Inflation Continues To Decline In Philippine And Indonesia's Central Bank Cut Interest Rates To 6.50%

Daily Forex Fundamentals | Written by ecPulse.com | Aug 05 09 07:09 GMT |

Philippine sees a continued decline in inflation, which is determining the central bank to maintain their interest rates at a record low trying to support the economic growth of the country. Prices have reached to the lowest in 22 years as commodities and row materials prices are still declining around the world. The consumer price index rose in July by 0.3% and less than the previous reading, which indicated an increase by 0.6%, while it was expected to rise by 0.5%, as for the annual reading it rose by 0.2% being lower than the previous reading of 1.5% after it was expected to rise by 0.4%. Inflation rates in the Philippines persist on declining amid a continuing fall in the costs of various sectors like the service sector and the utilities sector, giving the possibility for the Philippine central bank to lower interest rates or maintain them at their lowest levels of 4.00%. The Philippine central bank has already cut interest rates six times in seven months, in order to support domestic spending and to address the significant decline in economic growth, which has been evident during the first quarter when it recorded a growth rate of only 0.4%. The Central Bank announced that it is going to watch closely the developments seen by prices and the risks that could affect them; but since global demand is stabilizing, it is expected that prices will start picking up according to the theory of supply and demand. But the real problem faced by Philippine is now the problem of financing, where the government is unable to finance its debt which is limiting the government spending needed to support economic growth, and this determined it to ask help from the Asian Development Bank in order to obtain a loan worth 500 million dollars this month. Moving to Indonesia, where the central bank cut the interest rates by 25 basis points to 6.50% from 6.75% in line with expectations and for the ninth consecutive time after it reached to 9.5% in December. Asian central banks have stopped reducing interest rates after the recent stability seen in the global financial markets. Based on this the decision taken by the Indonesian central bank today may be the last of its kind, especially since the risks of inflation had began appearing in the horizon while the economy managed to witness a growth rate during the first quarter of the year by 4.4%, as the sharp cut in interest rates managed to support domestic consumption and offset the impact of the fall in global demand. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk

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Forex Technical Update

Daily Forex Technicals | Written by India Forex | Aug 05 09 06:57 GMT |

Rupee :Rupee maintained strength breaking the trend at 48.00 levels. Rupee stands bullish immediate term. It has reached the first target close to 47.41 and retraced back . We should be prepared for any impending short term reversals in dollars in international markets which would get us a move above 48.20-30 soon. We expect the range to be between 46.80 to 48.30 in the next 1 month with a bullish bias.Look for shorts near 47.80 - 48.25 levels (USD/INR : 47.68). Short term: Bullish , Medium term: Bearish Euro : Euro broke above 1.4303 and moved the euro till 1.4446 levels. We maintain bullishness till 1.45 levels and slightly higher until 1.42 breaks. Buy on dips around 1.4325-4350 for 100 -150 pips. (EUR/USD 1.4387) Short term: Bullish , Medium term: Bearish Sterling :Cable broke 1.6732 levels and reached 1.70 immediately in yesterdays trading session. Buying on dips around 1.6750 to 1.6825 would be recommended until reversal signs are seen . (GBP/USD 1.6920) . Short term: Bullish , Medium term: Bearish Yen: Yen broke the weekly trendline of 95.40 levels but unable to sustain above 95.40 levels. The charts are indicating rangebound to mild bullish patterns for the yen. We need a weekly close above 95.50 to make the yen bearish. (USD/JPY 94.90) Short term: Bearish , Medium term: Bullish Aud :Aud has been maintaining a stronger bias from the last 2-3 sessions. It is bullish until we see a break below 8150 . (AUD/USD -0.8418). Short term: Bullish , Medium term: Bearish Gold: Gold took a smart rebound yesterday due to increased buying in commodities across.Slightly bullish due to increased buying across commodities and precious metals and selling of dollar. Break of 960 dollars has started a new bull run for gold. (Gold- $963.80) Short term: Bullish ,Medium term: Bearish Dollar Index : The Dollar Index (basket against 6 currencies with EUR accounting for 57% of the basket) broke the important support of 78.33. It is expected to touch the low of 77 and rebound.(Dollar Index - 77.73) Short term: Bearish , Medium term: Bullish India Forex http://www.indiaforex.in DISCLAIMER 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 responsible 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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Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Aug 05 09 07:02 GMT |

EUR/USD posted an inside day with a lower close on Tuesday as it consolidated some of Monday's rally but remains above June's high crossing. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI have turned bullish signalling that additional strength is possible near-term. If it extends Monday's rally, weekly resistance crossing is the next upside target. USD/JPY closed higher on Tuesday but remains below the 10-day moving average crossing. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are oversold and are turning bullish hinting that a low might be in or is near. Closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If it extends the decline, the reaction low crossing is the next downside target. GBP/USD closed slightly lower due to profit taking on Tuesday as it consolidates some of Monday's rally but remains above June's high crossing. The low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are overbought diverging but are turning bullish signalling that sideways to higher prices are possible near-term. If it extends this summer's rally, the 75% retracement level of the 2008-2009-decline crossing is the next upside target. Closes below the 20-day moving average crossing at 90.30 would confirm that a short-term top has been posted. USD/CHF posted an inside day with a lower close on Tuesday as it consolidates some of Monday's rally. The mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI have turned bullish signalling that sideways to higher prices are possible near-term. Closes above trading range resistance crossing would open the door for a possible test of last December's high crossing. Closes below the 20-day moving average crossing would confirm that a double top with June's high has been posted. HY Markets http://www.hymarkets.com

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Australia’s Trade Gap Unexpectedly Narrows on Exports

By Jacob Greber

Aug. 5 (Bloomberg) -- Australia’s trade deficit unexpectedly narrowed in June as exports including gold rose and imports stagnated.

The shortfall shrank to A$441 million ($372 million) from a revised A$737 million in May, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg survey of 19 economists was for a gap of A$800 million.

Reserve Bank Governor Glenn Stevens says a recovery in China that is helping stoke global demand for natural resources may help Australia’s economy grow faster than he forecast six months ago. Stevens left the benchmark interest rate unchanged at a half-century low of 3 percent for a fourth month yesterday and signaled the next move may be an increase.

“The improvement comes on the back of continued resilience in exports,” said Ben Dinte, an economist at Macquarie Group Ltd. in Sydney. “In a positive sign for domestic demand, imports of consumer goods” rose.

The Australian dollar rose to 84.43 U.S. cents at 12:12 p.m. in Sydney from 84.40 cents just before the report was released. The two-year government bond yield was unchanged at 4.45 percent.

Exports rose 2 percent to A$20.4 billion in June, today’s report showed. Shipments of gold jumped 17 percent and cereal exports surged 15 percent.

Imports were little changed at A$20.8 billion. Fuel imports rose 13 percent and consumer goods advanced 4 percent.

Recession Avoided

Australia avoided a recession in the first quarter as government cash handouts and interest-rate cuts stoked consumer spending. A report yesterday showed retail sales jumped 2 percent in the second quarter from the previous three months.

The economy expanded 0.4 percent from the fourth quarter, when it shrank 0.6 percent. Second-quarter figures will be published on Sept. 2.

BHP Billiton Ltd., the world’s largest mining company, said today that China’s iron ore imports are increasing as steel production recovers “rapidly.”

The price of iron ore for immediate delivery to China, the biggest buyers of the steelmaking material, is now 25 percent above the benchmark agreed this year between Australian producers and mills in Japan, Korea and Taiwan, Ian Ashby, BHP iron ore division president, said in Kalgoorlie, Western Australia.

Roubini’s View

Nouriel Roubini, the New York University economist who predicted the global financial crisis, said this week in Western Australia that commodity prices will rise, especially next year.

“There is now potentially light at the end of the tunnel,” Roubini said on Aug. 3.

Economic growth in China accelerated in the second quarter to 7.9 percent from a year earlier.

Governor Stevens signaled yesterday that the next move in interest rates may be an increase as the economy gathers momentum.

Australia’s economy “is stronger than expected a few months ago,” he said, adding that growth in China “has been very strong.”

Investors predict Australia’s benchmark overnight cash rate target will be 155 basis points higher in a year, a Credit Suisse Group AG index based on swaps trading showed at 12:12 p.m. in Sydney.

“Australia’s economy remains quite resilient,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. Still, trade “numbers over the next few months are going to be quite volatile,” as changes in commodity prices feed through.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Service Industries in U.S. Probably Contracted at Slower Pace

By Courtney Schlisserman

Aug. 5 (Bloomberg) -- Service industries in the U.S. probably shrank at a slower pace in July, bringing the economy closer to emerging from the worst recession in eight decades, economists said ahead of a report today.

The Institute for Supply Management’s index of non- manufacturing businesses, which make up almost 90 percent of the economy, rose to 48, the highest level in 10 months, from 47 in June, according to the median forecast of 77 economists surveyed by Bloomberg News. Readings less than 50 signal contraction.

Government efforts to unclog lending, lower borrowing costs and revive demand may be starting to pay off as companies from Union Pacific Corp. to UAL Corp. see signs demand is steadying. Even so, mounting unemployment and stagnant wages will restrain consumer spending and limit the strength of any rebound.

“The economy is starting to transition to recovery,” said Michael Gregory, senior economist at BMO Capital Markets in Toronto. “Once the dust settles, it’s going to be a sluggish rate” of recovery.

The Tempe, Arizona-based group’s figures are due at 10 a.m. New York time. Estimates ranged from 44 to 49.3.

A report from ADP Employer Services, due at 8:15 a.m., may show companies cut 350,000 workers from payrolls in July, the smallest reduction since September, according to economists surveyed. The figures from the world’s largest payroll processor have shown declines in employment since February 2008.

The Labor Department’s July jobs report is due Aug. 7. The U.S. has lost 6.5 million jobs since the recession began in December 2007, the biggest decrease of any economic slump since the Great Depression.

Factory Orders

Data from the Commerce Department may show factory orders dropped 0.8 percent in June, held back by demand for cars and aircraft, which tends to be volatile.

Stocks have gained in recent weeks amid signs the U.S. economy may soon exit from recession. The Standard & Poor’s 500 Index surpassed 1,000 this week for the first time since November and ended yesterday at 1,005.65, up 0.3 percent.

The Bloomberg U.S. Airlines index rose yesterday for a ninth consecutive day, the longest climb since its creation in June 1999, on signs the slump in travel demand was easing.

UAL, the parent of United Airlines, said traffic in July showed the smallest drop in 11 months as fare sales enticed vacationers.

Union Pacific, the second biggest U.S. railroad by sales, last month reported second-quarter profits that beat analysts’ estimates. The recent increases in fuel prices “are an indication the economy is getting stronger,” Chief Executive Officer James Young said in July 23 interview.

‘Volumes Stabilize’

“We are beginning to see Burlington Northern’s volumes stabilize in our more economic sensitive businesses,” Matt Rose, chief executive officer at Union Pacific’s larger rival, said in a statement the same day.

Housing, a component of the ISM non-manufacturing index, is another area showing signs of improvement from its worst slump since the 1930s. Construction of single-family houses jumped in June by the most since 2004, figures from the Commerce Department showed last month.

Combined sales of new and existing houses climbed in June for a third consecutive month, reaching the highest since October, figures from Commerce and the National Association of Realtors also showed.

                        Bloomberg Survey

================================================================
                              ADP ISM Non-  Factory
                          Payroll     Manu   Orders
                           ,000’s    Index     MOM%
================================================================

Date of Release              08/05    08/05    08/05
Observation Period            July     July     June
----------------------------------------------------------------
Median                        -350     48.0    -0.8%
Average                       -339     48.1    -0.7%
High Forecast                 -200     49.3     1.6%
Low Forecast                  -410     44.0    -2.1%
Number of Participants          30       77       62
Previous                      -473     47.0     1.2%
----------------------------------------------------------------
4CAST Ltd.                    -200     48.5    -0.5%
Action Economics              -330     48.0    -0.5%
AIG Investments               ---      46.0    -1.1%
Aletti Gestielle SGR          ---      48.0    -0.2%
Ameriprise Financial Inc      -350     48.5    -0.8%
Argus Research Corp.          ---      48.5    -2.0%
Banesto                       -345     48.1     ---
Bank of Tokyo- Mitsubishi     ---      47.4    -1.2%
Bantleon Bank AG              ---      47.5    -0.5%
Barclays Capital              ---      48.0     0.0%
BBVA                          -353     48.2     1.1%
BMO Capital Markets           -320     48.0    -0.5%
BNP Paribas                   -350     48.0    -1.0%
Briefing.com                  -365     48.5     0.5%
C I T I C Securities          ---      49.0     ---
Calyon                        ---      ---     -0.8%
Capital Economics             ---      48.0    -1.5%
CIBC World Markets            ---      48.0    -2.1%
Citi                          ---      47.0     1.0%
ClearView Economics           ---      48.0    -1.0%
Commerzbank AG                ---      49.0    -1.7%
Credit Suisse                 ---      48.0     0.5%
Daiwa Securities America      ---      48.5    -0.5%
Danske Bank                   ---      47.0     ---
DekaBank                      ---      48.0     0.0%
Desjardins Group              ---      47.7    -0.3%
Deutsche Bank Securities      ---      48.0    -1.0%
Deutsche Postbank AG          ---      48.0    -1.3%
DZ Bank                       -310     48.0    -1.8%
First Trust Advisors          ---      49.0    -0.5%
FTN Financial                 ---      49.0     ---
Goldman, Sachs & Co.          ---      48.0    -1.0%
Helaba                        ---      48.0    -1.3%
Herrmann Forecasting          -347     49.2    -0.9%
High Frequency Economics      -350     47.0    -1.5%
HSBC Markets                  -375     49.0    -1.0%
IDEAglobal                    -350     49.0     0.4%
IHS Global Insight            ---      49.3     ---
Informa Global Markets        ---      47.5     ---
ING Financial Markets         -300     47.0     0.0%
Insight Economics             ---      49.0    -1.0%
Intesa-SanPaulo               ---      48.0     ---
J.P. Morgan Chase             ---      48.0     0.2%
Janney Montgomery Scott L     -367     49.2    -1.3%
Johnson Illington Advisor     ---      48.0     ---
JPMorgan’s Private Wealth     ---      47.5     ---
Landesbank Berlin             ---      44.0    -1.5%
Landesbank BW                 ---      48.0    -1.0%
Maria Fiorini Ramirez Inc     ---      48.5    -0.8%
Merrill Lynch/BAS             -350     48.5     1.6%
MFC Global Investment Man     -315     49.0     0.3%
Mizuho Securities             -375     46.0    -1.5%
Moody’s Economy.com           -350     48.3    -0.7%
Morgan Keegan & Co.           ---      ---      1.2%
National Bank Financial       ---      48.5     ---
Natixis                       -320     49.3     ---
Newedge                       ---      47.6    -0.2%
Nomura Securities Intl.       -275     48.8     0.6%
Nord/LB                       -390     48.5    -1.5%
PNC Bank                      ---      48.0    -1.9%
Raymond James                 ---      48.3    -0.8%
RBS Securities Inc.           ---      48.0     ---
Ried, Thunberg & Co.          ---      49.0     ---
Schneider Foreign Exchang     -255     46.8    -0.6%
Scotia Capital                -380     49.0    -0.8%
Societe Generale              ---      48.0    -1.1%
Standard Chartered            -340     48.2     ---
Stone & McCarthy Research     ---      46.6     0.0%
TD Securities                 -375     48.2     ---
Thomson Reuters/IFR           ---      47.5    -1.1%
Tullett Prebon                ---      48.0     0.4%
UBS Securities LLC            ---      48.0    -1.5%
UniCredit Research            ---      48.5     ---
Union Investment              -410     ---      ---
University of Maryland        -340     48.2    -0.7%
Wells Fargo & Co.             ---      47.5    -1.5%
WestLB AG                     -370     48.0    -1.5%
Westpac Banking Co.           ---      47.0    -2.0%
Woodley Park Research         -308     48.8    -1.1%
Wrightson Associates          ---      49.0     ---
================================================================

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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Australia Central Bank Shift Makes Rate Rise Likely

By Jacob Greber

Aug. 5 (Bloomberg) -- Australia’s central bank signaled that its next move in interest rates may be an increase as the economy gathers momentum, spurred by gains in housing and government spending.

The Reserve Bank of Australia kept its benchmark rate at 3 percent yesterday, and Governor Glenn Stevens in an accompanying statement dropped language used in the past two months to having “some scope for further easing of monetary policy.” The economy is “stronger than expected a few months ago,” he said.

Stevens’s shift reflects concern that the RBA’s record 4.25 percentage points of rate cuts, if left in place too long, may inflate a housing bubble, destabilizing the economy. The change also follows an acceleration in growth in China, Australia’s second-biggest export market, that’s spurring forecasts for higher prices of commodities, the nation’s main exports.

“The next step will be for the Reserve Bank to begin to withdraw at least some of this accommodative setting,” starting in December with a quarter-point increase, predicted Paul Brennan, an economist at Citigroup Inc. in Sydney.

Investors predict Australia’s benchmark overnight cash rate target will be 154 basis points higher in a year, a Credit Suisse Group AG index showed at 2:43 p.m. in Sydney.

Currency Gains

Speculation Stevens, 51, will begin raising rates as soon as this year also helped push the nation’s currency to a 10- month high of 84.71 U.S. cents. It traded at 84.27 at 2:52 p.m. in Sydney today.

Reports yesterday showed retail sales jumped last quarter by the most in almost two years and house prices surged. Stevens warned last week about the risks of a house-price bubble with borrowing costs at a 49-year low.

Rising Australian consumer and business confidence “suggests the risk of a severe contraction in the Australian economy has abated,” Stevens said yesterday. “The present accommodative setting of monetary policy is appropriate given the economy’s circumstances.”

While some analysts predict Stevens will begin raising borrowing costs as soon as this year, others including Craig James, a senior economist at Commonwealth Bank of Australia, argue policy makers are “certainly not suggesting that rate hikes are imminent.”

“The Reserve Bank will want to ensure the economy can stand on its own two feet -- without being propped up by the government -- before deciding to lift rates,” James said.

Rudd’s Stimulus

Prime Minister Kevin Rudd’s government has distributed A$12 billion ($10.1 billion) in cash handouts to households this year and is spending A$22 billion to upgrade roads, railways, ports and schools.

An index measuring the weighted average of prices for established houses in the eight capital cities climbed 4.2 percent from the first quarter, more than double the median gain forecast in a Bloomberg survey.

Stevens said last week that it will be “quite disturbing” if the cuts to borrowing costs result in higher prices and not many more new dwellings.

Other signs the economy is strengthening include reports today and yesterday showing exports rose in June and retail sales jumped 2 percent in the second quarter from the previous three months. Macquarie Group Ltd. economist Ben Dinte estimates retail sales account for as much as 25 percent of gross domestic product.

Household spending helped Australia’s economy avoid a recession after GDP rose 0.4 percent in the first quarter from the previous three months, when it shrank 0.6 percent. Second- quarter growth figures will be released on Sept. 2.

2010 Outlook

While household spending is “likely to slow somewhat,” stronger dwelling activity and government spending “will start to provide more support to overall demand soon, and is likely to firm into 2010,” Stevens said yesterday.

The central bank, which predicted in May that GDP would contract 1 percent this year before expanding 2 percent in 2010, will publish revised forecasts on Aug. 7.

Nouriel Roubini, the New York University economist who predicted the global financial crisis, told a mining conference in Western Australia on Aug. 3 that Australia’s central bank may be one of the first to increase borrowing costs after the global economic downturn.

“Hopefully” policy makers will find “a suitably timely way of returning to normal when the right time for that comes,” Stevens said on July 28.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Indonesia Lowers Rate Ninth Time, More Cuts Unlikely

By Aloysius Unditu

Aug. 5 (Bloomberg) -- Indonesia’s central bank lowered interest rates for a ninth month and signaled that further cuts may be unwarranted as inflation is expected to accelerate.

Bank Indonesia reduced its reference rate by a quarter- point to 6.50 percent, according to a statement in Jakarta today. The decision was predicted by 26 of 29 economists in a Bloomberg News survey. The others expected no change.

Central banks elsewhere in Asia have stopped cutting rates and have indicated their next moves may be to increase them as the region’s economies begin to emerge from the global recession. President Susilo Bambang Yudhoyono said in his Aug. 3 budget speech that policy makers will “protect” Indonesia’s poor from inflation, which is expected to quicken to 5 percent next year.

“If the central bank is being conservative, then this month’s cut will be the last for this year,” said Purbaya Yudhi Sadewa, chief economist at PT Danareksa Sekuritas in Jakarta.

Bank Indonesia has been able to reduce its policy rate from 9.5 percent in December as inflation slows. Consumer prices rose 2.71 percent in July from a year earlier, the smallest gain since June 2000.

Lower borrowing costs are helping buoy Indonesia’s economy, which expanded 4.4 percent in the first quarter from a year earlier. Neighboring Singapore, Malaysia and Thailand all contracted in the same period as their export-dependent economies were pummeled by the worst worldwide recession since the Great Depression.

‘Even Faster’

Indonesia’s economy is expected to grow 5 percent or more next year and “even faster” in subsequent years, President Yudhoyono said in this week’s budget. Central bank Deputy Governor Hartadi Sarwono said the government’s growth estimates were “realistic.”

Growth this year is expected to be at the “upper end” of a forecast range of 3.5 percent to 4 percent, the central bank said in today’s statement. Bank Indonesia said Southeast Asia’s largest economy may expand more than previously estimated in the third quarter.

Rising domestic demand and higher global commodity prices may cause inflation pressures in 2010, the central bank said.

“In this context, monetary policy will be directed to be more anticipative of the potential inflation increase so that the inflation target of 5 percent in 2010 can be met,” it said.

Some economists say this inflation target is too optimistic and that faster consumer price gains may force Bank Indonesia to start raising interest rates early next year.

Next Move

“Consumers in Indonesia are getting more confident, growth is better than elsewhere in the region and inflation is coming down so there is no reason for rates to be cut further,” said Tomo Kinoshita, an economist at Nomura Holdings Inc. in Hong Kong. “The next move by the central bank will be a rate hike in the first quarter of 2010.”

Australia’s central bank, which kept borrowing costs unchanged yesterday, may raise its overnight cash rate target by 150 basis points from 3 percent within a year, according to a Credit Suisse Group AG index based on swaps trading. Economists expect the Reserve Bank of India to start increasing its benchmark rate by early 2010.

To contact the reporter on this story: Aloysius Unditu in Jakarta at aunditu@bloomberg.net

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Fischer Has ‘Rich-Man Dilemma’ on Israel Rebound, Barclays Says

By David Wainer and Tal Barak Harif

Aug. 5 (Bloomberg) -- Bank of Israel Governor Stanley Fischer faces a “rich-man dilemma” trying to stop the shekel’s appreciation as the economy recovers, Barclays Capital said.

While Israel will be one of the first economies in the region of Europe, the Middle East and Africa to rebound from the global recession, Fischer can’t afford to stop buying U.S. dollars in the foreign-exchange market because gains in the shekel would hurt exports, Barclays said.

“The fundamentals of the economy are moving the shekel stronger, but Fischer doesn’t want an overshoot,” Koon Chow, an emerging-markets strategist at Barclays Capital in London, said in a telephone interview yesterday. “Fischer has a rich-man dilemma.”

The shekel, up 7 percent against the dollar in the past three months, fell 2.2 percent yesterday to 3.8779. The currency probably will gain to 3.65 per dollar by year-end, Chow said.

Israel’s index of leading economic indicators rose in June for the first time since July 2008, led by foreign trade, the Bank of Israel said July 19. Israel posted yesterday its first budget surplus in six months in July as revenue increased more than estimated.

The central bank said last month economic growth will resume by the end of 2009 and announced on July 27 it will end its program of buying government bonds. The shekel rose to a seven-month high the following day on speculation policy makers also were close to ending currency purchases. Fischer said on Aug. 3 he would continue to buy $100 million per day and may raise dollar purchases in the event of “unusual movements.”

Economic Growth

Israel’s economy will expand 0.3 percent in 2010, after shrinking 1.7 percent this year, according to the International Monetary Fund. That compares with a 0.4 contraction in the euro area next year, after shrinking 4.2 percent in 2009, the data show.

“Emergency policies in Israel are no longer needed and you can’t say the same thing for many countries,” Chow said. Still, the central bank can’t halt the purchases “quickly, because the last thing you want is a sharp appreciation of the shekel,” he said.

The central bank started buying dollars in March 2008 and has since accumulated about $50 billion in foreign currency reserves. It has been purchasing $100 million a day since July of last year in an effort to weaken the shekel and help prop up exports, hurt by the drop in demand caused by the global financial crisis. Exports amount to about 45 percent of gross domestic product, according to the Finance Ministry.

The Bank of Israel has cut the key interest rate by 3.75 percentage points since October to a record low of 0.5 percent as it seeks to revive an economy that shrank an annualized 3.7 percent in the first quarter and as unemployment rose to 8.4 percent in May.

To contact the reporter on this story: David Wainer in Tel Aviv at dwainer1@bloomberg.netTal Barak Harif in Tel Aviv at tbarak@bloomberg.net

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Europe Services, Manufacturing Contract More Slowly

By Simone Meier

Aug. 5 (Bloomberg) -- Europe’s manufacturing and service industries contracted at a weaker pace in July, adding to signs the worst recession since World War II has bottomed out.

A composite index of both industries rose to 47 from 44.6 in June, Markit Economics said today. The July reading is higher than the initial estimate of 46.8 published on July 24 and the median forecast of 16 economists in a Bloomberg News survey. The index is based on a survey of purchasing managers by Markit and a reading below 50 indicates a contraction.

The recession in the 16-nation euro region is showing signs of weakening, suggesting efforts by the European Central Bank and national governments to fight the slump are gaining traction. Economic confidence rose to the highest since November last month. ECB council member Christian Noyer said on July 23 that a recovery is still “fragile.”

The euro-area economy “could return to modest growth before the end of the year, and conceivably even in the third quarter,” Howard Archer, chief European economist at IHS Global Insight in London, said ahead of today’s report.

An index of services activity in the euro region rose to 45.7 last month from 44.7 in June, the data showed. A manufacturing index rose to 46.3, the highest in 11 months, from 42.6 in June.

‘Modest Recovery’

The euro region will experience a “modest recovery” next year, the International Monetary Fund said in a report last month. The Washington-based lender with 185 member nations sees Europe’s economy shrinking 0.3 percent in 2010 after a 4.8 percent contraction this year.

In the U.S., the world’s largest economy, gross domestic product dropped at a 1 percent annual rate in the second quarter after declining 6.4 percent in the previous three months. U.S. manufacturing also contracted less than forecast in July.

Walldorf, Germany-based SAP AG, the world’s largest maker of business-management software, last month raised its full-year profit forecast. BNP Paribas SA, France’s largest bank, yesterday reported a higher-than-expected second-quarter profit.

“I believe the worst is over,” Hans-Juergen Thaus, co- chief executive officer at Krones AG, a German maker of bottling and packaging equipment, said on July 29. “I’m quite confident on 2010 and we do have the first indications to back that up.”

The ECB tomorrow will probably keep its benchmark interest rate at a record low of 1 percent, a Bloomberg survey shows. The Frankfurt-based central bank has injected billions of euros into markets and last month started buying covered bonds to bolster the economy and revive lending.

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

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American Incomes Head Down, Threatening Recovery in Spending

By Shobhana Chandra

Aug. 5 (Bloomberg) -- Household income in the U.S. is weakening as the influence of the government’s stimulus plan wanes, prompting economists, Federal Reserve officials and a Nobel laureate to warn that consumer spending may struggle.

“Consumers have started to change their behavior and they are going to save more,” said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. “You have pressure on wages, you have employment still declining.”

Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released yesterday. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression.

Personal incomes, which include interest income, dividends, rents and other payments as well as wages, tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, yesterday’s Commerce report showed. Excluding the effects of the stimulus plan, June incomes would have dropped 0.1 percent after no change in May, according to the report. In May, one-time additional payments to Social Security recipients boosted incomes 1.3 percent.

One of every 10 American workers will be without a job by early 2010, economists project, shaking the confidence of those still on payrolls and discouraging spending. It may take as long as 15 years for consumers to fully repair finances battered by the decline in home values, stocks and employment, said Edmund Phelps, winner of the Nobel prize in economics in 2006.

Shrinking Net Worth

Decreasing pay is not the only hurdle for consumers. Plunging home prices and stocks reduced household net worth by a record $13.9 trillion from the third quarter of 2007 through this year’s first quarter, according to figures from the Fed.

“Households are going to have to do an awful lot of rebuilding of their wealth,” Phelps, a professor at Columbia University in New York, said this week in an interview on Bloomberg Television. “Even if that rebuilding goes on at a pretty good clip, it will take 12 or 15 years for households to get to the wealth level that they had several years ago. Consumer demand is going to take a long time to rebuild to normal levels.”

In the second half, incomes and spending will be hurt by the loss of transitory factors such as lower fuel prices, decreased tax rates and the one-time payment to retirees, William Dudley, president of the Fed Bank of New York, said in a speech last week.

Save More

“Consumer spending is unlikely to rise much faster than income” because of the need to boost savings, he said. “Weak income growth will be an effective constraint on the pace of consumer spending.”

Companies continue to trim expenses, threatening further cuts in pay and benefits. Tenneco Inc., the world’s largest maker of vehicle-exhaust systems, temporarily lowered pay and hours worked to reduce labor costs by 10 percent. Earlier this year, the Lake Forest, Illinois-based company suspended contributions to employees’ 401(k) retirement accounts and cut pay for the top 50 executives.

Government assistance such as the “cash-for-clunkers” program will help postpone the inevitable increase in savings and slowdown in spending as more baby boomers approach retirement, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.

“Spending is in desperate need of gimmicks like cash-for- clunkers in order to grow on a short-term basis,” he said.

Lifting Auto Sales

The program, which offers as much as $4,500 for trading in older, less fuel-efficient cars, ran through its $1 billion fund in about a week, and Congress is considering adding $2 billion. Auto industry data this week showed sales jumped to an 11.3 million annual pace last month, the highest level since September.

Mounting joblessness is among reasons that economists such as Rosenberg say will prompt Americans to save more. Unemployment, already at a 26-year high of 9.5 percent in June, may top 10 percent by early next year, according to the median estimate of economists surveyed by Bloomberg last month.

Economists estimate that a Labor Department report at the end of the week will show employers cut an additional 328,000 workers from payrolls in July. That would bring the total loss of jobs since the recession began in December 2007 to 6.8 million.

The savings rate in June fell to 4.6 percent as incomes dropped, yesterday’s Commerce Department report showed. The rate, which reached a 14-year high of 6.2 percent the previous month, is likely to keep climbing, Rosenberg said. A rate as high as 15 percent can’t be ruled out, he said.

“This is a different consumer than we had in the past 20 years,” Rosenberg said. “People are going to increasingly be putting more money into cookie jars, rather than into buying more cookie jars.”

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

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King to End Bond Purchases as Economy Revives, Gilt Dealers Say

By Anchalee Worrachate and Anna Rascouet

Aug. 5 (Bloomberg) -- The Bank of England will end a five- month program of bond purchases as Europe’s second-largest economy shows signs of emerging from a recession, said a majority of the firms that bid at government debt auctions.

Eight of 12 primary dealers surveyed by Bloomberg said the central bank will stop the program after announcing a pause at its monthly meeting tomorrow. Four -- BNP Paribas SA, RBC Capital Markets, Merrill Lynch & Co. and UBS AG -- predict policy makers will increase purchases.

The Bank of England has spent 125 billion pounds ($212 billion) of the 150 billion pounds authorized by the Treasury in March, equivalent to almost 10 percent of Britain’s gross domestic product, to help contain borrowing costs and pull the economy out of the recession. Central bank Governor Mervyn King’s policy of so-called quantitative easing helped spur a 23 percent increase in loans to small companies, British Bankers’ Association data show.

“The Bank of England may have done enough,” said Jamie Searle, a fixed-income strategist in London at Citigroup Inc. “They will probably announce a pause and reassure the market they can step in and resume the program quickly if need be. Our view is they won’t need to because the economy is beginning to recover.”

‘Watching’ Stance

The bank’s nine-member Monetary Policy Committee, which cut rates to a record low of 0.5 percent on March 5, voted against expanding the program on July 9 while it assessed whether the worst of the recession was over. The central bank may shift to a “watching” stance at their meeting tomorrow if officials decide the purchases worked, Andrew Sentance, a member of the committee, said in an interview in London on July 23.

Nationwide Building Society said in a July 30 report that British house prices rose for a third month in July amid a shortage of properties. The Chartered Institute of Purchasing and Supply and Markit said on Aug. 3 that manufacturing expanded last month for the first time in more than a year. The Bank of England said on July 29 mortgage approvals jumped to a 14-month high in June.

The U.K. inflation rate will be the fastest in the G-7 next year, the Paris-based Organization for Economic Cooperation and Development predicts.

“The bank is likely to pause given the upturn in leading indicators that suggests we’re through the trough,” said Francis Diamond, a fixed-income strategist in London at JPMorgan Chase & Co. “Policy makers might be cautious about continuing to provide further stimulus in this kind of environment. It’s not clear exactly what quantitative easing has done in terms of sparking growth for credit.”

Yield Increase

The 10-year gilt yield will rise to 3.95 percent by year- end after the central bank stops buying as record government debt issuance overwhelms investor demand, according to the median forecast of the 12 primary dealers. The yield on the benchmark 10-year note was at 3.85 percent in London yesterday.

The Treasury is selling 220 billion pounds of bonds in the year ending March 2010, 50 percent more than fiscal 2009.

Policy makers will expand the program because the economy will prove too weak, according to BNP Paribas. The median estimate of 25 economists surveyed by Bloomberg is for gross domestic product to contract 4.1 percent this year, followed by an expansion of 0.85 percent in 2010. Growth averaged 2.35 percent from 2001 through 2008.

“The extension of the quantitative-easing program is unavoidable, and we are bearish on gilts in the near term,” said Matteo Regesta, an interest-rate strategist at BNP Paribas in London. “Although we’ve seen some tentative signs of a gradual recovery, the economy is still quite weak.”

‘Not Necessarily Bad’

HSBC Holdings Plc predicted the biggest decline for the 10- year yield, forecasting 3.40 percent by year-end.

“The end of quantitative easing is not necessarily bad for gilts,” said Andre de Silva, deputy global head of fixed-income strategy in London at HSBC. “The currency will recover and that will enhance demand for gilts from foreign investors.”

International investors bought a net 3.3 billion pounds of gilts in June, the most since the asset-buying program began, the Bank of England said on July 29.

Scottish Widows Investment Partnership and Schroder Investment Management, two of Britain’s biggest gilt funds, said they will buy U.K. government bonds with maturities of seven years or less irrespective of the Bank of England’s decision.

Policy makers will keep the main interest rate at a record low in coming months and shorter-dated securities will benefit, said David Scammell, a money manager in London at Schroder, one of the 10 biggest holders of gilts.

Short-End ‘Comfort’

“I will still find comfort in the short end of the market,” even if the Bank of England suspends the plan, said Scammell. “There’s no sign policy makers will raise interest rates any time soon. The fact is the economy is still very, very weak.”

Scottish Widows said it moved as much as 400 million pounds from long-dated bonds into shorter maturities, betting on an end to quantitative easing, according to Rod Davidson, who is in charge of the company’s bond and foreign-exchange investments.

“All the signals are there that the program is going to end,” Davidson, who oversees 47 billion pounds of investments, said in an interview on July 28.

The 12 primary dealers that participated in the survey are Barclays Capital, BNP Paribas, Citigroup, Deutsche Bank AG, HSBC, JPMorgan, Merrill Lynch, Morgan Stanley, Nomura International Plc, RBC, Royal Bank of Scotland Group Plc and UBS. Goldman Sachs Group Inc., Credit Suisse AG and Winterflood Securities didn’t participate.

To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Anna Rascouet in London at arascouet@bloomberg.net

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U.K. House Prices Jump, Confidence Rises to Highest in a Year

By Svenja O’Donnell and Brian Swint

Aug. 5 (Bloomberg) -- U.K. house prices jumped almost twice as much as economists forecast in July and consumer confidence rose to the highest in more than a year, adding to evidence that Britain is shrugging off the recession.

Home values climbed 1.1 percent to an average of 159,623 pounds ($269,850), Lloyds Banking Group Plc’s Halifax division said in an e-mailed statement today. The median forecast of 15 economists in a Bloomberg News survey was for a 0.6 percent increase. Nationwide Building Society’s index of consumer sentiment rose to 60, the highest since May 2008.

The housing market is “significantly more stable” and in a better condition than expected, Peter Redfern, chief executive officer of homebuilders Taylor Wimpey Plc, told Bloomberg Television today. The Bank of England will assess tomorrow if signs of an economic recovery are strong enough for it to stop buying assets with newly printed money.

“Over the last month or two we’ve had significantly stronger survey data,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “Maybe there is clearer evidence of stabilization and maybe the economy is gaining a bit of traction. My sense is the Bank of England would quite like to pause” its asset purchases.

House prices rebounded after a 0.4 percent drop in June, Halifax said. Compared with July of last year, home values fell 9.9 percent.

Homebuyer Demand

“Demand for homes has risen, albeit from a very low base, since the start of the year, driven by improvements in affordability and low interest rates,” Martin Ellis, an economist at Halifax, said in the statement. “Higher demand has combined with the low levels of property available for sale to boost sales activity from exceptionally low levels and support prices over the past few months.”

Homeowners expect the value of their properties to rise 0.5 percent in the next six months, the most since December 2007, Nationwide’s report showed. Its consumer confidence index climbed one point from the previous month. TNS surveyed 1,000 people for Britain’s biggest customer-owned lender between June 22 and July 19.

“Consumers might have been reassured by reports that the housing market may be starting to recover,” Martin Gahbauer, Nationwide’s chief economist, said in a statement.

Shop-price inflation is slowing, helping purchasing power, the British Retail Consortium signaled in a separate report today. The annual rate of price gains in stores was 0.5 percent in June, the lowest in seven months. Annual gains in food prices slowed to 3.8 percent, and prices for non-food items fell 1.3 percent on the year, the BRC said.

Factory Output

While surveys have shown improvement in the economy, official statistics have yet to indicate a recovery has become entrenched.

Factory output probably fell for a second month in June according to the median of 25 economists in a Bloomberg News survey. The Office for National Statistics will publish that data at 9:30 a.m. today in London.

The recession has kept pushing up unemployment, which reached the highest since 1995 in the quarter through May. The U.K. economy contracted 0.8 percent in the second quarter after shrinking 2.4 percent in the previous three months.

A measure of hiring for permanent jobs fell in July for the first time since February, KPMG and the Recruitment and Employment Federation said in a separate report today. The gauge of permanent staff appointments by job consultants slipped to 46.1 from 48.6.

Rising Unemployment

“We are cognizant of rising unemployment and constraints on consumer spending generally,” Ralph Topping, chief executive officer of William Hill Plc, told reporters yesterday. The U.K.’s second-biggest bookmaker forecast that full-year betting- shop profit would be lower than analysts predicted.

The Bank of England, whose benchmark interest rate is at a record low of 0.5 percent, will decide tomorrow whether to extend its 125 billion pound ($211 billion) asset-purchase program. Economists are split on the outcome, with 21 out of 44 in a Bloomberg News survey predicting no expansion of the plan and the remainder forecasting that the bank will seek to spend at least another 25 billion pounds.

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Brian Swint in London at bswint@bloomberg.net.

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British Pound Trades Little Changed Against the Dollar and Euro

By Daniel Tilles

Aug. 5 (Bloomberg) -- The pound was little changed against the dollar and the euro.

The British currency traded at $1.6922 as of 6:13 a.m. in London, from $1.6939 yesterday. The pound was at 85.08 pence per euro, from 85.06 pence.

To contact the reporter on this story: Daniel Tilles in London at dtilles@bloomberg.net

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U.K. Consumer Confidence Rose to the Highest in a Year in July

By Brian Swint

Aug. 5 (Bloomberg) -- U.K. consumer confidence rose to the highest level in more than a year last month as house prices stopped falling, Nationwide Building Society said.

An index of sentiment climbed to 60 in July, the highest since May 2008 and up from 59 in June, Britain’s biggest customer-owned lender said in an e-mailed statement released today. TNS surveyed 1,000 people for Nationwide between June 22 and July 19.

The figures add to evidence that Britain has passed the worst of the recession. Bank of England policy makers tomorrow will decide whether the recovery is strong enough after five quarters of contraction for policy makers to ease off on their program of buying bonds with newly created money.

“Consumers might have been reassured by reports that the housing market may be starting to recover, and manufacturing output is no longer falling as rapidly as it was a few months ago,” Martin Gahbauer, Nationwide’s chief economist, said in the statement. “Consumers appear to be remaining cautious but not panicked by the economic climate.”

Shop-price inflation is slowing, helping purchasing power, the British Retail Consortium signaled in a separate report today. The annual rate of price gains in stores was 0.5 percent in June, the lowest in seven months. Annual gains in food prices slowed to 3.8 percent, and prices for non-food items fell 1.3 percent on the year, the BRC said.

Homeowner Optimism

About a fifth of Britons expect the economy to worsen in the next six months, compared with about half at the start of the year, Nationwide said. Homeowners expect the value of their properties to rise 0.5 percent in the next six months, the most since December 2007, the report showed.

Nationwide said last week that house prices rose in July for a third month. A manufacturing gauge based on a survey of factories climbed to 50.8, the highest since March 2008, from a revised 47.4 in June, the Chartered Institute of Purchasing and Supply and Markit said on Aug. 3.

Factory production probably fell for a second month in June, posting a 0.1 percent decline, according to the median of 25 economists in a Bloomberg News survey. The Office for National Statistics will publish that data at 9:30 a.m. today in London.

The U.K. economy contracted 0.8 percent in the second quarter after it shrank 2.4 percent in the previous three months. Consumers are less optimistic about making large purchases, Nationwide said.

Labor Market

A measure of hiring for permanent jobs fell in July for the first time since February, KPMG and the Recruitment and Employment Federation said in a separate report today. The gauge of permanent staff appointments by job consultants slipped to 46.1 from 48.6.

“We are cognizant of rising unemployment and constraints on consumer spending generally,” Ralph Topping, chief executive officer of William Hill Plc, told reporters yesterday. The U.K.’s second-biggest bookmaker forecast that full-year betting- shop profit would be lower than analysts predicted.

The Bank of England will decide tomorrow whether to extend its 125 billion pound ($211 billion) asset-purchase program. Economists are split on the outcome, with 21 out of 44 in a Bloomberg News survey predicting no expansion of the plan and the remainder forecasting that the bank will seek to spend at least another 25 billion pounds.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

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Ferrexpo Profit Falls 80%; Sees Second-Half Recovery

By Thomas Biesheuvel

Aug. 5 (Bloomberg) -- Ferrexpo Plc, the producer of iron ore in Ukraine, said first-half profit slumped 80 percent after demand for the steelmaking ingredient weakened.

Net income slipped to $28.5 million, or 4.87 cents a share, from $141.4 million, or 23.14 cents, a year earlier, Baar, Switzerland-based Ferrexpo said in a statement today. Sales declined 42 percent to $301.8 million. The declaration of its interim dividend will be deferred until October.

Trading reached a “low point” in the first half, Ferrexpo said in the statement. “We should be trading more profitably in the second half.”

There are signs of “normalization” in the iron-ore trade and strengthening regional consumption, while Chinese demand remains “robust,” the company said. Iron ore for immediate delivery to China, the biggest buyer, climbed to the highest in nine months last week, trading above the annual benchmark price agreed between Rio Tinto Group and mills in Japan, South Korea and Taiwan.

To contact the reporter on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net

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RBC Capital Lowers Dollar Forecasts on Greater Risk Appetite

By Garfield Reynolds

Aug. 5 (Bloomberg) -- Demand for the U.S. dollar is weakening as improved corporate earnings boosts appetite for riskier assets, RBC Capital Markets said.

“As risk sentiment improved, the U.S. dollar tumbled and it remains vulnerable to further declines in risk aversion,” David Watts, a senior currency strategist in Toronto at the unit of Canada’s biggest bank, wrote today in a note to clients.

RBC said the dollar’s rebound against the euro would peak at $1.38, from an earlier forecast for $1.33, and revised its year-end estimate for the Canadian dollar to C$1.09 from C$1.14.

To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net

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Yen, Dollar Advance as Lloyds Says Bad-Debt Provisions Increase

By Ron Harui and Theresa Barraclough

Aug. 5 (Bloomberg) -- The yen and the dollar rose after Lloyds Banking Group Plc posted a first-half loss and increased the size of bad-debt provisions, boosting demand for the safety of the Japanese and U.S. currencies.

The pound fell for the first time in six days against the yen after London-based Lloyds said its total impairments in the first half were “significantly” higher at 13.4 billion pounds ($22.7 billion). The yen gained for a second day against the euro as Asian shares dropped and on speculation Japanese exporters took advantage of the yen’s 1.3 percent drop versus Europe’s currency this month to bring home funds.

“Banks in Britain and in the euro-zone probably still have a lot of bad loans, so this is a big risk to long positions in the pound and the euro,” said Michiyoshi Kato, senior vice president of foreign-currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest bank by assets. “It’s a situation where the pound and the euro are easy to sell and the yen and the dollar to buy.” A long position is a bet an asset will rise.

Japan’s currency rose to 94.93 per dollar as of 7:38 a.m. in London from 95.23 yesterday in New York. It advanced to 136.51 per euro from 137.21. The dollar climbed to $1.4378 per euro from $1.4408. The pound dropped to $1.6912 from $1.6939, and fell to 160.84 yen from 161.31 yen.

Lloyds, RBS

The yen climbed against all of its 16 major counterparts. Lloyds reported a first-half proforma loss of 3.12 billion pounds. Royal Bank of Scotland Group Plc on Aug. 7 will report 6.4 billion pounds in provisions, up from 1.48 billion pounds a year earlier, according to analysts surveyed by Bloomberg.

RBS posted 31.9 billion pounds of writedowns and credit market losses from mid-2007 through March 31 and Lloyds reported 33 billion pounds, data compiled by Bloomberg show. Lloyds had 2.5 billion pounds of loan provisions in the first half of 2008.

The MSCI Asia Pacific Index of shares declined 0.8 percent in its second day of losses. Standard & Poor 500 Index futures dropped 0.4 percent.

“Players are looking at equity markets for direction so when stocks fall, the yen rises,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There’s a strong inverse relationship between the two. Some of this yen buying could also be from exporters.”

The euro-yen had a correlation of 0.9 with the MSCI Asia- Pacific excluding Japan Index in the past year, according to data compiled by Bloomberg. A value of 1 would mean the two move in lockstep.

U.S. Jobs Report

The Dollar Index traded near a 10-month low before payroll data by ADP Employer Services, the first of several U.S. jobs reports scheduled for the next three days.

U.S. companies cut an estimated 350,000 workers from payrolls in July after a reduction of 473,000 in June, according to a Bloomberg survey before the ADP report today. Data on U.S. initial jobless claims for last week will be announced on Aug. 6, and the Labor Department’s July jobs report is due Aug. 7.

“If this week’s events don’t dent expectations for a global economic recovery and risk appetite is sustained then the U.S. dollar will likely remain under pressure,” John Kyriakopoulos, Sydney-based head of currency strategy at National Australia Bank Ltd., wrote in a note today.

The Dollar Index, which the ICE uses to track the dollar against currencies of six major U.S. trading partners, was at 77.711 from 77.765 yesterday. It reached 77.451 on Aug. 3, the least since Sept. 29.

Australian Dollar

The Australian dollar may fall against the yen this month, snapping its longest stretch of monthly gains since 2004, as Japanese trusts expect to raise less cash to buy foreign securities, RBC Capital Markets said.

Japanese mutual funds that aim to attract cash from investors to buy foreign securities, also known as Toshin, are likely to raise 50 billion yen ($525 million) in August, down from 200 billion yen on average between March and July, Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney, wrote in a note to clients today. Toshin issuance in February was 47 billion yen, she said.

“The rally in the Australian dollar versus the yen from its March lows coincided with a resurgence in Toshin issuance,” Trinh wrote. “Based on the pitiful issuance we expect for August, it suggests the Australian dollar could pull back sharply from current levels” toward 73 yen, she wrote.

Australia’s dollar weakened 0.5 percent to 79.98 yen. The so-called Aussie has strengthened 30 percent against the yen since March 1.

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

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Gold’s Advance to Two-Month High May Stall: Technical Analysis

By Kim Kyoungwha

Aug. 5 (Bloomberg) -- Gold’s advance to the highest level in two months may stall before it reaches so-called resistance at $972 an ounce, Commerzbank AG said, citing trading patterns.

The resistance level is the 78.6 percent retracement of the move down from a June peak of $990.75, Karen Jones, a technical analyst with Commerzbank, wrote in a note yesterday. Resistance levels are where sell orders tend to be clustered.

Gold for immediate delivery fell 0.1 percent to $965.69 an ounce at 10:54 a.m. Singapore time. The precious metal, up 9.5 percent this year, touched $970.47 yesterday, the highest price since June 5.

“Near-term strength is viewed as an elongated correction only,” Jones said. “Our long-term bias remains negative. We view the $1,000 region as a ceiling for the market.”

A slide to less than $943.90, where there is 55-day moving average and Fibonacci support, “should be enough to alleviate upside pressure and cast attention back to $925, then the $904.80 support,” the report said.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

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