Wednesday, April 22, 2009

No Fundamentals Yet Earnings Where the Major Players for Today

Daily Forex Fundamentals | Written by ecPulse.com | Apr 22 09 12:25 GMT |

Between optimism, pessimism and the augmented concerns did not stop with the stimulus packages released out by governments, where traders are standing still waiting for chances to gain profits especially after they lived through much losses in the prior year. However, earnings was the major player in today's session were we start with Volkswagen, Praktiker and end with Peugeot.

Moreover, the International Monetary Fund announced yesterday fresh projections about the result of the worst credit crisis since the great depression, according to estimates the levels of write-downs will reach 4.15 trillion dollars rising from the previous estimate of 2.2 trillion. In addition, the IMF said the world growth will be heading into a contraction for the first time since the World War II.

Europe's biggest carmaker, Volkswagen announced first quarter earnings by saying that the level of profits dipped heavily with almost 74%, where the net income stood at 243 million euro's from the previous 929 million seen in the earlier year. Volkswagen profits were eroded heavily from the prolonged weakening demand across the globe along with the continuous resistance of banks from lending out money to borrowers.

Recently, the car industry tumbled heavily especially in the United States where two of the main car manufacturers are now crying for help just to keep going, General Motors and Chrysler on various times demanded the US government bailout, however they had failed in creating a convincible restructuring plans in order to keep going.

When signs of turbulence in the car industry came on surface, governments such as France started to work rapidly to support two car industries in their territory; the lent money came to rescue those companies just to keep going until the long lost confidence get restored once again and demand picks up some pace.

Praktiker one of the biggest home improvement retailers in Germany announced that their operating losses augmented heavily in the first three months of the year, their net losses reached to 36.8 million euro's from the previous losses seen at 23.5 million euro's. Recession hammered all sector in the economy, no chance for improvement even after the government had intervened on various occasions.

The prolonged turbulence will not stop unless the confidence in the economy get back on track, the non-spending consumers and the hesitant banks would continue to pressure growth and earnings into losses.

The European indices added Dow Jones euro stoxx added 0.50% reaching 2254.88 levels, CAC 40 added 0.44% reaching 2987.16 and the German DAX added 0.39% reaching 4519.07 levels.

Therefore, dear reader lets just wait to see the other fundamentals for this week where today our calendar lacked any...

Ecpulse

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No Fundamentals Yet Earnings Where the Major Players for Today

Daily Forex Fundamentals | Written by ecPulse.com | Apr 22 09 12:25 GMT |

The European indices added Dow Jones euro stoxx added 0.50% reaching 2254.88 levels, CAC 40 added 0.44% reaching 2987.16 and the German DAX added 0.39% reaching 4519.07 levels.

Therefore, dear reader lets just wait to see the other fundamentals for this week where today our calendar lacked any...

Ecpulse

Debt Fears Undermine Sterling

Daily Forex Fundamentals | Written by Investica | Apr 22 09 12:29 GMT |

The UK government deficit levels will continue to represent an extremely important medium-term risk factor for the UK currency. Countries with budget deficit levels above 10% of GDP run a very important risk of suffering a collapse in confidence. The degrees of risk appetite will also need to be watched very closely. If wider fear over the global economy increases again and stock markets start to suffer sharp losses, then there will be a much bigger risk of UK currency losses. Sterling, therefore, is still a leveraged play on the global economy. Overall, still look to sell the currency on rallies.

The headline UK unemployment claimant count increase was lower than expected at 73,600 for March which will provide some slight relief given expectations that unemployment would increase by more than 100,000 for the month, but the government borrowing data was even worse than expected which will reinforce budget fears and the shortfall was GBP90bn for the year.

The government announced an expected budget deficit of GBP175bn for the fiscal year starting in April with only a marginal decline the following year. Borrowing at this level would represent 12% of GDP and this assumes that the economy can start to stabilise before the end of 2009. Tax increases were also announced for the following year to help trim the deficit.

Borrowing at these levels remains a very important risk factor for Sterling as the deficit is certainly at a level which could trigger heavy and aggressive selling pressure on the currency.

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.

Currency Technical Report

Daily Forex Technicals | Written by FX Greece | Apr 22 09 12:35 GMT |

EUR/USD

Resistance: 1,2955/ 1,2985-90/ 1,3020/ 1,3050-55/ 1,3085-90/ 1,3120/ 1,315060/ 1,3200/ 1,3270
Support: 1,2910-15/1,2880/ 1,2830-40/ 1,2790/ 1,2730-40/ 1,2650

Comment: The positive ZEW outcome in Europe and the rise in stock markets, led euro to an upward reaction, but is remained shallow below 1,3000 area.

Our scenario remains the same and further pressure is expected for euro. A move towards 1,3100, which was an important support level until recently and is now turned into a resistance. Interim resistance emerges at 1,3000-20 and 1,3060. The ranges for the downward scenario will be set at 1,3150-70, which is the next important resistance.

Downwards, first targets are set at 1,2830-40 and 1,2730-40. If the move is limited below yesterday's tops and we see a downward break of the consolidation in the hourly chart, it will be a positive sign...

*STRATEGY:

We follow the short term trend with sell orders at the reactions. So we could try sell orders at 1,3000-20 with stops above 1,3040 and target at 1,2930-50.

Alternative sell positions could be tried again at 1,3080-3110, or at a downward break of the consolidation in the hourly chart.

We should be cautious regarding ling positions until we see reversal signs. We keep buy positions small with tight stops. Buy orders could be tried within the short term consolidation ranges, having as target the area of 1,3000, or at an upward reaction at 1,3020 with target at 1,3080-00...

FX Greece

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Copper Drops in Asia as Chinese Imports May Create Supply Glut

By Glenys Sim

April 22 (Bloomberg) -- Copper fell for a third day in Asia, reversing an earlier advance, as some investors sold the metal on concern a second straight month of record imports by China, the world’s largest user, may create a market surplus.

Refined copper imports gained 10 percent from the previous month to 296,843 tons in March, the Beijing-based customs office said today, citing revised final data. Imports were 138 percent more than March last year, according to customs data.

“While imports were widely expected to be high, investors are beginning to wonder if Chinese demand is really strong enough to absorb all this metal,” Yuan Fang, a trader at Shanghai East Asia Futures Co., said today.

Copper for three-month delivery on the London Metal Exchange fell as much as 2 percent to $4,415 a ton and traded at $4,441 at 3:10 p.m. Singapore time, extending the 6.2 percent decline in the past two days. The metal rose as much as 1.6 percent earlier.

July-delivery copper on the Shanghai Futures Exchange lost as much as 3.1 percent to 36,230 yuan ($5,305) a ton, before trading at 36,400 yuan. Earlier the most-active contract gained as much as 2 percent.

China’s economy will expand 8.3 percent in 2009, from an earlier estimate of 6 percent, as the government’s 4 trillion- yuan ($586 billion) stimulus package spurs domestic demand and boosts investment, Goldman Sachs Group Inc. said today.

“No matter how optimistic the market is about China’s demand, if imports continue to grow, we’re definitely going to face an oversupply situation,” Li Rong, chief analyst at Great Wall Futures Co., said from Shanghai.

Among other LME-traded metals, aluminum fell 0.8 percent to $1,448 a ton, zinc slid 3.3 percent to $1,427 a ton, and lead lost 2 percent to $1,433 a ton. Tin dropped 1.2 percent to $12,000 a ton, and nickel fell 0.5 percent to $11,449 a ton as of 3:13 p.m. Singapore time.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net

Gold Rebounds on Demand for Hedge From Inflation, Lower Stocks

By Claudia Carpenter

April 22 (Bloomberg) -- Gold rebounded in London as signs of inflation and falling equity markets may spur demand for the precious metal. Silver and palladium also gained.

U.K. money supply probably grew 19.2 percent in March from a year earlier, economists said before an official report today. Gold fell 70 cents yesterday after the Dow Jones Industrial Average climbed 1.6 percent. Futures on the Dow were down 0.7 percent today.

“We have inflation with the money supply, which is good for gold,” said Mario Innecco, a futures broker at MF Global Ltd. in London. “We’re finding a bottom in gold and a top in stock markets.”

Gold for immediate delivery rose $2.25, or 0.3 percent, to $886.05 an ounce at 9:07 a.m. local time. June gold futures climbed 0.5 percent to $886.90 an ounce in electronic trading on the New York Mercantile Exchange’s Comex division.

The U.K. money supply report from the Bank of England is set for release at 9:30 a.m. in London.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund in gold, was unchanged at 35.6 million ounces.

Among other metals for immediate delivery, silver gained 0.8 percent to $12.1313 an ounce. Platinum fell 25 cents to $1,160 an ounce, and palladium added 0.8 percent to $225.50 an ounce.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net

Crude Oil Declines on Forecast U.S. Inventories Grew Last Week

By Grant Smith

April 22 (Bloomberg) -- Oil fell before a report today forecast to show U.S. inventories rose from their highest level since 1990 as the recession in the world’s largest energy consumer cuts demand.

Crude oil stockpiles probably rose 2.5 million barrels in the week ended April 17 from 366.7 million the previous week, the highest since September 1990, according to a Bloomberg survey before today’s Energy Department report. The U.S. dollar rose to its strongest in a month against the euro, limiting demand for commodities as a hedge against inflation.

“Crude stock levels are still historically very high,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “It would take something quite bullish in the inventory data to take us back over $50 and I don’t see that happening.”

Crude oil for June delivery declined as much as 53 cents, or 1.1 percent, to $48.02 a barrel in electronic trading on the New York Mercantile Exchange. It was at $48.45 at 8:45 a.m. London time.

Japan’s crude oil imports fell in March for a fifth month, declining 18.4 percent from a year earlier to about 3.68 million barrels a day, a finance ministry preliminary trade report released in Tokyo showed. South Korea used 66.6 million barrels of oil products last month, down from 68.3 million barrels a year earlier, according to data from Korea National Oil Corp.

Yesterday, the industry-funded American Petroleum Institute reported that inventories declined 1.01 million barrels to 370.2 million last week, the first drop since March 6.

Energy Department

The Energy Department will probably show that gasoline stockpiles dropped 700,000 barrels from 216.5 million the prior week, according to the Bloomberg survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably fell 1 million barrels from 139.6 million barrels.

Oil-supply totals from the API and DOE moved in the same direction 76 percent of the time over the past four years, according to data compiled by Bloomberg.

API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The Energy Department requires reports to be filed for its weekly supply survey.

Brent crude oil for June settlement fell as much as 42 cents, or 0.8 percent, to $49.40 a barrel on London’s ICE Futures Europe Exchange. It was at $49.81 a barrel at 9:09 a.m. London time.

The dollar was at $1.2931 against the euro from $1.2948 in New York yesterday. It touched $1.2886 earlier, the strongest since March 16.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net

Japan’s Steel Demand Recovery May Take 3 to 5 Years

By Masumi Suga and Ichiro Suzuki

April 22 (Bloomberg) -- Demand for steel produced by Japanese mills, the world’s second-largest producer, may take three to five years to recover to levels before this recession, Japan Iron & Steel Federation Chairman Shoji Muneoka said.

“I expect it will take time” before demand is restored to 2007 peak levels, Muneoka said today at a press briefing in Tokyo Today. “Developing nations are likely to recover faster. It’s difficult to consider the U.S. market will be the first to see a recovery.”

Japan’s crude steel production tumbled by a record 13 percent to 105.5 million metric tons for the year ended March 31, the lowest since 2001, as the financial crisis damped demand from carmakers and electronics manufacturers, the Federation said April 20. Production this quarter will “bottom” before output improves next quarter, Muneoka said.

Muneoka, also the president of Nippon Steel Corp., Japan’s largest producer of the metal, said it will keep a blast furnace in Oita, southern Japan, idle for at least this quarter. The furnace was scheduled to resume operations in mid-May.

Nippon Steel and other Japanese mills, in iron ore price talks with BHP Billiton Ltd. and other producers, may take some more time to conclude, Muneoka said, without specifying the time frame.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net.

Most Asian Stocks Decline on Profit Concerns; Elpida Surges

By Jonathan Burgos and Shani Raja

April 22 (Bloomberg) -- Most Asian stocks fell as concern corporate earnings will disappoint countered gains by technology companies after Elpida Memory Inc. said it plans to raise memory-chip prices.

Takefuji Corp. sank 8.5 percent in Tokyo, pacing declines by financial companies, after Standard & Poor’s said interest refunds may force downgrades at Japan’s largest consumer lenders. Zhuzhou Smelter Group Co., China’s No. 1 refined zinc producer, sank 5.2 percent in Shanghai after profit plunged. KDDI Corp., Japan’s No. 2 mobile-phone carrier, dropped 3.9 percent as Deutsche Bank AG said the company’s growth is slowing. Elpida, Japan’s biggest computer-memory chip maker, surged 15 percent.

Five stocks declined for every four that advanced on the MSCI Asia Pacific Index, which lost 0.3 percent to 88.03 at 4:53 p.m. in Tokyo. The gauge has climbed 25 percent from a five-year low on March 9 amid speculation government measures will succeed in easing the global recession.

“When markets move so strongly there is some imperative to participate, but I don’t think there’s a great deal of clarity about where the post-crisis fundamentals are going to settle,” said Karma Wilson, Sydney-based head of Asian equities at AMP Capital Investors, which manages about $90 billion.

Japan’s Topix Index lost 0.1 percent, while Hong Kong’s Hang Seng Index fell 2.7 percent. China’s Shanghai Composite Index slipped 2.9 percent on speculation regulators will end a moratorium on initial share sales. All markets fell except South Korea, Taiwan, Thailand, the Philippines, Vietnam and Sri Lanka.

Aristocrat Leisure Ltd., the world’s second-largest maker of slot machines, tumbled 13 percent in Sydney after selling shares. Pioneer Corp., which makes car audio and navigation systems, climbed 17 percent in Tokyo after the Nikkei newspaper said Japan’s government may provide funds to the company.

Futures on the Standard & Poor’s 500 Index lost 0.8 percent. The gauge climbed 2.1 percent yesterday after Treasury Secretary Timothy Geithner said the vast majority of U.S. banks have more capital than they need to be considered well capitalized. The Federal Reserve is overseeing assessments of the health of the 19 biggest U.S. banks, with results to be released on May 4.

To contact the reporters for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.

European Stocks Erase Losses; Stoxx 600 Index Gains 0.2 Percent

By Andrew Rummer

April 22 (Bloomberg) -- European stocks erased earlier declines as a rally in banks offset disappointing earnings from Capital One Financial Corp. and Heineken NV.

The Dow Jones Stoxx 600 Index added 0.2 percent to 190.49 at 8:53 a.m. in London. Futures on the Standard & Poor’s 500 Index dropped 0.8 percent.

Geithner Comments Help Ease Stress Test Concerns

Daily Forex Fundamentals | Written by AC-Markets | Apr 22 09 07:55 GMT |

Market Brief

The Usd was stable in the Asian session, as the rally in risk failed to gain traction in local equity markets. The EurUsd traded between 1.2970 to 1.2911, while the UsdJpy traded between 98.92 to 98.08. A statement by Treasury Secretary Geithner, that most banks have sufficient reserves to protect against possible losses, gave US equity markets a boost. He also noted that the majority of US banks have adequate capital to be defined as well-capitalized and financial stability plan has roughly $109bn remaining in TARP, should capital be required. The reaction to the positive statement was unmistakable, with the equity markets reversing early losses and closing higher. However, Asian regional indexes have been unable to sustain the momentum. Meanwhile, the IMF's Global Financial Stability Report was released and estimates that total write-down's on US assets would reach $2.7 trn up from $2.1trn forecasted in January. Overall, we expect risk aversion to remain elevated near term ahead of corporate earnings and actual results of the US banks stress test. This risk averse environment should support Usd and Jpy trades.

Yesterday, the Bank of Canada cut its overnight rate by 25bp to 0.25% vs. consensus expectation of no change.. In addition, the central bank suggested that rates are expected to remain unchanged until mid-2010. Given that rates are practically zero, we suspect the BoC will follow the lead of other central banks and begin buying or lending against a range debt in the near term. We expect any Cad gains to renewal of risk appetite to be tempered by the effect of unconventional policy.

In Australia, consumer prices fell to 2.5% vs. 2.8% y/y exp. The data in our mind supports our theory that the RBA will be on hold for the foreseeable future and the Aud will be supported in the mid term. In addition, comments from several US industrial companies that China's stimulus plans, primarily in infrastructure investment, will give earnings a boost and should spill over to Aud and local firms.

In Japan, the trade balance for March was released today and showed fairly balanced trade with a surplus Y11bn versus expectations of a deficit of Y5bn. Exports for Japan fell by 45.6% y/y, while imports fell by 36.7% y/y.

European sessions focus will be squarely on the UK and should put pressure on the Sterling. First will be the release of public finances. In the 11 months to February, public borrowing totaled £75.2bn, so even a March deficit similar to last year's £11.5bn would put the year figure of around £87bn, arround £10bn above the November PBR forecast. This news will not help Alistair Darling and the release of his second budget and his attempt to instill much needed confidence

ACM FOREX

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.

Morning Forex Overview

Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Apr 22 09 07:33 GMT |

Previous session overview

The dollar and yen fell on Monday as European and U.S. equity markets rebounded after U.S.

Traders in Asia reacted skeptically to U.S. Treasury Secretary Timothy Geithner's statement overnight that he believes the government has made 'reasonably good' progress in improving the credit crunch, dealers said.

On Tuesday, the EURUSD pair entered calmer waters after the sell-off that resumed early last week. Stock markets continued to trade in a nervous and volatile way but after all, the decline was less sharp and this also slowed the decline of the euro against the dollar. The pair moved up and down in the USD1.29/1.30 range and closed the session at USD1.2948, slightly higher from the USD1.2921 close on Monday.

Sterling rose against the dollar recovering from steep falls overnight as investors bought the currency at cheaper levels. Sterling gains were also supported in tandem with the euro strengthening against the dollar.

The Japanese Yen tracked equity markets to weaken in the US session as risk appetite improved and banking stocks rallied. USDJPY jumped towards JPY99 although sluggishness in the EURJPY meant gains were limited.

The Australian dollar managed to nudge higher in Asia, despite sluggish regional equities, while interest rate futures weakened after a positive close on Wall Street. The Australian dollar was USD0.7053, up from USD0.7025 late Tuesday. Against the Japanese yen, it was JPY69.32, up from JPY69.13

Market expectation

The yen gained against the dollar and euro in Asia Wednesday as lackluster regional share markets and lingering worries over the U.S. economy prompted players to buy the safe-haven Japanese unit, dealers said.

Some players said the yen could clock more gains against the European currency if global stock markets head lower in the days ahead.

EURUSD traders note that stops now seen placed below USD1.2900. This added to earlier talk of demand seen positioned between USD1.2910/00, with stronger demand noted between USD1.2890/80. Still talk of option barrier interest at USD1.2875 and at USD1.2850. Offers seen placed at USD1.2950 through to USD1.2960, stronger between USD1.2975/80 ahead of USD1.2995/00. Traders mentions 'large' stops placed on a break of USD1.3020.

For Pound offers seen placed between USD1.4675/85, a break above to open a move on toward USD1.4700/10. A break above here can open a move on toward USD1.4735 ahead of USD1.4750 and stronger level at USD1.4765/70. Bids seen placed at USD1.4625/20 ahead of USD1.4610/00.

Analysts said the main focus overnight will again be the performance of U.S. equities, which are a key bellwether for global risk appetite

Dukascopy Swiss FX Group

Legal disclaimer and risk disclosure

This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.

Technical Analysis for Crosses

Daily Forex Technicals | Written by ecPulse.com | Apr 22 09 07:13 GMT |

GBP/JPY

Affected by the Stockstick overlapping the corrected yesterday's bullishness towards 23.6% Fibonacci of the CD leg of the bullish harmonic pattern. Now the upside actions are highly anticipated depending on the stable movements above the mentioned Fibonacci level as the previous mentioned daily studies show that the pair obtained a strong support around the lower line of the minor inclining channel above 23.6% Fibonacci of the medium term descending rally from 251.10 to 118.77 zones supports our positive scenario forming a bullish candlestick. Our overview can be damaged if a breakout occurs below 141.50.

Trading range for today is among key support at 140.00 and key resistance at 149.25.

The general trend is to the downside as far as 156.20.remains intact with target at 116.00.

Support: 143.35, 142.60, 141.70, 140.50, 140.00
Resistance: 144.50, 145.50, 146.00, 146.90, 147.45

Recommendation: According to our analysis, buy the pair at 144.00 with targets at 146.70 and stop loss at 141.80.

EUR/JPY

The medium term Elliott sequence which we explained before came back into focus again as Euro versus Japanese yen has formed a clear internal 5 waves reviving the probability of placing the bigger (A) wave. Therefore we the Bigger (B) is under construction for the time being and its expected to retest the lower line of the inclining channel within 3 up trending waves .( Elliott wave oscillator – MACD combination ) and CCI indicators support this scenario.

Trading range for today is among key support at 123.85 and key resistance now at 131.45.

The general trend is to the downside as far as 141.44 remains intact with targets at 100.00 followed by 88.97 levels.

Support: 127.00, 126.50, 125.70, 125.00, 124.35
Resistance: 127.80, 128.60, 129.30, 130.05, 131.00

Recommendation: According to our analysis, buy the pair at 127.00 with targets at 129.35 and stop loss at 125.00.

EUR/GBP

The royal pair is trapped in a rectangle pattern as proved on Heiken Ashi – filter tool of the Japanese candle- on the secondary image but we still can't say that may cause a continuation for the downside movements occurred yesterday as a result for the bullish candle appearing on the above image targeting 0.8960 zones and may extend towards the target line of the mentioned Wolfe's wave around 0.9020 zones. A break out above 0.8860 is needed to activate this expected positive scenario. Carefully note that CCI is approaching an oversold area.

Trading range is among the key support 0.8660 and key resistance now at 0.9070.

The general trend is to the upside as far as 0.8020 area remains intact with targets at 1.0000 followed by 1.0400 levels.

Support: 0.8800, 0.8760, 0.8720, 0.8680, 0.8660
Resistance: 0.8865, 0.8900, 0.8935, 0.9000, 0.9030

Recommendation: According to our analysis, buy the pair at 0.8830 with targets at 0.8925 and stop loss at 0.8750.

Ecpulse

Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Apr 22 09 07:31 GMT |

CHF

The pre-planned buyers' positions from the key supports have been realized with attainment of minimal assumed targets. OsMA trend indicator having generally marked the activity fall of both parties with minimal advantage of bullish party gives grounds to preserve earlier composed trading plans almost without changes. So as before we assume rate return to supports 1.1620/40, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.1680/1.1700, 1.1740/60 and/or further targets at 1.1800/20, 1.1860/80, 1.1940/60. An alternative for sells will be below 1.1560 with the targets 1.1500/20, 1.1440/60.

GBP

The assumed test of key resistance range has been confirmed but high level of bullish activity revealed by OsMA indicator did not dispose to realization of the pre-planned buyers' positions. Hence because of chosen strategy based on revealed factors of making a choice in favor of bullish planning priorities as well as taking into account descending direction of indicator chart, we assume a possibility of rate return to the nearest supports 1.4560/80, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.4620/40, 1.4700/20 and/or further breakout variant up to 1.4760/80, 1.4820/40, 1.4900/40. An alternative for sells will be below 1.4400 with the targets 1.4320/40, 1.4240/60, 1.4100/40.

JPY

The pre-planned short positions from the key resistance range have been realized with overlap of minimal assumed targets. OsMA trend indicator having marked the preservation of activity parity of both parties does not bring in clearness to a choice of planning priorities for today. Hence taking into account the features of incompletion of bullish development as before we assume a possibility of rate return to the nearest resistance range 98.80/99.00, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 98.20/40, 97.60/80 and/or further breakout variant up to 97.00/20, 96.40/60, 95.80/96.00. An alternative for buyers will be above 99.60 with the targets 100.00/20, 100.60/80, 101.20/40.

EUR

The pre-planned short positions from the key resistance range have been realized with overlap of minimal assumed target. OsMA trend indicator having marked the activity parity of both parties as a result of previous trading day gives grounds to presume further range movement of the rate without clearness in a choice of planning priorities for today. Hence and because of current uncertainty of bearish development earlier composed trading plans are still without changes. So we assume a possibility of another test of 1.2980/1.3000, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term sells on condition of formation of topping signals the targets will be 1.2920/40, 1.2740/60, 1.2660/80. An alternative for buyers will be above 1.3100 with the targets 1.3140/60, 1.3200/20, 1.3260/80.

FOREX Ltd
www.forexltd.co.uk

English Says N.Z. May Abandon Tax Cuts Amid Recession

By Tracy Withers

April 22 (Bloomberg) -- New Zealand’s economy is still in recession, leaving the government with a widening budget deficit that may force it to abandon promised income-tax cuts, Finance Minister Bill English said.

“We’re now in what we expect to be our sixth quarter of recession,” English said in a speech today in Auckland. “The government believes lower taxes will benefit the economy, but we must consider whether they can be afforded in the economic and fiscal environment.”

English is preparing to deliver a budget on May 28 as the economy struggles to recover from its worst recession in more than three decades. The government, which won power in November pledging three years of tax cuts, may have to delay the plan after only the first installment of the promised reductions became effective on April 1.

The decision on future tax cuts will be announced in the budget, English said today.

“The government’s books are undoubtedly in worse shape than Treasury predicted in the December downside forecasts, with ongoing budget deficits and an expected doubling in gross debt over the next three years,” he said. “Our revenue will remain under severe pressure until the economy recovers.”

Without policy changes, debt would be 45 percent of gross domestic product by 2013 compared with 39 percent forecast in the December forecasts, English said.

Budget Deficit

New Zealand’s budget cash deficit was NZ$6.61 billion ($3.8 billion) in the eight months ended Feb. 28, or NZ$1.71 billion wider than forecast, the Treasury said on April 3. Tax receipts were NZ$1.86 billion less than forecast.

The government estimates the economy will permanently lose about NZ$50 billion of output over the three years to 2012, English said. “That is NZ$50 billion that cannot be taxed,” he said.

The budget will outline how the government will curb its own spending in low priority areas while ensuring welfare and pension entitlements are maintained, he said. The rate of new spending will be less than in recent years.

“I’ve set out a clear message of restraint to both ministers and to public-sector chief executives,” English said. “We will need to put a much sharper focus on improving the quality of our spending.”

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.

IMF to Loan Tajikistan $116 Million for Government Programs

By Shamim Adam

April 22 (Bloomberg) -- The International Monetary Fund agreed to give a $116 million loan to Tajikistan to help the Central Asian nation cope with a decline in export demand and lower remittances.

A deterioration in the global economy has “adversely affected” Tajikistan’s main exports of cotton and aluminum, and threatens to erode gains in poverty reduction, the Washington- based lender said in an April 21 statement. Tajikistan can draw about $38.7 million from the three-year loan immediately, the IMF said.

The government has “committed to raising transfers to households in response to the economic crisis, and increasing resource allocations for health and education, even though revenues are expected to decline on account of the crisis,” said the IMF’s first deputy managing editor, John Lipsky. “Authorities are delaying some low-priority investment projects and scrutinizing current expenditures carefully” to meet deficit targets.

Economic growth in the Caucasus and Central Asia will slow by two-thirds this year as exports recede and money sent from citizens abroad shrink, the IMF predicted last month. A slowdown in Russia is spilling over into countries including Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan and Turkmenistan, the fund said.

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

Darling Plans Record U.K. Deficit, Limiting Room for Stimulus

By Mark Deen

April 22 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling today will deliver a U.K. budget with what may be the biggest deficit on record, limiting his ability to counter the worst recession since World War II.

The shortfall this year may jump to 160 billion pounds ($232 billion), or 11 percent of gross domestic product, according to a survey of 24 economists conducted by the Treasury. Darling, who estimated an 8 percent gap in November, will announce his figures to Parliament at 12:30 p.m. in London.

With an election a little more than a year away, Prime Minister Gordon Brown may be unable to spur growth through new spending because the Treasury has already more than doubled the value of its bond sales to 146 billion pounds this year. The deficit would be the biggest in Europe and the third largest in the Group of 20 nations behind the U.S. and India.

“The U.K.’s fiscal position is worsening so rapidly that any stimulus measures in the budget are likely to be modest,” said Michael Saunders, chief western European economist at Citigroup Inc. “When it is most needed, fiscal policy will not be able to act. This is a major policy failure.”

Darling today will announce 1 billion pounds of aid to homebuilders and another 1 billion pounds to people younger than 24 who have unemployed for than a year, people familiar with his plans said this week. He’ll introduce support for automakers, including incentives to buy electric cars; trade insurance for exporters and manufacturers, and a 50 billion-pound program to underwrite mortgage-backed securities, the people said.

Stimulus Spending

Britain’s 25 billion pounds of stimulus to date cost the government 1.4 percent of GDP this year, less than the programs worth 2 percent in the U.S. and 1.5 percent in Germany, the International Monetary Fund says. Next year, the U.K. and South Africa alone in the G-20 have penciled in fiscal contractions.

Last month, Brown retreated from calls for a new fiscal stimulus after Bank of England Governor Mervyn King said the Treasury should be “cautious” about the deficit, which Citigroup says is the biggest in more than a century, excluding the two world wars.

Bond prices are likely to extend their decline as borrowing needs increase. Yields, which move inversely to prices, on two- year government notes will rise to 1.99 percent in the second quarter of 2010, from the current 1.43 percent, according to the average of seven analysts’ forecasts compiled by Bloomberg.

Since modern record-keeping began in 1970, the deficit peaked at 9.2 percent of GDP in 1976, when the U.K. tapped the International Monetary Fund for emergency credit.

‘Targeted’ Aid

Brown says today’s measures, which cover the five fiscal years through March 2014, will be “targeted” at industries and groups suffering most.

Darling has said Britain’s economy won’t bounce back before next year, later than he anticipated in November, when the Treasury forecast a contraction of no more than 1.25 percent this year. The median forecast of analysts surveyed by the Treasury now is for a drop of 3.7 percent of GDP, the worst since modern growth records began in 1948.

“We are expecting pretty grim forecasts and deferment of economic recovery,” said Robin Marshall, director of fixed income at Smith and Williamson Investment Management. “Investors will look to Darling for some reassurance that they will make it sustainable. I’m not sure it will be easy for him to assuage the fears.”

The government yesterday signaled spending restraint when the Treasury announced plans to save 15 billion pounds through cost cuts and efficiency.

Facing Voters

That may not do anything to help Brown in an election he must call by June 2010. He was 19 points behind the Conservative opposition in a survey by BPIX Ltd. this week. His pledges to support those without jobs or struggling to pay the mortgage will go unheard unless he can point the way out of recession, said Andrew Cooper, chief executive of Populus Ltd., a polling company.

“Voters are intensely cynical about budgets,” Cooper said. “It will have a bit more impact this time because it will update them on how frightened they should be. Is there a sign that things are getting better, that the government has a clue what to do about the situation?”

The IMF predicts Britain will suffer the deepest recession among the Group of Seven nations. Unemployment is headed to 10.3 percent next year, the most since 1994, the Confederation of British Industry says.

The Trades Union Congress representing 6.5 million workers wants Darling to spend 2 billion pounds on programs to give job experience to people who are long-term unemployed. Brown last week pledged “a budget for jobs.”

Declining Revenue

Darling has to fund those demands with plunging tax receipts. Profits in the U.K.’s financial services industry, which provides more than a quarter of the nation’s corporate tax revenue, have suffered from the banking crises. Bonuses to London bankers have fallen 62 percent, according to recruiter Napier Scott Search Group, curtailing income tax payments.

“Any hopes that this budget might deliver a significant boost to the economy have probably been dashed,” said Roger Bootle, an economist at Deloite & Touche LLP. He expects “a sizable and no doubt onerous fiscal consolidation when the economy finally emerges from this recession.”

To contact the reporters on this story: Mark Deen in London at markdeen@bloomberg.net

Caterpillar Says China, Not U.S., ‘Has It Right’ on Stimulus

By Melita Marie Garza

April 22 (Bloomberg) -- Caterpillar Inc., the world’s largest maker of bulldozers and earth-moving equipment, said China’s stimulus plan is getting money into the economy faster than the U.S. program that President Barack Obama championed.

“We think China has it right,” Chief Financial Officer Dave Burritt said in an interview after the Peoria, Illinois- based company reported its first quarterly net loss in 16 years. “The majority of their package is on infrastructure spending. We are seeing life there. We are seeing the turnaround. We would like to see a more robust infrastructure package” in the U.S.

Obama visited Caterpillar in Peoria to rouse support on Feb. 12, the day before Congress passed the $787 billion plan, and Chief Executive Officer Jim Owens is a member of his Economic Recovery Advisory Board. Caterpillar yesterday said full-year profit may be half what it predicted in January as a credit crunch and recession cut demand from builders and miners.

“China, with an economy one-third the size of the United States, is allocating over three times as much for infrastructure,” Caterpillar said in an economic analysis in with the earnings report. “Initial results from this package look promising.”

United Technologies Corp. and Eaton Corp. also said they are seeing early results from China.

White House press secretary Robert Gibbs said the U.S. spending represents “the single greatest infrastructure investment in this country” since President Dwight Eisenhower started the interstate highway system in the 1950s. Obama agrees “infrastructure needs have been neglected” and will work with Congress to address additional spending on such projects when the next highway bill comes up, Gibbs said yesterday.

China Spending

Caterpillar said it expects some benefit this year from China, which enacted a 4 trillion yuan ($585 billion) stimulus package and cut central bank interest rates. The actions will let China’s economy grow at a rate of more than 7.5 percent this year, the company said.

The U.S. may disburse as much as $70 billion this year to build infrastructure, about 6.5 percent of last year’s total construction spending and not enough to offset the drop in private projects, Caterpillar said. The U.S. plan included about $28 billion for bridge and highway construction.

“The infrastructure portion of the stimulus package was disappointing in that it was less aggressive than other countries and missed an opportunity to correct past underinvestment in U.S. infrastructure,” Caterpillar said in its analysis with the earnings report.

China Results

United Technologies Corp., Eaton Corp. and DuPont Co. all said they are starting to see results from China’s plan. This week all three reported first-quarter sales declines ranging from 12 percent to 20 percent.

United Technologies’ fire and security division “is seeing some benefits from the stimulus already in terms of the dollars which are flowing through to infrastructure” from China’s plan, Akhil Johri, the head of investor relations, said yesterday. The Hartford, Connecticut-based company makes Otis elevators, Carrier air-conditioners and Pratt & Whitney engines.

At Wilmington, Delaware-based DuPont, the third-biggest U.S. chemical maker, “electronics customers are reporting some benefit from the China stimulus package,” CEO Ellen Kullman told analysts on a call yesterday.

Eaton CEO Sandy Cutler earlier this week described China as “the first market where we can really string things through to government stimulus activity.” Eaton is a Cleveland-based maker of circuit breakers and fuel pumps.

Caterpillar Forecasts

Caterpillar predicted the U.S. recession in October 2007, two months before it officially began, and said yesterday it expects the world economy to decline about 1.3 percent this year. Owens, 63, joined the company in 1972 as an economist.

The first-quarter net loss of $112 million, or 19 cents a share, compared with net income of $922 million, or $1.45, a year earlier. Revenue dropped 22 percent to $9.23 billion.

Excluding some costs for eliminating jobs, profit was 39 cents a share, more than the 5-cent average estimate in a Bloomberg survey of 20 analysts. Caterpillar rose 91 cents to $31.39 in composite trading on the New York Stock Exchange. The shares have fallen 30 percent so far this year.

Full-year profit will be about $1.25 a share excluding severance and other costs, or half the company’s January forecast, Caterpillar said.

During his February visit, Obama said “you can measure America’s bottom line by looking at Caterpillar’s bottom line.”

To contact the reporter on this story: Melita Marie Garza in Chicago at mgarza4@bloomberg.net

Japan Exports Slide Slows in Sign Recession May Ease

By Jason Clenfield

April 22 (Bloomberg) -- Japan’s export slump slowed in March, ending a four-month streak of record drops and adding to signs the recession may start to ease.

Overseas shipments slumped 45.6 percent from a year earlier, compared with February’s unprecedented 49.4 percent plunge, the Finance Ministry said today in Tokyo. Economists predicted exports would drop 46.4 percent.

Shipments to the U.S. and China, Japan’s two largest markets, fell at a slower pace. Federal Reserve Chairman Ben S. Bernanke said last week the “sharp decline” in the U.S. may be slowing. Goldman Sachs Group Inc. today raised its economic growth forecast for China to 8.3 percent this year from 6 percent previously, citing Premier Wen Jiabao’s 4 trillion yuan ($585 billion) stimulus package.

“It looks as if the fog has cleared and the worst is over,” said Junko Nishioka, an economist at RBS Securities Japan Ltd. in Tokyo. “But the downturn that began with the slump in overseas demand is spreading to the domestic economy.”

The Nikkei 225 Stock Average climbed 0.8 percent at 10:05 a.m. in Tokyo. The yen traded at 98.58 against the dollar from 98.60 before the report was published.

Exports to China sank 31.5 percent compared with a 39.7 percent drop in February. Shipments to the U.S. fell 51.4 percent in March after a 58.4 percent drop the previous month.

Japanese manufacturers planned to increase output in March and April, ending a five-month drop, a government report showed last month. Gauges of confidence among consumers, merchants and small businesses all rose in March.

‘Hit Bottom’

“We’re seeing that the ground is being built for the economy to hit bottom by the end of this year,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Co. in Tokyo. Still, “the pace of the recovery will be very moderate.”

Gross domestic product may have contracted at an annual 10.9 percent pace in the first quarter, economists surveyed by Bloomberg predict, after shrinking 12.1 percent pace in the previous three months, the steepest drop since 1974.

Bank of Japan Governor Masaaki Shirakawa said this month that weakening spending by companies and consumers will impair growth even as declines in exports and production moderate. The central bank’s Tankan survey of business sentiment this month showed plunging demand has saddled companies with too many employees, signaling unemployment is likely to rise from its current level of 4.4 percent.

31-Year Low

Toyota Motor Corp., Japan’s largest automaker, may cut domestic production in the current business year to a 31-year low, the Yomiuri newspaper reported yesterday. Output will fall 30 percent from its 2007 peak, putting pressure on the automaker to start cutting full-time workers, the newspaper said.

Prime Minister Taro Aso this month unveiled a record 15.4 trillion yen ($156 billion) stimulus plan, a bid to pull the economy out of its deepest recession since 1945. The package will boost gross domestic product by 2 percentage points this fiscal year and create up to 500,000 jobs a year, the government said.

Toshiba Corp. last week said it will cut 3,900 temporary jobs this fiscal year, on top of 4,500 eliminations announced in January. The chipmaker will also reduce research and development spending by 18 percent.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

India’s Steepest String of Rate Cuts May End as Slowdown Eases

By Cherian Thomas

April 22 (Bloomberg) -- India’s central bank may be coming to the end of its steepest string of interest-rate cuts on record after saying Asia’s third-largest economy is faring better than most in the global recession.

The Reserve Bank of India expects economic growth, which slowed to a six-year low of 5.3 percent in the December quarter, to pick up to as much as 6 percent over the next year. The bank yesterday reduced rates for the sixth time in as many months.

Governor Duvvuri Subbarao urged commercial lenders to follow the central bank’s lead and lower rates on loans for companies and consumers. India’s economy, which is less dependent on exports than its Asian neighbors, is this year likely to be the second-fastest growing in the region after China as record harvests boost rural incomes.

“The fiscal and monetary stimulus measures initiated coupled with lower commodity prices could cushion the downturn in the growth momentum” over 2009 to 2010, the central bank said. “Notwithstanding the contraction of global demand, growth prospects in India continue to remain favorable compared to most countries.”

Before yesterday’s rate decision, the central bank had estimated its policy measures, along with increased government spending and tax cuts, were worth as much as $85 billion, or almost 7 percent of gross domestic product.

“The Reserve Bank is close to the end of the rate-cutting cycle,” said Sailesh Jha, an economist at Barclays Capital Plc in Singapore. “Growth has either bottomed out or is close to bottom. The monetary and fiscal loosening so far will start to kick in from the second half of this year.”

Banking System

By September, the central bank will inject another 1.2 trillion rupees ($23.8 billion) into the banking system by purchasing government bonds via auctions and buying back market stabilization bonds, which were sold in the past four years to drain money from the economy. The injection will be equivalent to a 3 percentage point reduction in the cash reserve ratio, the Reserve Bank said yesterday.

Part of Subbarao’s optimism stems from forecasts that this year’s monsoon rains will be normal. That will help sustain the unprecedented 4.3 percent average farm production recorded since 2005, boosting incomes for the three-fifths of India’s 1.2 billion people who depend on agriculture for their livelihood.

India is also less vulnerable to the global economic slump than most of its neighbors as exports make up about a quarter of its $1.2 trillion economy, compared with about half of GDP for developing Asia as a whole.

Critical Challenge

A challenge to keep domestic demand buoyant will be to lower the cost of funds in the economy, the central bank said.

The Reserve Bank, which cut its reverse repurchase rate by a quarter point to 3.25 percent yesterday, has lowered the benchmark by 275 basis points since October. The repurchase rate has been reduced by 425 basis points over the same period.

India’s lenders haven’t fully passed on those rate cuts to their customers. ICICI Bank Ltd., India’s biggest non-state- owned financial institution, has reduced its lending rates by only 50 basis points in the past six months. State-run banks have lowered their borrowing costs by about 200 basis points after government prodding.

“I was not expecting much more from RBI,” said Sunirmal Talukdar, chief financial officer at Hindalco Industries Ltd., India’s biggest aluminum producer. “What needs to be done is to ensure that more funds are made available to companies as banks have artificially kept lending rates high.”

Postal Deposits

Lenders say state-run savings plans such as postal deposits, which compete with banks’ deposits, offer returns of as much as 8 percent and prevent them from cutting rates. The rates on these plans are set by the government and haven’t changed since the central bank started cutting borrowing costs to counter the global recession.

Banks are also holding high-cost term deposits because the central bank’s key rates were double current levels until October 2008 after inflation touched a 16-year high of 12.91 percent in August.

Inflation has subsequently slowed to 0.18 percent in the week ended April 4. The central bank expects inflation to accelerate to about 4 percent by the end of March.

“Inflation risks have clearly abated,” Subbarao said. “Banks should not be overly apprehensive about reducing deposit rates for fear of competition from small savings, especially as the overall systemic liquidity remains highly comfortable. There is scope for the overall interest rate structure to move down.”

To contact the reporter on this story: Cherian Thomas in Mumbai at Cthomas1@bloomberg.net.

India Attracts LNG Cargoes as Asia, Europe Buyers Cut Imports

By Dinakar Sethuraman and Archana Chaudhary

April 22 (Bloomberg) -- India may rank among the largest markets for spot cargoes of liquefied natural gas this year as Japan, South Korea and Spain slash purchases.

India faces a shortage of 80 million cubic meters of gas a day, or more than half of domestic demand, even as economic growth slows, said Upendra Datta Choubey, chairman of gas distribution monopoly GAIL India Ltd.

The emergence of India in the spot LNG market may prop up prices that fell 70 percent from last year’s peak, while diverting tankers from the U.S. and Europe. India is importing at least nine so-called spot cargoes outside of long- term contracts in March and April, compared with two from November to February, AIS Live ship-tracking data compiled by Bloomberg show.

“This recession has no effect on demand of natural gas in India,” Choubey said by telephone from New Delhi. “Currently we’re meeting hardly 60 percent of gas demand in India.”

New Delhi-based Petronet LNG Ltd., Royal Dutch Shell Plc, Total SA and GAIL-led Ratnagiri Gas are doubling the country’s import capacity this year at three facilities on India’s west coast, anticipating higher demand for LNG as prices fall.

“India may be the only serious buyer for spot LNG in Asia,” said Tony Regan, a Singapore-based independent consultant who worked for Shell and was involved in spot LNG trades. “Cargoes are turning back from Northeast Asia.”

LNG Trade

Global LNG trading probably declined in 2008 for the first time in three decades, slipping 0.3 percent to about 172 million metric tons, based on preliminary numbers from Alexis Aik, a consultant with Facts Global Energy.

Asia’s demand for LNG, or gas chilled to a liquid for transportation by tanker, may drop by as much as 10 percent this year, Poten & Partners said in March.

Spot LNG sells for $4.60 per million British thermal units, a 47 percent discount to crude oil, JPMorgan Chase & Co. said in a note on April 3. LNG sold for a premium to oil in 2008.

Utilities in Asia paid more than $20 per million Btu last year for spot cargoes, according to official data from Japan, South Korea and Taiwan.

“We should expect a fall in LNG prices to around $6 or so,” GAIL India’s Choubey said. The level is about 70 percent below the record reached last year.

Asian LNG buyers typically pay a few dollars more than gas costs at the U.K.’s benchmark National Balancing Point to attract spot cargoes from Europe and the Americas, according to Andy Flower, an independent consultant and a former BP Plc employee. U.K. natural gas for immediate delivery sold yesterday for $3.68 per million Btu.

China Imports

China, the world’s second-largest energy user, has increased imports of the cleaner-burning fuel to reduce coal consumption and pollution.

China bought three spot cargoes in April after a seven- month halt. Japan, the world’s biggest LNG buyer, reduced spot imports 50 percent in February after the recession lowered electricity demand from manufacturers.

Reliance Industries Ltd. started pumping gas from the Krishna Godavari area off India’s east coast on April 2 and plans to increase production to 80 million cubic meters a day, almost double current output, Indian Oil Secretary R.S. Pandey said.

Reliance’s gas may cost $6.50 per million Btu, cheaper than the $7 per million Btu charged for LNG from Petronet and Shell, said an official from one of India’s biggest fertilizer makers, declining to be identified because prices are confidential. Naphtha, a competing oil-based energy source, costs about $10.50 in Gujarat, India’s most industrialized state, he said.

2010 ‘Worse’

“Next year will be worse for spot LNG because Reliance’s output is expected to rise from 15 million cubic meters a day to 80 million,” said Ballabh Modani, a Mumbai-based analyst at Enam Securities Ltd. “So most of India’s demand will be covered.”

India’s gap between gas demand and production is equal to about half of consumption in South Korea, the world’s second- largest LNG buyer. South Korea’s LNG purchases fell 14 percent in March, according to the Korea International Trade Association.

Japan’s LNG imports dropped 9.5 percent in February, with spot LNG purchases from the Americas and Europe falling more than 50 percent, according to data from the Ministry of Finance. Tokyo Electric Power Co., the world’s biggest LNG buyer, said in March it may cut imports this year by about 9 percent.

Shipments to Spain, the dominant LNG importer in the Americas and Europe, may decline because of a deteriorating economy and plans to start up a second gas pipeline from Algeria, PanEurasian Enterprises Inc., a Raleigh, North Carolina-based consultant, said in a report.

To contact the reporters on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net; Archana Chaudhary in Mumbai at achaudhary2@bloomberg.net.

Australian Dollar May Rise 17% Versus Yen, St. George Bank Says

By Ron Harui

April 22 (Bloomberg) -- The Australian dollar may rise 17 percent against the yen by the end of this year on signs of “improved risk appetite” and a “sharply weaker” Japanese economy, according to St. George Bank Ltd.

Australia’s currency is also likely to strengthen versus the yen because of a “tapering-off” of Japanese fiscal year- end repatriation flows, Sydney-based economists Besa Deda and Amanda Tan wrote in a research note yesterday. St. George Bank forecasts the Aussie, as the currency is known, will climb to 81.60 yen by December.

“The Australian dollar has benefited from the recent general improvement in risk aversion and appreciated against most currencies as a result,” the economists wrote. “Further, the focus has shifted to the sharp deterioration in Japanese economic fundamentals.”

Australia’s dollar traded at 69.67 yen at 9:55 a.m. in Sydney from 70.24 yen in New York yesterday. The currency touched 73.49 yen on April 14, the highest level since Oct. 14.

The Aussie strengthened 9.4 percent this year against the yen as the VIX volatility index, a barometer of risk aversion, fell from its October high of 89.53 to 37.14 yesterday. The index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes, reached 33.68 on April 17, the lowest since Sept. 26.

“The trends in risk appetites reflect the market view for the global growth outlook,” the economists wrote. “The consensus view is that the global economy could start to recover toward the end of this year or early next year.”

Signs Recession Deepening

The yen also may weaken on increasing signs of a deepening recession in the Japanese economy, according to St. George Bank.

Japan’s overseas shipments slumped 45.6 percent from a year earlier, compared with February’s unprecedented 49.4 percent plunge, the Finance Ministry said today in Tokyo. The government cut its evaluation of business sentiment after the Bank of Japan’s Tankan survey showed this month that confidence at large manufacturers declined to a record low in March.

“Over August 2008 to February 2009, the Japanese trade balance was in the red,” the economists wrote. “Corporate sentiment in Japan touched record lows in the first quarter. These developments have weighed heavily on the yen.”

The Australian dollar will likely appreciate to 71.40 yen by the end of this quarter and to 75.90 yen by the end of September, according to St. George Bank.

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