Forex Daily Commentary

Daily Forex Technicals | Written by FastBrokers | Mar 31 09 12:56 GMT |

EUR/USD The EUR/USD has recovered well from Monday's lows despite a lower than expected CPI Flash Estimate. The large movement upwards is a bit confusing considering declining prices imply the ECB may need to get more aggressive with its monetary policy at Thursday's meeting. Analysts are expecting the ECB to lower its benchmark rate to 1% and the use of quantitative easing is on the table. Monetary easing is normally negative for a currency, hence why the surge taking place this morning is a bit out of place. As a result, we view the appreciation of the Euro against the Dollar over the last 24 hours as buyers taking advantage of oversold conditions. On an encouraging note, for those long the EUR/USD the currency pair didn't even come close to the psychological 1.30 level and our 1st tier uptrend line. Therefore, the short-term uptrend is still in play. The defining point for the uptrend will be whether the EUR/USD can brave above our 2nd tier uptrend and medium-term downtrend lines. The U.S. will release the Chicago PMI and CB Consumer Confidence data today. However, all eyes will be on U.S. equities to see if the S&P futures can recover from yesterday's large selloff. We anticipate the positive correlation between the EUR/USD and S&P futures to continue until Thursday's ECB meeting. Fundamentally, we find supports of 1.3291, 1.3253, 1.3205, 1.3162, and 1.3124. To the topside, we see resistances of 1.3334, 1.3366, 1.3409, and 1.3446. The 1.35 area serves as a psychological barrier with 1.30 acting as a heavily-weighted psychological cushion. The EUR/USD is currently exchanging at 1.3308. GBP/USD The Pound appreciated against the Dollar after GfK Consumer Confidence came in above analyst expectations and British retailing giant Marks and Spencer reported an improvement in earnings. The GBP/USD proceeded to experience considerable strength from our medium-term downtrend line, and is fighting towards our 2nd tier uptrend line as we type. The bounce in the Cable is encouraging considering it happened comfortably above our 1st tier uptrend line. However, the rally is fueled mostly by oversold conditions since we don't view the above-mentioned news as game-changing. Additionally, the up-bars and supported by insufficient volume. U.S. financials are still in serious trouble, applying downward pressure on equities. Considering the financial industry comprises nearly 25% of Britain's GDP, another setback in U.S. financials would likely have negative repercussions for the British economy. Britain and America are coupled, and both central banks are implementing quantitative easing. Hence, it's difficult to place one's full weight behind an uptrend in the GBP/USD. Regardless, the near-term uptrend is beating out our medium-term downtrend for the time being. Therefore, we will have to see how the trend plays out with the much-anticipated G20 Summit approaching. As with the EUR/USD, we anticipate the GBP/USD staying true to its positive correlation with U.S. equities. Fundamentally, we find resistance of 1.4326 with additional resistances hanging at 1.4362, 1.4398, and 1.4437. The 1.45 area will serve as a psychological barrier with 1.40 acting as a highly psychological cushion. To the downside, we see supports of 1.4283, 1.4240, 1.4208, 1.4159, and 1.4100. The GBP/USD is currently exchanging at 1.4298. USD/JPY The USD/JPY continues its sideways battle as investors await the incoming Tankan Manufacturing Index. Japan released some mixed data earlier today, including worse than expected Unemployment and Average Cash Earnings numbers. On the flipside, Household Spending declined less than expected. Despite the encouraging Household Spending number, the data coming from Japan reiterates the same negative theme. Though new economic stimulus seems imminent, Aso and the BOJ aren't budging as the G20 Summit approaches. The inactivity from the BOJ combined with discouraging economic data is sending the USD/JPY back towards the crest of February highs. However, it seems investors will wait for the Tankan Index before deciding whether to send the currency pair towards 100. The USD/JPY's incessant battle with February highs indicates the significance of present levels. If the Tankan is much worse than expected, then we could see the USD/JPY launch out of its trading range towards new highs. However, don't forget the downtrend is nearby. If the USD/JPY fails to retest 100 this time around, we could see the currency pair collapse back into its debilitating downtrend. Fundamentally, we see resistances of 99.06, 99.79, 100.28, 100.71, and 101.44. To the downside, we find supports of 98.16, 97.66, 96.65, and 95.98. The USD/JPY is currently exchanging at 98.54. FastBrokers Disclaimer: FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange. © Fast Trading Services, LLC. All materials are proprerty of Fast Trading services, LLC and unless otherwise indicated,any unauthorised reproduction is prohibited.

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FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Mar 31 09 12:46 GMT |

USD-CHF @ 1.1391/95...Stop Loss Sell Order R: 1.1431 / 1.1444 / 1.1495 S: 1.1360-53 / 1.1206 / 1.1170 Dollar-Swiss has fallen towards the 1.1400-1.1350 region as mentioned earlier after facing Resistance from the 1.1520-1.1565 region as we have mentioned earlier. We could possibly see it move towards 1.1170 over the next few days. But for now, it is taking Support of the 38.2% retracement of the rise from 1.0371 (29-Dec-08) to 1.1968 (12-Mar-09) at 1.1360. The Limit Sell Order did not get triggered as the pair did not rise towards 1.1540. Stop Loss Sell Order: Sell USD 10K at 1.1290, SL 1.1420, TP 1.1190 Cable GBP-USD @ 1.4306/10...Resistance at 1.4348 held R: 1.4341-48 / 1.4400 / 1.4456-4500 S: 1.4237 / 1.4185 / 1.4075 Cable has managed to find Resistance near 1.4348 (13-day MA) but has risen past the 21-MA on the 4-hourly. If it continues to rise from here on, we may possibly see Resistance near 1.4456-1.4500 region. Having made a U-turn from 1.4111 yesterday, we may see it rising even towards 1.47 over the next couple of days or more but then it could possibly settle near 1.43 over the next few days. To see the chart of Cable, click on: http://www.kshitij.com/graphgallery/gbpcandle.shtml#candle Aussie AUD-USD @ 0.6925/28...Resistance region 0.6900-45 R: 0.6945 / 0.7227 / 0.7291 S: 0.6863 / 0.6832 / 0.6735 Aussie has risen during the day into the Resistance region of 0.6900-0.6945. A significant break past this shall reignite the hopes of 0.75 and render the dip seen over the last two days as a spike. If it faces Resistance near this region and comes down, the pair might intend to consolidate within the range of 0.6640-0.6945 over the next few days. RBA Meet next week would be crucial to decide where could the pair be headed. But till then it could be consolidating between 0.6640-0.6900 over the next few days. Kshitij Consultancy Service http://www.fxthoughts.com Legal disclaimer and risk disclosure These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

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Speculation Surrounding G20 meeting Keeps Markets Volatile & Directionless

Daily Forex Fundamentals | Written by AC-Markets | Mar 31 09 10:50 GMT |

After a dismal day on Wall Street, we are seeing some respite in deleveraging and a positive bounce in risk appetite. Yesterday, Wall Street session saw the S&P 500 drop -3.48%. However, for the most part Asia and European equity markets have been able to shrug of concerns over the G20 (or “G2” as is the current fashion), collapsing Automakers, weak Japanese economic data and Fortis’s eur28bn loss to trade higher. USD has come under selling pressure, as risk appetite seems to be creeping back into the FX markets. Gold is trending orderly upwards after a volatile day yesterday. The rational for the $15oz swings has been assigned to everything from buy stops at $920oz, to “flight to quality”. However, it would be a mistake to rule out statistics from the WGC which suggested Russia had increased their gold reserves by roughly 30 metric tons. Japanese labor data came in worse than expected, with unemployment deteriorating to 4.4% vs. 4.3% exp. and the jobs-applicants ratio slipping to 0.59x from 0.67x. In addition, consumption still looks weak with real household spending falling 3.5% y/y in February. The JPY was sold across the board on the back of the released economic data and the prospects of a decidedly negative Tankan report tonight. The USDJPY traded higher to 98.31, now targeting 98.88 resistance. The Yen fueled carry trades also got a boost, as the AUDJPY was able to reverse its downward slide trading up from 66.15 to 67.89. Perhaps a bright spot from Japan was the news that Finance Minister Aso will announce a major fiscal stimulus package today. The white elephant in the room has to be the G20 meeting. In a draft statement released over the weekend, core issues will be fiscal and monetary policy commitments and efforts to expand resources at the IMF. The critical issue to FX trades is that there was no specific mention of currencies (illustrating China’s new weight) or specific plans for a coordinated stimulus package. However, there are still significant risks for a rogue commentary by officials, renewed support for the greenback as the world reserve currency or clarity from the ECB in regard to adoption and application of unconventional measures which would have significant repercussion across markets. In our minds, we think that the potential for a surprise from the ECB (at Thursdays press conference) poise the greatest risk event. With speculation ranging from purchasing of sovereign debt to buying eastern European currencies being circulated the near term risks are enormous. Today Key Issues (time in GMT): 09:00 EUR CPI (Mar Prov.) 0.7% exp, 12:00 CAD GDP -0.7 exp, -0.7 prior 14:00 USD Case-Shiller 20-City House Price Index (Jan) -2.0%(-18.3%) exp, -2.5%(-18.6%) prior 13:45 USD Chicago PMI (Mar) 34.0 exp, 34.2 prior 14:00 USD Conf. Board Consumer Confidence Index (Mar) 25.0 exp, 25.0 prior 14:00 GBP BoE MPC member Tucker testify to House of Lords 17:00 USD FRB of Philly President speaks on “Financial Regulatory Reform” 23:50 JPY Tankan Large Manufacturers (Q1) -40 exp, -24 prior The Risk today: EurUsd Bullish intermission subsides and weaker Euro resumes as continued pressure in European economies weighs on the single currency. Broad bearish trend regains strength as we fail to break 1.3493 – 1.3681 range. Declining neckline breaks lower, initial resistance sits at 1.3341. Focus is lower, initial support at 1.3088 setting the tone for a mid-term target at 1.2457. GbpUsd Head and shoulder formation confirms and signals a change in immediate trend, regaining the broader scheme of things which points to sterling weakness. Initial support stands at 1.4163, with sights on resistance at 1.4361, then 1.4495. UsdJpy Return of risk aversion trade only confirms our past weeks analysis that a firm call on risk appetite was premature. Yen rallies against the dollar as dollar rallies against other currencies – repatriation style Yen dynamic returning – inversely correlated to dollar moves. Break of yesterday 98.32 highs places initial resistance at 98.88 in the short term. On the downside one should be weary of bears extending too far ahead of the G20. Initial support at recent low of 95.96. UsdChf Complete reversal of yester days gains now puts the emphasis on the bottom of the 1.1829 – 1.1171 range. Initial support stands at 1.1326 while resistance stands at 1.1546 (intersect of days high and 21d MA) EURUSD GBPUSD USDJPY USDCHF 1.3727 S 1.4640 S 100.00 M 1.1684 T 1.3598 M 1.4495 99.7 1.1577 M 1.3441 K 1.4361 99.2 1.15 1.3292 1.4291 98.35 1.1399 1.3088 S 1.4163 M 97.05 S 1.1326 M 1.2845 M 1.3845 96.65 1.1228 1.2457 K 1.3653 T 95.65 T 1.1171 K S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot AC Markets http://www.ac-markets.com Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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Euro Recovery Set to Stall

Daily Forex Fundamentals | Written by Investica | Mar 31 09 10:46 GMT |

Caution is required as quarter-end position adjustment could spark near-term volatility. There will be strong expectations that the ECB will cut interest rates again this Thursday while economic fears will also be an important feature as the OECD forecasts a deep European recession and credit-rating downgrades continue. Any confirmation of a move to non-standard credit policies would also tend to weaken the currency. Euro selling should be contained at this stage, especially as an interest rate cut should be priced in and there has been firm technical buying above the 1.31 region. The most likely outcome is that the Euro recovery will stall below 1.34 and drift back towards support near 1.31 over the next 36 hours. The Euro-zone economic data has remained generally weak over the past 24 hours with the business confidence index weakening to a fresh record low while Spanish inflation turned negative according to the latest monthly data. German unemployment rose by a further 69,000 in March. The Euro-zone flash headline rate fell to 0.6% for March from 1.2% and there will be further strong expectations that the ECB will cut interest rates by a further 0.50% to 1.00% at the Thursday policy meeting. The potential for quantitative easing will also be important with ECB Chairman Trichet stating that a decision whether to buy corporate bonds had not yen been reached. Speculation over an ECB policy switch, allied with sharp Wall Street losses, pushed the Euro to a low of 1.3115 before a corrective recovery to 1.3190 as significant technical support levels held. The Euro continued to correct slightly higher on Tuesday as risk appetite improved. Recoveries were limited as there were further credit-rating downgrades for European countries with Irish and Hungarian ratings both cut over the past 24 hours. Investica http://www.investica.co.uk Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.

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Technical Analysis Daily

Daily Forex Technicals | Written by iFOREX.bg | Mar 31 09 10:36 GMT |

USD/JPY 98.27 - 31 March USD/JPY Open 97.42 High 98.49 Low 95.96 Close 97.25 Dollar/Yen fell sharply on Monday, reaching a bottom of 95.96, but closed the day higher at 97.25, after rejection of further decreasing scenario. Despite the decline, yesterday's bottom should now become switch to the spring increase with objectives towards 101.00 - 102.50. On the 4 hour chart there is a flag formation, suggesting a potential ascending scenario. The nearest support is 96.60. At the same time the CCI indicator crossed up the 100 line, confirming signals for bullish movement. Breaking up the flag may cause increasing momentum towards the region of 99.00. Technical resistance levels: 97.40 98.80 100.00 Technical support levels: 96.60 94.75 93.45 Trading range: 98.15 - 98.70 Trend: Neutral Buy at 98.27 SL 97.97 TP 98.57 iFOREX.bg Forecasts and Trading Signals http://www.zifx.com

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Currency Technical Report

Daily Forex Technicals | Written by FX Greece | Mar 31 09 10:12 GMT |

EUR/USD Resistance: 1,3250/ 1,3285-90/ 1,3310-15/ 1,3350/ 1,3420/ 1,3470/ 1,3520 Support : 1,3210/ 1,3170/ 1,3150/ 1,3120/ 1,3100/ 1,3080/ 1,3045/ 1,3000 Comment: The first day of the week was negative for euro, as it moved towards our targets at 1,3100-20. An upward reaction was expected at these important support levels. The short term trend remains bearish and the reaction is still in terms of a retracement. If bulls gain momentum at the first support levels at 1,3200-10 and 1,3170-80, it will be a sign of strength. If support is confirmed and we see an upward reaction above 1,3280, our next target will be at 1,3330-50 or 1,3400-20, which was the base of the consolidation before the decline. Otherwise, a move below 1,3170, will bring the area of 1,3100-20 back into focus. A downward break would cancel our upward expectations and our next target will be at 1,2950. *STRATEGY : Small buy orders could be tried at 1,3210 and 1,3180, with stops below yesterdays lows (high risk). Our target will be at 1,3270-80 area. Buy opportunities would also emerge in case of an upward break of 1,3280, with stops below 1,3240 and target at 1,3340-50 or even 1,3400-20. Sell orders could be tried at 1,3420-40 with stops above 1,3480 area. FX Greece DISCLAIMER The details and information included in the above analysis, are part of research based exclusively on currency charts and are of purely instructional and educational nature. None of the information featuring in the analysis can be considered as an invitation for opening positions in FOREX market or in the market of forward contracts or any securities listed on an organized or unorganized market. We assume no responsibility for any kind of losses ,profits or property loss resulting, in whole or in part, from acts that are based either directly or indirectly on the processing or the use of information, details and strategies, the reader may find in the analysis. The readers hold full responsibility for the use and the results of their actions. The recipients of the analysis must acknowledge and accept that investment choices of any kind, especially concerning the FOREX market, contain risks (high, low and occasionally zero) of reduction or even loss of their investment. Therefore, they should always be cautious prior to any kind of action. We reserve the right to change the terms and the characteristics of the analysis. The contents of the analysis are solely intended for personal use. They may not be retransmitted, reproduced, distributed, published, adapted, modified or assigned to third parties in any way whatsoever. Anyone having access to them is required to comply with the law provisions on the protection of third party intellectual property rights.

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Mar 31 09 09:54 GMT |

EUR/USD Current level-1.3245 EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated between the 50- and 200-Day SMA, currently projected at 1.2951 and 1.3834. Yesterday's low at 1.3112 was a test of the 1.3092 support zone and currently a larger corrective phase is on the run, targeting 1.3328 and probably 1.3410 resistance. Intraday bias is rather neutral, considering the ranging mode at the moment, but on the lower frames there is an uptrend for 1.3328, with a risk limit below 1.3210. Resistance Support intraday intraweek intraday intraweek 1.3328 1.3821-69 1.3090 1.2942 1.3410 1.4213 1.2942 1.2740 USD/JPY Current level - 98.17 A short-term bottom has been set at 87.12 and a large consolidation is unfolding since. Trading is situated between the 50- and 200-day SMA, currently projected at 94.12 and 99.36. After breaking above the 96.96 resistance, the pair advanced quickly towards the important zone around 98.98. A break beyond 98.98 will set a target in the 100.93-100.16 area. Resistance Support intraday intraweek intraday intraweek 98.98 99.69 97.56 92.28 99.69 103.55 93.58 89.82 GBP/USD Current level- 1.4314 The pair is in a corrective phase, after bottoming at 1.3506. Trading is situated between the 50- and 200-day SMA, currently projected at 1.4259 and 1.6470. With yesterday's low at 1.4106, the pair has entered a corrective phase, aiming at the 1.4403 resistance. Resistance Support intraday intraweek intraday intraweek 1.4353 1.4986 1.3960 1.3699 1.4403 1.5727 1.3823 1.30+ DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

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Asia to Expand at Slowest Pace Since 1998, ADB Says

By Shamim Adam

March 31 (Bloomberg) -- Asian economic growth will slow to the weakest since the 1998 financial crisis as the global recession hurts exports, the Asian Development Bank said, cutting its forecast for the second time in four months.

Asia excluding Japan will grow 3.4 percent this year, less than a 5.8 percent estimate in early December and a 7.2 percent forecast in September, the Manila-based institution said in a report today. The economies may recover next year with a 6 percent expansion, it said.

Global trade may contract for the first time since World War II this year, the World Trade Organization predicts, as U.S. and European demand slumps. Asia’s expansion in the next two years will be “well below” recent growth rates, hindering efforts to reduce poverty in a region where more than half the population live on less than $2 a day, the ADB said.

“The short-term outlook for the region is bleak as the full impact of the severe recession in industrialized economies is transmitted to emerging markets,” ADB’s acting chief economist Lee Jong-Wha said in a statement. “The concern for the region is that it is not yet clear that the U.S., European Union and Japan will recover as soon as next year.”

Asia needs to reduce its dependence on exports, and implement more policies to boost domestic consumption, the lender said. Overseas shipments account for about 32 percent of Asia’s gross domestic product, according to the World Bank.

Stimulus Limited

Central banks across Asia have lowered interest rates to stimulate demand, and governments are pumping more than $700 billion in spending, tax cuts and cash handouts into their economies to kick-start local consumer and business spending.

“It is uncertain these conventional monetary policies and discretionary fiscal policies can continue to support demand until external demand recovers,” the ADB said. “If the planned fiscal packages turn out to be ineffective or insufficient, many Asian economies will not have room to resort to additional fiscal packages.”

Economic reports continue to signal deteriorating conditions in the world’s largest markets. Japan’s exports plunged an unprecedented 49.4 percent in February from a year earlier, European confidence fell to the lowest on record in March, and U.S. jobless benefits data show more Americans are spending longer periods out of work.

In Asia, Chinese industrial companies’ profits dropped for the first time on record in the first two months of the year, while South Korea’s industrial production fell 10.3 percent in February from a year earlier.

Job Losses

Exports by developing Asian economies may shrink 10.3 percent this year, after growing 14.7 percent in 2008, the ADB said. Imports will probably contract 11.9 percent.

The MSCI Asia Pacific excluding Japan Index has dropped 46 percent in the past year, while nine of 10 Asian currencies tracked by Bloomberg have dropped against the dollar in 2009.

“Across the region, factory closures and job losses are rising, weighing on consumer sentiment and forcing households to cut back on spending,” the ADB said. “Slowing demand and the uncertain economic environment are discouraging investment. As business sentiment continues to degenerate, capital spending will be restrained.”

Inflation, which averaged 6.9 percent in developing Asia last year, may ease to 2.4 percent in 2009 and 2010 as demand shrinks and commodity prices tumble, the ADB predicts.

China will expand 7 percent this year, from 9 percent in 2008, the ADB predicts. The World Bank expects Asia’s second- largest economy to grow 6.5 percent this year, while the government says 8 percent is possible.

Southeast Asia

India’s economy will grow 5 percent this year, the ADB said. Prime Minister Manmohan Singh’s government expects growth in the year starting April 1 to be slower than the 7.1 percent it projected for the current year, while the International Monetary Fund forecasts an expansion of 5.3 percent.

In Southeast Asia, the ADB expects the economies of Thailand, Malaysia and Singapore will shrink this year, dragging growth in the region to 0.7 percent in 2009. The East Asian economies of South Korea, Taiwan and Hong Kong will also contract, it said.

Some of the world’s biggest financial companies including Lehman Brothers Holdings Inc. have collapsed as banks and other financial institutions reported about $1.3 trillion of writedowns and losses since the start of 2007. Asian financial systems have weathered the crisis “quite well” and bank lending is flowing “normally,” the ADB said.

“Nevertheless, the global financial crisis is far from over, and the speed and scale of its resolution remain subject to a great deal of uncertainty,” the ADB said. “The biggest risk to the region’s continuing financial stability is the specter of a deep and protracted downturn.”

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

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European March Inflation Slows to Lowest on Record

By Simone Meier

March 31 (Bloomberg) -- Europe’s inflation rate dropped more than economists expected to the lowest on record in March as the economic slump intensified across the region, adding to concerns that deflationary pressures are emerging.

Inflation in the euro area slowed to 0.6 percent from 1.2 percent in February, the European Union statistics office in Luxembourg said today. The March rate is the lowest since the data were first compiled in 1996 and below the 0.7 percent forecast by economists, according to the median of 35 estimates in a Bloomberg News survey.

Inflation is subsiding as Europe’s economy grapples with the worst recession since World War II and companies cut spending and jobs to weather the global slump. Spanish consumer prices declined from a year earlier for the first time ever in March, data showed yesterday. The European Central Bank has signaled it is ready to reduce its benchmark rate further from a record low to help revive growth.

“We don’t have an inflation threat at the moment and that’s why the ECB has to focus on deflation,” said Sylvain Broyer, an economist at Natixis in Frankfurt. “We’ll probably reach the low point in inflation at just below zero around mid- year.”

Consumer-price expectations fell for a fifth month in March, reaching the lowest level since the indicator was first published in 1990, the European Commission said in a report yesterday. Manufacturers’ selling-price expectations also dropped to a record low.

‘Grim Outlook’

“The grim outlook for economic activity in the euro area and widespread evidence of falling inflation call for exhausting the remaining scope for further cuts,” the Organization for Economic Cooperation and Development said in a report today. “With the bleak economic outlook, quantitative easing should be used to support demand.”

The euro-area economy will probably shrink around 2.7 percent this year and stagnate in 2010, the ECB said earlier this month. Inflation may average about 0.4 percent this year. The central bank aims to keep annual price growth just below 2 percent.

“We expect demand to remain very weak throughout 2009 before gradually recovering in the course of 2010,” ECB President Jean-Claude Trichet told European lawmakers in Brussels yesterday. He said 2009 will be “a very, very difficult year, where you have to accept negative growth all across the year.”

Jobless Rate

With employers firing workers to cope with declining demand, Europe’s jobless rate probably rose to 8.3 percent in February from 8.2 percent in the previous month, according to a Bloomberg survey. That would be the highest since June 2006. The statistics office will release the unemployment report tomorrow.

Munich-based Siemens AG, Europe’s largest engineering company, said on March 27 that it is cutting personnel costs and will “significantly” increase the number of employees working shorter hours. Heidelberger Druckmaschinen AG, the world’s largest manufacturer of printing presses, plans to fire 5,000 workers, or about a quarter of the workforce.

A 50 percent drop in oil prices over the past year has helped push down inflation. European core inflation, excluding energy and food prices, is currently at 1.7 percent.

The “spectacular decline” in energy costs since mid-2008 has increased “the risk of deflation,” ECB council member Nout Wellink wrote in a March 26 report. Trichet yesterday said policy makers “don’t see that risk substantiated” at the moment. While inflation rates will “possibly temporarily” turn negative around mid-year, they are expected to accelerate again in the second half, Trichet said earlier this month.

‘Strong Evidence’

There is “already strong evidence that underlying inflationary pressures are diminishing rapidly,” said Howard Archer, chief European economist at IHS Global Insight in London. “We expect the ECB to bring interest rates down to a low of 0.5 percent by mid-year.”

Most economists in a Bloomberg survey expect the ECB to lower its benchmark rate to 1 percent when council members next meet on April 2 in Frankfurt. The central bank already has cut the key rate by 2.75 percentage points since early October.

To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net

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Japan’s Jobless Rate Jumps to Three-Year High of 4.4%

By Toru Fujioka

March 31 (Bloomberg) -- Japan’s recession deepened as the unemployment rate surged to a three-year high, wages fell and job openings plunged at the fastest pace in three decades.

The jobless rate rose to 4.4 percent last month from 4.1 percent in January, the statistics bureau said today in Tokyo. The ratio of jobs available to each applicant tumbled to 0.59 from 0.67, the biggest drop since 1974, the Labor Ministry said.

Companies from Toyota Motor Corp. to NEC Corp. are firing thousands of workers, increasing pressure on the government to give more assistance to the nation’s jobless, most of whom don’t receive benefits. Prime Minister Taro Aso said the government plans to unveil a stimulus package in mid-April that will include aid for households.

“We don’t think this is the ceiling for the unemployment rate,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo, who expects it to reach a record 5.7 percent this year. “Manufacturers are going to keep cutting costs by suppressing employment.”

Wages slid 2.7 percent as a record slump in exports forced manufacturers to slash production and overtime. Household spending fell 3.5 percent, a 12th monthly decline, indicating domestic demand is unlikely to make up for the collapse in exports. Purchases by consumers account for more than half of the economy.

The yen fell to 98.27 per dollar at 5:57 p.m. in Tokyo from 97.36 before the reports, and is heading for its biggest quarterly loss in seven years. The Nikkei 225 Stock Average fell 1.5 percent.

Sentiment Tumbles

Sentiment among the nation’s largest manufacturers probably tumbled to its lowest level in more than 30 years, the Bank of Japan’s Tankan survey is expected to show tomorrow. Exports fell an unprecedented 49.4 percent in February from a year earlier. Factory output slid 9.4 percent from January, when it declined a record 10.2 percent, a report showed yesterday.

Suzuki Motor Corp., Japan’s fourth-largest automaker, said yesterday it will shut some domestic factories for up to seven days next month to get rid of inventories.

Overtime compensation dropped an unprecedented 18.5 percent last month as manufacturers cut extra working hours by a record 47.7 percent, today’s Labor Ministry report showed.

Aso, speaking to reporters before heading to the Group of 20 summit in London, said compiling his newest stimulus package is his highest priority and the government needs to take measures to prevent the economy from “falling apart.” Since he took office in September, Aso has announced stimulus measures in two plans totaling 10 trillion yen ($102 billion).

Debt Burden

The government’s ability to spend may be limited as the nation’s debt burden is set to rise to 197.3 percent of gross domestic product next year, the Organization for Economic Cooperation and Development said in a report today. The ratio is the highest among OECD-member countries and almost double that of the U.S., where the ratio is projected to rise to 100 percent, OECD data show.

Some 77 percent of jobless people aren’t getting unemployment benefits, the highest figure among Group of Seven nations except Italy, whose data weren’t available, the International Labour Organization said in a report last week.

“The policy response has been pretty slow in creating a safety net for unemployment, which is putting downward pressure on the whole economy,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo.

The jobless rate will reach a postwar high of 5.5 percent in the first quarter of next year, according to the median estimate of 14 economists surveyed by Bloomberg News.

Oki Electric Industry Co., a maker of communications equipment, said it will cut administrative workers after weakening demand forced it to widen its loss forecast this month.

Harder to Find

New jobs are also becoming harder to find as companies try to contain costs. A total of 1,845 graduates had their job offers rescinded as of March 23, up 17 percent from February, the Labor Ministry said.

Toyota, the world’s largest automaker, this month said it will almost halve recruitment of graduates in Japan to the lowest in 14 years after forecasting its first loss in almost six decades. NEC, Japan’s largest personal computer maker, said it plans to cut new hires by almost 90 percent to 100 people.

NEC said in January that it will eliminate 20,000 jobs worldwide and Toyota plans to trim its workforce by at least 3,000.

“Japan’s labor market will keep deteriorating,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “The question is how much consumer spending will become a drag on the economy as wages and employment conditions worsen.”

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Fed Takes Lead Role in Executing ‘Stress Tests’ of U.S. Banks

By Craig Torres and Lizzie O’Leary

March 31 (Bloomberg) -- The Federal Reserve has taken the primary role in determining how much new capital the nation’s biggest banks need to weather the economic slump, people familiar with the matter said.

Putting the Fed in charge may help ease concern that different assessments by different agencies would lead to some firms being judged less strictly than others. Treasury Secretary Timothy Geithner has said he anticipates the results, due at the end of April, will result in “large” capital needs for some companies, offering investors a way of differentiating between weaker and stronger lenders.

Fed examiners are deployed alongside counterparts from three other agencies that oversee parts of the 19 banks that are involved in the so-called stress tests.

“You could argue this is a systemic risk issue and it is good to have another regulator step in and assert a uniform set of standards,” said Kevin Fitzsimmons, analyst at Sandler O’Neill & Partners LP in New York, and a former bank examiner at the Federal Reserve Bank of Boston. “The Fed has its hands on every institution that is a holding company.”

All 19 of the firms under scrutiny, from American Express Co. and GMAC LLC to SunTrust Banks Inc. and Citigroup Inc., are bank holding companies, giving the Fed an overarching role.

‘Consistency’ of Tests

Geithner unveiled the stress tests on Feb. 10. They were billed as a comprehensive set of standards for the financial system’s most important banks, regardless of their regulator. He stressed “consistency” and “realism” in congressional hearings that week.

While U.S. regulators don’t intend to publish the details of their stress tests, the results will effectively become known once it is determined how much capital each bank is required to raise. Under the terms of the February plan, firms will be given six months to raise the funds either from private investors or the government.

The tests are designed to mesh with the administration’s effort to remove distressed mortgage assets from banks’ balance sheets, which have hampered lending to consumers and businesses. Officials aim to have the first purchases of the toxic assets by private investors financed by the government within weeks of the conclusion of the capital-need assessments.

“Banks are going to have an incentive” to sell their devalued assets because they want to “go raise private capital from the markets,” Geithner said in an interview with NBC’s “Meet the Press” March 29.

Price of Assets

Still, it’s unclear whether most of the big banks will be willing to sell loans and securities at prices that may be below the current valuations on their balance sheets.

Bank of America Corp. Chief Executive Officer Kenneth Lewis said in a Bloomberg Television interview March 27 that the pricing of the assets is “going to be the key” determinant of his bank’s participation.

Citigroup CEO Vikram Pandit told reporters after a group of bank chief executives met with President Barack Obama March 27 that “we want to do whatever it takes” and work with officials “to promote a recovery.”

All of the 19 banks are bank or financial holding companies, according to the Federal Deposit Insurance Corp.’s Web site. Some of them have units overseen by the FDIC, Office of the Comptroller of the Currency and Office of Thrift Supervision.

OCC spokesman Kevin Mukri referred to prior Treasury statements noting that federal supervisors would coordinate in the tests.

OTS Ouster

Geithner removed OTS Acting Director Scott Polakoff last week amid concern about how the agency handled accounting for capital raised by banks it oversaw. John Bowman, the deputy director and chief counsel, was named acting director, becoming the third OTS chief so far this year.

The OTS failed to uncover “unsafe and unsound” practices at Pasadena, California-based IndyMac Bancorp Inc., an audit concluded last month. The Treasury’s inspector general disclosed on Jan. 30 that the OTS permitted IndyMac and four other unidentified lenders to improperly backdate a capital infusion, which helped them avoid regulatory restrictions.

“If these stress tests are going to be meaningful, as they should be, then banks are going to require more capital,” Patrick Cave, a former Treasury official who is now chief executive officer of Cypress Group LLC, said in an interview on Bloomberg Television. He added that the administration is right to pursue a “tough love” approach to any further assistance.

Economic Projections

Regulators’ assessments are based on two scenarios for the economy. The “baseline” forecast projected a 2 percent economic contraction and an 8.4 percent jobless rate in 2009, followed by 2.1 percent growth and 8.8 percent unemployment in 2010.

The “alternative more adverse” scenario had a 3.3 percent contraction in 2009, accompanied by 8.9 percent unemployment, followed by 0.5 percent growth and 10.3 percent jobless in 2010.

The Treasury estimates it has about $135 billion left in the $700 billion financial-rescue fund enacted in October. Banks who already received government funding also could get a capital boost if the Treasury agrees to convert its preferred shares into common equity. Obama administration officials haven’t said when they may need more rescue money and ask for congressional authorization.

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net; Lizzie O’Leary in Medellin at loleary2@bloomberg.net

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Abu Dhabi’s IPIC Raises Cepsa Stake for EU3.3 Billion

By Paul Tobin and Arif Sharif

March 31 (Bloomberg) -- International Petroleum Investment Co., an Abu Dhabi government-owned company, agreed to invest 3.3 billion euros ($4.4 billion) to raise its stake in Cia Espanola de Petroleos SA, Spain’s second-largest oil producer.

IPIC will boost its interest in Cepsa to about 47 percent from 9.5 percent by acquiring stakes from Banco Santander SA and Union Fenosa SA at 33 euros a share, the Abu Dhabi-based company said today in a statement. Cepsa rose as much as 2.1 percent 32.15 euros in Madrid and was trading at 31.97 euros at 9:46 a.m. local time.

IPIC’s stake purchase in Cepsa is its second acquisition this month. IPIC unit Aabar Investments PJSC said March 22 it bought a 9.1 percent stake in Daimler AG, the world’s second- biggest luxury carmaker, for $2.7 billion. IPIC Chief Executive Officer Khadem al-Qubaisi said Jan. 10 the company aimed to boost its holdings to as much as $20 billion in the next five years from $12 billion to $15 billion now, as it seeks to benefit from falling asset prices globally.

“IPIC will endeavor to play an active and constructive role in Cepsa’s development,” the company said in the statement. The transaction requires regulatory approvals and is subject to the availability of financing for the deal, it said.

The agreement will make IPIC the second-largest investor in Madrid-based Cepsa after Total SA, Europe’s third-biggest oil company. Santander agreed to sell its 32.5 percent stake in Cepsa, while Fenosa will sell its 5 percent stake.

Santander

The transaction helps Santander raise cash amid increasing loan defaults. Bad loans at the bank more than doubled to 14.2 billion euros in 2008. Santander, which raised 7.2 billion euros with a rights offering in November, ended last year with a core capital of 7.23 percent, up from 6.31 percent in September.

Abu Dhabi, holder of 8 percent of the world’s oil reserves, is the biggest and richest of the seven states that make up the United Arab Emirates. Abu Dhabi government-backed investment vehicles have announced plans to expand their holdings by at least $12 billion over the next five years as part of a plan to use its oil surpluses to diversify the emirate’s economy.

IPIC on March 30 received antitrust clearance form the U.S. Federal Trade Commission to buy Nova Chemicals Corp., Canada’s largest chemical maker, for $499 million in cash. It earlier this month got approval from European Union regulators for its plan to buy a 70 percent stake in MAN AG’s Ferrostaal industrial-services units for 631 million euros.

To contact the reporter on this story: Paul Tobin in Madrid at ptobin@bloomberg.netArif Sharif in Dubai at asharif2@bloomberg.net

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World Bank, OECD Cut Economic Forecasts, Warn of Jobless Jump

By Sandrine Rastello and Svenja O’Donnell

March 31 (Bloomberg) -- The World Bank and OECD cut their economic outlooks for emerging and rich nations and warned surging unemployment may deal another blow to the global economy.

The Organization for Economic Cooperation and Development said in Paris the economy of its 30 members will contract 4.3 percent this year, four percentage points below its previous prediction. The World Bank lowered its growth forecast for developing countries this year by more than half to 2.1 percent.

“2009 will be a dangerous year,” World Bank President Robert Zoellick said in a speech in London as he expressed concern of a looming “unemployment crisis.”

The deteriorating world economy adds urgency to the London summit in two days of Group of 20 leaders which is being held to find remedies to the worst economic and financial turmoil in six decades. Job cuts from Volkswagen AG to Agilent Technologies Inc. are putting pressure on governments to do more even as they run out of room to ease fiscal and monetary policies.

“It is important and necessary for the summit to take credible decisions which will help to halt and reverse the current slowdown and to instill a sense of confidence in the global economy,” Indian Prime Minister Manmohan Singh said today before leaving for London.

The OECD urged the policy makers to “devise and implement without delay a coherent strategy that squarely tackles the mess in financial markets.” Governments with the scope to do so should introduce more fiscal stimulus to support demand, it said, singling out Canada, Germany, South Korea and Australia.

Japan Contraction

The OECD projected Japan’s economy will shrink 6.6 percent, outpacing declines of 4.1 percent in the euro area and 4 percent in the U.S. It predicted unemployment across its 30 members would rise to 10.1 percent by the end of 2010 from 7.5 percent in the current quarter, forecasting that would leave inflation in many economies close to zero.

Central banks should keep interest rates close to zero and the OECD also urged policy makers to find ways to rid banks of toxic assets. Deflation “appears to be a significant risk” for many economies next year, the OECD said.

The organization warned its outlook was subject to “risks that remain firmly tilted to the downside,” citing the potential for another bout of problems at banks and governments failing to do enough to calm markets. Deutsche Bank AG Chief Risk Officer Hugo Banziger said yesterday the credit crisis is “far from over.”

‘Real Hardships’

The World Bank’s Global Economic Prospects report predicted the world economy will shrink 1.7 percent this year and Zoellick identified central and eastern European economies as the most vulnerable to the international slump.

While joblessness, home repossessions and the collapse in asset values are “real hardships” in the developed world, Zoellick said poorer nations “have much less cushion: no savings, no insurance, no unemployment benefits, and often no food.”

Capital flows to the developing world have shrunk this year to about one-third of the peak of $1.2 trillion reached in 2007. Financing shortfalls, declining commodity prices and a drop in demand may lead to a “social and human crisis,” Zoellick said.

Both institutions warned governments not to resort to protectionism. The World Bank estimated the volume of global trade in goods and services will drop 6 percent and the OECD predicted a 13.2 percent plunge.

While the OECD said its bloc will contract 0.1 percent next year, the World Bank predicted the global economy will grow 2.3 percent.

“Even if global growth turns positive again in 2010, output levels will remain depressed, fiscal pressures will mount and unemployment levels will rise further in virtually every economy well into 2011,” Hans Timmer, a World Bank economist, said in a statement.

To contact the reporters on this story: Sandrine Rastello in Paris at srastello@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net.

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Waxman Said to Propose Emission Cuts, Renewable Energy Sources

By Tina Seeley and Jim Efstathiou Jr.

March 31 (Bloomberg) -- Representative Henry Waxman, chairman of the House energy panel, will unveil draft legislation to reduce U.S. greenhouse gas emissions by 20 percent and require that utilities use some renewable sources of power, according to two people familiar with the measure.

Waxman, a California Democrat who heads the Energy and Commerce Committee, will release the proposal today, according to the people, who declined to be identified because the plan isn’t yet public.

“The Waxman bill is the opening shot in the battle about what we do about global warming,” said Daniel Becker, director of the Washington-based Safe Climate Campaign. “So it’s pretty important.”

President Barack Obama has called for the U.S. to reduce emissions 80 percent by 2050, and get a quarter of its electricity from renewable sources by 2025. Waxman’s proposal would follow those goals.

The first hearing for the legislation will be the week of April 20, and a full committee vote may occur by the week of May 11, according to one of the people, an energy lobbyist.

The president’s proposed budget for 2010 assumes greenhouse gas limits are in place and the federal government will begin to receive revenue from auctioning off pollution credits by 2012. Selling all such permits would raise at least $646 billion by 2019, according to the administration.

The Waxman plan doesn’t specify whether any allowances will be given for free, as some companies have requested. The committee staff favors auctioning a majority of them, according to the energy lobbyist.

Climate Partnership

Waxman’s plan to cut emissions is similar to a proposal by the U.S. Climate Action Partnership, a group that favors federal action on emissions limits and includes utilities, oil companies and environmental organizations. The group in January proposed reducing such greenhouse gases by up to 20 percent below 2005 levels by 2020.

Members of the climate group include Duke Energy Corp., BP Plc and the Dow Chemical Co. Jim Rogers, chief executive officer of Charlotte, North Carolina-based Duke, has called on the government to give away as much as 80 percent of the pollution credits and use the revenue from the rest to fund research into low-carbon technology.

The Waxman legislation includes a national requirement that 25 percent of electricity come from renewable sources by 2025. The requirement could be reduced to 20 percent if certain energy efficiency standards are met.

Twenty-eight states and the District of Columbia now have programs for renewable energy sources, according to the Clean Energy States Alliance, based in Montpelier, Vermont.

To contact the reporters on this story: Tina Seeley in Washington at tseeley@bloomberg.net; Jim Efstathiou Jr. in New York at +1- jefstathiou@bloomberg.net.

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Australian, N.Z. Dollars Head for Quarterly Loss on Recession

By Candice Zachariahs

March 31 (Bloomberg) -- The Australian dollar headed for a third quarterly loss and New Zealand’s for a fourth as concern the global recession is deepening damped demand for higher- yielding assets.

The two currencies were set for the longest run of quarterly losses since 2006 as Australia’s central bank said for the first time today the economy is likely to slide into a recession this year and a report showed New Zealand’s business confidence was the second-worst on record. The currencies gained today as local stocks performed better than U.S. equities yesterday, encouraging some investors.

“Europe will be a continued focus with worries about their fiscal, economic and banking problems and there appears to be a clear end-game for the U.S. auto sector with a much greater chance of them moving into Chapter 11,” said Tony Morriss, a senior markets strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “People are taking risk off the table.”

Australia’s currency traded at 68.73 U.S. cents as of 6:40 p.m. in Sydney from 68.14 cents in New York yesterday and 70.26 cents at the end of last year. New Zealand’s dollar bought 56.82 cents from 56.34 cents yesterday and 57.92 cents on Dec. 31.

Australia’s gross domestic product is “likely to fall in 2009,” deputy central bank governor Ric Battellino said today in Brisbane. Still, “Australia will remain one of the better- performing economies in the developed world,” he said.

Rate Bets

Traders reduced bets to 15 percent the Reserve Bank of Australia will cut its benchmark interest rate by half a percentage point to 2.75 percent at its next meeting on April 7 from 33 percent odds yesterday, according to a Credit Suisse index based on swaps.

“The market is reassessing the severity of an RBA cut, if any, next month,” said Tim Waterer, a foreign-exchange dealer with CMC Markets in Sydney.

Australian bank lending growth unexpectedly stalled in February with total loans provided by banks and other finance companies remaining unchanged from January, the RBA said today. The median forecast of economists surveyed by Bloomberg News was for a 0.5 percent gain.

A net 21.2 percent of New Zealand’s companies surveyed this month expect sales and profits will decline over the next 12 months, according to a report released by ANZ National Bank Ltd. A December reading of 21.5 was the most pessimistic since the survey began in 1988.

Daily Gain

The currencies gained today as Australia’s S&P/ASX 200 Index declined 0.6 percent compared with the 3.3 percent slump in the Dow Jones Industrial Average yesterday.

“The Australian stock market is holding up better than expected in the wake of that 250-point fall in the Dow and that put the local currency in good stead,” CMC’s Waterer said.

The Australian and New Zealand currencies are poised to register their first quarterly gain against the yen since June, rising 6 percent and 6.3 percent respectively.

Australia’s dollar advanced 1.8 percent today to 67.47 yen and New Zealand’s currency climbed 1.8 percent to 55.81 yen.

Higher interest rates in Australia and New Zealand compared with 0.1 percent in Japan and as low as zero in the U.S. attract investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. New Zealand’s benchmark rate is 3 percent.

Monthly Gain

The currencies rose in March against the dollar and yen as global stocks headed for their best month since 2003. New Zealand’s dollar has strengthened 14 percent against the greenback and Australia’s currency has risen 7.6 percent.

Australian government bonds rose for a second day. The yield on the benchmark 10-year note fell four basis points, or 0.04 percentage point, to 4.42 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 added 0.31, or A$3.10 per A$1,000 face amount, to 106.59.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.95 percent from 4.04 yesterday.

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

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Thai Baht Poised for 5th Quarterly Loss as Funds Trim Holdings

By Shanthy Nambiar

March 31 (Bloomberg) -- Thailand’s baht was headed for a fifth quarterly decline, the longest stretch of losses since 2001, as an economic slump prompted overseas investors to reduce their holdings of the nation’s assets.

The currency added to last year’s 15 percent drop as global funds sold $147 million more Thai stocks than they bought since the end of December. The finance ministry forecast last week that the economy would shrink as much as 3 percent this year as exports slide and unemployment climbs. That would be the first annual contraction since 1998.

“People will have to price in the fact that there is still downside risk to growth,” said Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore. “The flight to safety scenario is still intact.”

The baht traded at 35.51 per dollar as of 11 a.m. in Bangkok, little changed from 35.54 yesterday, according to data compiled by Bloomberg. The currency has fallen 2.3 percent this quarter. It may decline to 36.5 by the end of June and 37 by the end of September, Tanuwidjaja said.

Nine of Asia’s 10 most-active currencies excluding the yen dropped against the U.S. dollar this year as the MSCI Asia Pacific Index of regional shares slumped 8.3 percent. Hong Kong’s dollar, which is pegged to the greenback, was little changed.

Thailand’s central bank doesn’t have “a preference for the baht to be weak or strong,” Deputy Governor Atchana Waiquamdee said last week. “We monitor the baht to make sure it doesn’t overshoot or undershoot regional currencies and affect our competitiveness.”

The Dollar Index, which the ICE uses to track the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, has climbed 5 percent this year.

To contact the reporter on this story: Shanthy Nambiar in Bangkok at snambiar1@bloomberg.net

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Indonesian Rupiah to Drop 6 Percent by End-June, OCBC Predicts

By James Regan

March 31 (Bloomberg) -- Indonesia’s rupiah is likely to slide 6 percent to 12,500 per dollar in the coming quarter as overseas investors shun riskier assets and foreign exchange is needed to meet payments on imports and debt, according to Oversea-Chinese Banking Corp.

“We continue to project the rupiah to still be trading on a slightly weaker bias against the U.S. dollar,” Enrico Tanuwidjaja, an economist at OCBC in Singapore, wrote yesterday in a research note. “Sustained corporate dollar demand should guard any excessive plunge in the USD-IDR past the 11,000 mark in the very near term.”

The currency is likely to weaken to 13,000 per dollar in the third quarter before rebounding to 12,500 in the final three months of the year, Tanuwidjaja wrote.

The rupiah was recently 1.7 percent weaker at 11,750 in Jakarta, paring this month’s gain to 3.7 percent. The currency has dropped 5.7 percent so far this year and reached 12,300 on Feb. 18, the weakest since Dec. 3.

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China Regulator Sees Risk of Dollar Fall, Securities News Says

By Judy Chen

March 31 (Bloomberg) -- The U.S. dollar is at risk of weakening as the supply of the currency is boosted, the Shanghai Securities News reported, citing a senior official at China’s State Administration of Foreign Exchange.

The surge in the amount of dollars in circulation may also stoke inflation, Guan Tao, deputy head of the Balance of Payments Department at the currency regulator, told the Chinese- language newspaper. Guan added that it would be hard to replace the dollar as the world’s dominant currency in the short term, the report said.

The paper said Guan made the comments at a financial forum in Shanghai, and didn’t provide the date of the event.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net

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Euro Is Still “Bullish” Against Dollar: Technical Analysis

By Ron Harui

March 31 (Bloomberg) -- The euro is poised to gain versus the dollar as long as the currency stays above so-called support at $1.3065, said BNP Paribas SA, citing trading patterns.

Support at $1.3065 represents an ascending trend line that connects the European currency’s lows of March 4 though March 11, according to data compiled by Bloomberg. Support is a level where buy orders may be clustered.

“Overall, holding above $1.3065, the mood remains bullish,” Claude Mattern, a Paris-based technical analyst at BNP Paribas, wrote in a research note today. “The currency pair is consolidating the fall of the past few days.”

The euro rose to $1.3274 as of 9:22 a.m. in London from $1.3199 in New York yesterday, when it reached $1.3114, the lowest since March 18. The currency has dropped 5 percent this year and is heading for a fourth quarterly decline, the longest losing streak since December 2005.

“The euro-dollar, meeting support on a minor trend line, is slightly rebounding within the range of the past few days,” Mattern wrote.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.

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Asian Currencies Heading for Best Month of 2009 as Stocks Rally

By Bob Chen and Patricia Lui

March 31 (Bloomberg) -- Asian currencies posted their first monthly gain since December as stocks rallied on optimism government stimulus spending will help revive regional economies and draw investors back to emerging markets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active currencies excluding the yen, climbed 2.7 percent in March, trimming a loss for the quarter to 2.7 percent. Overseas funds bought more shares than they sold this month in South Korea, Indonesia, Taiwan and Thailand, putting the MSCI Asia Pacific Index on course for its biggest monthly advance since December. The rally in Asian currencies may be reaching a peak, according to Calyon, a unit of France’s Credit Agricole SA.

“Various currencies like the Korean won had been heavily oversold and were due for some sort of a pull back,” said Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong. “Some equity markets rallied around 20 percent which eased risk aversion and helped capital flow back into many Asian markets.”

The Korean won closed at 1,383.25 per dollar, according to Seoul Money Brokerage Services Ltd. It advanced 11 percent in March, the best performing Asian currency. Indonesia’s rupiah trailed, rising 3.7 percent to 11,558, followed by Taiwan’s dollar, which gained 3 percent to NT$33.917 this month.

Stocks Rebound

Stocks rebounded after Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. said they were profitable in the first two months of 2009. Bank of America and JPMorgan said this week that they may not have performed so well in March. U.S. Treasury Secretary Timothy Geithner said some U.S. banks will need “large amounts” of assistance.

The Standard & Poor’s 500 Index, the benchmark for U.S. stocks, advanced 21 percent in the 14 trading days ended March 27, the most over a stretch of that size since 1938, according to data compiled by New York-based S&P analyst Howard Silverblatt.

The gauge dropped 3.5 percent yesterday, trimming its March rally to 7.1 percent, after President Barack Obama’s administration warned that General Motors Corp. and Chrysler LLC have one last change to restructure.

“After Geithner said the banks need more help, there’s resumption of risk aversion and people preferred safe-haven assets again,” said David Mann, senior foreign-exchange strategist at Standard Chartered Bank. Mann predicted the Taiwan dollar, Singapore dollar, Thai baht and Malaysian ringgit will weaken further this year because their economies are “more open to the global slowdown.”

‘Extended Consolidation’

The won rounded out its first monthly gain of the year as the country’s stocks rallied the most since 2001 and the nation’s finances improved. The MSCI regional share index climbed 7.8 percent in March.

The Korean currency pared a loss for the quarter to 9 percent as the current-account balance turned to surplus and the government announced a stimulus spending package to help avert a recession. Manufacturers’ confidence rebounded from near a record low to reach the highest in five months, according to a central bank report today, causing the won to reverse an earlier loss.

“The won flipped after a weak opening as local stocks powered higher,” said Jo Hyun Suk, a foreign-exchange dealer with Korea Exchange Bank in Seoul. “The undercurrent is not that bad for the won.”

Japan and South Korea agreed to extend their bilateral currency-swap accord by six months through to the end of October, Bank of Korea said today, adding that “this action mitigates adverse influences of the global financial turmoil on the two sound and well-managed economies and contributes to securing stability in regional financial markets.”

China Swaps

China’s central bank said it’s in talks to sign more currency-swap agreements to bolster international trade, after sealing six such accords since November 2008.

The People’s Bank of China has set up 650 billion yuan ($95 billion) worth of swaps to provide short-term liquidity, according to a statement today on its Web site. The central bank said the funding will promote bilateral trade and direct investment by allowing one country to pay for imports in another nation’s currency.

The central bank has entered swap agreements with Indonesia, Malaysia, South Korea, Hong Kong, Belarus and Argentina, broadening access to the yuan, which isn’t freely convertible.

The rupiah pared losses of as much as 2.5 percent on speculation Bank Indonesia intervened to stem the decline, while stock gains fueled optimism overseas investors will buy more local equities.

Rupiah Intervention

“The rupiah’s steep losses earlier today were due to the sell-off in regional currencies, stocks and bonds following through from yesterday and overnight,” said Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. “But stocks turned positive by late morning and BI also intervened to offer dollars. So the rupiah recovered a bit.”

The rupiah was little changed at 11,548 a dollar after slipping to 11,840, the lowest level since March 20, according to data compiled by Bloomberg. Foreign funds bought $147 million more local stocks than they sold this month.

Elsewhere, the Thai baht was at 35.46 per dollar, headed for a monthly advance of 1.9 percent, Bloomberg data show. Malaysia’s ringgit strengthened 1.6 percent for the month to 3.6445. India’s rupee rose 0.3 percent to 50.8050 and Vietnam’s dong declined 1.8 percent to 17,797.00. The Philippine peso gained 1 percent to 48.333, according to Tullet Prebon Plc.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Patricia Lui in Singapore at plui4@bloomberg.net

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