Wakeup Call: Risk Could Be Back Today On Better Than Expected Durable Goods

Daily Forex Fundamentals | Written by Saxo Bank | Oct 28 09 09:03 GMT |

Buy on dips with a tight stop in equities. We believe that Durable Goods Order could surprise significantly to the upside today and the sentiment for tomorrow's GDP is quite positive Calendar Economic Data Releases Country Name Time (GMT) Expectation Prior Comment US 12:30 Durable Goods Orders MoM (SEP) 1.0% -2.6% US 12:30 Durable G.O. ex. Transp. MoM (SEP) 0.7% -0.3% US 14:00 New Home Sales MoM (SEP) 2.6% 0.7% Earnings Data Releases Country Name Time (GMT) Expectation Prior Comment US Bf-Mkt Coca Cola 0.462 US 16:30 Conoco Phillips 0.939 What's going on? US figures yesterday were quite disappointing. Especially Consumer Confidence at 47.7 vs. 53.5 expected. S&P500 wedge levels today: 1111 and 1055. We are close to support. Buy on dips with a tight stop. We believe that Durable Goods Order could surprise significantly to the upside today and the sentiment for tomorrow's GDP is quite positive. The USD is again under pressure and commodities were picked up yesterday. One worry: Treasuries and VIX both a lot higher in the past two days. FX FX Daily stance Comment EURUSD 0/- Still look to sell rallies. 1.4830-50 immediate res lvl, target 1.4775 then 1.4700. Stop abv 1.4925. USDJPY 0 Initial suppt at 91.0, below sees 90.70-80 but seen holding for rebound back to 91.50. EURJPY 0/- Bearish developments. May find n/term suppt at 134.85 lvl but sell rallies to 135.75-85 for 134.65. GBPUSD 0/- Sell rallies to 1.6380-90 for break through 1.6335 to target 1.6250. Stop abv 1.6425. AUDUSD 0/- Break below 0.9125 suggests further weakness. Res now 0.9130, max 0.9175 before lower. Tgt 0.90. Equities Equities Daily stance Comment DAX 0/- Buy on dips towards 5590 and target 5650. Stop below 5570. FTSE100 0/+ Buy on dips towards 5173 and target 5222. Stop below 5155. S&P500 0/+ Buy on dips towards 1056 and target 1065. Stop below 1052. Nasdaq100 0/+ DJIA 0/+ Futures Commodities Daily Stance Comment Gold 0/+ Buy at the break of 1044 and target 1055. Stop below 1039. Silver 0/+ Buy on dips towards 16.55 and target 16.75. Stop below 16.40. Crude Oil 0/+ Buy on dips towards 78.50 and target 81. Stop below 77.50. FX Options FX-Options Comment USDJPY Vols went bid yesterday duo to heard behavior when EURUSD vol went bid. Mkt very keen on buying 91.90 expiring today, so we believe that level to act as a magnet on the ccy today. EURUSD Still decent talk abt the 1.49 strike expiring today. Likely to see EURUSD advance to that level for NY expiry before heading lower again. Saxo Bank Analysis Disclosure & Disclaimer Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. Saxo Bank utilizes financial information providers and information from such providers may form the basis for an analysis. Saxo Bank accepts no responsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in Saxo Bank's analysis derive from objective fundamental macro economical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations to buy or sell a specific financial instrument, such recommendation should be seen as Saxo Bank's opinion that the specific instrument will respectively outperform the relevant market or underperform compared to the market. Saxo Bank's recommendations should statistically correspond to an even distribution between buy and sell recommendations. The recommendations may expire promptly due to market volatility and in general, Saxo Bank does not anticipate its recommendations to be valid more than one month. An analysis will be updated if and only if a market development or other issues relevant to the analysis render a new analysis on the same topic relevant. Saxo Bank's analysis does not cover any specific financial product over time but only products which Saxo Bank's strategy team finds it important to cover at any given point in time. In order to prevent conflicts of interest, Saxo Bank has established appropriate business procedures, incl. procedures applicable to research and analysis to ensure objective research reports. Saxo Bank's research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. Saxo Bank is under supervision by the Danish Financial Supervisory Authority. Saxo Bank does not engage in corporate finance activities and accordingly, Saxo Bank's employees, incl. the persons responsible for an analysis, do not receive remuneration associated with investment banking transactions.

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Morning Forex Overview

Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Oct 28 09 08:16 GMT |

Previous session overview The euro fell to a one-week low against the yen in Asia on Wednesday as weak regional share prices prompted investors to decrease their holdings of the risk-sensitive unit. The common unit fell below JPY135.00 for the first time since Oct. 20 and other high-yielding units also declined against the yen. These currencies usually weaken when risk appetite deflates. At 0450 GMT, the euro was at JPY134.99 from JPY135.88 in New York on Tuesday. The New Zealand dollar was at JPY67.23 from JPY68.33, while the Australian dollar was at JPY82.84 from JPY84.13. In the European foreign exchanges Wednesday, the euro regained some ground against the dollar, with the single currency at USD1.4826 at 0730 GMT, up from USD1.4804 late in New York Tuesday. Pound opened Asia around USD1.6378 with rate influenced by the early CPI react rally in Aussie, edging to an early high of USD1.6406.Rate reversed off highs, the move down seen in line with Aussie as both Aussie-yen and sterling-yen came under pressure out of Tokyo, cable pressed to lows of USD1.6338, though traders reported that pound continues to enjoy an underlying buoyant tone, though just off recent pullback lows of USD1.6251, seen after last Friday's release of poor UK GDP. The Australian dollar was lower late Wednesday in Asia after inflation numbers failed to prove the case for an aggressive ramp up in monetary policy tightening by the central bank. Market expectation Analysts suggested the euro might be able to rebound from the lows touched Tuesday. For EURUSD offers seen placed between USD1.4840/50, a break above to open a move toward USD1.4865/70 ahead of USD1.4900, though one Asian trader has noted that funds have been more than willing to sell into the ACB inspired recovery. Support now seen placed back toward USD1.4800, with stronger interest noted between USD1.4770/60. A break here to USD1.4740 with stops placed on a break below. Further demand USD1.4725 with talk of short entry sell orders placed on a break below. Traders suggested that the break of USD1.4760 exposes USD1.4680. For Pound offers remain in place between USD1.6380/85,a break above to open a move back toward USD1.6400/05. Support USD1.6335/30, a break to allow for a retest of Tuesday's pullback area between USD1.6315/10 ahead of USD1.6295/85 area. Stops noted below USD1.6280, which if tripped to expose recent pullback lows of USD1.6251, with bids seen to USD1.6250. In Australia core third quarter inflation at 0.8% from the previous quarter was marginally firmer than the forecast 0.7%, analysts said the price rises won't be enough to push the Reserve Bank of Australia into tightening more than an anticipated 25 basis points at next week's meeting. Investors will pay attention to stock price movements and any central bank comments that give hints about future policy, analysts said. European stocks are expected to open lower Wednesday, with a weak session in Asia weighing on the markets as investors look to profit from this year's rally. 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.

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Forex Technical Analysis

Daily Forex Technicals | Written by DeltaStock Inc. | Oct 28 09 08:25 GMT |

EUR/USD Current level-1.4827 EUR/USD is in a broad consolidation, after bottoming at 1.2331 (Oct.28,2008). Technical indicators are neutral, and trading is situated above the 50- and 200-Day SMA, currently projected at 1.4134 and 1.3523. With the recent break below 1.4840 the downtrend has been renewed and while the pair holds below 1.4840-50 resistance the overall bias will remain negative for 1.4690 and 1.4615. Crucial on the upside is 1.4927, but even a break above 1.4850 will neutralize current bearish outlook. Resistance Support intraday intraweek intraday intraweek 1.4840-50 1.5063 1.4769 1.4444 1.4927 1.6040 1.4690 1.4190 USD/JPY Current level - 91.25 A short-term bottom has been set at 87.12 and a large consolidation is unfolding since. Trading is situated below the 50- and 200-day SMA, currently projected at 94.86 and 94.84 The expected reversal in the 92.10-40 area is already a fact and was confirmed with the recent break below 91.57. Current target is set at 90.20 and the bias is extremely negative with an intraday resistance at 91.57-62. Resistance Support intraday intraweek intraday intraweek 91.57 92.40 91.10 88.01 92.40 97.79 90.20 83.53 GBP/USD Current level- 1.6367 The pair is in a downtrend after peaking at 1.7042. Trading is situated between the 50- and 200-day SMA, currently projected at 1.6454 and 1.5258. Although the pair reversed at 1.6440, the test of 1.63+ support failed and the consolidation pattern above 1.6250 is still active. We continue to expect a break below 1.63+, that will target directly 1.6130 major support, but from an intraday point of view the bias is neutral and there is still no clear downtrend on the chart. Crucial on the upside is 1.6490 resistance and after we see a break below 1.63+ crucial will become yesterday's high at 1.6440. Resistance Support intraday intraweek intraday intraweek 1.6440 1.6752 1.6305 1.6130 1.6490 1.7042 1.6250 1.5352 DeltaStock Inc. - Online Forex & Securities Broker www.deltastock.com RISK DISCLAIMER: These analyses are for information purposes only. They DO NOT post a BUY or SELL recommendation for any of the financial instruments herein analyzed. The information is obtained from generally accessible data sources. The forecasts made are based on technical analysis. However, Delta Stock’s Analyst Dept. also takes into consideration a number of fundamental and macroeconomic factors, which we believe impact the price moves of the observed instruments. Delta Stock Inc. assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon the information on this page. Delta Stock Inc. shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation, losses or unrealized gains that may result. Any information is subject to change without notice.

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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Oct 28 09 08:03 GMT |

CHF The estimated test of key supports has not exactly been confirmed and the estimated rate rise marked signs of rate overbought as the ground to suppose further rate correction period with the preservation of bullish direction for planning of trading operations for today. On the assumption of it, as well as of current bearish cycle according to OsMA indicator version we can assume probability of the achievement of close 1,0160/80 supports where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of shorter time interval. As for short-term buying positions on condition of the formation of topping signals the targets will be ,0220/40, 1,0280/1,0300 and (or) further break-out variant up to 1,0340/60, 1,0400/40. The alternative for sales will be below 1,0100 with the targets of 1,0040/60, 0,9980/1,0000. GBP The pre-planned short positions from key resistance range levels were implemented with overlap of minimal estimated target. OsMA trend indicator, having marked activity fall of both parties and does not clarify the choice of planning priorities for today. With the preservation of trading plans made before for today. Therefore, as it was before, we can assume probability of the achievement of Senoku Span B of Ichimoku indicator at 1,6400/40 resistance levels where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of shorter time interval. As for short-term sales on condition of formation of topping signals the targets will be 1,6340/60, 1,6240/80 and (or) further break-out variant up to 1,6180/1,6200, 1,6140/60, 1,6080/1,6100. The alternative for buyers will be above 1,6540 with the targets of 1,6580/1,6600, 1,6640/60, 1,6700/20. JPY Short positions opened and saved before had positive result of overlap of minimal estimated targets. OsMA trend indicator, having marked bearish activity progress gives grounds to support sales planning priority for today. On the assumption of it as well as considering rate position within Ichimoku cloud borders we can suppose rate return to close cloud border at 91,60/70, where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of shorter time interval. As for sales, on condition of the formation of topping signals the targets will be 91,00/20 and (or) further break-out variant up to 90,40/60, 89,80/90,00. The alternative for buyers will be above 92,40 with the targets of 92,80/93,00, 93,40/60. EUR The pre-planned short positions from key resistance range levels were implemented with the achievement of main estimated target. OsMA trend indicator, having marked the current week Low by sign of rate oversold gives grounds to suppose further rate correction period but with the preservation of sales priorities for planning if trading operations for today. On the assumption of it as well as considering ascending direction of indicator chart we can assume probability of rate return to channel line '1' at 1,4860/80 levels where it is recommended to evaluate the development of the activity of both parties in accordance with the charts of shorter time interval. As for short-term sales on condition of the formation of topping signals the targets will be 1,4800/20, 1,4760/80 and (or) further break-out variant up to 1,4700/20, 1,4640/60. The alternative for buyers will be above 1,4940 with the targets of 1,4980/1,5000, 1,5040/60. FOREX Ltd www.forexltd.co.uk

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New Zealand’s Bollard May Signal Earlier Interest-Rate Increase

By Tracy Withers

Oct. 28 (Bloomberg) -- New Zealand central bank Governor Alan Bollard may signal tomorrow that he is unlikely to wait until late next year to raise interest rates as a stronger housing market leads the economy out of recession.

The Reserve Bank of New Zealand will leave the official cash rate at a record-low 2.5 percent at 9 a.m. in Wellington tomorrow, according to all 11 economists surveyed by Bloomberg. Bollard will rule out further rate cuts as inflation pressures start to emerge, analysts say.

Bollard on Sept. 10 said he expected to keep the cash rate at or below 2.5 percent until the “latter part” of 2010 because the economy’s recovery was just getting under way and needed more stimulus. Traders are betting he may raise borrowing costs in the first quarter of next year after reports in the past month showed consumer prices rose more than expected and house prices jumped.

“They certainly need to have softened their rhetoric from back in September,” said Craig Ebert, senior economist at Bank of New Zealand Ltd. in Wellington. “They can’t hold off for as long as the end of next year.”

Two economists expect a rate increase in March and nine predict a move before June 30. Traders are betting the cash rate will rise 235 basis points over the next year, according to a Credit Suisse index based on swaps trading. A basis point is 0.01 percentage point.

Global Rates

Central bankers around the world are now assessing when to start raising rates as the global economy recovers.

Reserve Bank of Australia Governor Glenn Stevens unexpectedly raised his benchmark rate on Oct. 6 to 3.25 percent, the first G-20 central banker to move since the height of the financial crisis. Bank of England Governor Mervyn King wrote in a newspaper last week that “it would be wise” to take into account the prospect of higher rates.

In New Zealand, trader expectations of a rate increase surged after an Oct. 15 report showed inflation accelerated faster in the third quarter than Bollard expected, and that core inflation hasn’t slowed amid the worst recession in three decades.

The economy grew for the first time in six quarters in the three months to June. As growth recovers next year, inflation pressures may accelerate, said Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland, who expects the first increase in April.

Housing Market

“Over the past few months the downside risks to the inflation outlook have diminished rapidly,” he said.

Tuffley said a stronger property market and improving confidence amongst consumers and companies will hasten the economic recovery next year.

House prices have increased 7.9 percent since a low in January and property sales in September surged 44 percent from a year earlier, according to Real Estate Institute figures.

A stronger housing market helped drive consumer confidence to a four-year high in the third quarter, according to an index complied by Westpac Banking Corp. and McDermott Miller Ltd.

Signs of a global recovery and rising commodity prices boosted business confidence to a 10-year high last month, according to an ANZ National Bank Ltd. survey.

Bollard “won’t want to give wind to the market view that they’ll be hiking rates early next year” because the economic recovery is just getting under way and there are a lot of risks for sustainable growth, Ebert said.

No Pay Increases

“There are still some broader risks out there,” he said. “Some of the expectations are overrunning reality. Some of the drivers over the next 18 months or so are not really conducive to a strong pickup” in growth.

The government, which borrowed heavily to help boost the economy with tax cuts and spending, plans to remove that stimulus this year. Prime Minister John Key last week said government workers shouldn’t expect large pay increases next year.

Immigration, which rose to a five-year high in the 12 months ended Sept. 30, may be near a peak, said Ebert.

The New Zealand dollar’s 33 percent gain against the U.S. currency in the past six months will curb export returns and is acting as a restraint on economic growth and inflation.

“That can’t be ignored,” said Ebert.

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

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South Korea Posts Eighth Current Account Surplus

By Saeromi Shin and Seyoon Kim

Oct. 28 (Bloomberg) -- South Korea posted a current account surplus for an eighth consecutive month in September after the nation sold more cars and semiconductor chips as overseas demand strengthened.

The surplus was $4.2 billion last month, compared with a revised $1.91 billion in August, the Bank of Korea said in Seoul today. The current account is the broadest measure of trade, tracking the flow of goods, services and investment income.

“The current account will remain in surplus in the coming months, thanks to exports,” said Kim Seung Hyun, head of research at Taurus Investment & Securities Co. in Seoul. “Still, the surplus may narrow as oil prices rise and imports may increase on the back of an economic recovery.”

South Korea’s economy expanded 2.9 percent in the third quarter from three months earlier, the fastest pace in seven years. Finance Minister Yoon Jeung Hyun said after the Oct. 26 report that full-year growth is possible in 2009.

The trade goods surplus was $5.45 billion in September from $3.33 billion in August, today’s report showed. Exports on a customs-cleared basis rose to $34.51 billion from a revised $28.96 billion in August.

The current account surplus will be about $3 billion in October and the full-year amount may reach “the latter part of the $30 billions range,” Lee Young Bog, a Bank of Korea statistics official, told reporters in Seoul today. In the first nine months, the surplus totaled $32.22 billion.

The central bank said in July that the nation will post a surplus of $29 billion this year. The gap may shrink to $7 billion in 2010, the bank said.

The nation’s benchmark Kospi stock index has gained 45 percent this year and the won strengthened 23 percent against the dollar in the past 12 months. The Kospi fell 1 percent at 9:28 a.m. in Seoul, and the won dropped 0.9 percent, to 1,195.15.

The services deficit, which measures the flow of travel, transport costs and royalties, was $1.63 billion in September, compared with $1.79 billion in August.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.netSaeromi Shin in Seoul at sshin15@bloomberg.net

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Italian Business Confidence Rises in October as Recession Ends

By Lorenzo Totaro

Oct. 28 (Bloomberg) -- Italian business confidence rose in October to the highest in more than a year, a further sign that companies are boosting output as the country emerges from its worst recession since World War II.

The Isae Institute’s manufacturing sentiment index climbed to 77.1 from a revised 74.3 in September, the Rome-based research center said today. The October reading, the highest since September 2008, compared with a median forecast of 75.1 in a Bloomberg News survey of 16 economists.

“The combination of new orders and de-stocking are currently supporting the modest increase in production,” said Annalisa Piazza, an economist at Newedge Group in London. “Italy is on a moderate upward trend and further improvement will come in the near future.”

Industrial production posted a record rise in August as Europe’s fourth-biggest economy benefited from growing exports and government incentives to trade in old cars. As manufacturers stepped up production to rebuild stocks, output will rise this month after falling in September, employers’ association Confindustria said yesterday.

Italy’s economy expanded in the three months through September after five quarters of contraction, the country’s central bank said in its October bulletin. Italy will grow 0.6 percent in 2009 after shrinking 4.7 percent this year, Isae said on Oct. 14. The forecast compares with a projection for 0.8 percent growth by Confindustria.

French Confidence

The optimism of Italian manufacturers mirrored a rise in confidence in France, where an index of sentiment among factory executives climbed to the highest in more than a year, buoyed by demand outside Europe and state support for the car industry. German business confidence climbed to a 13-month high in October, improving the outlook for growth in Europe’s largest economy, Ifo institute said on Oct. 23.

Government incentives in Italy and across Europe have helped auto sales recover from a global decline caused by the recession, benefiting Italy’s biggest manufacturer, Fiat SpA.

On Oct. 21, the Turin-based carmaker that acquired a stake in Chrysler Group LLC unexpectedly reported a third-quarter profit. Its chief executive officer, Sergio Marchionne, said Fiat will lose 370 million euros ($556 million) in operating profit next year without the incentives.

The Italian government will wait until the release of new auto sales numbers next month before deciding whether to extend the incentives to 2010, Industry Minister Claudio Scajola said in an interview on Oct. 22.

Export Uncertainty

As France and Germany, Italy’s two biggest trading partners, emerged from recession in the second quarter, Italian exports to the European Union returned to growth in July before falling in August. Exports “haven’t shown a clear recovery over the summer,” the Bank of Italy said on Oct. 15.

“The Italian economy is largely dependent on exports,” Piazza said. “The current uncertainties on the global recovery might put a lid on business confidence going forward.”

As job losses mount, there are also risks to consumption in the $2.1 trillion economy. The number of employed Italians fell 1.6 percent in the second quarter, the biggest drop since 1994, while the jobless rate rose to 7.4 percent, the highest since 2005. The rate may exceed 10 percent in 2010 should the recovery remain weak, the Organization for Economic Cooperation and Development said last month.

The Bank of Italy said that unemployment will hold back gains in consumer spending in the coming months. Consumer confidence unexpectedly fell from a seven-year high in October on concern that rising joblessness may hit spending power, Isae said yesterday.

Manufacturers were more optimistic about the job market than consumers, today’s report showed. A sub-index measuring expectations on employment rose to minus 16 in October from minus 19.

Isae conducted its latest survey of 4,000 companies between Oct. 1 and Oct. 20. The research center revised its September reading from an initial 74.

To contact the reporter responsible for this story: Lorenzo Totaro in Rome at ltotaro@bloomberg.net

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Australian Inflation Cools to Slowest Pace in Decade

By Jacob Greber and Victoria Batchelor

Oct. 28 (Bloomberg) -- Australian inflation cooled to the slowest pace in 10 years, easing pressure on central bank Governor Glenn Stevens to increase the benchmark lending rate by a half point next week.

The consumer price index rose in the third quarter by an annual 1.3 percent, the smallest gain since the second quarter of 1999, after advancing 1.5 percent in the previous three months, the Bureau of Statistics said in Sydney today. Prices gained 1 percent from the second quarter.

Australia’s dollar fell as the report prompted traders to trim bets on the size of interest-rate increases. The Reserve Bank of Australia, the first Group of 20 central bank to raise borrowing costs since the height of the global financial crisis, said keeping borrowing costs too low may threaten its goal of maintaining inflation between 2 percent and 3 percent on average.

“Anyone worrying about inflation in the near term is barking up the wrong tree,” said Prasad Patkar, who helps manage about $1.3 billion at Platypus Asset Management in Sydney. Still, “today’s report probably won’t alter the Reserve Bank’s stance on gradually withdrawing monetary stimulus from ‘emergency’ levels.”

The Australian dollar, the best performer among the 16 major currencies, fell to 91.06 U.S. cents at 2:09 p.m. in Sydney from 91.80 just before the report, paring its gain over the past 12 months to 42 percent. The two-year government bond yield dropped 8 basis points to 4.85 percent. A basis is 0.01 percentage point.

Bank Minutes

The currency’s gain will “likely” act as a “contractionary influence on activity and help contain inflation,” central bank policy makers said last week.

Investors are certain Governor Stevens will increase the key rate by a quarter point on Nov. 3, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. There is also a 10 percent chance of a half-point increase, the futures showed at 1:46 p.m., down from 16 percent prior to the report.

Food prices fell 0.8 percent and health costs slipped 1 percent in the third quarter, today’s report showed. By contrast, electricity costs rose 11.4 percent and gasoline advanced 4 percent.

The median estimate of economists surveyed by Bloomberg News was for annual inflation of 1.2 percent.

Core Measures

The Reserve Bank’s core inflation measures, which exclude the largest price increases and declines, were also published today.

The weighted-median gauge of inflation advanced 0.8 percent in the third quarter for an annual increase of 3.8 percent. Economists forecast gains of 0.8 percent and 3.7 percent respectively.

“The Reserve Bank is on a path back to neutral but there’s nothing in the data that suggests they have to ramp up their rhetoric or their tightening,” said Annette Beacher, senior strategist at TD Securities in Singapore.

Signs are mounting that Australia’s economy, one of the few including China and India to skirt a recession in the first half of this year, will strengthen in coming months.

Reports published since Sept. 30 show consumer confidence jumped this month to the highest level in more than two years, business sentiment held last month near a six-year high, retail sales rose in August, and house prices climbed 7.9 percent this year through August.

Skilled Vacancies

An index of skilled vacancies in Australia rose 1.9 percent in October from September, a report today showed.

Gross domestic product expanded 1 percent in the first half of this year as consumers increased spending, spurred by the central bank slashing borrowing costs by a record 4.25 percentage points between September last year and April, plus A$42 billion ($39 billion) in government stimulus spending.

Governor Stevens expects GDP growth to accelerate close to its “trend” pace of 3 percent next year.

Australia’s experience of the global recession has been “much milder than elsewhere,” Assistant Governor Malcolm Edey said in Sydney today. “Australia came into the most intense phase of the crisis period in better shape than most, and with more scope than most to make timely macroeconomic policy responses.”

The economy’s rebound from the worst global recession since the Great Depression was a key reason central bank policy makers raised the benchmark interest rate to 3.25 percent from a 49- year low of 3 percent on Oct. 6.

Keeping the rate at “very low levels” may be “imprudent,” the bank said in minutes of its October meeting, published last week.

“While the current forecasts suggested inflation would fall in the coming year, the expected trough in inflation was significantly higher than earlier thought,” the bank said on Oct. 20. “By 2011 inflation could be rising again.”

To contact the reporters for this story: Jacob Greber in Sydney at jgreber@bloomberg.netVictoria Batchelor at vbatchelor@bloomberg.net

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Obama’s Power-Grid Grants May Revive Industry in ‘Paralysis’

By Daniel Whitten, Nicholas Johnston and Mark Chediak

Oct. 28 (Bloomberg) -- Companies that make smart meters, thermostats and other elements of an electric transmission system gained in New York trading yesterday as the U.S. announced an $8 billion upgrade to the nation’s grid.

Echelon Corp. of San Jose, California, rose 4.5 percent, St. Louis-based ESCO Technologies Inc., gained 3.5 percent and Liberty Lake, Washington’s Itron Inc. climbed 3.2 percent after President Barack Obama announced the U.S. was giving out $3.4 billion.

Recipients will kick in the rest of the money. Most of the federal aid will go to utilities to install meters, transformers and other equipment that can control the flow of electricity and reduce power use and homeowner bills.

“The industry was in a state of paralysis, waiting for these awards,” Ben Schuman, an analyst for Pacific Crest Securities in Portland, Oregon, said yesterday in a telephone interview.

The investment is a down payment on what Energy Secretary Steven Chu told Bloomberg Television would be hundreds of billions of dollars in investments to upgrade the power grid.

The goal is to jumpstart spending in technologies that would lead to more efficient energy use, and clear the way for renewable electricity adoption, he said.

“This is not about selling widgets, this is about technology deployment, this is about getting more bang for the buck,” said Christine Tezak, an analyst for Robert W. Baird & Co. “The better you understand electricity usage, the better your investments are going to do.”

Tezak said that the money will test a range of technologies and determine whether national deployment of a comprehensive so- called smart grid is feasible.

Electric Utilities

FPL Group Inc., of Juno Beach, Florida, the largest producer of wind power; Constellation Energy Group of Baltimore; and Charlotte, North Carolina-based Duke Energy Corp. will each spend at least $250 million to add to the federal grants. Publicly traded and municipal electric utilities were among 100 grant winners in 49 states to upgrade the power grid.

Smart-grid equipment makers such as Itron, Echelon, EnerNOC Inc. of Boston and ESCO stand to benefit from the government funding, Schuman said.

“We look forward to the momentum that these grants will generate in the industry and the economy,” Malcolm Unsworth, Itron’s chief executive officer, said in a statement.

The grants, ranging from $400,000 to $200 million, will be used to develop and install technology to make electricity transmission more reliable and aid the delivery of energy generated from sources such as wind and solar power.

The money comes from the $787 billion economic stimulus legislation approved by Congress in February. Jared Bernstein, chief economic adviser to Vice President Joe Biden, told reporters Oct. 26 that the grants will “save or create tens of thousands” of jobs.

‘PR Effort’

“I truly think that this is more of an expensive PR effort on the part of the president,” said Patrick Creighton, a spokesman for the Institute for Energy Research, which is partly funded by energy companies. “If these smart meters and thermostats would truly save energy, create jobs and help the economy, than why does it need a massive government subsidy?”

Obama made the announcement at FPL’s DeSoto Next Generation Solar Energy Center, which will generate enough power for 3,000 homes when it is completed. He highlighted new technologies to transmit renewable electricity from places like Arcadia, about 60 miles (97 kilometers) southeast of Tampa, to locations where energy demand is greater.

“Frankly, after the market meltdown, the renewable energy industry was basically on its deathbed,” FPL’s Chief Executive Officer Lewis Hay III said in a telephone interview. “Through initiatives like this and some of the items they put in the stimulus bill, it really has revived the renewable industry.”

During Lunch

Hay, who told Obama about the DeSoto project during a lunch Oct. 8, said the company will use technology developed by Fairfield, Connecticut-based General Electric Co. and managed by Cisco Systems Inc. of San Jose. FPL will spend $378 million to go along with the government’s $200 million to buy 2.6 million smart meters, 9,000 power-distribution devices and advanced monitoring equipment for 270 substations.

Mayo Shattuck, Constellation’s chief executive officer, said during a conference call with reporters that his company won’t buy the equipment unless Maryland regulators approve a rate increase to pay for it.

“It is our hope that we will receive the commission’s final approval by year’s end, so we can begin providing our customers with the savings, reliability, service quality and environmental benefits as soon as possible,” Shattuck said.

Constellation’s Baltimore Gas and Electric Co. will provide new electric meters to 1.1 million households that will allow real-time monitoring of electricity use and help customers adjust their consumption during peak times.

‘Manage and Control’

“Consumers will have the power to manage and control their energy use, and we can add more clean-energy sources to the generation mix,” Luke Clemente, general manager of GE Energy Services’ smart grid business, said in a statement.

GE is bidding for Areva SA’s transmission and distribution unit with CVC Capital Partners. Areva is the world’s third- biggest maker of transmission and distribution equipment behind Germany’s Siemens AG and Switzerland’s ABB Ltd.

GE and other companies are interested in the Areva division because of the growing demand for more efficient electrical grids. GE said in February that the market for so-called smart meters that help distribute electricity more efficiently would grow to $12 billion in five years.

Echelon gained 61 cents to $14.33 and Itron gained $1.86 to $59.65 in Nasdaq Stock Market trading. Esco rose $1.37 to $40.91 in New York Stock Exchange composite trading.

To contact the reporters on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net; Nicholas Johnston in Washington at njohnston3@bloomberg.net

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China Guangdong Wins Approval for Energy Metals Bid

By Jesse Riseborough

Oct. 28 (Bloomberg) -- A unit of China Guangdong Nuclear Power Holding Co., the smaller of the nation’s two atomic power producers, won approval from Australia to buy 70 percent of uranium explorer Energy Metals Ltd.

China Uranium Development Co., which offered A$83.6 million ($76 million), or A$1.02 a share, for Energy Metals on Sept. 8, received notification yesterday from Australia’s Foreign Investment Review Board, the Perth-based company said today in a statement to the Australian stock exchange.

The agreed takeover still requires Chinese regulatory approvals and a minimum 50.1 percent acceptance from Energy Metals shareholders. On Oct. 23, Australia allowed China’s Yanzhou Coal Mining Co. to proceed with a A$3.5 billion takeover of Felix Resources Ltd.

By Jesse Riseborough

Oct. 28 (Bloomberg) -- A unit of China Guangdong Nuclear Power Holding Co., the smaller of the nation’s two atomic power producers, won approval from Australia to buy 70 percent of uranium explorer Energy Metals Ltd.

China Uranium Development Co., which offered A$83.6 million ($76 million), or A$1.02 a share, for Energy Metals on Sept. 8, received notification yesterday from Australia’s Foreign Investment Review Board, the Perth-based company said today in a statement to the Australian stock exchange.

The agreed takeover still requires Chinese regulatory approvals and a minimum 50.1 percent acceptance from Energy Metals shareholders. On Oct. 23, Australia allowed China’s Yanzhou Coal Mining Co. to proceed with a A$3.5 billion takeover of Felix Resources Ltd.

Energy Metals, which has more than doubled this year in Sydney trading, rose 3.3 percent to 95 cents at the 4:10 p.m. Sydney time close on the exchange. The company is 40 percent owned by Jindalee Resources Ltd. which jumped 10 percent to 98 cents.

Energy Metals owns uranium exploration projects in Western Australia state and the Northern Territory including the Bigrlyi joint venture, estimated to contain 9,340 metric tons of uranium, according to a July 22 company presentation.

China National Nuclear Corp., state-controlled like China Guangdong Nuclear, is the country’s largest operator of atomic power plants.

To contact the reporters on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net

Energy Metals, which has more than doubled this year in Sydney trading, rose 3.3 percent to 95 cents at the 4:10 p.m. Sydney time close on the exchange. The company is 40 percent owned by Jindalee Resources Ltd. which jumped 10 percent to 98 cents.

Energy Metals owns uranium exploration projects in Western Australia state and the Northern Territory including the Bigrlyi joint venture, estimated to contain 9,340 metric tons of uranium, according to a July 22 company presentation.

China National Nuclear Corp., state-controlled like China Guangdong Nuclear, is the country’s largest operator of atomic power plants.

To contact the reporters on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net

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BP May Cut 600 Jobs in Germany, Westdeutsche Allgemeine Says

By Claudia Rach

Oct. 28 (Bloomberg) -- BP Plc, Europe’s second-largest oil company, may cut 600 jobs in Germany, Westdeutsche Allgemeine Zeitung reported, citing the head of BP’s German unit.

London-based BP plans to cut 340 of the 2,060 jobs at its refinery in Gelsenkirchen, Uwe Franke, chief executive officer of Deutsche BP AG, told the newspaper. It will also move 200 jobs from Bochum, 50 from Hamburg and 10 from Moenchengladbach to Budapest, where it is opening a European service center, the newspaper said in a preview of today’s edition.

To contact the reporter on this story: Claudia Rach in Berlin at crach1@bloomberg.net

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Conservatives Say Low Rates Are U.K.’s Best Route Out of Slump

By Robert Hutton and Jennifer Joan Lee

Oct. 28 (Bloomberg) -- Philip Hammond, a lawmaker who speaks on Treasury policy for the Conservatives, said the opposition party wants the Bank of England to keep interest rates low and will cut the deficit to allow this to happen.

“It is essential that in the recovery we are able to continue to keep monetary policy relatively loose,” Hammond said in an interview at Bloomberg’s office in London. “We will only be able to do that if we have got the deficit under control.”

The focus on monetary policy contrasts with Prime Minister Gordon Brown’s argument that maintaining government spending is the best bring Britain out of the worst recession since World War II.

With an election due within seven months, the question of how and when to cut spending is at the heart of the debate between the ruling Labour Party and the opposition. Brown argues that maintaining spending and cutting taxes are the best ways to return to growth. The Conservatives say those steps risk lifting inflation and interest rates, choking off recovery.

“What has got Britain through the recession so far has been the activist monetary policy at the Bank of England, keeping interest rates low, supporting the economy through quantitative easing,” Hammond said. “We will only be able to do that if we have sent a clear signal to the markets that we intend to execute a plan to get the deficit under control. We need to make a start in 2010.”

‘Active Monetary Policy’

Conservative leader David Cameron yesterday said he was “a great believer in an active monetary policy,” a step away from previous comments that the bank’s quantitative easing program would have to end soon.

Cameron told journalists that a speech he’d made at the start of the month had been misunderstood. “The point I was making was about how easy or difficult to fund our debt, because the market for gilts hasn’t really been tested yet, because of QE,” he said. He repeated his point that the intervention will have to end some time. “You can’t go on indefinitely.”

Policy makers at the central bank will decide next week whether to extend their asset purchase program, which is pumping 175 billion pounds ($286 billion) in newly created money into the economy.

The program has increased demand for U.K. government bonds, known as gilts, as the Treasury sells a record 220 billion pounds of debt this year.

The Conservatives have repeatedly warned this year that Brown’s spending plans are putting the U.K.’s AAA debt rating at risk. Hammond’s boss, George Osborne, told an audience of financiers on Monday that it was only the likelihood of a Conservative victory at the next election that was keeping Britain’s debt costs down.

Conservatives have led Labour in polls for two years.

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net; Jennifer Joan Lee in London at jlee176@bloomberg.net

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Norway to Favor Gradual Rate Increases to Balance Krone, Demand

By Josiane Kremer

Oct. 28 (Bloomberg) -- Norges Bank, which today may become Europe’s first central bank to raise interest rates since the credit crisis started easing, will favor gradual increases as it seeks to balance krone gains against accelerating asset prices, economists said.

The Oslo-based bank will follow the Bank of Israel and Australia’s Reserve Bank to become the third central bank to reverse an easing cycle that brought Norway’s borrowing costs to a record-low 1.25 percent. Governor Svein Gjedrem will announce a quarter point increase in the overnight deposit rate at 2 p.m. today, a Bloomberg survey of 20 economists shows.

“It is a trade-off between the need for higher rates to curb the acceleration in home prices and the strength in private consumption” and “the effect of the krone exchange rate on the manufacturing sector,” said Bjoern Roger Wilhelmsen, a senior economist at First Securities ASA in Oslo and a former economist at the central bank. He expects borrowing costs to rise to a “neutral” rate of 5 percent to 5.5 percent within two years.

Norway, the world’s fifth-biggest oil exporter, suffered a milder recession than its Nordic neighbors, resuming growth in the second quarter as record-low borrowing costs and government stimulus measures equivalent to 4.7 percent of gross domestic product boosted consumer spending and kept unemployment the lowest in Europe. Prime Minister Jens Stoltenberg, who was re- elected last month, has pledged to continue spending in excess of national fiscal guidelines for a second consecutive year.

‘Extremely Low’

Gjedrem said on Sept. 30 that asset prices “have risen sharply and probably excessively,” characterizing policy rates as “extremely low.” Five days earlier, Gjedrem gave a speech saying that a strengthening of the krone “suggests that the key policy rate should be kept low for a period ahead.”

The krone has gained 7.8 percent against the euro since the end of June, making it the second-best performer of the 16 major currencies tracked by Bloomberg in the period. A further strengthening would hurt exporters including Norsk Hydro ASA, Europe’s third-largest aluminum producer, and Norske Skogindustrier ASA, the world’s second-biggest newsprint maker.

“In my view we will see a cautious start of the hiking cycle,” Wilhelmsen said.

At the same time, house prices in the only Scandinavian country that isn’t a member of the European Union have returned to a peak reached in the summer of 2007, not taking inflation into account, according to the Finance Ministry.

Housing Peak

House prices rose a quarterly 1.8 percent in the three months ended September, after gaining 5.3 percent in the previous quarter, Statistics Norway said on Oct. 14.

House prices grew even when the economy was in a technical recession as unemployment, which fell to 2.7 percent in September, remained the lowest in Europe throughout the credit crisis. Norwegians, the world’s second-richest citizens per capita after Luxembourgers, didn’t have to wait long for low interest rates to feed through to disposable income, with about 90 percent of mortgage holders using floating rates, according to the Finance Ministry.

“We see a very big difference between strong growth in private consumption and household demand and a quite strong contribution from the public sector,” Wilhelmsen said. “On the other hand, the construction sector is still suffering and the export sector is quite weak.”

Oil Wealth

The country’s oil wealth has shielded it from the worst of the economic crisis, and mainland GDP, which excludes oil, gas and shipping, grew 0.3 percent in the second quarter, ending six months of recession. The government expects the economy to grow 2.1 percent next year after contracting 1.1 percent this year. The jobless rate will average 3.2 percent this year and 3.7 percent in 2010.

The strong growth outlook has helped the krone outperform Sweden’s krona against the euro since the end of March.

“We think the currency will limit the room for the central bank to hike interest rates going forward,” said Maren Romstad, currency strategist at DnB NOR ASA, Norway’s biggest bank. “The export sector is still struggling and a stronger krone will only weaken the sector further.”

The krone will continue to strengthen as the global economy recovers, said Erik Bruce, senior economist at Nordea Bank AB in Oslo. “The strengthening of the krone means that core inflation will maybe go down to 1 percent next year and it means that the export sector will have problems on the international market.”

Inflation

The central bank targets price growth, adjusting for the effect of energy and taxes, of 2.5 percent. Inflation accelerated to 2.4 percent last month from 2.3 percent in August. Inflation has exceeded the bank’s target in six of nine months this year.

Exports will recover more slowly than consumer demand, the government forecasts, rising 0.1 percent in 2010 after slumping 6.5 percent this year.

Bruce expects Norges Bank to move “gradually” and increase rates at every second meeting to 2.75 percent within 12 months. If the bank “moves too fast, we will surely see an even stronger krone and that will lead to a too tight monetary situation, too low inflation.”

Norges Bank also releases its revised economic forecasts and rate path today.

To contact the reporter on this story: Josiane Kremer in Oslo at Jkremer4@bloomberg.net.

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Colombian Peso Drops to a Six-Week Low; Argentine Bonds Gain

By Drew Benson and Andrea Jaramillo

Oct. 27 (Bloomberg) -- Colombia’s peso fell to the lowest level in six weeks on speculation the central bank will buy dollars, pushing further declines in the currency.

The peso dropped for a fourth day, weakening 1.8 percent to 1,984.72 per U.S. dollar at 2:40 p.m. New York time, from 1,948.7 yesterday. It touched 1,990, the weakest since Sept. 15. The peso has tumbled 3.3 percent in the last five days, the second-biggest drop after the South African rand among 26 emerging market currencies tracked by Bloomberg.

“The peso is sliding on expectations the central bank will buy dollars, but we don’t see the central bank buying yet,” said Julian Cardenas, head of economic research at Bogota-based brokerage Corredores Asociados SA.

The central bank said Oct. 23 it will spend as much as 3 trillion pesos ($1.52 billion) to buy U.S. dollars and government peso bonds to inject cash into the financial system. Policy makers didn’t disclose how much would be spent on buying each.

The yield on Colombia’s 11 percent bonds due in July 2020 rose six basis points, or 0.06 percentage point, to 8.47 percent, according to Colombia’s stock exchange.

In Argentina, the yield on the nation’s inflation-linked peso bonds due in 2033 fell 20 basis points to 11.62 percent, according to Citigroup Inc.’s local unit.

Argentine Debt Law

Economy Minister Amado Boudou will discuss the government’s plan to suspend a law preventing the restructuring of about $20 billion in debt with Congress tomorrow, spokesman Sergio Poggi said. President Cristina Fernandez de Kirchner sent a bill to Congress last night calling for the suspension of the law through the end of 2010. Lawsuits stemming from the 2001 default are blocking Argentina from international debt markets.

Argentina’s peso rose 0.1 percent to 3.8213 per dollar from 3.8235 yesterday.

Venezuela’s bolivar gained 1.5 percent to 5.22 per dollar in unregulated parallel market trading from 5.3 yesterday, traders said. Venezuelans buy dollars in the parallel market when they can’t get government authorization to purchase them at the official exchange rate of 2.15 per dollar.

Petroleos de Venezuela SA, the country’s state oil company, said yesterday it boosted a bond sale to $3.26 billion from $3 billion to meet local investor demand for dollar-based assets. PDVSA, as the company is known, said it met 100 percent of the orders for the securities than can be purchased locally with bolivars and sold abroad for dollars.

In Chile, the peso climbed 0.6 percent to 531.25 per dollar, from 534.45 yesterday. The yield for a basket of Chile’s 10-year peso bonds in inflation-linked currency units, called unidades de fomento, rose three basis points to 2.94 percent, according to Bloomberg composite prices.

Peru’s sol declined 0.1 percent to 2.8905 per dollar, from 2.8890 yesterday. The yield on the country’s 8.6 percent sol- denominated bond due August 2017 was little changed at 4.83 percent, according to Bloomberg prices.

To contact the reporters on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net; Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

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Yen Strength May Turn Into Broader Dollar Rally, RBC Says

By Daniel Tilles

Oct. 28 (Bloomberg) -- The yen’s strength may herald gains by the dollar as October draws to a close, according to RBC Capital Markets.

“The sell-off in cross-yen risks extension to a broader dollar rally as we head into month-end, where the bias is skewed toward dollar demand,” Sue Trinh, a senior currency strategist in Sydney, wrote today in a report. “There is a risk dollar-yen could move higher into the end of the week.”

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

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Dollar Rally to Last for ‘a While,’ Jim Rogers Says

By Theresa Barraclough

Oct. 28 (Bloomberg) -- A rally in the dollar may last for “a while” as equity and commodities markets decline, said Jim Rogers, chairman of Singapore-based Rogers Holdings.

“Everybody is pessimistic on the dollar,” Rogers said in an interview with Bloomberg television in Singapore. “Whenever you have everybody on the same side of the boat, you know what you have to do. We may have a rally in the dollar, a decline in commodity prices or stock prices for a while.”

Rogers, an author whose books include “Investment Biker” and “Adventure Capitalist,” said in an Oct. 8 interview that there may be a rally in the dollar, although it won’t be “sustainable.” He said at a financial forum in Hong Kong in January that printing of the U.S. currency to help revive the economy would weaken the greenback and Treasuries.

The dollar has weakened so far this year versus all but one of its 16 major counterparts, including a 5.7 percent drop against the euro. The currency traded at $1.4812 per euro as of 1:55 p.m. in Tokyo from $1.4804 yesterday, after gaining 1.5 percent over the previous three days. The dollar weakened to 91.14 yen, from 91.80 yen.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell to 76.090 today, from 81.308 at the end of last year.

“The dollar is overdue for a rally,” Rogers said.

Trimming Net Longs

Investors have been reducing bets that the dollar will decline versus the yen and the euro. The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so- called net longs -- was 36,033 on Oct. 20, compared with net longs of 43,367 a week earlier. Similarly, net yen longs were 31,185 on Oct. 20, from 33,339 a week earlier.

Rogers, who predicted the start of the global commodities rally in 1999, said that raw material prices may decline for a while. The Reuters/Jefferies CRB Index, which tracks 19 commodities, has fallen 0.8 percent over the past week trimming this year’s gains. The index dropped 36 percent in 2008, its worst annual performance on record.

Rogers also said that he “certainly wouldn’t be buying U.S. Treasuries” and “couldn’t imagine lending money to the U.S. government for long periods of time.”

Ten-year Treasury yields have increase one and a quarter percentage point so far this year to 3.46 percent as President Barack Obama pushed U.S. marketable debt to $7.01 trillion, the most ever, as the budget deficit reached a record $1.42 trillion in the fiscal year that ended Sept. 30.

To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

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Yen Rises as Economic Concerns Damp Demand for Higher Yields

By Yasuhiko Seki and Ron Harui

Oct. 28 (Bloomberg) -- The yen gained against the euro and dollar on speculation the global economic recovery will slow, reducing demand for higher-yielding assets.

The euro slid to a one-week low against Japan’s currency before reports this week forecast to show German consumer prices fell and unemployment rose, backing the case for the European Central Bank to hold down interest rates. Australia’s dollar dropped versus the yen as a report showed inflation slowed, easing speculation the central bank will speed up rate increases.

“As the market shifts attention to the sustainability or the strength of a recovery from a cyclical upturn, the mood of euphoria may wane,” said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second- largest lender.

The yen rose to 135.50 per euro as of 6:56 a.m. in London from 135.89 in New York yesterday, after earlier reaching 134.85, the highest level since Oct. 20. Japan’s currency fetched 91.33 per dollar from 91.80. The dollar traded at $1.4833 per euro from $1.4804 yesterday, when it touched $1.4770, the strongest level since Oct. 13.

Australia’s currency dropped to 91.29 U.S. cents from 91.66 cents yesterday after touching 90.73 cents, the least since Oct. 14. It was at 83.39 yen from 84.14 yen yesterday.

German Prices

The jobless rate in Germany, Europe’s biggest economy, probably rose to 8.3 percent in October from 8.2 percent in the previous month, according to a Bloomberg News survey of economists before the report’s release tomorrow.

The nation’s consumer price index, calculated using a harmonized European Union method, fell 0.1 percent in October from a year earlier after slipping 0.5 percent in September, a separate survey showed. The Federal Statistics Office in Wiesbaden will release the report later today.

“We expect German CPI to remain weak,” Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, wrote in a research note yesterday. “We continue to target the euro- dollar back at $1.45 in one month as sentiment is clearly showing signs of strain.”

The ECB will maintain its benchmark interest rate at 1 percent through the second quarter of 2010, a Bloomberg survey showed. The central bank next meets on Nov. 5.

Australia’s consumer prices advanced 1 percent from the second quarter, when it gained 0.5 percent, the Bureau of Statistics said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.9 percent increase. Prices gained 1.3 percent from a year earlier.

Unsustainable Rally

“We saw a modest drop in the pricing of expectations of a 50 basis point hike next week in Australia, which weighed a bit on the Aussie,” said David Forrester, a currency economist in Singapore at Barclays Capital. “Since then it’s been taken over by what’s going on with the U.S. dollar and equity markets.”

Futures markets pared to 10 percent from 14 percent yesterday the chance of a 50 basis point increase in official interest rates when the reserve bank meets next week.

The yen rose against all 16 of the most-active currencies on concern a rally in stocks and commodities can’t be sustained.

The six-month run-up in shares and raw materials is probably at its peak as U.S. growth lags behind historical averages, according to Bill Gross at Newport Beach, California- based Pacific Investment Management Co.

Gross, a founder and co-chief investment officer of the world’s biggest manager of bond funds, has predicted a “new normal” in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.

“What has happened is that our ‘paper asset’ economy has driven not only stock prices, but all asset prices higher than the economic growth required to justify them,” Gross wrote yesterday on Pimco’s Web site.

Japan Retail

The Standard & Poor’s 500 Index slipped 0.3 percent to 1,063.41 yesterday in New York. The Nikkei 225 Stock Average fell 1.4 percent today, while the MSCI Asia Pacific Index of regional shares lost 1 percent.

Adding to signs the recovery will be slow, Japan’s retail sales fell for a 13th month in September, the Trade Ministry said today in Tokyo. Sales slid 1.4 percent from a year earlier.

The dollar fell against the Japanese currency on renewed concern over the health of the U.S. banking sector.

GMAC Inc., the lender that received two government bailouts totaling $13.5 billion, is in talks with the Treasury Department to receive a third lifeline, a person familiar with the matter told Bloomberg News.

GMAC Support

“This development may renew worries over the health of the U.S. financial sector,” Takashi Kudo, director of foreign- exchange sales at NTTSmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp., said about GMAC. “This could add to the argument for the Fed to keep borrowing costs low, and would likely be negative for the dollar and positive for the yen.”

GMAC is preparing to report third-quarter results on Nov. 4 after posting losses in seven of the past eight periods. The U.S. rescued GMAC last December after deciding the firm was crucial to the survival of the auto industry. General Motors Co., its former parent, and Chrysler Group LLC rely on GMAC to provide financing to customers.

The dollar reached 92.32 yen yesterday, the strongest level since Sept. 21, on speculation that Federal Reserve will change rhetoric on the duration of credit easing when policy makers meet next week.

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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