Obama Administration Tries to Reassure China on Treasury Debt

By Rebecca Christie and Kim Chipman

March 14 (Bloomberg) -- The U.S. sought to ease Chinese Premier Wen Jiabao’s concern about the security of his country’s investments in U.S. government debt, reiterating pledges to cut the budget deficit in half in four years.

“There’s no safer investment in the world than in the United States,” White House Press Secretary Robert Gibbs said yesterday at a briefing in Washington.

Gibbs was responding to comments from Wen that China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets,” Wen said at a press briefing in Beijing.

President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of U.S. debt sales to fund a $787 billion stimulus package and a deficit this year forecast to reach $1.5 trillion. Investors abroad own almost half of all U.S. debt outstanding, and China last year overtook Japan as the biggest foreign buyer.

Wen’s comments contributed to a decline in Treasuries yesterday. Yields on benchmark 10-year notes rose as high as 2.96 percent, from 2.85 percent a day earlier, and closed at 2.89 percent.

White House National Economic Council Director Lawrence Summers, asked yesterday about Wen’s remarks, said overseas “confidence” in Treasuries would be hurt without the administration’s steps to end the economy’s decline.

Japan, China

China held $696 billion in U.S. Treasury debt as of Dec. 31, more than Japan’s holdings of $578 billion. Foreign holdings of U.S. Treasury debt at the end of last year totaled $3.1 trillion.

The Treasury also offered a response that sought to reassure investors.

“The U.S. Treasury market remains the deepest and most liquid market in the world,” Treasury spokeswoman Heather Wong said in an e-mailed statement. “President Obama is committed to taking the steps necessary to restore growth and put this country on the path of fiscal sustainability, including cutting the long-term deficit in half over the next four years.”

During the first five months of fiscal 2009, which began Oct. 1, the U.S. budget deficit swelled to a record $764.5 billion for the period, compared with a $265 billion shortfall during the same period a year earlier. The shortfall this year already has exceeded the record $459 billion gap for all of 2008.

‘Stronger Position’

The administration is “tackling many long-ignored problems, ensuring that the U.S. will be in a stronger position than ever,” Wong said. “We are facing whatever challenges come up and will continue to do so.”

Treasuries have handed investors a loss of 2.7 percent in yuan terms this year, according to Merrill Lynch & Co.’s U.S. Treasury Master index. Chinese holdings of the securities surged 46 percent last year, according to Treasury Department data.

“Of course we are concerned about the safety of our assets,” Wen said after an annual meeting of the legislature. “To be honest, I am a little bit worried.”

Diversifying Reserves

China should seek to “fend off risks” as it diversifies its $1.95 trillion in foreign-exchange reserves, Wen said. Yu Yongding, a former adviser to the central bank, said in an interview on Feb. 10 that the nation should seek guarantees that its Treasury holdings won’t be eroded by “reckless policies.”

Treasuries have benefited from demand as a haven in the past two years as financial companies reported $1.2 trillion in credit losses. China boosted holdings of government debt as it lost more than $5 billion from investing $10.5 billion of its reserves in New York-based Blackstone Group LP, Morgan Stanley and TPG Inc. since mid-2007.

“China won’t sell the U.S. debt now as that will only drive down Treasury prices, hurting not only the U.S. but also the value of its own investments,” said Shen Jianguang, a Hong Kong-based economist at China International Capital Corp., an investment bank partly owned by Morgan Stanley.

U.S. Secretary of State Hillary Clinton urged China, while visiting officials in Beijing on Feb. 22, to continue buying U.S. debt, which she called a “safe investment.”

To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net; Kim Chipman in Washington at kchipman@bloomberg.net.

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G-20 Looks to Tackle Toxic Assets, Defuse Tension

By Simon Kennedy

March 14 (Bloomberg) -- Group of 20 finance ministers zeroed in on cleansing banks of toxic assets as they sought to set aside a transatlantic dispute on how best to fight the global recession.

As the officials gathered for talks in southern England, Canada’s Jim Flaherty and Christine Lagarde of France signaled they were seeking fresh ways to tackle the banking crisis, which continues to choke off money from their economies.

“You are not going to have a substantial recovery in the real economies until we solve this bank issue,” Flaherty told reporters in Horsham. Lagarde, who this week stoked concerns of a rift with the U.S., said in an interview that “it would be major” if the G-20 agreed how to aid banks.

A deepening slump and the banking turmoil are forcing officials to form a more united approach. The run-up to the meeting was marred by discord as European governments rebuffed a U.S. call to spend more money and demanded more focus be paid to tightening market regulation.

“We need urgent policy action,” Simon Johnson, a former chief economist at the International Monetary Fund and now a senior fellow at the Peterson Institute for International Economics, told Bloomberg Television. “The financial sector problems are far from over. We have a worsening real economy.”

Luxury Resort

The G-20 officials dined last night at a luxury countryside retreat and continue discussions today. The gathering will build the agenda for an April 2 summit of national leaders in London.

They met at the end of a week in which the IMF said the global economy would contract for the first year since World War II. Data in recent days showed U.S. consumer confidence near a 28-year low, Chinese exports plunging by a record and German factory orders sinking 38 percent.

IMF Managing Director Dominique Strauss-Kahn warns that failure to step up efforts to rid banks of damaged securities may delay the economic recovery beyond 2010. “If you don’t take on the banking issue, stimulus is just like a sugar high,” World Bank President Robert Zoellick said yesterday in London.

Indicating that banks remain reluctant to lend 19 months after the crisis began, the London interbank offered rate, or Libor, that they say they charge each other for three-month funds, this week rebounded to the highest since Jan. 8. Financial companies are still hoarding cash after being stung by almost $1.2 trillion of writedowns and losses.

Britain’s Bailout

The U.S. has yet to implement its plan to remove tainted assets from banks, while the U.K. has guaranteed 585 billion pounds ($820 billion) of them held by Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.

German Chancellor Angela Merkel’s government is considering a plan to take over non-performing bank assets until they mature, enabling lenders to avoid massive write-offs while dodging a new bailout, according to three people familiar with the proposal.

Having told LCI Television yesterday morning that G-20 members “don’t exactly have the same priorities,” Lagarde later said she was “very optimistic” that a compromise could be found between the U.S.’s urging of greater stimulus and Europe’s request to toughen market rules. “Everyone is working with that spirit,” she said in an interview in Horsham.

Resolving Differences

“There’s a lot of common ground between us, although, obviously with 20 people around the table, there are bound to be differences,” U.K. Chancellor of the Exchequer Alistair Darling said. “I would expect for people to sit down and resolve those differences.”

For their part, U.S. officials said they weren’t obsessed with easing fiscal policy alone and that they were also keen to overhaul governance of markets to prevent future crises. Treasury Secretary Timothy Geithner “will reiterate the dual priorities of forging consensus on the need for sustained action toward recovery and growth, while coordinating and reforming the international regulatory and supervisory system,” his office said.

Geithner approached the G-20 talks by lobbying his counterparts to follow the U.S. in injecting fiscal stimulus equivalent to at least 2 percent of their economy’s gross domestic product this year. European officials argued they had already spent enough, ran bigger social safety nets and didn’t want to blow out budgets.

The U.S. push for governments to do more was heeded by Japan, where Prime Minister Taro Aso ordered a third spending plan. The U.S. and Japan share the view that “combating economic and financial crisis should be a priority at this point, although regulatory reform is important,” Japanese Finance Minister Kaoru Yosano said after meeting Geithner.

G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.

To contact the reporter on this story: Simon Kennedy in Horsham at Skennedy4@bloomberg.net

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Australia Oil Spill ‘Tragedy’ for Sunshine Coast

By Candice Zachariahs

March 14 (Bloomberg) -- The Australian state of Queensland will “pull out all stops” to restore tourist traffic before the Easter holidays to areas including its Sunshine Coast tainted by an oil spill “substantially” larger than estimated.

Queensland Premier Anna Bligh declared parts of the Sunshine Coast, Moreton Island and Bribie Island disaster zones after a container ship leaked fuel oil in a storm, threatening populations of turtles, pelicans and other wildlife. The slick has contaminated about 60 kilometers (37 miles) of beach and mangroves, the Australian newspaper reported today.

“Preparations are ongoing to restore all beach areas as soon as possible, but there is no denying that this is a tragedy for the affected regions,” Tourism Minister Desley Boyle said. Tourism Queensland has begun work on a marketing campaign before the “crucial Easter holiday period,” she said today in a statement.

Tourism employs 103,000 people and contributes more than A$8 billion ($5.3 billion) to Queensland’s economy, according to data on the Tourism Queensland Web site. The state also produces commodities including coal, copper and zinc, and agricultural products such as sugar and cotton.

Swire Shipping, operator of the MV Pacific Adventurer said yesterday the vessel discharged “substantially more” heavy fuel oil than previously estimated.

230 Tons

Queensland’s Deputy Premier Paul Lucas said today the spill was about 230 tons, according to the Australian Broadcasting Corp. Initial estimates were that some 20 metric tons of heavy fuel oil had leaked from the vessel. Moreton Island -- about 40 kilometers off Brisbane -- is the worst affected spot, ABC said.

The accident occurred when 31 containers carrying ammonium nitrate washed overboard in rough seas whipped up by Tropical Cyclone Hamish, piercing the hull of the Pacific Adventurer.

More than 100 rescue workers have been deployed to help repair the damage north of the state capital, Brisbane, and more are on standby, the Queensland state government said.

Seventeen oiled birds have been recovered and a comprehensive oiled wildlife response plan is in place, Maritime Safety Queensland said.

Selected Sunshine Coast beaches will be closed for at least the next 24 hours, while four-wheel-drive access to Moreton Island will be closed until March 16, Boyle said. Beaches on the ocean side of Moreton Island and Ocean Beach on Bribie Island are closed to campers and vehicles till further notice, she said.

Election Issue

The oil spill may become an election issue for Premier Bligh, who is seeking a fifth straight term in office at polls March 21. Opposition leader Lawrence Springborg yesterday accused Bligh of not acting on warnings and then lying about the extent of the disaster, according to The Australian newspaper.

The global financial crisis has already wiped A$8 billion from state revenue, making likely a A$1.57 billion cash deficit in the year ending June 30, Treasurer Andrew Fraser said Feb. 20, given the Bligh government’s commitment to A$17 billion in infrastructure spending.

Standard & Poor’s cut Queensland state debt rating on Feb. 20 citing its large spending program and a “significant decline” in operating revenue.

The opposition Liberal National Party leads Bligh’s Labor Party with 51 percent of support, showed a Newspoll survey of 850 people published in the Australian newspaper on March 10.

To contact the reporters on this story: To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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Asian Currencies Have Best Week of 2009, Led by Won, Rupiah

By Lilian Karunungan

March 14 (Bloomberg) -- Asian currencies strengthened this week, led by South Korea’s won and the Indonesian rupiah, as a global stocks rally spurred demand for emerging-market assets.

The won gained the most in almost three months against the dollar and the rupiah climbed for the first week in nine after Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. said they were profitable. The Bloomberg-JPMorgan Asia Dollar Index had its best weekly advance this year after the U.S., the region’s biggest export market, reported a smaller drop in February retail sales than economists forecast.

“Risk appetite and sentiment has turned more optimistic this week as markets were able to look past bad news to focus on the good,” said Carl Rajoo, an economist at Forecast Singapore Pte. “News on the U.S. banks and the better-than-expected retail sales reinforce hopes that the economy may be bottoming. As a result, equities rallied and likewise Asian currencies.”

The won was at 1,483.50 per dollar as of 3 p.m. yesterday in Seoul, 4.5 percent higher than a week ago. The rupiah rose 0.9 percent this week to 11,978. The Asia Dollar Index climbed 0.7 percent this week, its best performance since the period ended Dec. 19.

Bank of America, JPMorgan and Citigroup all said they made money in the last two months, helping counter the $1.2 trillion of credit losses announced by financial companies since mid- 2007.

Stock Gains

The MSCI Asia-Pacific Index of shares climbed 3.7 percent in the week, halting four weeks of losses.

The won, Asia’s worst performer of 2009, pared this year’s loss to 15 percent. The Kospi stock index rose 6.7 percent this week.

“The atmosphere is turning a bit favorable,” said Lee Young Chul, a currency dealer with Korea Exchange Bank in Seoul. “Still, it’s hard to say a trend for the won’s strength has taken root as there’s no strong view formed on the direction of the market.”

Malaysia’s ringgit gained 0.3 percent this week to 3.7055 per dollar in Kuala Lumpur. The government on March 10 announced a $16 billion economic stimulus plan to help sustain growth. The U.S., Japan, Singapore, Hong Kong and Taiwan are all already in recession.

“We can see risk appetite coming back into the ringgit trades,” said Tan Voon Ching, a currency trader at OSK Investment Bank Bhd. in Kuala Lumpur. “The question remains if this is sustainable.”

Extend Losses

Asian currencies will extend losses in the second quarter as exports slump and fiscal deficits widen, according to DBS Group Holdings Inc., which said the Indian rupee is its “chief concern.”

The India rupee was at 51.5875 per dollar in Mumbai, up 0.2 percent from a week ago. DBS predicts the currency, which reached a record low of 52.183 on March 3, will weaken to 55 by the end of June.

“Many Asian currencies actually lack the positive fundamentals they enjoyed before the global crisis,” Philip Wee, a Singapore-based senior currency economist at Southeast Asia’s largest bank, wrote in a report dated March 12. “On average, the collapse in exports was significantly worse than those during the global tech crisis in 2001-2002 and the Asian financial crisis in 1997-1998.”

Taiwan’s dollar rose 0.8 percent this week to NT$34.495 versus the U.S. currency, Singapore’s strengthened 0.3 percent to S$1.5422 and the Thai baht climbed 0.4 percent to 35.94. The Philippine peso and Vietnam’s dong were both little changed at 48.550 and 17,482.50, respectively.

To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net

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Iraq Minister Says Japan Wanted in Oil Projects, Nikkei Reports

By Kanoko Matsuyama

March 14 (Bloomberg) -- Iraq wants Japanese companies to help develop its oil fields, the Nikkei newspaper reported, citing an interview with Iraqi Oil Minister Hussain al- Shahristani.

The Mideast nation is studying technical details of proposals for development of its Nasiriyah field and a refinery, Nikkei cited Shahristani as saying.

Two European alliances led by Italy’s Eni SpA and Spain’s Repsol YPF SA and a Japanese group comprising Nippon Oil Corp., Inpex Corp. and JGC Corp. are competing to develop the field in southern Iraq with an estimated daily output of 300,000 barrels, Nikkei said.

Iraq will name a developer for the project, which is expected to cost as much as 1 trillion yen ($10 billion), as early as April, after receiving estimates this month, the report said, citing the oil minister.

To contact the reporter on this story: Kanoko Matsuyama in Tokyo at kmatsuyama2@bloomberg.net.

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Saudi Paper Manufacturing Expands Output by 79% at Dammam Plant

By Glen Carey

March 14 (Bloomberg) -- Saudi Paper Manufacturing Co., a maker of tissue paper, invested 300 million riyals ($80 million) to expand production by 79 percent at its plant in Dammam, Saudi Arabia.

Production increased to 125,000 tons a year on March 12, from 70,000 tons a year, the company said in a statement to the Saudi bourse Web site today.

To contact the reporter on this story: Glen Carey in Dubai at gcarey8@bloomberg.net

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Asian Stocks Post Weekly Gain on Stimulus Optimism; Banks Rise

By Jonathan Burgos

March 14 (Bloomberg) -- Asian stocks rose for the first time in five weeks as Japan and China signaled more measures to buttress their economies from the deepening global recession.

PetroChina Co., the nation’s largest oil producer, climbed 12 percent in Hong Kong after crude oil surged and Premier Wen Jiabao said China can boost spending plans any time. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, gained 4.5 percent in Tokyo after Prime Minister Taro Aso ordered more economic stimulus measures. Commonwealth Bank of Australia jumped 12 percent, pacing gains among financial companies, as three U.S. banks said earnings were improving.

“Markets can take comfort that countries with the ability to do so are providing fiscal stimulus, rather than waiting till it’s too difficult to fight the momentum,” said Tim Schroeders, who helps manage about $2.6 billion at Pengana Capital Ltd. in Melbourne. “We’re seeing some money parked in safe havens returning to the market.”

The MSCI Asia Pacific Index rose 3.9 percent to 74.72 this week, snapping a four-week, 14 percent decline. Japan’s Nikkei 225 Stock Average climbed 5.5 percent to 7,569.28, while Hong Kong’s Hang Seng Index rose 5.1 percent.

Chartered Semiconductor Manufacturing Ltd., the world’s third-biggest maker customized chips, plunged 48 percent after announcing a $300 million rights offering. Elpida Memory Inc., Japan’s biggest memory-chip maker, slumped 23 percent after a merger with Taiwanese rivals failed to materialize.

‘Government Support’

Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. Reports this week showed China’s industrial production slowed, Australia’s jobless rate rose and Japan’s economy shrank the most since 1974 in the fourth quarter.

Japan’s Aso said yesterday he will consult a panel of economists, industry leaders and government officials next week on measures to stimulate the world’s second-biggest economy. China’s Wen told reporters the country has “adequate ammunition” to revive its economy and can add to its 4 trillion yuan ($585 billion) stimulus package at any time.

Also this week, Malaysia unveiled an additional $16 billion of spending, while New Zealand’s central bank reduced its benchmark interest rate to a record low.

PetroChina jumped 12 percent to HK$5.75 in Hong Kong this week after crude prices surged. BHP Billiton, Australia’s largest oil producer, climbed 15 percent to A$31.66.

Oil Surges

Crude oil for April delivery rose 1.6 percent in the week to $46.25 a barrel, its fourth week of gains. The contract surged before a meeting by the Organization of Petroleum Exporting Countries where it may decide to cut production.

Mitsubishi UFJ gained 4.5 percent to 419 yen in Tokyo. Nomura Holdings Inc., the country’s largest brokerage, jumped 12 percent to 469 yen. Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks and discuss ways to support the stock market.

Commonwealth Bank of Australia, the nation’s second-biggest lender, climbed 12 percent to A$30.25 in Sydney. Australia New Zealand Banking Group Ltd., the nation’s third biggest, rose 9.1 percent to A$13.49.

Bank of America Corp. joined Citigroup Inc. and JPMorgan Chase & Co. in saying this week that it was profitable in the first two months of 2009.

The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion and helped a rally in global equities. The MSCI World Index gained 8.5 percent this week, the most since the period ended Nov. 28.

Fund Raising

“Positive comments from the U.S. banks are reassuring, but we’re not out of the woods yet,” said Nicole Sze, a Singapore- based investment analyst for Bank Julius Baer & Co., which manages $350 billion. “Investors are still waiting for concrete signs that the economy has bottomed, stimulus measures are working and that the global financial system has stabilized.”

Chartered Semiconductor, which joined HSBC Holdings Plc and Shinsei Bank Ltd. in seeking to raise capital, tumbled 48 percent to 13 Singapore cents.

Elpida Memory Inc. plunged 23 percent to 418 yen after Taiwan ruled out a state-led merger of local computer chipmakers that would have resulted in an investment in the Japanese company.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net;

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China Resources, Filinvest, UMW: Asia Ex-Japan Equity Preview

By Hanny Wan

March 14 (Bloomberg) -- The following companies may have unusual price changes in Asia trading, excluding Japan. Stock symbols are in parentheses, and share prices are from the previous close, unless noted otherwise.

Philippine banks: Bangko Sentral ng Pilipinas needs to consider easing monetary policy further to boost economic growth, including reducing reserve requirements and boosting lending to banks, Deputy Governor Diwa Guinigundo said. Banco de Oro Unibank Inc. (BDO PM) declined 1.2 percent to 20 pesos. Metropolitan Bank & Trust Co. (MBT PM) climbed 6 percent to 22.25 pesos.

Bank of the Philippine Islands (BPI PM): Remittances sent by overseas Filipinos through the bank rose more than 10 percent in the first two months of the year, President Aurelio Montinola said. BPI fell 1.6 percent to 31 pesos.

China Resources Enterprise Ltd. (291 HK): The company said it will pay 285 million yuan ($41.7 million) to buy a brewery in the nation’s eastern province of Shandong. China Resources, a government-controlled retailer and brewer, climbed 1.4 percent to HK$11.50.

Chemical Company of Malaysia Bhd. (CCM MK): The Malaysian chemicals producer has targeted a pretax profit of 120 million ringgit for 2009, saying it will be an “extremely difficult” year given the slowing economy. The company expects sales of 1.82 billion ringgit. The targets are part of the company’s key performance indicators set for 2009, it said in a statement. The stock was unchanged at 2.04 ringgit on March 12.

Filinvest Development Corp. (FDC PM): The company’s East West Banking Corp. unit paid $45 million on March 12 for Philam Savings Bank and two other assets auctioned by American International Group Inc. Filinvest Development was unchanged at 94 pesos.

Philippine Long Distance Telephone Co. (TEL PM): The carrier’s Pilipino Telephone Corp. (PLTL PM) unit agreed to buy 20 percent of Manila Electric Co. from First Philippine Holdings Corp. for 20.1 billion pesos. PLDT fell 2.5 percent to 2,145 pesos. Pilipino Telephone climbed 8.8 percent to 7.40 pesos. First Philippine was unchanged at 25.50 pesos.

UMW Holdings Bhd. (UMWH MK): The auto assembler asked the Securities Commission for an extension of six months to Sept. 30 to complete a reorganization and listing of its oil and gas unit. UMW said in a statement it needs more time because of the “prevailing” market conditions. UMW was unchanged at 5.25 ringgit.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net

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Here Comes the 2-Month Cycle

Daily Forex Fundamentals | Written by Ashraf Laidi | Mar 13 09 15:41 GMT |

Friday 13 may imply plenty of luck for global equity markets as it could confirm the beginning of a 2-month rally in the major indices based on cyclical analysis of the past 12 months. Since mid March 2008 (1-year anniversary of the Bear Stearns bailout), the S&P500 has persistently shown rallies and declines lasting 7-8 weeks. The same rule has applied for the FTSE, DAX and the NIKKEI. 2-Month Long Bear Market Rallies March-May 2008: S&P500 along with major global equity indices began a 2-month climb after the March 17 bailout of Bear Stearns. The bailout was accompanied by a series of liquidity-enhancing measures from the Fed and other central banks, such as extending the duration of credit lines given to banks, and broadening the types of securities purchased by these central banks. The intervention of authorities provided a temporary sense of relief that could not last beyond end of May. July-September 2008: Global equity indices were stimulated by various factors such as the US-led consumer stimulus package, broadening central bank currency swaps and credit-expanding loans as well as a global inflation boom, which proved helpful for profit margins. November-January 2008-09: Coordinated global interest rate cuts, concerted stimulus packages from the US, UK, Germany and China, credit-market specific announcements such as TARP and TALF, and promises of bailouts to ailing auto sectors were among the factors driving short-sellers to book profits ahead of the end-of-year closing. Seasonal analysis has also shown that the last 4-5 weeks of the calendar year usually involve a paring down of the trends prevailing in the third quarter of the year. Where to From Here? I've shown in previous notes that since the equities peak of autumn 2007, global indices have shown rallies that were no more than 25%. (The Nov-Jan rally of 28% proved the exception as it involved three interim declines of 7%). With the likely duration of the current rally expected to last for about 8 weeks and extending for about 25%, the S&P500 may reach the 840-850 level as the next target for possible re-emergence of selling into end of June. Technically, 850 coincides with the 100-day moving average, which has not been broken since June 2008. Accordingly, major equity indices such as FTSE-100, DAX and NIKKEI-225 may also accumulate gains of similar magnitude and duration as was proven over the past 12 months. The currency implications suggest further erosion in the US dollar against its higher yielding counterparts, specifically, EUR, AUD, NZD and NOK, while GBP and CAD are to show the most resistance in gaining vs the greenback. Yesterdays note illustrated how the dollar index (against basket of 6 currencies) failed to breach above its 7-year trend line resistance of 89.60, which also mark the 38% retracement of the decline from the 2002 high to the 2008 low. Today, the index is at 87.27, reflecting the prolonged decline in USD vs most major currencies. The $1.2930 target in EURUSD has now been breached, making way for $1.3070 and $1.3350, while GBPUSD carries momentum to test $1.4160, followed by $1.4410. USDJPY to remain capped at 100.80. Oil prices could be emboldened by a combination of additional OPEC cuts, USD losses and improved risk appetite and garner a climb a towards $50.20. Ashraf Laidi http://www.ashraflaidi.com

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Is EUR/USD Finally Ready to Break Free of 1.30?

Daily Forex Fundamentals | Written by Lena Manousarides | Mar 13 09 16:37 GMT |

The week has come to an end, with markets rallying for the most of it! New York has closed positive yesterday and there is scope for more gains today! The European markets were up too, after investors welcomed better earnings reports from Banks and corporations. As a result, we saw weakness in the dollar against the euro and the pound, and EUR/USD moving higher towards important 1.30! The EUR/USD has been gaining consistently these days and as long as 1.2680-1.27 stays intact, there is further scope for higher moves! The next level to watch now is 1.2970 ahead of 1.30. If the latter levels give way then 1.3060 comes back in the game! However, with today being Friday and last day of the week and also G20 this weekend, traders maybe wait till the Monday open before they commit either way! The GBP/USD gained this week also, after a terrible start which saw the pair all the way down towards 1, 36. However in the last few days, the pair skyrocketed breaking important psychological support levels of 1.40 and printing a new daily high at 1.4070. Next level to watch is 1.4130 as it is a good resistance level and may keep for now amid weekend approaching. Investors feel more confident these days and the fact that more UK banks announced that are expecting profits in the coming months, is taking some comfort in traders' minds! Today the economic calendar had a few economic data, with Canadian employment numbers come out worse than expected, and also consumer confidence and trade balance out of US which came out better than expected, giving even more reasons for investors to increase their risk appetite for now! The dollar seems to be suffering today and yesterday as traders don't wish to buy it for safe haven reasons and the hope that things may stabilize sooner than later is giving investors a renewed confidence! Today, we have the G20 starting in UK, where 20 of the most industrialized countries in the world will get together to discuss the current economic global crisis and it will be monitored closely from investors for any signals as to what the world leaders are doing in order to bring stability into the financial sector! Yesterday we witnessed Swill National Bank taking matters at hand and intervene heavily on its currency, as fear of the gloomy economic outlook made the bank wary as to how suitable a strong Swiss franc is at current deteriorating conditions! Investors now speculate that other countries may follow Switzerland's example and therefore moves in the currency markets may be choppy and volatile in the coming days. Let's see how New York futures will close for the day and if the week will finish on positive territory! Don't forget that at such fragile market environments, rallies cannot be sustained for too long, as investors cannot afford to be long in a bearish environment! So it may be a case of not letting ourselves “fall in love with the upside” for now, but just enjoy the ride! For now let's watch how EUR/USD behaves at 1.30 and if the recent upside rally was enough to sustain further gains pass that level! In the last few months, the pair tried to break out of that level for many times, but risk aversion always came back to haunt it! Will the latest confidence in traders make euro bulls finally ready to “break free of 1.30? The coming days will be crucial for any direction in the currencies and also the outcome of the G20 this weekend… Lena Manousarides Independent Market Analyst and Professional Trader Email: manousarides@yahoo.comThis email address is being protected from spam bots, you need Javascript enabled to view it Lena Manousarides is a professional Trader and an independent Market Analyst, who pioneers in Fx trading in Athens, Greece. After several years of professional trading in the Forex Market, Lena formerly worked with FXGreece as a Market Analyst, writing articles on a daily basis, using fundamental and technical analysis. She also writes for several major financial newspapers in Greece and is in the process of becoming professional Commodity Trading Advisor.

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USD Recovers as Equities Give Back Early Gains

Daily Forex Fundamentals | Written by Easy Forex | Mar 13 09 16:50 GMT |

USD: Mixed, trade deficit and Michigan consumer sentiment beat expectation JPY: Lower, pressured by diminished safe haven demand, possible threat of intervention EUR: Lower, tracking global equities, EU retail sales fall more than expected GBP: Higher, rising risk sentiment sparks short covering CAD and AUD: AUD & CAD higher, supported by improving risk sentiment, Canadian unemployment rises Overview USD and JPY traded mixed to lower as global equities markets extend recent gains and risk appetite improves. Improving risk appetite is attributed to speculation that the US banks have weathered the financial market storm and that new fiscal stimulus from the US and China will help to boost global growth. Comments from the CEO of Bank of America that the Bank of America will not seek additional government funds sparked speculation that the worst for the US banking crisis may be over. Friday, China announced a new 1.8 trillion stimulus plan. Optimism that US banks have weathered the credit crisis and the new Chinese stimulus plan helped fuel equity market gains. USD was also pressured by comments from Chinese Premier Wen. Wen said that he is concerned about US holdings and that he expects the US to protect Chinese assets held in the US. The PBOC says it expects the USD to remain strong in 2009 but the USD outlook is uncertain beyond 2009. GBP outperformed in Friday's trade benefiting the most from the recovery in global equity markets with sharp gains against the JPY and EUR. Commodity currencies firmed supported by rising equity markets with CAD gaining despite report that Canada's unemployment rises to a six year high. Although the USD continues to trade inversely to the direction of equities and risk sentiment USD downside has been relatively limited despite this week's sharp rebound in global equity markets. This may reflect the fact that many traders believe the rebound is equities is a bear market rally and not the start of sustained uptrend. Optimism about equities remains in question. Because of rising US deficits and increased need for foreign capital to fund the deficits comments by Chinese Premier Wen about uncertain USD outlook may be more troubling for the USD. Concern that foreign investors will not support the US deficits is a major risk to the long term outlook for the dollar. Risk aversion and uncertainty about global economic outlook trumps the potential long term risk to the US dollar from rising US deficits. Nervous investors continue to seek safe haven in US treasuries. US February import prices fall 0.2%, a 0.8% decline was expected. January trade balance falls to 36 billon from 39.9 billion in December. US trade deficit narrowed to its lowest level since October 2002. March University of Michigan consumer sentiment rises to 56.6 from 56.3 in February. The trade was looking for the March consumer confidence to drop to 55. USD extends its losses in reaction to report of improving US trade deficit and better than expected Michigan consumer sentiment. These reports contribute to improving risk sentiment. At this writing US equity market trades lower and USD recovered. Next week's US economic calendar includes the March 16th release of March Empire Manufacturing Index expected at -33 compared to -34.6 last month. February industrial production and capacity utilization will be released on March 16th. Industrial production is expected to fall 1% compared to a 1.8% drop last month. Capacity utilization for February is expected at 71.3 compared to 72 last month. NAHB index for March will also be released on March 16th expected at 8 compared at 9 last month. On March 17th February housing starts and building permits will be released. February housing starts are expected at 460K compared to 466K last month. February building permits are expected at 510K compared to 521K last month. February PPI will also be released on March 17th expected at 0.3% compared to 0.8% last month. On March 18th February CPI will be released expected unchanged at 0.3%. Q4 current account will also be released on March 18th expected at -136.7 billon compared to -174.1 last quarter. On March 19th initial jobs claims for week ending 3/14 will be released expected at 645K. February leading economic indicators will also be released on February 19th expected at -0.2% compared to 0.4% last month. USD has traded firmed in 2009 despite negative US economic data tracking the direction of equities and risk sentiment. US economic data maybe become a more important market driver for the USD as the trade tries to determine whether the US equity market recovery is more than a rally in a bear market. JPY JPY traded lower pressured by rising global equity markets and improving risk sentiment. The Nikkei closed up 371 points Friday following this week's sharp rebound in US equities. JPY is moving in tandem with investor sentiment and equities. JPY was also pressured by comments from the Bank of Japan Governor Shirakawa that Japan's financial conditions are severe. Japan's February consumer confidence index improved to 26.7 from 26.4 last month and January industrial production was revised down to -10.2% from -10% last month. The data had limited impact on today's JPY trade. The Nikkei press reports that demand for USD in front of Japan's fiscal year end is strong. Japan's fiscal year in March 31st. Repatriation flows in front of Japan's fiscal year end may limit JPY downside. JPY may however be vulnerable to speculation that Thursday's decision by the SNB to intervene to try to weaken the CHF will encourage the Bank of Japan intervene to try to weaken the JPY. Despite this week's equity market rebound USD/JPY is relatively unchanged. The EUR and commodity currencies have been the main beneficiaries of improved risk sentiment. EUR/JPY is trading above 1.26 gaining over 1% in Friday's trade. AUD/JPY also gained over 1% Friday. Next week's Japanese economic calendar includes the March 17th release of January tertiary index. On March 18th January leading indicators will be released. On March 19th January all industry activity will be released. These reports are expected to confirm continuing deteriorating outlook for Japan's economy. The technical outlook for JPY has turned mixed with this week's failure to take out psychological resistance at 100.00. Key technical levels to watch in USD/JPY include support at 95.67 the March 12th low with resistance at 99.67 the March 5th high and 100.55 the November 4th high. EUR EUR traded mixed to firm with upside limited by report of weaker than expected EU retail sales and selling in cross trade to the GBP. EUR continues to trade with close correlation to the direction of equities and was supported by Friday's global equity market rally. EU January retail sales fall 2.2%, a 1.9% decline was expected. This is the eighth consecutive month that EU retail sales have declined. EU Q4 labor costs rise 3.8% compared to 4.2% in Q3. These reports confirm weakening EU economy and lower inflation. The data may encourage ECB rate cut speculation. EUR has been gaining this week against the GBP with GBP pressured by the Bank of England's decision to implement quantitative ease. GBP has underperformed because of concern about deteriorating UK economic outlook, UK bank troubles and in response to the Bank of England decision to move to quantitative ease. Friday, GBP experienced a sharp short covering rebound mainly supported by improving risk sentiment and EUR/GBP traded lower. EUR traded above 1.2900 supported by a recovery in US equities. US equities firmed in reaction to report of better than expected US January trade deficit and a slight improvement in Michigan consumer sentiment .EUR price direction remains closely correlated to the direction of global equities and risk sentiment. Skepticism about the rebound in global equities will likely limit EUR gains. Next week's EU economic calendar includes March 17th release of German March ZEW Index. On March 19th EU January industrial production will be released. On March 20th EU current account and foreign trade balance for January will be released. The technical outlook for the EUR has improved with EUR trading above resistance at 1.2900 the February 25th high. The break of this level could spark a test of February 23rd high at 1.2998. Expect key EUR support at 1.2710 and 1.2650. Look for EUR/USD to range 1.2650-1.2998. Next key EUR resistance is at 1.3075 the February 10th high. GBP GBP traded higher supported by short covering and improving risk appetite as global equity markets trade higher. Comments by China's premier about the uncertain long-term outlook for the USD sparked early selling of the USD. No major UK economic data was released in today's trade. GBP rallied despite comments from the Bank of England's Barker that the Bank of England may consider additional quantitative ease. The Bank of England launched quantitative ease Wednesday, buying UK gilts. Quantitative ease will increase the supply of GBP. GBP traded above 1.4000 the prior range low. The rally above 1.4000 sparked short covering in the GBP. GBP technical price suggests the GBP may be trying to carve out a technical bottom. GBP traded to the day's highs after the release of better than expected US January trade deficit. The Bank of England implemented the first stage of quantitative ease Wednesday. The Bank of England is buying UK gilts to try and boost the UK money supply and lower LIBOR rates. The BOE will continue purchase gilts on a biweekly basis with the allotment to total as much as GBP150 billion. The Bank of England's quantitative ease is directed at boosting UK growth. The Bank of England quantitative ease will flood the market with GBP. Increased supply of sterling is a negative for GBP. Because of the negative economic outlook in the UK GBP will continue to be most sensitive to the direction of equities and risk sentiment. GBP downside was limited by today's rebound in global equities. GBP price direction maintains a close correlation to the direction of equities. Next week's UK economic calendar includes Monday's release of the Bank of England quarterly bulletin and Rightmove house survey. On March 18th January unemployment and February public-sector borrowing will be released along with the Bank of England policy minutes for the March 4/5 meeting. Look for key GBP support at 1.3865 the March13th low with resistance at 1.4185 the March 9th high. CAD CAD traded higher despite report that Canada's unemployment rate rises to a six year high and Canada's trade deficit widened. CAD was supported by improving risk sentiment. Canada's February unemployment rate rises to 7.7% from 7.2% last month. Jobs growth falls 82.6K compared to -129K last month. January trade balance widened to a 1 billion deficit. The Canadian trade balance was right in line with expectation. The fact that the CAD continues to rally despite deteriorating Canadian economic outlook confirms that the main driver for the CAD is risk sentiment. Risk sentiment has improved this week as global equity markets rally supported by optimism that the worse for the US banking crisis may have passed. The Bank of Canada says it will continue to provide liquidity as long as necessary .BOC Deputy Governor Longworth says that he expects the Canadian economy to improve in the second half of 2009. Toronto Dominion and Royal Bank of Canada analysts said Thursday that the Canadian economy faces risk of deeper recession because of falling commodity prices and weakening demand for Canadian exports. TD Bank expects the Canadian economy to contract by 2.4% and Royal Bank of Canada expects the economy to contract by 1.4%.Both banks expect the Canadian economy to rebound in 2010, with the rebound dependent on the US. The BOC is more optimistic and expects the Canadian economy to contract by 1.2%. The Canadian economy contracted 3.4% in Q4. This marked the fastest pace contraction for the Canadian economy since the recession of 1991. The Bank of Canada recently cut interest rates to 0.5% and the government introduced the $40 billion fiscal package at end of January. Longworth also said the BOC is preparing for quantitative ease. Next week's Canadian economic calendar includes the March 16th release of Q4 capacity utilization. On March 17th Q4 labor productivity will be released along with January manufacturing shipments. On March 18th January wholesale sales will be released. The key Canadian economic report for next week's trade will be Friday's release of the February CPI. The CPI report is expected to confirm decreasing inflationary pressure. Weaker Canadian CPI may open the door for the BOC to consider quantitative ease Canada's January net foreign investment will also be released on March 19th. On March 20th January retail sales are due for release CAD continues to trade in a remarkably volatile pattern with the dominant driver, the direction of equities and risk sentiment. Monday USD/CAD traded above a triple top at 1.3015 and tested 1.3064. The break of 1.3015 level encouraged fresh selling the CAD. The fresh selling wound up to be a bear trap and CAD quickly recovered to the 1.2800 level. Look for near-term resistance at 1.2844 the March13th high and 1.3064 March 9th high with support 1.2520 the February 27th low. AUD AUD traded higher supported by improving risk sentiment and firmer commodity prices. Today's announcement that China plans an additional 1.8 trillion stimulus plan supported the AUD on hope the plan will help boost global growth and demand for Australian exports. The trade will monitor this weekend's G-20 Finance Ministers meeting for clues to whether the G-20 plan additional coordinated economic stimulus. The trade will also be minor Sunday's OPEC meeting. OPEC is expected to consider another oil production cut. If OPEC agrees to a production cut crude prices may extend Friday's rally. The recent rebound in commodity prices contributes to optimism that the global economy may be nearing a bottom. Higher crude prices and a pledge of coordinated stimulus from the G- 20 may help carry this week's improvement in risk sentiment forward into next week's trade. No major Australian economic data was released in today's trade. The only data on the Australian economic calendar for next week is the March 19th release of Q4 dwelling unit commencements and new car sales for February. AUD continues to closely track the direction of equities and the EUR. The fundamental outlook for the AUD continues to improve as commodity currencies try to carve out a bottom supported by speculation that the global economy will begin to recover the midyear. The technical outlook for the AUD has improved as well. Look for key AUD support at 6415 with resistance at 6640 the February 13th high. AUD trade above 6640 could spark a move to 6800. By By Michael J. Malpede Easy Forex Michael J. Malpede is Chief Market Analyst with Easy-Forex® and has previously been featured on Bloomberg TV, Bloomberg radio, Reuters, MarketWatch, Wall Street Journal, Chicago Tribune, Chicago Sun Times, Toronto Star and Nikkei press. In analyzing the markets, he draws from 29 years of Foreign Exchange Research as a Foreign Exchange Analyst. Please note that Forex trading (OTC Trading) involves substantial risk of loss, and may not be suitable for everyone. This report is provided by Easy- Forex® for informative purposes only. In no way it is a recommendation by Easy-Forex® for you to engage in any trade. It is your sole responsibility and you will have no claims with regards to this report against Easy-Forex®. If you do not agree to this, you are strongly advised not to use this report. Hence, Easy-Forex® shall not be held responsible for any outcome of trading decisions, in regards with this report or similar reports.

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