Morning Forex Overview

Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Nov 04 09 08:19 GMT |

Previous session overview The dollar edged down against the yen in Asia Wednesday as short-term players sold the U.S. unit ahead of a Federal Open Mark Committee meeting later in the global day. At 0450 GMT, the dollar traded at JPY90.22 compared with JPY90.37 late Tuesday in New York. It could fall to JPY89.80 if the FOMC does not lay the groundwork for eventual dollar-positive rate hikes, said dealers. The risk-sensitive euro and Australian dollar were also lower against the safe-haven Japanese unit after data showed Australian retail sales fell 0.2% in September, worse than expectations for a 0.4% rise, dealers said. The Dollar Index, which measures the currency's value against six major units including the euro, edged down to 76.253 from 76.320. Earlier, euro traded relatively quietly in Asia with Tokyo markets closed for a holiday, the pair then tumbled in Europe to as low as USD1.4626 partly due to the selloff in European stock markets. The Pound broke below USD1.6300 as the market continued to focus on the downside ahead of BOE and in the midst of banking concerns. A rebound in commodities and US stocks helped lift the pair from lows. The Australian dollar was slightly stronger late Wednesday despite a volatile session fueled by surprising weakness in retail sales in September. Market expectation EURJPY, EURUSD keep rising as players buy higher-yielding assets with risk appetite slightly higher on stronger Asian share markets, World Bank forecast for Chinese GDP to grow 8.7% in 2010, above its revised estimate for 8.4% growth in 2009, say analysts. Yet regardless of the results, volatilities are unlikely to decline much further for now, the dealers said, as players are still worried about a sudden sharp fall in the dollar due to lingering risk-aversion sentiment. They added players will avoid unloading a lot of hedges even after the FOMC meeting today, as other events, such as non-farm payrolls data due later this week, will come up. EURUSD traders have suggested that sell interest seen placed to USD1.4760, a break to open a move toward USD1.4775/80 ahead of USD1.4811 (Tuesday's Asian highs). Support USD1.4705/00, stronger toward USD1.4680. Markets expected to remain relatively subdued ahead of this evening's FOMC announcement. Traders said the next hurdle for the Australian dollar will be the outcome of the U.S. Federal Reserve two-day policy meeting Thursday. 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.

Read more...

Currencies: Dollar Had A Rollercoaster Ride That Might Have Been Influenced By FOMC Speculation

Daily Forex Fundamentals | Written by KBC Bank | Nov 04 09 08:38 GMT |

Sunrise Market Commentary Bonds fail to break above first key resistance levels and fall lower, as US equities stage a late rebound Yesterday, global bonds ended a volatile session moderately lower. The failed test to break above first key resistance levels is a bearish technical signal, which suggests that the upside is blocked for now and that a new test of the lows is looming. Whether this will happen will also depend on the outcome of the Fed meeting this evening. Dollar had a rollercoaster ride that might have been influenced by FOMC speculation Dollar recently profited from risk aversion as investors feared that the FOMC might decide to start to unwind its policy ac-commodation. This would redraw liquidity, probably the most important factor behind the stunning equity rally. We think that the FOMC will stand put and if confirmed it may end the correction in risky markets, which would be dollar negative The Sunrise Headlines On Tuesday, US Equities had difficulties to choose direction ahead of the FOMC meeting. Dow/S&P ended mixed after a quite volatile trading session. This morning, Asian stocks gain some ground. Yesterday, a senior US Treasury Department official said Finance chiefs from the G20 will start to develop a timeline for reforms to better balance the global economy at weekend meeting in Scotland, but emphasis needs to stay trained on boosting growth. This morning, the World Bank raised its forecasts for Chinese growth this year and projected a slightly faster pace of expansion in 2010, but added that Beijing did not need to embark on major policy tightening at this stage. General Motors reversed course by abandoning a long-expected sale of its Opel unit to Magna and opting to keep the European unit after a year of uncer-tainty. Europe's biggest bank, HSBC is cutting over 1 700 jobs in Britain, adding to thousands of cuts across the industry in the last year as pressure increases to re-duce costs. Yesterday, gold prices rose to an all-time high of $1084.50 on mounting concerns that efforts by governments and central banks might create side effects. Today, the calendar contains the final figure of euro zone services PMI, UK ser-vices PMI, the US ADP employment report and non-manufacturing ISM. The FOMC will announce rates EUR/USD On Tuesday, EUR/USD had a rollercoaster ride that ended with modest, technical insignificant gains for the dollar. At first the dollar correction resumed as European equities hit the skids and EUR/USD fell from about 1.48 at the onset of European trading till a 1.4626 intra-day low at noon. Later on, equities found their composure and even regained some, albeit modest ground. Unsurprisingly, this pushed EUR/USD again up towards a 1.4725 close, limiting daily losses to about 50 ticks. Today, the eco calendar is attractive in the US with the ADP employment report (Oc-tober) and non-manufacturing ISM (October) scheduled for release. In the euro zone, the final figure of October services PMI is scheduled for release. However, forget these interesting data for a moment as it is the FOMC statement that will be decisive for all markets. With regard to the FOMC meeting, we don't think that the language about the stance of policy will change materially at this meeting, but if it will, markets would react sharply (equities down and so EUR/USD too). Time is simply not ripe to announce a near time change in policy orientation. Unemployment is still rising and the economy only grows one quarter, while downside risks still abounded. If the economy were to grow for let say three quarters and unemployment starts to stabilize, the policy re-quirements would surely change. This is some distance away. In the meantime, the FOMC should continue thinking about how to create more flexibility to act when it wants to. So, we stick to our view that the Fed won't do anything to rock the markets and therefore expect only marginal changes to the statement. On bal-ance, a fundamental change in the statement might seem to make more sense at the beginning of 2010 when the January meeting is followed by the semi-annual testimony of Mr. Bernanke before congress. (see our full FOMC report) If the sharp correction in equities and the more moderate decline in EUR/USD were due to a return of risk aversion and fears that the FOMC would start to redraw liquid-ity in the near future, an outcome of the FOMC meeting as outlined above (little changes), would suggest the correction in equities and in EUR/USD may be over. This does not mean that equities should revisit new highs or that EUR/USD would overshoot on the upside. Indeed, we have the impression that investors won't put on too big bets anymore going towards the year end, safeguarding the excellent invest-ment results for 2009. Tentatively, the price action of the last 24 hours suggests that the market may have decided that indeed the FOMC statement may end the correc-tion in equity markets and thus in EUR/USD. Of course, we need to see the S&P (equities) decisively move above the uptrendline at about 1062 and EUR/USD above 1.4750 (uptrendline) and even 1.4852 (MTMA). Global context: recently, the swings in risk appetite/risk aversion were the drivers on the currency markets. Improving investor sentiment towards risk is still considered a good reason to sell the US dollar. On top of that, in this low yield environment, the dollar has become (or is at least perceived to have become) the preferred currency to fund carry-trade deals. Lingering uncertainty on the huge US financing needs, some international debate on the status of the dollar and the Fed's intention to run an expansionary monetary policy for a prolonged period of time offer additional ammuni-tion for carry traders to use the dollar rather than other currencies. This has put the dollar in a vulnerable position. We stay dollar skeptical as long as we don't get a clear signal that the Fed is coming closer to reversing its very stimulating monetary policy. Last week, the ongoing building up of USD short positions in step with the stock market rally triggered a correction. However, this correction phase might have entered its final phase if our expectations for the FOMC meeting are correct. . Looking at the (technical) charts, the break of EUR/USD above the range top at 1.4438/48 and above the 1.4719 (Dec high) improved the picture, but the move con-tinued to develop in a rather gradual way. Nevertheless, the corrections, if any, were very limited, too. As we had reached our long-standing technical target of 1.5021 (2nd target double bottom of 1.3739), we turned more cautious on the ST upside potential in the pair and advised partial profit taking on standing EUR/USD long positions. We maintained a buy on dips approach with levels at 1.4750 (uptrendline) and the 1.4480 level obvious entry points. The former has been broken though and need to be recaptured to prevent a resumption of the correction towards 1.4480. Only a move above MTMA at 1.4850 (today) would be comforting for euro bulls. EUR/USD: MT uptrend line lost, but FOMC decisive whether correction is over for now Support comes in at 1.4698 (break-up hourly), at 1.4640 (Bollinger bot-tom/daily envelop), at 1.4626/24 (week low/weekly envelop) and at 1.4594 (2e target double top hourly). Resistance stands at 1.4753/71 (STMA/uptrendline), at 1.4793/1.4803 (38% retracement/daily envelop), at 1.4846/52 (week high/MTMA), at 1.4901 (weekly envelop) and at 1.5064 (reaction high). The pair is in oversold conditions USD/JPY On Tuesday, USD/JPY disconnected from other developments in currency markets and hovered in a tight 89.87 to 90.58 range to close virtually unchanged at 90.33 (up 12 ticks from previous close). While the dollar gained quite some ground intra-day with the trade weighted dollar reaching even a one month high, it lost more than half of its intra-day gains later on. However, the price action in USD/JPY was little im-pacted with the overall dollar trading and in fact really dull. The pair slid about 30 ticks to an intra-day low of 89.87, as European equities hit the skids in the European morning session, not a very exciting move. However, the tide turned and the yen gains evaporated when equities stabilized and later staged some recovery, after which the pair remained nearly paralyzed around the 90.30 range. Concluding, a day to forget rapidly. Overnight, trading remained basically sideways, even if some volatility was ob-served. BOJ governor Shirakawa said that the central bank will maintain its very easy monetary policy as the economic recovery is likely to remain moderate. He added that the balance of risks is more neutral as compared to the downward risks that dominated earlier this year. The change was due to better eco performance and outlook for the emerging countries. The governor admitted that downward price pressures (deflation) will remain for quite a long time due to a big output gap, but added (strangely) that it wouldn't hurt the economy. Shirakawa, who came under pressure from the government after the BOJ decided last week to end its corporate and commercial paper buying in December, also said this decision didn't mean the stance of monetary policy had changed. These comments are intrinsically yen-negative, even if they don't come as a complete surprise. It may have helped undo some intra-day yen strength. The pair is currently changing hands at unchanged lev-els of 90.34. Today, the US eco calendar is interesting with the ADP employment and the non-manufacturing ISM reports for October, but market will probably await the FOMC de-cision and statement late in the session to react. In recent day there was nervous-ness about the FOMC changing the wordings of the statement in a slightly less ac-commodative way. We think that the FOMC will opt more or less for the status quo. This would help equities overcome the correction and stimulate risk ap-petite, which is a negative for the dollar, but maybe still slightly more negative for the yen. However, while we favour the downside in the pair, the price action should remain range-bound. Global context: USD/JPY reached a reaction high in the 97.80 area early August. Despite positive global investor sentiment, the dollar could not hold on to its gains against the yen. The link between USD/JPY and global investor risk aversion/risk appetite became less tight and sometimes it even reversed. The dollar (and not the yen) was said to have become the preferred funding currency for carry trades. So, the price action in USD/JPY more or less joined the global dollar trend (decline). The long-term trend obviously remains USD/JPY negative. We turned more cautious on USD/JPY shorts on technical considerations, looking for re-entry opportunities in the 92/93 area, an area reached last week. We advocated re-installing USD/JPY short positions for return action lower in the trading range. We hold on to our bias. USD/JPY: downtrend intact, but no momentum Support is seen at 89.87/84 (reaction lows), at 89.46 (daily envelop), at 89.18 (week low), at 88.83 (14 Oct low), at 88.76/01 (Boll Bottom/07 Oct low). Resistance comes in at 90.48/59 (Bollinger mid-line/STMA/reaction high hourly), at 90.71/78 (week high/daily envelop), at 91.33/45 (bro-ken uptrendline/weekly MTMA) and at 92.55 (21 Sep high). The pair is in neutral territory EURGBP On Tuesday, price action in sterling trading was again volatile and showed that the aggressive re-positioning apparently isn't over yet. At first, EUR/GBP moved mod-estly higher, prolonging Monday's rally, but in early European session, euro selling, sterling buying resumed and the pair dropped fast from 0.9060 to 0.8970 where the pair took a breather. In the afternoon session a second violent sterling buying spree pushed the pair to 0.8935, after which calm returned and the pair gradually climbed to a 0.8958 close. There were no eco releases to explain the price action. The UK government communicated its plans for the bank giants RBS and Lloyds. It will cost the UK taxpayer quite a lot of money, but may help in healing the key banking sector. What this means for sterling isn't unequivocal clear. However, if large pieces of the banks will be sold to banks from outside the UK, demand for sterling would of course soar, pushing sterling up. Whatever the case, the price action didn't really change the picture. It isn't yet clear whether the correction in EUR/GBP is over or whether another sterling buying spree will lead to a third down-leg of the pair Today, the UK services PMI for October is interesting. Especially as the important survey showed already a high 55.3 result in September, defying the bleak picture the Q3 GDP report painted of the UK economy. However, traders and investors are probably wary to put big bets before the BoE and ECB meetings that take place to-morrow and the FOMC meeting that concludes after closure today. Especially the decision of the MPC on the eventual extension of the QE is key for the fortunes of sterling in a medium term perspective. Global context: Since early August, sterling sentiment deteriorated again. The BoE decision in August to raise the asset purchase program to £175B and Governor King's call for an even greater effort indicated that the Bank intended to maintain a loose policy for a prolonged period of time. This triggered a new sterling selling wave. At the September meeting, the BoE took no additional policy steps and this applies also to the October meeting. However, the Minutes of that meeting neverthe-less attracted the attention. Some observers correctly noted that in contrast to Sep-tember meeting, the more dovish MPC members didn't re-state there preference for more QE, making such an expansion of the QE unlikely, especially as some MPC members including governor King in a newspaper had become slightly more optimis-tic on the economy. We were not sure whether such an interpretation of the Minutes was correct and have to wait for Thursday's MPC meeting to know. Nevertheless, this week's drop below the key 0.8984 support is a technical warning signal, sug-gesting that the unwinding of sterling overextended short positions is not completely worked out. For now we keep a wait and see approach to see how the test of this key support area will work out. However, it is obvious that our ST sterling negative bias is under pressure. If the pair doesn't return above the 0.9000 mark soon and sustain, the correction might go quite a bit further. The 0.8845 area is the next high profile support EUR/GBP: euro tries to fight back, but with little success until now. The MPC decision on QE may be decisive. Support comes in at 0.8951 (to-day low), at 0.8935 (week low), at 0.8912/06 (Reaction low/ 50%retracement from 0.8400) and at 0.8829 (LTMA break-up). Resistance is at 0.8995 (reaction high hourly), 0.9011 (daily en-velop), at 0.9037 (MTMA), at 0.9061/70 (week high/weekly envelop). The pair is in oversold territory News US: factory orders surprise on the upside In September, US factory orders rose by 0.9% M/M, slightly more than the consen-sus estimate of 0.8% M/M. Looking at the details, shipments of durable goods orders rose by 1.4% M/M, while non-durables increased by 0.6% M/M. Inventories fell for the thirteenth consecutive month in September. The sharp decline in inventories and improvement in orders provides further evidence that also the US manu-facturing sector is recovering, even if the report brought us little new info after the release of the timelier ISM manufacturing survey. Download entire Sunrise Market Commentary Disclaimer: This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

Read more...

FX Technical Analysis

Daily Forex Technicals | Written by Mizuho Corporate Bank | Nov 04 09 07:39 GMT |

EURUSD Comment: Good futures volume over the last five days as recent longs get stopped out on the break below 1.4680. The Euro has now bounced from Fibonacci and channel support at 1.4626 and likely to hold above here today. We continue to see the latest decline as corrective but are not sure where we will form an interim base. Strategy: Possibly attempt small longs at 1.4740; stop below 1.4620. Short term target 1.4855, maybe 1.4900. Direction of Trade: → Chart Levels: Support Resistance 1.4700 " 1.4811 1.4681 1.4825 1.4626* 1.4860* 1.459 1.49 1.4555 1.4928 GBPUSD Comment: cBouncing strongly from the recent low at 1.6250 but this is no reason to become complacent. Cable is still trapped below important resistance around 1.6665 and further cautious downside probes cannot be ruled out. Nevertheless we continue to favour the building of a new interim low this month where short term watch support around 1.6200; medium term the 1.5900 area is key. Strategy: Attempt small longs at 1.6365; stop well below 1.6200. First target 1.6600/1.6665. Direction of Trade: → Chart Levels: Support Resistance 1.6400 " 1.648 1.632 1.658 1.625 1.6635/1.6665* 1.62 1.6745* 1.6100* 1.68 USDJPY Comment: Still hovering slightly unstably at the 26-day average at 90.17, under a very large Ichimoku 'cloud' and the 9-day moving average which has yet to turn bearish. The US dollar is still not oversold and momentum has yet to turn bearish so today expect a slow drop towards 89.65, below which downside pressure should kick in properly. Expect repeated cautious downside testing of a series of key support levels between 89.00 and 87.00 this month, then lower to key 85.00 towards year-end. Strategy: Attempt shorts at 90.35/90.50; stop above 91.25. Short term target 89.65, then 88.60. Direction of Trade: → Chart Levels: Support Resistance 90.00 " 90.44/90.59 89.84 90.71 89.65 91 89.35/89.18* 91.30* 88.85 91.65** EURJPY Comment: Hovering in the middle of this year's broad range. Hopefully the widening Ichimoku 'cloud' will start to exert more downside pressure over the coming week. Note that momentum has just turned bearish and the Euro is currently not oversold against the Yen. Strategy: Attempt shorts at 133.45, adding to 134.00; stop above 134.65. Short term target 132.00, then 131.00, eventually another big slide lower still Direction of Trade: → Chart Levels: Support Resistance 132.50 " 134 132 134.5 131.74 134.75 131.5 135.25 131.00* 136 Mizuho Corporate Bank Disclaimer The information contained in this paper is based on or derived from information generally available to the public from sources believed to be reliable. No representation or warranty is made or implied that it is accurate or complete. Any opinions expressed in this paper are subject to change without notice. This paper has been prepared solely for information purposes and if so decided, for private circulation and does not constitute any solicitation to buy or sell any instrument, or to engage in any trading strategy.

Read more...

Technical Analysis for Major Currencies

Daily Forex Technicals | Written by ecPulse.com | Nov 04 09 07:28 GMT |

EURO The euro versus dollar returned to ascend and retest the breached main support currently at 1.4730. The clear positive pressure appearing through momentum indicators needs the pair to unload these signs and gain some negative momentum, which in turn will help it continue its new bearish direction. The 100 MA is still pressuring the pair to move to the downside. From here we can expect a bearish trend over an intraday basis for today, which requires the four-hours closing to remain below 1.4770 and targets around 1.4615, initially. The trading range for today is among the key support at 1.4480 and the key resistance at 1.4925. The general trend is to the upside as far as 1.4135 remains intact with targets at 1.6000. Support: 1.4700, 1.4615, 1.4575, 1.4535, 1.4480 Resistance: 1.4730, 1.4770, 1.4860, 1.4925, 1.4970 Recommendation: Based on the charts and explanations above our opinion is selling the pair at 1.4730 and targeting 1.4615 and stop loss above 1.4815, might be appropriate GBP The cable pushed to the upside, after nearing main support 1.6245 – the neckline for the previously shown bearish technical pattern – and stabilizing trading around 1.6400. The stochastic shows overbought signs and bearish cross over signs that are about to show, thus we see that a final ascend will reverse the correction to the upside and target the required bearish momentum to resume the bearish direction. Consequently, the expected direction for today remains bearish and moving downwards targeting chiefly reaching 1.6245, while keeping in mind the importance of the four-hour closing below 1.6445 for chances of the bullish technical pattern to fail moving to the awaited downside today – shown in the side image - . The trading range for today is among the key support at 1.6160 and the key resistance at 1.6740. The general trend is to the upside as far as 1.4840 remains intact with targets at 1.7100. Support: 1.6390, 1.6310, 1.6245, 1.6160, 1.6120 Resistance: 1.6445, 1.6500, 1.6560, 1.6630, 1.6680 Recommendation: Based on the charts and explanations above our opinion is selling the pair at 1.6440 and targeting 1.6310 and stop loss above 1.6520, might be appropriate. JPY The dollar versus yen pair stabilized around the breached neckline currently at 90.35, where we think that these trades are considered to be an attempt to gain the desired bearish momentum to support continuing the expected previous downside move for the pair. Momentum indicators are currently neutral, where we await confirmation signs from it. Thus, we still hold onto our previous expectations that point to a possible bearish direction over an intraday basis today, where awaited targets are around 88.00 – the bearish technical patterns previously shown -. Meanwhile, it is vital that the pair continues to close below 91.00 so it would prevail to the expected downside direction. The trading range for today is among the key support at 88.00 and the key resistance at 92.35. The general trend is to the downside as far as 102.60 remains intact with targets at 84.95 and 82.60. Support: 90.10, 89.65, 89.00, 88.35, 88.00 Resistance: 90.35, 91.00, 91.25, 91.80, 92.25 Recommendation: Based on the charts and explanations above our opinion is selling the pair at 90.35 To target 89.00 and stop loss above 91.00, might be appropriate CHF After yesterday's volatile bullish wave; the pair returned to correct to the downside move, mentioned in yesterday's report, where it retested breached resistance levels, where the most currently obvious one being 1.0250. The stochastic is nearing oversold areas that are inline with the pair reaching new support – breached resistance – at 1.0250, where it is supposed to make the pair rebound to start an intraday short term bullish wave that targets 1.0400 and then 1.0500. Chances of achieving the expected bullish direction for today remains intact if the four-hours closing holds above 1.0210. The trading range for today is among the key support at 0.9975 and the key resistance at 1.0500. The general trend is to the downside as far as 1.1225 remains intact with targets at 0.9600. Support: 1.0250, 1.0210, 1.0175, 1.0130, 1.0090 Resistance: 1.0275, 1.0350, 1.0390, 1.0450, 1.0480 Recommendation: Based on the charts and explanations above our opinion is buying the pair at 1.0250 and targeting 1.0400 and stop loss below 1.0175, might be appropriate CAD The dollar versus loonie pair inched closer to the awaited target level for yesterday around 1.0635 and stabilized trading around the 200 MA at 1.0645. The pair currently exists above the previously breached resistance for the previous bearish direction that keeps the bullish short term direction intact, while protected by the mentioned MA. From here we expect a bullish intraday trend for today, where its primary target is around 1.0770 where chances of this direction will prevail if the breach is achieved and the four-hour closing holds below 1.0635. The trading range for today is among the key support at 1.0430 and the key resistance at 1.0990. The general trend is to the downside as far as 1.1870 remains intact with targets at 1.0000. Support: 1.0635, 1.0600, 1.0545, 1.0475, 1.0445 Resistance: 1.0725, 1.0770, 1.0845, 1.0875, 1.0960 Recommendation: Based on the charts and explanations above our opinion is buying the pair at 1.0635 and targeting 1.0770 and stop loss below 1.0545, might be appropriate 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

Read more...

Fed Likely to Signal Economy Improving, Keep Interest Rates Low

By Vivien Lou Chen and Scott Lanman

Nov. 4 (Bloomberg) -- Federal Reserve officials may today indicate their $1 trillion injection into the economy is helping to revive growth without requiring an increase in interest rates from near zero, economists said.

Policy makers will probably maintain their commitment to keeping rates low for an “extended period,” said Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington and a former Fed governor. They may also start a discussion about altering the wording of their policy statement, to leave them more leeway to signal a change in the future.

Chairman Ben S. Bernanke and his colleagues are reluctant to raise rates until the labor market shows signs of recovery, even though a report last week showed the economy resumed growth after 12 months of contraction. The Fed isn’t yet willing to signal that it’s ready to join central banks in Australia, Norway and Israel in pushing borrowing costs higher.

“They’ve got, for a lot of reasons, to say that it looks like what we’ve been doing has been working,” said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc. in Vineland, New Jersey. “But if they’re too exuberant about it, it’s going to trigger expectations of a policy move quicker than perhaps they might like to do.”

Members of the Federal Open Market Committee, whose two-day meeting ends today, may be concerned any hint of a change in policy would prompt investors to sell Treasury bonds, sending rates higher on consumer and business loans and endangering the recovery, analysts said. A statement is due around 2:15 p.m.

Worst Recession

The Fed, while trying to pull the economy from its worst recession since the Great Depression, has held the benchmark lending rate close to zero since December while using asset purchases as its main policy tool. The unprecedented monetary stimulus helped fuel 3.5 percent growth during the third quarter.

Much of the expansion stemmed from government incentives for the purchase of cars and homes that boosted consumer spending, which accounts for about 70 percent of the economy. Excluding sales, production and inventories of automobiles, the economy grew 1.9 percent last quarter.

Growth “looks really good on the face of it, but the key question is whether it is sustainable,” said Tom Porcelli, a senior economist at RBC Capital Markets in New York. “A large chunk of the gain was stimulus related. A lot of it was artificially generated.”

The economy will probably expand at a 2.4 percent annual rate from October through December, according to the median forecast in a survey of economists last month.

‘Uneven Recovery’

Bernanke and Fed Vice Chairman Donald Kohn “expect a very fragile and uneven recovery,” said former Fed economist David Milton Jones, president of Denver-based DMJ Advisors and author of four books on the central bank.

Policy makers will probably reiterate that slack in the economy and stable expectations for inflation will limit a broad increase in prices “for some time,” analysts said.

Inflation “will be low in the near term,” said Eisenbeis, adding that the doubling in the Fed’s assets since September 2008 to $2.16 trillion may spark higher prices in the longer term. “I see, with the buildup in the Federal Reserve’s balance sheet, a lot of threats there,” he said.

Investors are pouring money into inflation-linked debt to prepare for a surge in the cost of living spurred by the $11.6 trillion the Fed and government lent, spent or guaranteed to bolster the economy and financial system.

Inflation Expectations

The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, widened to 2.06 percentage points yesterday from 1.80 points on Sept. 23. The TIPS spread is a sign that long-term inflation expectations are rising, challenging Fed efforts to keep policy accommodative.

Record central bank liquidity has also stoked a rise in asset prices. The Standard & Poor’s 500 Index has rallied 55 percent from a 12-year low in March, while crude-oil futures are up 78 percent this year.

Investors, reacting to signs of a recovery, have created “bubbles in oil prices” and equities, Jones said. “Bubbles are a nightmare for the Fed.”

Still, with unemployment rising, policy makers will reiterate their intent to hold the federal funds rate at “exceptionally low levels,” analysts said. The jobless rate reached a 26-year high of 9.8 percent in September and economists project it will exceed 10 percent by early next year.

‘Very Accommodative’

“The Fed’s dual mandate includes full employment, and as long as the jobless rate is in its present vicinity, then monetary policy has to stay very accommodative,” said Richard DeKaser, chief economist at Woodley Park Research in Washington.

Since their previous meeting in September, central bankers have voiced differing views on the pace and timing of a change in monetary policy.

Fed Governor Kevin Warsh said Sept. 25 interest rates may need to rise “with greater force” than usual, while New York Fed President William Dudley said Oct. 5 the recovery’s pace “is not likely to be robust” and inflation risks are “on the downside.”

An increase in the main interest rate is “a long ways off,” Gramley said. The economy “needs continued sustenance.”

To contact the reporters on this story: Vivien Lou Chen in San Francisco at vchen1@bloomberg.netScott Lanman in Washington at slanman@bloomberg.net.

Read more...

East Asia’s Growth Adds Risk of Asset Bubbles, World Bank Says

By Shamim Adam

Nov. 4 (Bloomberg) -- East Asian economies will grow faster than initially estimated this year, adding pressure on central banks to tighten policy and allow currency flexibility to prevent asset bubbles, the World Bank said.

Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea, Singapore and the Indian subcontinent, will expand 6.7 percent this year, more than an April estimate of 5.3 percent, the Washington-based lender said its semi-annual report today. Growth may accelerate to 7.8 percent next year, it said.

Asian governments have pumped more than $950 billion into their economies after the global credit crunch cut demand for the region’s cars and flat-panel televisions. Australia has begun raising interest rates, while central banks including India’s and South Korea’s have signaled a readiness to raise borrowing costs in the coming months.

“As growth recovers broadly and inflation pressures begin to materialize, monetary policy may need to be tightened sooner rather than later in East Asia,” the World Bank said. “Exchange-rate flexibility will be critical in managing foreign-exchange inflows while keeping inflation and asset-price increases in check.”

Policy makers are concerned that an appreciation in their exchange rates will stymie the potential recovery in exports and encourage capital inflows that may “bring instability to financial systems and exert further upward pressure on currencies,” the World Bank said.

China’s Yuan

Asian nations also don’t want their currencies to lose out to China’s as the world’s third-largest economy has prevented the yuan from appreciating since July 2008, after it advanced 21 percent against the dollar over the previous three years.

“Authorities in many East Asian countries are concerned about losing competitiveness against China should they allow their currencies to strengthen at a time when China has effectively re-pegged the renminbi to the weakening dollar since mid-2008,” the World Bank said. “Some observers have suggested that if such concerns persist, countries in the region may consider intervening jointly to appreciate their currencies against the dollar.”

Global capital flows are likely to recover from this year’s lows as the world economy emerges from the deepest recession since the 1930s, according to the World Bank report. The global equity rally has added more than $17 trillion to the value of stocks since this year’s low on March 9.

“East Asia may receive a larger share of these inflows because of a combination of investor expectations of stronger growth in the region than the rest of the world, the potential for currency appreciation and the growing liquidity and sophistication of the region’s financial markets,” the World Bank said.

Housing Prices

Central banks around the region lowered interest rates and loosened other policy requirements to kick-start local consumer and business spending.

Housing prices in some Asian nations are rising, while the region’s stock markets have surged in the past six months. As economies recover and banks extend more loans, some of the stimulus needs to be pulled back, the World Bank said.

Central banks may tighten policy by “removing some of the support for liquidity in domestic and foreign currencies, returning reserve requirements to pre-crisis levels and scaling back the scope for collateral eligible for accessing central bank facilities before hiking rates,” it said.

China Growth

China’s economy will expand 8.4 percent this year, and the pace will accelerate to 8.7 percent in 2010, according to the report. Asia’s second-largest economy still makes up most of the region’s growth, the World Bank said.

“Take China out of the equation, and the rest of the region is recovering with less vigor,” the lender said. “Even with solid growth in Indonesia and Vietnam, developing East Asia excluding China is projected to grow more slowly in 2009 than South Asia, the Middle East and North Africa, and only modestly faster than Sub-Saharan Africa.”

Asian governments must maintain fiscal support to spur their economies as world export demand remains sluggish, the International Monetary Fund said last week. Some countries have more room than others in maintaining such stimulus, the World Bank said today.

“Governments are aware that fiscal and monetary stimulus alone cannot sustain domestic demand for an extended period of time,” it said. That’s “especially if investors are not reassured that the authorities will have viable exit strategies in place and will bring government debt to levels that will not jeopardize long-term debt sustainability.”

High Growth Rates

Asia can maintain “high growth rates” by depending less on exports and boosting domestic demand, the World Bank said. Many nations had imitated strategies by Japan, Taiwan and South Korea of relying on export-led growth without regard to the distortions such policies caused, it said.

“Governments are realizing that more growth can be extracted from domestic demand if they ease or eliminate incentives that favor the quick buildup of export-led, investment-heavy manufacturing supported by undervalued exchange rates and suppressed domestic consumption and services,” the lender said.

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

Read more...

Indonesia Keeps Key Interest Rate Unchanged at 6.5%

By Aloysius Unditu and Novrida Manurung

Nov. 4 (Bloomberg) -- Indonesia’s central bank refrained from raising interest rates, judging that inflation isn’t yet enough of a risk to warrant higher borrowing costs.

Bank Indonesia maintained its reference rate at 6.5 percent, the lowest level since the measure was introduced in May 2005, the central bank said in a statement released in Jakarta today. All 24 economists in a Bloomberg News survey predicted the decision.

The current monetary policy direction is still “conducive for the process of economic recovery,” the central bank said, adding that inflation will continue to ease in the medium term. Consumer prices may rise at the lower end of Bank Indonesia’s 3.5 percent-to-5.5 percent target this year, it said.

Indonesia’s inflation unexpectedly slowed to a nine-year low of 2.57 percent in October, giving policy makers more time before they follow other Asian central banks in exiting monetary stimulus. Prices may start to climb faster in the coming months, according to economists, forcing Bank Indonesia to raise borrowing costs early next year.

“We expect inflation to head higher on account of commodity price movements, mainly food and oil,” said Prakriti Sofat, an economist at Barclays Capital Research in Singapore. “We think tightening will begin in the second quarter next year.”

The Indonesian rupiah rose 0.9 percent to 9,555 against the dollar at 12:31 p.m. in Jakarta today as investors bet the country’s assets will maintain their yield advantage over the U.S., where the benchmark interest rate is near zero.

Australia Rates

The Reserve Bank of Australia yesterday raised interest rates for the second time in four weeks, citing “stronger-than- expected” economic conditions for its decision to raise the overnight cash rate target by a quarter point to 3.5 percent. Australia last month became the first among Group of 20 nations to increase borrowing costs since the height of the global credit squeeze.

The Reserve Bank of India in its Oct. 27 monetary policy statement said the “unconventional” steps taken during the global slump can now be reversed. Governor Duvvuri Subbarao ordered lenders to keep more cash in government bonds, increasing the central bank’s statutory liquidity ratio to 25 percent from 24 percent.

East Asian economies will grow faster than initially estimated this year, adding pressure on central banks to tighten policy and allow currency flexibility to prevent asset bubbles, the World Bank said today.

Limited Scope

Bank Indonesia stopped cutting rates in August after slashing borrowing costs for nine straight months to help shield Southeast Asia’s largest economy from the worst global recession since the 1930s.

Deputy Governor Hartadi Sarwono on Oct. 22 said that Bank Indonesia’s scope to lower rates has become “limited,” indicating that borrowing cost are now more likely to go up rather than down. Inflation may accelerate to between 4 percent and 6 percent next year, the central bank said.

Indonesia’s $514 billion economy is forecast to expand 5.5 percent next year from an estimated 4.3 percent this year, driven by consumer demand, according to the central bank. Indonesian President Susilo Bambang Yudhoyono said last week his government aims to achieve economic growth of 7 percent by the end of his second five-year term in 2014.

Toyota Cars

The economy may expand faster in the fourth quarter than in the previous three months, the central bank said today. The World Bank may raise the country’s 2009 growth forecast from the current estimate of more than 4.3 percent in December, said William Wallace, lead economist in the Washington-based lender’s office in Jakarta.

Car sales in Indonesia may reach 550,000 to 600,000 next year from between 460,000 and 475,000 vehicles in 2009, PT Toyota Astra Motor’s marketing director Joko Trisanyoto said in Bandung on Oct. 22.

“Having weathered the global crisis well, Indonesia looks on course to be one of the fastest-growing economies in the world in 2010,” said James Lord, an economist at Capital Economics Ltd. in London.

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

Read more...

Iran Raises Uranium Output as Photos Show Need for Wider Checks

By Jonathan Tirone

Nov. 4 (Bloomberg) -- Satellite photos indicate that Iran has increased production at a uranium mine, underscoring the need for wider UN inspections to determine whether the country is trying to build a nuclear weapon.

Evidence of stepped-up activity at the Gchine mine, near the Persian Gulf coast city of Bandar Abbas, is seen in pictures obtained by Bloomberg News and the Washington-based New America Foundation, according to four nuclear analysts who examined the images. The mine could produce enough uranium to craft at least two atomic bombs a year, experts said.

The photographs, taken on April 26 and Oct. 3 by DigitalGlobe Inc. and GeoEye Inc., two U.S. commercial satellite companies, show Iran increased the rate at which it pumps waste from the mine during the intervening months. Iran has filled one waste pool since November 2008, when a previous photograph was taken, and built a second pond with pipes connecting it to processing tanks that separate the metal from rock.

“Iran’s decision to expand mining and milling at Bandar Abbas seems to validate the suspicions of those who think it was the main uranium site for a covert program,” Jeffrey G. Lewis, nuclear strategy and non-proliferation director at the New America Foundation, a public policy institute, said in an Oct. 20 interview.

The increased uranium production indicates that United Nations inspectors need to widen their field of vision beyond facilities such as Iran’s uranium-enrichment plant in Natanz and its Esfahan conversion facility, Lewis and other analysts said. The UN’s nuclear agency should renew demands to inspect research labs, machine shops and mines including Gchine, they added.

Top Priority

The international community’s top priority should be to gain “considerably more access into the Iranian program as a whole so that there is a verifiable distance between Iran’s option to build a bomb and the exercise of that option,” said Lewis, who formerly ran the nuclear non-proliferation research program at Harvard University in Cambridge, Massachusetts.

The U.S. and several allies say Iran’s atomic work is cover for the development of a weapon, while the government in Tehran insists that the program is peaceful and intended for civilian purposes such as electricity generation.

Iran has been under investigation by the UN since 2003 because it concealed nuclear work from the world body’s International Atomic Energy Agency for two decades. It is subject to three sets of UN economic sanctions for ignoring Security Council demands that it suspend uranium enrichment and related work and allow wider inspections.

Weapon Fears

The IAEA said Oct. 29 that it would consult with world powers and Iran after the country failed to fully accept a UN- brokered plan for Russia to process nuclear fuel for a medical- research reactor in Tehran. Iran said its “technical and economic concerns” had to be addressed.

The proposal would slow any effort by Iran to make a weapon with its 1,500-kilogram (3,300-pound) stockpile of low-enriched uranium and, if accepted, improve prospects for international talks aimed at ensuring that the country doesn’t produce a bomb.

Holder of the world’s No. 2 oil and natural gas reserves, Iran has been using about 530 tons of uranium obtained from South Africa in 1982 to fuel its declared enrichment program, centered at the Natanz plant, about 210 kilometers (130 miles) south of Tehran. IAEA inspectors have long sought to establish whether Iran has an alternative fuel source for a nuclear effort running in parallel with the declared program.

Yellowcake

The Gchine site, which Iran no longer allows the IAEA to visit, could produce enough raw uranium for processing into two warheads a year if Iran chose to secretly enrich the uranium to weapons grade, according to calculations by the Verification Research, Training and Information Center, a London-based institute that is a non-governmental observer at the IAEA and funded by European governments.

Gchine has the capacity to produce annually up to 21 tons of milled uranium, or yellowcake, Iran told the Paris-based Nuclear Energy Agency, part of the Organization for Economic Cooperation and Development, in 2007. Satellite photographs taken last year showed that the mine was only beginning operations and not working at capacity.

“Although the mill has a design capacity of 21 tons of yellowcake per year, it has actually operated at much lower levels,” Lewis said. “The construction of a much larger pond suggests Iran is moving toward operating the mill at its design capacity.”

About half that amount, or 9,000 kilograms of yellowcake, would be needed to produce the 25 kilograms (55 pounds) of 93 percent enriched uranium required for a weapon, according to the verification center.

History of Concealment

The satellite photos, while showing that Iran is ramping up capacity, can’t pinpoint the amount of uranium being produced, the analysts said. Inspections would be needed to find out how close to production capacity Iran is at the mine.

“Given Iran’s history of concealing nuclear facilities, an effective safeguards regime needs to cover all of Iran’s nuclear activities from the moment the ore comes out of the earth at Bandar Abbas and elsewhere,” Lewis said.

An IAEA agreement with Iran, which allows inspection of declared nuclear sites such as Natanz and Esfahan, located about 340 kilometers south of Tehran, doesn’t extend to mining operations.

Inspectors gained some access to Gchine from 2003 until 2006, when Iran stopped complying with an IAEA agreement that allowed for more stringent investigations. President Mahmoud Ahmadinejad ceased Iran’s cooperation with the so-called Additional Protocol in 2006 in retaliation for the IAEA’s referral of the dispute over Iran’s nuclear work to the Security Council.

Heavy-Water Reactor

The agency has repeatedly requested more access to the mine as well as other sites involved in Iran’s atomic work, most recently in a Sept. 9 report.

The Additional Protocol, created in 1997 after the discovery that Iraq and North Korea had atomic programs, would give inspectors access to places beyond Gchine, such as an incomplete heavy-water reactor in Arak, 240 kilometers south of Tehran, and plants that make centrifuges used in uranium enrichment. Inspectors would also be allowed to take water and soil samples and talk with key figures in Iran’s nuclear program.

What the international community “would like to know now is where all that uranium yellowcake is going,” Andreas Persbo, executive director of the verification institute, said in an Oct. 21 interview.

Chain Reaction

Two of the four analysts who examined the satellite images and confirmed the production increase declined to be identified because they aren’t authorized to speak publicly on the issue. The two satellite image companies regularly take pictures of countries such as Iran and sell the photographs to interested governments and scientists.

Inspectors don’t know whether all of the mine’s output is going to Esfahan for conversion, whether some is being stockpiled at the mine or whether it is being secretly transferred to an undeclared site, said Persbo. Iran hasn’t reported details of the output.

At the conversion stage, yellowcake is turned into uranium hexafluoride gas. It is then transported in casks to Natanz, where centrifuges isolate the uranium-235 isotope used in a nuclear chain reaction.

Iran could produce a warhead without the IAEA’s knowledge if secret facilities to convert and enrich the uranium mined at Gchine were used, according to the analysts.

Underground Facility

Iran told the IAEA about a previously secret underground enrichment plant, called Fordo, some 160 kilometers south of Tehran, in September. IAEA inspectors undertook a four-day visit to the site and will report their findings to the organization’s 35-member board of governors.

Iran’s ambassador to the IAEA, Aliasghar Soltanieh, when reached by telephone yesterday, wouldn’t confirm that production had increased at Gchine or comment on whether the country would submit to wider inspections.

The IAEA declined to comment on the satellite photographs. U.S. diplomats also declined to comment and referred Bloomberg News to an Oct. 21 speech by Secretary of State Hillary Clinton.

“The International Atomic Energy Agency doesn’t have the tools or authority to carry out its mission effectively,” Clinton said in the Washington speech. “We saw this in the institution’s failure to detect Iran’s covert enrichment plant.”

To contact the reporter on this story: Jonathan Tirone at jtirone@bloomberg.net.

Read more...

China Must Avert Loan-Fueled Bubbles, World Bank Says

By Bloomberg News

Nov. 4 (Bloomberg) -- China’s policy makers must avert stock and property market bubbles after lending swelled to a record $1.27 trillion this year, the World Bank said.

The Washington-based lender raised China’s economic growth forecast for this year to 8.4 percent from 7.2 percent and Beijing-based senior economist Louis Kuijs said the central bank will “eventually” have to rein in credit to ensure resources are properly allocated.

The Shanghai Composite Index has surged 72 percent this year after Chinese authorities enacted a $586 billion stimulus plan, lowered banks’ cash reserve requirements and reduced the one-year lending rate to a five-year low. The World Bank also said China will need to do more to rebalance the economy toward consumption and services and away from investment and industry.

“Risks of asset-price bubbles and misallocation of resources amidst abundant liquidity need to be addressed,” Kuijs said. While there’s currently no need for a “major tightening,” the costs of sustaining the current expansionary policy stance “will increase over time,” he said.

China may tighten monetary policy from the second quarter of next year because of stronger growth and rising consumer prices, Goldman Sachs Group Inc. said Oct. 29. Li Dongrong, an assistant governor at the central bank, said on Nov. 1 that China will maintain a “relatively loose monetary policy.”

The Shanghai Composite climbed 0.2 percent at 2:43 p.m., little changed from before the report was released.

Overheating Concern

“Policy makers have been quite successful in bottoming out the economy,” said Tomo Kinoshita, an economist at Nomura Holdings Inc. in Hong Kong. “Next year, there’ll be concerns over overheating, particularly when we see asset prices going up further. There’ll be talk of tightening and policy makers have more work to do.”

China’s banking regulator plans to review debt levels at some real-estate developers on concern the companies’ borrowings are fueling excessive gains in property prices, according to a person familiar with the matter. Home prices rose at the fastest pace in a year in September.

“If there’s not a bubble now it’s building up,” said Ardo Hansson, the World Bank’s chief economist on China in Beijing. “More and more” of the new credit is going into mortgages and “the view that something should be done is quite right.”

Hong Kong Bubble

In Hong Kong, authorities have tightened lending to rein in home prices. The International Monetary Fund said yesterday it shares the Hong Kong government’s concerns that there could be a sharp run-up in prices for property and financial assets.

Stimulus spending and the surge in lending helped China’s gross domestic product grow 8.9 percent in the three months to Sept. 30, the fastest expansion in a year.

The World Bank said the economy will grow 8.7 percent in 2010, more than an earlier estimate of 7.7 percent. Rebounding housing construction and a turnaround for exports will help the economy pick up next year even as overall growth in investment falls by about half, the lender said in today’s report.

“More policy measures will be needed to rebalance growth in China,” the World Bank said. “Structural reforms to unleash more growth and competition in the service sector and stimulate more successful, permanent migration would be particularly welcome.”

Stronger Safety Net

Recent initiatives to increase investment in health, education and the social safety net, as well as improving access to finance for smaller companies, are steps in the right direction, the World Bank said. China is likely to post growth over the next five years of about 8 percent annually, it said.

International Monetary Fund Managing Director Dominique Strauss-Kahn said he anticipates China will address its “undervalued” currency to achieve greater dependence on domestic demand rather than exports.

The global financial crisis has already started rebalancing the world economy as U.S. consumers are saving more and China moves toward a “more domestic-led” growth model, Strauss-Kahn said in an interview yesterday on Bloomberg Television in Washington.

China has prevented the yuan from appreciating since July 2008, stoking tensions with American manufacturers.

“On trade matters there are tensions building up and there are risks of various tit-for-tat measures,” said Hansson.

Because China needs to reduce its trade surplus and boost domestic demand an appreciation of the yuan “is probably something that is in the pipeline,” while a depreciation of the dollar is “probably going to be part of the natural order of things,” Hansson said.

Manufacturing investment will remain under pressure next year because of spare capacity in China and abroad, the World Bank said. That will help keep “underlying inflationary pressures” largely absent, the report said.

To contact the Bloomberg News staff for this story: Kevin Hamlin in Beijing at khamlin@bloomberg.net

Read more...

Supreme Court Says New Panel to Hear Ambani Gas Case

By P.S. Patnaik

Nov. 4 (Bloomberg) -- India’s Supreme Court said a new panel of judges will hear arguments afresh in the Ambani gas lawsuit, starting tomorrow, after one member withdrew from the case to avoid a potential conflict of interest.

Justice R.V. Raveendran stepped down from the panel of three judges headed by Chief Justice K.G. Balakrishnan that’s hearing the case, saying his daughter works with a law company that advises Reliance Industries Ltd., controlled by billionaire Mukesh Ambani.

“I do not want to be a party to this case,” Raveendran said. “Yesterday, I spoke to my daughter who is in Bangalore and she works with AZB & Partners, which is advising Reliance Industries on other projects for global acquisitions.”

The Supreme Court is hearing a plea by Reliance Industries to overturn a lower-court order to supply gas to a company owned by Mukesh’s younger brother Anil Ambani at 44 percent less than a price set by the government in 2007. Raveendran previously offered to withdraw from the hearings after saying he owns shares in Reliance Industries and Reliance Natural Resources.

Reliance shares gained 4 percent to 1,891 rupees at 11:56 a.m. in Mumbai trading compared with a 2.2 percent increase in the benchmark Sensitive Index. Reliance Natural shares rose 1.9 percent to 67.70 rupees.

Lawyers for both companies said they had no objection to Raveendran continuing on the panel. Raveendran holds 772 shares of Reliance Industries and 783 shares of Reliance Natural, according to a list of assets owned by judges on the Web site of the Supreme Court.

The nation’s top court started hearings on the dispute on Oct. 20 after agreeing to skip preliminary hearings.

The case is SLP(C) No. 14997/2009 between Reliance Natural Resources and Reliance Industries in India’s Supreme Court.

To contact the reporter on this story: P.S. Patnaik in New Delhi at ppatnaik2@bloomberg.net.

Read more...

Pound to Drop to Euro Parity, Become Funding Currency, LGT Says

By Candice Zachariahs and Susan Li

Nov. 4 (Bloomberg) -- The U.K. pound may replace the dollar and the yen as the world’s biggest funding currency, dropping sterling to parity against the euro as the Bank of England buys more bonds to combat a recession, LGT Group said.

Britain’s economy shrank for a sixth consecutive quarter in the three months to Sept. 30, the longest contraction since records began in 1955. The Bank of England will expand its bond purchase program to 225 billion pounds ($369 billion) from 175 billion pounds on Nov. 5, according to the median estimate of 48 economists in a Bloomberg News survey.

“The pound could take over even from the U.S. dollar and Japanese yen as the main funding currency,” said Simon Grose- Hodge, a strategist in Singapore at LGT Group, the bank owned by Liechtenstein’s royal family. “Some central banks have already got to the stage where they’re beginning to withdraw stimulus and tighten policy and the U.K. now stands out as the only one that’s still on an easing bias.”

The pound fell 0.2 percent to 89.74 pence against the euro as of 12:45 p.m. in Tokyo from 89.58 pence yesterday. It declined 0.2 percent against the greenback to $1.6409. The U.K. economy shrank 0.4 percent in the third quarter, the statistics bureau said Oct. 3

Sterling will likely trade at parity with Europe’s single currency in six months to a year as the U.K. government’s debt expands and Britain’s financial industry remains weak.

The pound fell yesterday after the government announced a second bailout for Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc amounting to 31.3 billion pounds.

Aussie Set for Parity

Grose-Hodge also said Australia’s dollar -- the world’s best-performing currency against the greenback over the past 12 months -- will likely climb to parity against its U.S. counterpart by the middle of next year.

“There’s very good demand for the Australian dollar and we’re still bullish,” he said.

The Reserve Bank of Australia yesterday raised interest rates for the second time in four weeks, after an Oct. 6 decision that made it the first Group of 20 central bank to raise borrowing costs this year.

Benchmark interest rates are 3.5 percent in Australia, compared with 0.1 percent in Japan, 0.5 percent in the U.K. and as low as zero in the U.S., attracting investors to the South Pacific nation’s higher-yielding assets in so-called carry trades. The risk in such trades is that currency market moves will erase profits.

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

Read more...

British Pound Rises Against Dollar, Little Changed Versus Euro

By Daniel Tilles

Nov. 4 (Bloomberg) -- The pound rose against the dollar and was little changed versus the euro.

The British currency advanced 0.2 percent to $1.6468 as of 7:02 a.m. in London. Sterling traded at 89.52 pence per euro, from 89.59 pence yesterday.

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

Read more...

Euro Advances Against Yen, Dollar Before German Factory Orders

By Yoshiaki Nohara and Ron Harui

Nov. 4 (Bloomberg) -- The euro gained against the yen before a German report this week that may show factory orders rose for a seventh month, backing the case for the European Central Bank to refrain from lowering borrowing costs.

The yen traded near a three-week high against the dollar on speculation the Federal Reserve will today repeat its pledge to keep interest rates low for an “extended period,” diminishing the appeal of U.S. assets. Australia’s dollar was set for two days of losses against the greenback after a government report showed the nation’s retail sales unexpectedly dropped, raising concern its central bank will temper the pace of rate increases.

“The euro-zone economy seems to be doing well, compared with economies in the U.S. and Japan,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The bias is for the euro to be bought and the dollar and the yen to be sold.”

The euro rose to 133.34 yen at 7:04 a.m. in London from from 133.01 in New York yesterday. It climbed to $1.4739 from $1.4724. The U.S. currency fetched $1.6468 per pound from $1.6436, and was at 1.0254 Swiss franc from 1.0259 franc.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

Read more...

Crude Oil Trades Above $79 on Economic Growth Data, Gold Gains

By Christian Schmollinger

Nov. 4 (Bloomberg) -- Crude oil traded little changed above $79 a barrel after rising yesterday on signs the U.S. economic expansion may spur fuel demand in the world’s largest energy consumer.

Oil climbed 1.9 percent after India’s central bank bought 200 metric tons of gold from the International Monetary Fund. Factory orders in the U.S., the world’s biggest crude consumer, rose in September for the fifth time in six months.

“People that are investing in gold are also investing in oil as a hard commodity hedge against dollar weakness,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “So oil just feeds off of gold and vice-versa. In general it’s the same commodity play.”

Crude oil for December delivery traded at $79.39 a barrel, down 21 cents, in electronic trading on the New York Mercantile Exchange at 1:28 p.m. Singapore time. Oil has risen 78 percent this year. Yesterday, the contract settled up $1.47 at $79.60.

Oil fell as much as 2 percent earlier yesterday on the announcement that Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc received a second bailout from U.K. taxpayers, signaling the economy may take longer to recover from the worst recession since the 1930s.

Record Gold

“Commodities overall last night seemed to take the lead from the strong move in gold prices, and that came despite the strength in the dollar,” Toby Hassall, a research analyst with CWA Global Markets, said by phone from Sydney. “Oil probably tapped some strength from the economic data as well.”

Gold futures for December delivery rose $30.90, or 2.9 percent, to $1,084.90 an ounce yesterday on the Comex division of the New York Mercantile Exchange, a record settlement price. The contract touched $1,088.50, the all-time high intraday price. The previous record was $1,072 an ounce, set on Oct. 14.

The Reuters/Jefferies CRB Index of 19 commodities advanced 1.1 percent to 276.43.

The U.S. dollar was at $1.4730 to the euro at 1:30 p.m. Singapore time from $1.4724 yesterday. The greenback fell as low as $1.5016 on Oct. 21.

Prices were also supported by an industry-funded report showing U.S. crude stockpiles declined last week.

Crude inventories fell 3.28 million barrels last week to 336.2 million, the American Petroleum Institute said yesterday.

U.S. Inventories

The U.S. Energy Department is scheduled to release its supply report for the week ended Oct. 30 today at 10:30 a.m. in Washington. Analysts forecast that stockpiles would increase by 1.5 million barrels, according to the median of 16 responses in a survey conducted by Bloomberg News.

By Christian Schmollinger

Nov. 4 (Bloomberg) -- Crude oil traded little changed above $79 a barrel after rising yesterday on signs the U.S. economic expansion may spur fuel demand in the world’s largest energy consumer.

Oil climbed 1.9 percent after India’s central bank bought 200 metric tons of gold from the International Monetary Fund. Factory orders in the U.S., the world’s biggest crude consumer, rose in September for the fifth time in six months.

“People that are investing in gold are also investing in oil as a hard commodity hedge against dollar weakness,” said Anthony Nunan, an assistant general manager for risk management at Mitsubishi Corp. in Tokyo. “So oil just feeds off of gold and vice-versa. In general it’s the same commodity play.”

Crude oil for December delivery traded at $79.39 a barrel, down 21 cents, in electronic trading on the New York Mercantile Exchange at 1:28 p.m. Singapore time. Oil has risen 78 percent this year. Yesterday, the contract settled up $1.47 at $79.60.

Oil fell as much as 2 percent earlier yesterday on the announcement that Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc received a second bailout from U.K. taxpayers, signaling the economy may take longer to recover from the worst recession since the 1930s.

Record Gold

“Commodities overall last night seemed to take the lead from the strong move in gold prices, and that came despite the strength in the dollar,” Toby Hassall, a research analyst with CWA Global Markets, said by phone from Sydney. “Oil probably tapped some strength from the economic data as well.”

Gold futures for December delivery rose $30.90, or 2.9 percent, to $1,084.90 an ounce yesterday on the Comex division of the New York Mercantile Exchange, a record settlement price. The contract touched $1,088.50, the all-time high intraday price. The previous record was $1,072 an ounce, set on Oct. 14.

The Reuters/Jefferies CRB Index of 19 commodities advanced 1.1 percent to 276.43.

The U.S. dollar was at $1.4730 to the euro at 1:30 p.m. Singapore time from $1.4724 yesterday. The greenback fell as low as $1.5016 on Oct. 21.

Prices were also supported by an industry-funded report showing U.S. crude stockpiles declined last week.

Crude inventories fell 3.28 million barrels last week to 336.2 million, the American Petroleum Institute said yesterday.

U.S. Inventories

The U.S. Energy Department is scheduled to release its supply report for the week ended Oct. 30 today at 10:30 a.m. in Washington. Analysts forecast that stockpiles would increase by 1.5 million barrels, according to the median of 16 responses in a survey conducted by Bloomberg News.

Oil-supply totals from the API and DOE moved in the same direction 75 percent of the time over the past four years, according to data compiled by Bloomberg.

The Department of Energy report is expected to show that distillate fuel inventories, including heating oil and diesel, probably declined 1 million barrels. Gasoline supplies probably increased 400,000 barrels, the survey showed.

Brent crude for December settlement was at $77.90 a barrel, down 21 cents, on the London-based ICE Futures Europe exchange at 1:28 p.m. Singapore time. The contract increased $1.56, or 2 percent, to end the session at $78.11 a barrel.

China’s Demand

China’s domestic apparent fuel demand rose 0.7 percent in the first nine months of this year from a year earlier, spurred by the economic recovery, the China Petroleum and Chemical Industry Association said in a report today.

Apparent crude demand, which includes domestic output and net imports and excludes inventories, rose 3.3 percent during the nine-month period, compared with a 1 percent decline in the first half, the Beijing-based association said in a monthly report, without giving exact demand figures.

China’s growth in crude demand isn’t matched by developed economies such as the U.S. and Europe.

The International Energy Agency will lower its long-term forecast for oil demand in its annual World Energy Outlook next week, predicting that energy-efficiency efforts will slow consumption growth, the Wall Street Journal reported today, citing an unidentified person.

“Demand management policies” are reducing the need for crude in some countries, the report said.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

Oil-supply totals from the API and DOE moved in the same direction 75 percent of the time over the past four years, according to data compiled by Bloomberg.

The Department of Energy report is expected to show that distillate fuel inventories, including heating oil and diesel, probably declined 1 million barrels. Gasoline supplies probably increased 400,000 barrels, the survey showed.

Brent crude for December settlement was at $77.90 a barrel, down 21 cents, on the London-based ICE Futures Europe exchange at 1:28 p.m. Singapore time. The contract increased $1.56, or 2 percent, to end the session at $78.11 a barrel.

China’s Demand

China’s domestic apparent fuel demand rose 0.7 percent in the first nine months of this year from a year earlier, spurred by the economic recovery, the China Petroleum and Chemical Industry Association said in a report today.

Apparent crude demand, which includes domestic output and net imports and excludes inventories, rose 3.3 percent during the nine-month period, compared with a 1 percent decline in the first half, the Beijing-based association said in a monthly report, without giving exact demand figures.

China’s growth in crude demand isn’t matched by developed economies such as the U.S. and Europe.

The International Energy Agency will lower its long-term forecast for oil demand in its annual World Energy Outlook next week, predicting that energy-efficiency efforts will slow consumption growth, the Wall Street Journal reported today, citing an unidentified person.

“Demand management policies” are reducing the need for crude in some countries, the report said.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

Read more...