for the market open at 9:30 ET, and as long as this sort of sentiment persists, the odds remain in favor of US dollar and Japanese yen strength. 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.

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Dollar Closing In on 5% Targets, Where are the Value Points?

Daily Forex Fundamentals | Written by GFT | Oct 24 08 13:04 GMT |

The type of moves that we have seen in the currency market during the Asian and European trading sessions are typically what we see in a quarter or a half year. USD/JPY has fallen 5 percent, AUD/USD is down more than 8.5 percent while the NZD/USD is down 7 percent. The sell-off in the Japanese Yen crosses are even more severe with AUD/JPY down 13.5 percent and NZD/JPY down 12 percent. Here is a list of the biggest movers as of 9am ET: Yesterday, I warned against a premature top in the EUR/USD! Although it may be very tempting to say that the dollar has hit a top, especially against the Euro, in order for this EUR/USD rally to be real and for investors to be convinced to stop selling higher yielding currencies, we need to see stabilization in the financial markets and a return of confidence. The mentality in the currency and stock markets is sell now, ask questions later. The low yielding US dollar and Japanese Yen continue to be the biggest beneficiaries of risk aversion. The only thing that investors want right now are safe haven plays. The dollar's strength will force emerging market countries to rush to prevent a flight of capital out of their currencies - more rate hikes could be likely. With deleveraging being the theme of the day, when confidence is lost, it will be difficult to recover. Where are the Value Points for the Currency Market? In the Wed edition of my Daily GFT Report and on CNBC and Bloomberg I talked about how the dollar could rise another 5%. At that time, the EUR/USD was trading at 1.2829 and the GBP/USD at 1.6236. The GBP/USD has already hit my 5 percent target and at one point this morning even became undervalued on a purchasing parity basis. Although the UK GDP report confirms that the country is headed for a recession and validates the weakness, I believe that we have seen a near term low in the currency pair. The EUR/USD on the other hand has only dropped 2.5 percent. The EUR/USD does not become a value play until 1.15-1.20. As for USD/JPY, it has also reached my target of 95. Although I won't be a buyer at these levels, I won't be a seller either. There are no rewards for heros in this type of market. Will the BoJ Intervene? If you are wondering about Bank of Japan intervention, don't expect it to happen. As an export dependent nation, a strong currency is not in Japan's best interest. However unlike in the past where the BoJ has intervened when USD/JPY fell below 105 and 100, we may not see any action by the Japanese government this time around. Since the problems are inherent in the US and the Eurozone, intervening at this time may be counterproductive for the Japanese. The Japanese government needs to stand aside and allow the US and Eurozone governments to take their measures to spur growth and not strengthen the dollar for their own short term relief. Risk of Limit Down Day in US Stocks With S&P futures already trading at limit down this morning, there is a decent chance that circuit breakers may be hit in the first hour of trading. The moves in the Dow Jones Industrial Average these days is strikingly similar to the move in 1906 and 1907 (Here is a chart from Barclays). In the last phase of the sell off between Q2 of 1907 and Q4 of 1908, the Dow dropped 37% before it bottomed out. From the August 11500 levels in the Dow, a 37% move would take the index down to a new 6 year low of 7245. Kathy Lien http://www.gftforex.com DISCLAIMER: GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading and GFT Global Markets UK Limited. GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS Licence 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. © 2008 Global Futures & Forex, Ltd. All rights reserved.

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Malaysia Holds Interest Rate Steady for 20th Straight Meeting

By Shamim Adam

Oct. 24 (Bloomberg) -- Malaysia's central bank kept its benchmark interest rate unchanged even as inflation slows and growth concerns mount, betting that borrowing costs are low enough to spur the economy.

Bank Negara Malaysia maintained its overnight policy rate at 3.5 percent for a 20th straight meeting today, it said in a statement in Kuala Lumpur. The decision was predicted by 13 of the 14 economists surveyed by Bloomberg News.

``Malaysia did not raise interest rates earlier on when its regional counterparts had done so and that gives them time to retain their policy,'' said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. ``For the time being, the economy is not weak enough to warrant a rate cut. They will be cautious in cutting rates because it will affect the currency.''

The central bank held off from raising rates this year even as inflation accelerated to a 26-year high and its neighbors tightened policy, arguing it was focused on staving off a growth slowdown. The decision to keep rates steady gives it room now to delay any action at a time when policy makers in China, India and Australia are cutting borrowing costs.

Still, ``in the face of diminishing inflationary pressures, and in the event of heightened downside risks to growth, the bank will take swift monetary policy action to provide support to the economy,'' Bank Negara said.

Inflation in Malaysia has eased as oil and commodity prices fell. Consumer prices rose 8.2 percent in September from a year earlier, easing from a rate of 8.5 percent in August, according to data released today.

Gasoline Prices

The government has cut gasoline prices three times since late August as crude oil fell from a record $147.27 a barrel on July 11. Fuel prices are expected to drop further, Domestic Trade and Consumer Affairs Minister Shahrir Abdul Samad said today, adding that he doesn't foresee an increase in transportation costs while some food items will be cheaper.

Bank Negara expects inflation to slow to below 4 percent before the second half of 2009, Governor Zeti Akhtar Aziz said last week.

``The assessment is that inflation has now peaked and is expected to moderate into 2009,'' the central bank said in its statement today. ``An increasing number of indicators now signal an easing of inflationary pressures. Lower cost pressures and moderating domestic demand are expected to reduce inflation in 2009.''

Central banks around the world are shifting their focus to supporting growth from damping inflation as the global credit crisis escalates. The turmoil has led to the collapse of banks and forced some countries to approach the International Monetary Fund for loans, while more nations are reporting a contraction in their economies, increasing the risk of a world recession.

Sharp Downturn

``The greater focus of policy makers is now towards restoring the functioning of the international financial markets and towards avoiding a sharp global economic downturn,'' Bank Negara said. ``While the downside risks to global growth have increased significantly, concerns about inflation have subsided as commodity and energy prices declined, and as slower growth sets in.''

In Malaysia, the economy may expand 5 percent this year, lower than the government's August forecast of 5.7 percent growth, Finance Minister Najib Razak said in an interview yesterday.

``The slower global growth and the decline in commodity prices will affect the performance of the export sector and consequently, the overall economic growth in 2009,'' the central bank said.

Malaysia will cut its 2009 economic-growth forecast on Nov. 4, from the current estimate of 5.4 percent, Najib said earlier this week. Bank Negara's Zeti last week predicted growth may be little as 4 percent in 2009 and said policy makers have the capacity and the capability to implement ``fiscal, monetary and other measures'' to prevent such an economic downturn.

Other central banks aren't waiting. The Reserve Bank of India lowered its benchmark by 1 percentage point on Oct. 20, while China has cut borrowing costs twice in the past six weeks.

In Thailand, central bank Governor Tarisa Watanagase today said the monetary authority has room to ease interest rates to counter slower economic growth after raising borrowing costs in July and August.

To contact the reporter on this story: Shamim Adam in Singapore sadam2@bloomberg.net

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Hu Says China's Economy Stable, Pledges Coordination on Crisis

By Dune Lawrence

Oct. 24 (Bloomberg) -- Chinese President Hu Jintao said maintaining his country's economic growth rate, the fastest among major economies, is the best way to combat a credit crisis that threatens a global recession.

``The fundamentals of the Chinese economy have not changed,'' Hu said at the opening of a biennial summit of Asian and European leaders today in Beijing and after China reported its slowest growth in five years in the third quarter. ``We must first and foremost run our own affairs well.''

The two-day Asia-Europe Meeting, known as ASEM, is the first between Asian leaders since bank failures, plunging stock markets and weakening currencies amplified fears that the world is headed for a prolonged economic decline. China was pressed ahead of the meeting to get more involved in combating the crisis by attendees, including European Commission President Jose Barroso.

``It is an obligation for us to work together,'' French President Nicolas Sarkozy said during a speech at the opening ceremony, where he appealed for support for European efforts to ease the crisis. ``Europe needs Asia, it needs Asia's growth, Asia's intelligence and its creativity.''

China is seen as key to any global response because it has the world's fastest-growing major economy and $1.9 trillion of currency reserves, an amount larger than Canada's gross domestic product.

Credit Freeze

Credit markets have frozen worldwide amid $660 billion in mortgage-related losses that have forced central banks to pump $2 trillion into bailouts for failing financial institutions. The benchmark MSCI Asia Pacific Index has plunged 49 percent this year.

China ``appreciates'' measures taken by other countries and pledged to coordinate policy to help cope with financial turmoil, Hu said. China also called for increased international cooperation to create a ``fair and equitable'' global financial system and urged the International Monetary Fund to increase its surveillance, according to a statement from the Ministry of Finance.

A draft agreement from summit leaders on the financial crisis echoed China's wishes, saying the IMF should ``play a critical role'' in assisting countries affected by the crisis, according to a copy published by Reuters.

China has also agreed with 10 Southeast Asian nations, along with Japan and South Korea, to finalize a proposed $80 billion fund to shore up Asian exchange rates by the end of the year, Surin Pitsuwan, Secretary General of the Association of Southeast Asian Nations, said in an interview with Bloomberg Television.

China's Response

The ASEM meeting is one of several in the coming weeks that will focus attention on China's response to the crisis.

President George W. Bush has invited leaders from the Group of 20 industrialized and developing nations -- including China - -to attend a Nov. 15 summit in Washington, 11 days after the U.S. presidential election.

Finance ministers from the Asia-Pacific Economic Cooperation group gather in Trujillo, Peru, starting Nov. 6. APEC's heads of state get together in Lima on Nov. 22. The G- 20's finance ministers and central bank governors convene in Sao Paulo beginning on Nov. 8.

Thailand has proposed that China ease currency-conversion restrictions to facilitate the pooling of reserves and create a $350 billion fund to protect the region's currencies and buy stocks and bonds, said Thailand's Deputy Prime Minister, Olarn Chaipravat, in an interview in Bangkok on Oct. 22.

``The message of this initiative is for China to consider whether or not China would open up its banking system and allow the strongest currency in the world, which is the Chinese yuan, relative to anybody, to be the rightful and anointed convertible currency of the world,'' he said.

Crisis Lessons

Lessons from the Latin American debt crisis and Asian financial crisis are that mechanisms must be put in place rapidly to aid vulnerable markets, and China is one of the few countries with resources to play a leadership role, wrote Citigroup Inc. Senior Vice Chairman William Rhodes in the Financial Times.

China will be forced to take proposals from other Asian countries seriously, said Steve Tsang, a fellow in modern Chinese studies at St. Anthony's College, Oxford, U.K.

``If the region is financially destabilized, it will have more of an impact on China'' than the banking crisis in the U.S. and Europe, where a slowdown in consumer spending may choke off demand for Chinese products, Tsang said.

To contact the reporter on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.net

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Roubini Says Forecast of Market Shutdown Coming True

By Ben Sills and Emma Ross-Thomas

Oct. 24 (Bloomberg) -- New York University Professor Nouriel Roubini said the suspension of U.S. futures trading today shows his prediction that markets will be shut down amid panic selling is coming true.

``This morning, even before the markets in the U.S. opened, the S&P futures fell by more than their daily limit,'' resulting in futures trading being halted, Roubini told a conference in Madrid today. ``What I said yesterday has already started.''

Roubini said yesterday that policy makers may need to shut down financial markets for a week or two as investors dump assets. Trading in futures on the Standard & Poor's 500 Index and the Dow Jones Industrial Average was halted today after declines of more than 6 percent. Trading of U.S. stocks would be suspended for an hour should the Dow Jones Industrial Average decline 1,100 points to 7,591.25.

``Things are getting worse, they are not getting better,'' Roubini said. There's an increased risk of a ``multi-year economic stagnation'' in the U.S. and ``we have a whole set of emerging market economies in trouble. Even a few of them going bust may cause systemic trouble.''

Russia's RTS exchange today stopped trading after stocks slumped more than 10 percent. Europe's Dow Jones Stoxx 600 Index slid 8.5 percent. The MSCI World index of global stocks has lost 45 percent this year as the fallout from the U.S. housing crisis toppled banks from Seattle to Paris. It fell 3.8 percent at 3:14 p.m. Madrid time today.

``Catastrophic'' Meltdown

In July 2006 Roubini predicted the financial crisis. In February this year he forecast a ``catastrophic'' meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ``sharp drop'' in equities.

Roubini said that the European Central Bank should provide ``much more monetary easing'' and governments around the world must put together a massive fiscal stimulus package after action so far failed to halt the stock-market rout. The U.S. bank bail- out plan will likely require between $600 billion and $700 billion, he said.

Roubini, a former senior adviser to the U.S. Treasury Department, said earlier this month that the world's biggest economy will suffer its worst recession in 40 years.

To contact the reporters on this story: Ben Sills in Madrid at bsills@bloomberg.net; Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

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Italian Business Confidence Falls to 15-Year Low

By Lorenzo Totaro

Oct. 24 (Bloomberg) -- Italian business confidence fell to the lowest in 15 years in October and consumer optimism dipped on prospects that the global financial crisis has pushed Europe's fourth-biggest economy into a recession.

The Isae Institute's business confidence index dropped to 77.7 from a revised 81.8 in September, the Rome-based research center said today. That was less than the median forecast of 81.7 in a survey of 17 economists by Bloomberg News. Consumer confidence slipped to 102.2 from 102.8, Isae said.

The credit crunch is making it difficult for companies to borrow and invest, and the falling stock market, combined with higher mortgage rates, is weighing on consumer spending. The Italian economy contracted in the second quarter and Bank of Italy Governor Mario Draghi indicated on Oct. 21 that Italy is already in the fourth recession in a decade.

``Manufacturers' confidence has fallen to a level consistent with clearly shrinking factory output, and negative growth,'' said Marco Valli, an economist at UniCredit SpA in Milan. ``The positive effect on production of lower oil prices and the weaker currency is unlikely to show up anytime soon.''

U.K. Contracts

Oil prices have tumbled 54 percent from the record $147.27 on July 11 and dropped about 23 percent from a year ago on the prospect that a global economic recession will crimp demand. On the currency market, the euro is trading near a two-year low against the dollar, making European exports cheaper abroad.

Still, the slumping global economy is offsetting the effects of the cheaper oil and exports on confidence. The U.K. economy shrank 0.5 percent in the third quarter, the first contraction in 16 years, a report said today. Unemployment in Spain rose to the highest in more than four years and tops the EU at 11.3 percent, another report showed today.

Prospects for a global recession slammed financial markets today with Italy's benchmark S&P/MIB falling as much as 9 percent to its lowest in almost 11 years.

ISAE also presented evidence about how the freeze in credit markets is affecting the real economy. The number of Italian companies failing to get a loan, either because banks refused to lend or because the costs involved were considered excessive, rose in the third quarter to 8 percent from 6.9 percent in the previous three months, Isae said today.

Car Sales

Manufacturers are also being hit by slumping demand. Italian new auto registrations declined for a ninth straight month in September, cutting Fiat SpA's car sales by 6 percent in its biggest market.

As Italy's largest manufacturer, Fiat is a bellwether for the state of the country's economy. The carmaker now forecasts earnings may plunge as much as 85 percent next year in a ``worst-case'' scenario if the financial crisis continues to sap credit and depress auto demand. It is ``difficult to peg a particular point as being a reliable guidance for the performance of Fiat in 2009,'' Fiat said in a release on Oct. 23.

Eaton Corp., the Cleveland-based maker of power- distribution equipment and car-engine parts, said on Oct. 20 it will close an engine-valve factory in Massa, Italy, putting 355 people out of work by year-end, as demand declines in the automotive industry.

Isae conducted its survey of 4,000 companies between Oct. 1 and Oct. 20.

To contact the reporter on this story: Lorenzo Totaro at ltotaro@bloomberg.net

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U.S. Home Resales Probably Increased on Foreclosures

By Bob Willis

(Corrects to say million in penultimate paragraph.)

Oct. 24 (Bloomberg) -- Home resales in the U.S. probably rose in September, aided by foreclosure-driven declines in prices that made properties more affordable, economists said before a report today.

Purchases of existing homes rose 0.8 percent last month to a 4.95 million annual pace, just over the 4.94 million average so far this year, according to the median estimate of economists surveyed by Bloomberg News.

``Banks are foreclosing and selling homes at fire-sale prices and that is driving this,'' said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. ``A jump in existing sales would be a one-month thing -- they'll continue falling.''

The boost to sales from lower prices may be short-lived as banks withhold financing on mounting concern that record foreclosures will hurt profits and depress values even more. The collapse in lending signals the housing recession will extend well into a fourth year.

The National Association of Realtors' resales report is due at 10 a.m. in Washington. Estimates of the 66 economists surveyed ranged from 4.7 million to 5.11 million.

Purchases dropped to a 4.86 million rate in June, the lowest in a decade and down 33 percent from the record reached in September 2005.

New-Home Sales

The market for new houses is even worse off as builder discounts haven't matched the cut in prices on foreclosed properties.

The Commerce Department is forecast to report Oct. 27 that sales of new houses dropped to an annual pace of 455,000, a 17- year low, from 460,000 in August, according to the survey median. Sales are down about 67 percent from the record reached in 2005.

Average prices are down by a fifth from peaks reached in mid-2006, according to the S&P/Case Shiller Home Price Index of 20 metropolitan areas. Falling values make it harder to refinance mortgages, pushing up foreclosures in August to the highest since record-keeping began in 2005, according to Realtytrac.com.

Declines in home equity have undermined consumer spending as owners have less cash to tap. A cascade of bank losses and failures has led to the most severe financial crisis in seven decades. Most economists are forecasting a recession in the U.S. and a global slowdown.

Construction Slump

As home sales shrank, builders scaled back construction projects by 64 percent through September from a peak in January 2006, the biggest decline since at least 1959. Work began last month on the fewest single-family homes in 26 years, the Commerce Department reported last week. The number of building permits issued also fell, a sign that declines in construction will continue to hurt the economy.

``The housing downswing is really not exactly even nearing a bottom at this point,'' David Seiders, chief economist at the National Association of Homebuilders said Oct. 17 in an interview with Bloomberg Television. ``The core problem in the economy is still housing, and house prices are decimating the financial markets.''

Construction companies continue to struggle. Pulte Homes Inc., the third-largest U.S. builder, this week reported a net loss of $280.4 million for the third quarter, more than double what analysts had projected.

``A bottom in the housing market may not come for some time,'' Chief Executive Officer Richard Dugas said on a conference call yesterday.

                         Bloomberg Survey

==============================================
                            Exist    Exist
                            Homes    Homes
                             Mlns     MOM%
==============================================

Date of Release              10/24    10/24
Observation Period           Sept.     Aug.
----------------------------------------------
Median                        4.95     0.8%
Average                       4.95     0.8%
High Forecast                 5.11     4.1%
Low Forecast                  4.70    -4.3%
Number of Participants          66       66
Previous                      4.91    -2.2%
----------------------------------------------
4CAST Ltd.                    5.05     2.9%
Action Economics              4.87    -0.8%
Aletti Gestielle SGR          4.80    -2.2%
Argus Research Corp.          4.95     0.8%
Banc of America Securitie     4.90    -0.2%
Bank of Tokyo- Mitsubishi     4.94     0.6%
Barclays Capital              5.10     3.9%
BMO Capital Markets           5.00     1.8%
BNP Paribas                   5.10     3.9%
Briefing.com                  4.97     1.2%
Calyon                        5.00     1.8%
CFC Group                     4.96     1.0%
CIBC World Markets            4.80    -2.2%
Citi                          5.00     1.8%
Commerzbank AG                5.00     1.8%
Credit Suisse                 4.94     0.6%
Daiwa Securities America      4.80    -2.2%
Danske Bank                   4.95     0.8%
DekaBank                      5.10     3.9%
Desjardins Group              4.90    -0.2%
Deutsche Bank Securities      4.75    -3.3%
Dresdner Kleinwort            5.01     2.0%
DZ Bank                       4.90    -0.2%
First Trust Advisors          4.79    -2.4%
Fortis                        5.00     1.8%
FTN Financial                 4.89    -0.4%
Global Insight Inc.           5.10     3.9%
Goldman, Sachs & Co.          4.86    -1.0%
H&R Block Financial Advis     4.96     1.0%
Helaba                        5.00     1.8%
High Frequency Economics      5.10     3.9%
HSBC Markets                  5.05     2.9%
IDEAglobal                    4.85    -1.2%
Informa Global Markets        5.05     2.8%
ING Financial Markets         5.11     4.1%
Insight Economics             4.90    -0.2%
Intesa-SanPaulo               5.00     1.8%
J.P. Morgan Chase             5.00     1.8%
Janney Montgomery Scott L     4.91     0.0%
Landesbank Berlin             5.05     2.9%
Landesbank BW                 4.95     0.8%
Lloyds TSB                    4.95     0.8%
Maria Fiorini Ramirez Inc     4.80    -2.2%
Merk Investments              4.70    -4.3%
Merrill Lynch                 4.90    -0.2%
Moody's Economy.com           4.99     1.6%
National Bank Financial       4.90    -0.2%
Natixis                       5.01     2.0%
Nomura Securities Intl.       4.90    -0.2%
PNC Bank                      4.91     0.0%
RBS Greenwich Capital         5.00     1.8%
Ried, Thunberg & Co.          5.10     3.9%
Schneider Trading Associa     5.04     2.7%
Scotia Capital                4.80    -2.2%
Societe Generale              4.93     0.4%
TD Securities                 4.86    -1.0%
Thomson Financial/IFR         4.88    -0.6%
Tullett Prebon                4.97     1.2%
UBS Securities LLC            5.06     3.0%
Unicredit MIB                 4.90    -0.2%
University of Maryland        5.10     3.9%
Wachovia Corp.                4.75    -3.3%
Wells Fargo & Co.             4.87    -0.8%
WestLB AG                     4.88    -0.6%
Westpac Banking Co.           5.06     3.1%
Wrightson Associates          5.10     3.9%
==============================================

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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Denmark Raises Main Rate Half a Point to 5.5% to Boost Krone

By Tasneem Brogger

Oct. 24 (Bloomberg) -- Denmark's central bank unexpectedly raised the benchmark lending rate by half a percentage point to an eight-year high, showing policymakers will defend the krone even as the economy teeters on the brink of recession.

Copenhagen-based Nationalbanken lifted the rate to 5.5 percent, it said today. The bank's mandate is to keep the krone pegged to the euro in a 2.25 percent band. In the past week, the krone slid 0.1 percent and on Oct. 13 fell as much as 0.7 percent.

Danish mortgage rates are rising as the economy faces a contraction, with unemployment forecast to double in the next two years. House prices have fallen for three consecutive quarters and dropped an annual 5.2 percent in the three months through September. Consumer confidence plunged to the lowest in 19 years this month, the statistics office said today.

``In a climate in which the krone is under pressure, they need to react by raising rates,'' said Niels Roenholt, an economist at Jyske Bank A/S in Silkeborg, Denmark. ``But it's worrying in that it puts the Danish economy, not least mortgage holders, under even more pressure.''

The krone slipped 0.05 percent against the euro to 7.4623 as of 12.25 p.m.

The benchmark index of Denmark's 20 most-traded stocks dropped 7.4 percent as of 11:57 a.m. in Copenhagen. The yield on the 4 percent bond due November 2017 jumped 0.11 of a percentage point to 4.35 percent. The yield on Germany's 4.25 percent bond due July 2018, by comparison, slipped 0.07 of a percentage point.

`Raise Again'

``The krone has actually fallen slightly since they raised rates this morning, so they may have to raise again,'' said Jacob Graven, chief economist at Sydbank A/S in Aabenraa. ``One can't rule out an increase as early as today, or possibly in the coming days. Additional increases may well be larger than half a point.''

Denmark is raising rates as Nordic neighbors Sweden and Norway cut borrowing costs to support growth. Sweden yesterday cut the benchmark rate by a greater-than-expected 0.5 of a percentage point to 3.75 percent, the second reduction in two weeks. Norway on Oct. 15 also lowered key rate by half a point to 5.25 percent.

Today's Danish rate increase tracks moves in other economies defending small currencies, such as Hungary, which raised the benchmark by 3 percentage points to 11.5 percent on Oct. 22.

By raising rates today, the central bank is showing ``they don't want to go anywhere near the outer limits of the target range,'' Graven said. ``they want to establish long-term credibility.''

Sole Mandate

Denmark became the first European economy to enter a recession after reporting two quarters of contraction in the three months ended March 31. The economy returned to growth in the second quarter, expanding 0.4 percent.

Gross domestic product will shrink 0.2 percent this year and 1.4 percent in 2009, according to Deutsche Bank AG. That will send the budget from a surplus of about 3 percent of GDP this year to a 1 percent deficit in 2009, Deutsche Bank estimates.

Nationalbanken's mandate is to keep the krone pegged to the single currency within 2.25 percent of 7.46038 per euro.

Today's move is the fourth time since February 2006 that the bank has changed rates independently of the European Central Bank. The bank last raised the rate on Oct. 7 by 0.4 of a percentage point to 5 percent.

The move was part of a ``continued intervention to support the Danish krone,'' the bank said in a statement.

Denmark is one of five members of the Exchange Rate Mechanism 2 and defends the tightest spread to the euro. The bank doesn't hold scheduled meetings and changes rates in response to currency swings that threaten its target.

To contact the reporters on this story: Tasneem Brogger in Copenhagen at tbrogger@bloomberg.net;

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U.K. GDP Shrinks, First Recession Since 1991 Looms

By Jennifer Ryan

Oct. 24 (Bloomberg) -- The U.K. economy shrank more than forecast in the third quarter as the financial crisis ravaged industries from banking to construction, evidence that Britain is in the grips of its first recession since 1991.

Gross domestic product dropped 0.5 percent from the second quarter, the first contraction in 16 years, the Office for National Statistics said today in London. Economists predicted a 0.2 percent decline, according to the median of 35 forecasts in a Bloomberg News survey. Growth stalled in the prior three months.

The pound had the biggest intraday drop against the dollar in at least 37 years as the report confirmed Prime Minister Gordon Brown's prediction this week that a recession is likely. His government's 500 billion-pound ($805 billion) bank rescue and the Bank of England's half-point rate cut this month, the biggest since 2001, may have come too late to prevent further contraction.

``It's pretty bleak and it looks ever more likely that we're going to have a recession that resembles what we saw in the early 1990s,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. ``We'll see another half point cut at the bank's next meeting, if not sooner.''

The pound fell as much as 2.5 percent against the dollar after the report and traded at $1.5518 as of 12:40 p.m. in London. The FTSE 100 benchmark stock index fell as much as 9.11 percent today to touch a low of 3715.24.

IMF Forecast

The U.K. is the first of the Group of Seven nations to announce GDP figures for the third quarter. The International Monetary Fund predicts the world's advanced economies will next year grow at the slowest pace since 1982 as the U.S. falters, and global growth will be 3 percent, on the cusp of the group's informal definition of a world recession.

``We are determined to do everything we can and as soon as we can to help people,'' Chancellor of the Exchequer Alistair Darling told Sky News today. ``We've got to work together. the credit crunch is global.''

Today's data prompted economists at BNP Paribas to predict a full percentage-point interest-rate reduction from the current 4.5 percent at the Nov. 6 decision, followed by a half-point cut in December. Bank of America Corp and JPMorgan Chase & Co. forecast a 0.75 percentage-point cut for next month. The bank hasn't cut by more than half a point since it started setting rates in 1997.

Service industries, accounting for 75 percent of the economy, shrank 0.4 percent in the quarter, the first contraction since 1992, the statistics office said. Business services and finance output dropped 0.4 percent, the first decline since 2002.

Bank Rescue

The U.K. government announced plans to buy stakes in Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group Plc in a rescue this month after money market tensions undermined investor confidence in banks around the world.

Manufacturing production dropped 1 percent and construction slipped 0.8 percent as both areas of the economy fell into a recession, the statistics office said. Together they make up about 20 percent of gross domestic product.

Manganese Bronze Holdings Plc, the biggest maker of London's iconic black cabs, fell the most in at least 19 years on Oct. 22 after the global financial crisis and economic slowdown sent taxi sales plunging. Travis Perkins Plc, the U.K. building materials distributor that owns the Wickes home-improvement chain, dropped the most in 19 years on Oct. 16 after saying it plans to scrap its dividend to hoard cash.

Europe's services and manufacturing industries contracted the most since 1998 in October as the crisis squeezed exports and consumer spending, according to a survey of purchasing managers released today.

Recession Forecast

Bank of England Governor Mervyn King said Oct. 22 economic news has ``probably been the worst in such a short period for a very considerable time,'' and that ``it now seems likely that the U.K. economy is entering a recession.'' He said policy makers will act ``promptly'' to keep inflation from slowing too much.

The governor's remarks came after the Bank of England joined the European Central Bank, the U.S. Federal Reserve, and counterparts around the world in a coordinated half-point rate cut on Oct. 8 to stem the financial crisis.

Lenders worldwide have had $660 billion of writedowns and losses from a credit freeze that a succession of government rescue plans has yet to unlock. U.S. lawmakers are considering a second fiscal stimulus and Italy, Germany and France are looking at tax breaks to shield their economies from the crisis fallout.

Brown gained popular support at the expense of the Conservative opposition after he announced the bank rescue plan. His Labour Party rose 6 points to 30 percent among those certain to vote, while the Conservative Party fell 7 points to 45 percent, according to an Ipsos MORI Ltd. poll released this week.

`Defining Moment'

Today's report ``is a defining moment in the record of Gordon Brown,'' said George Osborne, the Conservative spokesman on Treasury affairs. ``The day that we can all see that the central claims he made over 10 years, that he had abolished boom and bust and therefore didn't need to set aside money for a rainy day has been shown to be completely false.''

Brown said two days ago that officials must ``take action on the global financial recession'' to protect the U.K. economy. Unemployment has already risen at the fastest place in 17 years, and economists including Michael Saunders at Citigroup Inc. say more job losses will follow.

``We expect we are now in a recession,'' Nick Bate, an economist at Merrill Lynch & Co. in London and a former U.K. Treasury official, told Bloomberg Television. ``Momentum is on a strong downward path. We're looking to the second half of 2009 before we start to recover.''

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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BG Said to Bid for Stake in Queensland Gas, May Lead to Offer

By Eduard Gismatullin and Ambereen Choudhury

Oct. 24 (Bloomberg) -- BG Group Plc, the third-largest U.K. oil and natural-gas producer, is negotiating to buy Australian AGL Energy Ltd.'s stake in Queensland Gas Co. and may bid for the company, two people familiar with the plan said.

BG approached Sydney-based AGL and has offered to acquire its 24.9 percent shareholding in Queensland Gas, BG's partner in an Australian A$8 billion ($5 billion) coal-seam gas project, the people said, declining to be identified because the talks are confidential. The stake's market value is A$726 million, based on today's closing share price. An announcement may come as early as Monday, the people said.

BG Group already owns 9.9 percent of QGC and has a 20 percent interest in some of its assets as it builds gas reserves to tap rising demand in north Asia. Last month, BG dropped its A$13.8 billion offer for Origin Energy Ltd., Australia's biggest producer of natural gas from coal seams, after Origin attracted an investment of as much as $8 billion from ConocoPhillips.

``BG was right to walk away from the overpriced Origin Deal, while QGC offers almost the same reserves potential but at a fraction of the price,'' Richard Griffith, an analyst at Evolution Securities Ltd. in London, wrote today in an e-mailed report.

Brisbane-based Queensland Gas has a market capitalization of A$2.9 billion. BG spokeswoman Jo Thethi said the company doesn't have any comment, while Hedley Thomas, a spokesman for QGC, also declined to comment.

Trading Halt

AGL was halted from trading in Australia pending a ``possible material transaction,'' according to the company statement, while Queensland Gas also requested a halt for its shares.

``We've got no comment until we make an announcement, hopefully before the trading commences on Tuesday morning'' next week, Graeme Thompson, head of investor relations at AGL, said by phone today. ``We've said our ultimate strategy was to exit the equity stake that we have in the company and move to a holding at the acreage level, be it QGC acreage or other acreage.''

BG shares fell as much as 100 pence, or 13 percent, to 674 pence in London trading. They were down 7.8 percent at 713.5 as of 12:16 a.m. local time.

Like Origin Energy, Brisbane-based Queensland Gas owns coal-seam gas fields in Queensland state in northeastern Australia. BG plans to develop an A$8 billion liquefied natural gas project with the company, to export the fuel by tanker and tap rising demand in north Asia.

LNG Project

Buying Queensland would help boost the Reading, England- based company's LNG project pipeline. Macquarie Group Ltd. analysts said in an Oct. 8 note BG will probably seek alternative investments after failing to buy Origin Energy, to improve its ability to profit from the ``premium-priced'' Asian gas market.

``BG already has an agreement with QGC to offtake LNG from the first train, but raising its stake will give it greater control of the Australian company,'' Iain Reid, a London-based analyst at Macquarie, said by phone today. Yesterday's Macquarie report on Queensland estimated that the company could be worth A$6.1 a share ``if acquired by a company with a lower cost of capital and access to funds such as BG,'' he said.

Queensland is bidding for Sunshine Gas Ltd. to use its reserves for local demand. It got regulatory approval for the deal Oct. 12 and declared the bid unconditional.

Queensland Gas said Sept. 17 its reserves increased by 6 percent in 10 weeks after drilling more wells. Proven reserves rose to 705 petajoules. Proven and probable reserves rose almost 12 percent to 2,703 petajoules, compared with 5,770 petajoules of proved and probable reserves held by Origin Energy.

Coal-Seam Gas

``Queensland Gas has the second-biggest exploration area for coal-seam gas after Arrow Energy Ltd.,'' Andrew Pedler, an analyst with Brisbane-based Wilson HTM, said today. ``AGL has an imperative to put its foot on sufficient gas to set aside for future needs,'' he said.

BG produces LNG in Trinidad and Egypt and its most advanced planned venture is the 14.25 percent-owned OK project in Nigeria, which is suffering delays.

LNG is natural gas cooled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net. Eduard Gismatullin in London on egismatulling@bloomberg.net

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Oil Tumbles on Signs OPEC Cut Won't Halt Slide as Demand Drops

By Mark Shenk

Oct. 24 (Bloomberg) -- Crude oil tumbled to a 16-month low as OPEC's decision to slash production by 1.5 million barrels a day failed to ease concern that the global economic slump is curbing fuel demand.

``At this stage it looks like we are at the edge of a bottomless pit and prices are heading quickly toward $50,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``OPEC really needed to take the bull by the horns and make a bigger cut.''

The 13 members of the Organization of Petroleum Exporting Countries agreed to lower supply starting in November, oil ministers said today at a meeting in Vienna. Prices have dropped 57 percent from the record $147.27 a barrel reached on July 11 as stock markets declined.

Crude oil for December delivery fell $3.96, or 5.8 percent, to $63.88 a barrel at 9:20 a.m. on the New York Mercantile Exchange. Futures touched $62.85, the lowest since May 31, 2007. Prices are down 27 percent from a year ago.

Stocks tumbled around the world on concern the economic slump will crimp earnings. Treasuries rose as investors sought the safest assets, and the yen climbed to a 13-year high against the dollar.

``Every market participant is scared to death,'' said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``Commodities are one of the riskiest asset classes, so of course, they are taking a big hit.''

`One Quick Decision'

OPEC's production cut was ``one quick decision,'' Saudi Arabian Oil Minister Ali al-Naimi said in an interview. The group's president and Algerian Oil Minister Chakib Khelil said at a news conference that the cut will be ``100 percent effective'' in stabilizing prices.

OPEC's reduction will be from the existing quota for 11 members of 28.8 million barrels a day. Saudi Arabia, the group's largest producer, will reduce its output target by 466,000 barrels a day. Iran, the second-biggest, will cut 199,000 barrels, OPEC said in a statement.

``The 1.5 million cut does suggest, at least somewhat, that OPEC understands it can't be behind the curve in a decreasing demand environment,'' said Christopher Edmonds, the managing principal of FIG Partners Energy Research & Capital Group in Atlanta. ``If they don't react firmly, any minimal chance to regain a position of strength will disappear for the foreseeable future, if not longer.''

Brent crude oil for December settlement declined $4.07, or 6.2 percent, to $61.85 a barrel on London's ICE Futures Europe exchange. Futures touched $61, the lowest since March 21, 2007.

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

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OPEC Agrees to Cut Production Quotas as Price Slumps

By Maher Chmaytelli and Margot Habiby

Oct. 24 (Bloomberg) -- The Organization of Petroleum Exporting Countries cut oil production targets for the first time in almost two years to stem a collapse in prices.

OPEC decided to lower supply by 1.5 million barrels a day from November, oil ministers said today at the end of a meeting at the group's Vienna's headquarters. The reduction will be from the existing quota for 11 members of 28.8 million barrels a day.

``Demand is significantly less than what is being supplied, that is the reason the cut was taken,'' Saudi Arabian Oil Minister Ali al-Naimi said after the meeting. Crude oil has tumbled 57 percent from a July 11 record of $147.27 a barrel as the financial market crisis spreads, job cuts increase and fuel consumption slows. Prices fell as much as 7.1 percent after the decision.

``OPEC has offered the market all the ammunition they had,'' said Robert Laughlin, senior broker at MF Global Ltd. in London. ``With the bearish economic outlook and manufacturing in freefall this accord is not good enough.''

The International Energy Agency said Oct. 10 that demand among industrialized nations will fall 2.2 percent this year, reducing overall world demand growth to 0.5 percent.

OPEC President and Algerian Oil Minister Chakib Khelil said at a news conference that the cut will be ``100 percent effective'' in stabilizing prices.

Saudi Arabia, the group's largest producer, will reduce its output target by 466,000 barrels a day. Iran, the second-biggest, will cut 199,000 barrels, OPEC said in a statement. Kuwait's share of the reduction will be 132,000 barrels, the United Arab Emirates 134,000 barrels and Venezuela 129,000 barrels.

Another Cut

Another cut in December is ``possible,'' depending on how the oil market reacts, Qatari Oil Minister Abdullah bin Hamad al- Attiyah said in an interview after the decision. The producer group is scheduled to convene in Oran, Algeria, on Dec. 17.

Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut, said in an interview in Vienna that a further reduction of 500,000 barrels a day is possible.

``If prices continue to fall, they may find themselves having to revisit deeper production cuts,'' Armstrong said.

Al-Naimi said there was no need for a further cut yet. Conversely, should prices rally again, OPEC would consider raising production, the Saudi minister said.

Oil for December delivery dropped as much as $4.79, or 7.1 percent, to $63.05 a barrel on the New York Mercantile Exchange after OPEC announced its decision. Crude was at $63.82 at 11:56 a.m. London time.

Price Levels

Saudi's al-Naimi rejected a suggestion put forward by Venezuela that the group re-establish a target price range. OPEC nations use different price assumptions in their government budgets and the group abandoned a range of $22 to $28 a barrel several years ago.

``I just wish they would say what price they want,'' John Hall, managing director of John Hall Associates Ltd., said today in an interview in Vienna. ``Is it $60, $80 or $90?''

At a meeting last month, OPEC urged greater compliance with existing quotas, saying that would reduce supply by about 500,000 barrels a day. OPEC members excluding Iraq and Indonesia last month pumped 390,000 barrels a day more than their combined quota of 28.8 million barrels a day, according to Bloomberg estimates.

The last time OPEC decided to slash official quotas was at a December 2006 meeting in Abuja, Nigeria. The 500,000 barrel-a-day cut took effect in February 2007, expanding an earlier reduction agreed in October. The cuts were reversed later in 2007 as oil rallied.

Historic Mistake

Eleven years ago, OPEC members bickered about output quotas as oil slid 28 percent in 10 months amid the onset of the Asian financial crisis. At a meeting in Jakarta in November 1997, they raised quotas, ignoring the turmoil that slowed Asian economies and cut oil demand. Prices fell another 44 percent by December 1998 to below $11 a barrel.

``The important thing about this meeting is that it shows they have the resolution and cohesion to deal with the downturn in demand and not repeat the mistake of the Asian crisis,'' David Kirsch, an industry consultant at PFC Energy said today in an interview in Vienna.

To contact the reporters on this story: Margot Habiby in Vienna at mhabiby@bloomberg.net; Maher Chmaytelli in Vienna at mchmaytelli@bloomberg.net.

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OPEC Agrees to First Crude Production Cut in Two Years (Table)

By Ben Farey

Oct. 24 (Bloomberg) -- The following table lists the agreed production cuts announced today by OPEC's member states. The figures are in barrels a day.

The Organization of Petroleum Exporting Countries decided to lower supply by 1.5 million barrels a day from November, oil ministers said today at the end of a meeting at the group's Vienna's headquarters. The reduction will be from the existing quota for 11 members of 28.808 million barrels a day.

                          Production Cut

Algeria                       71,000
Angola                        99,000
Ecuador                       27,000
Iran                         199,000
Kuwait                       132,000
Libya                         89,000
Nigeria                      113,000
Qatar                         43,000
Saudi Arabia                 466,000
U.A.E.                       134,000
Venezuela                    129,000

TOTAL                      1,500,000

To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net

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Swiss Franc Gains Most Ever Against Euro, Threatening Exports

By Joshua Gallu

Oct. 24 (Bloomberg) -- The Swiss franc rose the most against the euro since the common European currency's debut in 1999 as the economic outlook for the 15-nation area worsened.

The franc gained as much as 3.4 percent after euro-area manufacturing and services shrank at a record pace and the U.K. economy contracted in the third quarter.

``The franc is going through the roof against the euro,'' said Janwillem Acket, Zurich-based chief economist at Bank Julius Baer, Switzerland's biggest independent wealth manager. ``This is certainly bad news for Swiss exporters to the euro area.''

The franc's 14 percent gain against the euro this year is eroding the value of Swiss exporters' sales in the single currency region, just as economies including Germany and France slide toward recession. The European Union accounts for more than half of Swiss products sold abroad.

Switzerland's leading economic indicators dropped to the lowest in five years last month and a measure of manufacturing growth signaled contraction for the first time in more than three years. Swiss exports declined for the first time in almost four years in September as slowing growth damped orders.

The franc gained 2.9 percent to 1.4553 per euro by 12:10 p.m. in Zurich, the strongest since March 5, 2003. Against the dollar, it was little changed at 1.1597.

``If we go the 1.45 level'' against the euro, ``we'll have the setting for a rate cut,'' Acket said. ``The SNB may even cut rates as early as December.''

The Swiss National Bank joined global central banks in cutting rates Oct. 8 as credit markets froze, lowering its benchmark to 2.5 percent from 2.75 percent. SNB President Jean- Pierre Roth told Aargauer Zeitung last week that he may lower interest rates further if the economy worsens.

To contact the reporter on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net

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Brazil's Real Drops as Global Stocks Fall, U.S. Limits Futures

By Drew Benson

Oct. 24 (Bloomberg) -- Brazil's real dropped as global stock markets plunged and trading in U.S. futures was limited amid widespread flight from higher-yielding, emerging-market assets.

The real slid 4.4 percent to 2.367 per dollar at 9:31 a.m. New York time, from 2.2608 yesterday.

The central bank bought reais for dollars at a rate of 2.35 per dollar in a bid to shore up the currency during a 10-minute window that opened at 8:53 a.m. New York time. The bank also said it will offer 40,000 currency swaps today. With them, the bank sells the U.S. currency in the futures market, allowing investors to hedge against a weaker real.

``Overall risk reduction amidst concerns about global recession and talk of position liquidations by troubled funds that may already have suffered losses this week on the emerging- markets tumble are contributing to the move'' worldwide to the U.S. dollar and the Japanese yen, said New York-based Marc Chandler and Meg Browne of Brown Brothers Harriman in a research note.

The real's decline erased a rebound yesterday sparked by a central bank announcement that it will pump the equivalent of $50 billion into currency markets, its biggest move yet to bolster the currency.

The real has tumbled 31 percent from a nine-year high on Aug. 1.

To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net

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Mexican Peso Drops and Approaches Record on Growth Concern

By Valerie Rota

Oct. 24 (Bloomberg) -- Mexico's peso fell to near a record low on mounting concern the global economic slowdown will deepen, sapping demand for developing nation exports.

The peso dropped 1.8 percent to 13.6615 per U.S. dollar at 8:29 a.m. New York time, from 13.4170 yesterday, when it touched a record low of 14.3017.

The peso has fallen 20 percent in October, heading for its worst monthly performance since December 1994, when Mexico devalued its currency to keep the nation from depleting its foreign reserves.

To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.

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Rupee Has 11th Weekly Loss as Stocks Plunge, Growth Outlook Cut

By Anoop Agrawal and Anil Varma

Oct. 24 (Bloomberg) -- India's rupee dropped for an eleventh week, the longest losing streak since December 2005, as the nation's benchmark share index plunged the most in four years on signs global economies are headed for a recession.

The currency weakened past 50 per dollar for the first time earlier as the Reserve Bank of India cut the economic growth outlook for the year ending March 31 to as little as 7.5 percent from an earlier estimate of 8 percent. The central bank also left the benchmark interest rate unchanged, dashing investor expectations for a reduction to prevent an economic slump.

``Domestically, the exchange rate is not getting support from the interest-rate policy and a cut in borrowing costs would have further driven away rupee investors,'' said Vinod Kumar Khanna, general manager of treasury at state-owned Union Bank of India in Mumbai. ``With global equity markets under intense pressure, the rupee will weaken further.''

The rupee, which was made partly convertible in 1993, slid as much as 0.7 percent to 50.165 per dollar, an all-time low, before closing at 49.96 at 5 p.m. in Mumbai, according to data compiled by Bloomberg. It fell 2.2 percent this week. Nine of the 10 most-traded Asian currencies declined this week.

The currency has lost more than 21 percent versus the dollar this year and is the worst performer in Asia after South Korea's won. It is headed for its worst year since 1991, when the nation devalued it by an average 20 percent against four major currencies to help boost exports.

Risk of Flight

The central bank today left the repurchase rate at 8 percent, four days after slashing it by 1 percentage point.

``The recent slide in the rupee has stopped the central bank from further loosening monetary policy'' as it may ``increase the risk of capital flight,'' said Sherman Chan, an economist at Moody's Economy.com.

The rupee pared losses on speculation the central bank intervened to stem declines. The Reserve Bank doesn't comment on daily rupee movements, according to its Mumbai-based spokeswoman Alpana Killawala.

India's foreign-exchange reserves have dwindled by more than $42 billion to $273.9 billion as on Oct. 17, from a record $316.2 billion reached in May, central bank data show. The drop indicates policy makers sold dollars.

Overseas funds are shunning emerging-market assets as Pakistan, Hungary, Iceland, Ukraine and Belarus approached the International Monetary Fund for financial aid. Russia faces possible cuts to its sovereign debt rating and Argentina said this week that it will seize its nation's pension funds.

Shunning Assets

Sales of Indian shares by overseas investors this year exceeded purchases by a record $12.2 billion as the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, slid more than 55 percent. The gauge, headed for its first annual decline since 2001, fell 11 percent today, the most since May 2004.

The MSCI Asia Pacific Index of regional shares tumbled as much as 6.2 percent today, touching the lowest since 2004.

Asia's third-biggest economy faces a ``temporary slowdown'' in the year ending March 31, Prime Minister Manmohan Singh said on Oct. 20. Growth averaged almost 9 percent in the five years through March 31, the fastest for such a period since India gained independence from Great Britain in 1947.

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

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