By Lily Nonomiya
June 26 (Bloomberg) -- The Bank of Japan is concerned that rising energy and raw-materials costs may force the nation's companies and consumers to spend less, policy board member Seiji Nakamura said.
``Even though capital spending and personal consumption remain solid, we need to carefully watch whether weakening of the spending mechanism will hurt domestic demand,'' Nakamura, 66, said in a speech in Asahikawa, northern Japan.
Nakamura said the central bank is also watching whether rising inflationary pressures worldwide will spread to Japan. ``Rising uncertainty'' over the economic outlook makes it inappropriate to predetermine the policy direction, he added, reinforcing that the bank has no bias toward raising or lowering the benchmark interest rate from 0.5 percent.
``Nakamura's speech indicates that unlike in the U.S. and Europe, rising commodity prices are only intensifying the risk of Japan's economic deterioration,'' said Mari Iwashita, chief market economist at Daiwa Securities SMBC Co. in Tokyo. ``There's no chance for the central bank to raise interest rates this year at least.''
The yield on Japan's five-year note fell 1.5 basis points to 1.24 percent, the lowest in three weeks. The odds that the Bank of Japan will lift borrowing costs by year-end slid to 36 percent from 50 percent at the start of the week, interest-rate swaps show, according to JPMorgan Chase & Co. calculations.
Faster Inflation
Higher prices of oil and food are spurring the fastest inflation in a decade, crimping profits and forcing companies in the world's second-largest economy to pare spending plans.
``Uncertainty concerning the outlook is rising because of trends in overseas economies, inflationary pressures resulting from surging energy and raw-materials prices, as well as volatility in global financial markets,'' Nakamura said. ``It's important to be flexible in implementing monetary policy in accordance with developments in the economy and prices.''
Only three of 34 economists surveyed by Bloomberg News this month said the bank will increase rates this year. The remaining 31 expect no change in the benchmark rate, the lowest in the industrialized world, which was last raised in February 2007.
Still, Nakamura said Japan's interest rates are lower than the inflation rate and may stimulate demand in the world's second-largest economy.
``Real short-term rates are negative and in relation to the potential growth rate, they are very low,'' Nakamura said. ``I think that this accommodative monetary environment amid such low interest-rate levels will support private demand.''
Consumer Prices
A report tomorrow will probably show that consumer prices excluding fresh food climbed 1.4 percent in May, the fastest pace in a decade. Wholesale inflation surged 4.7 percent last month, the quickest in 27 years, increasing pressure on companies to pass record commodities costs to households.
Given that food and energy costs are rising ``it is expected that gains will remain around the mid-1 percent range for some time,'' Nakamura said. ``There is a need to keep an eye on changes in consumers' inflationary expectations, companies' price-setting behavior as well as whether rising inflationary pressures overseas will spread to Japan.''
Sentiment at the nation's largest manufacturers fell at the fastest pace in four years this quarter, a government survey this week showed, and companies said they plan to cut capital outlays 0.9 percent in the year ending March 31. Data yesterday showed growth in exports slowed to 3.7 percent last month as sales to Europe fell for the first time in more than two years.
Nakamura headed MOL Ferry Co., a subsidiary of Mitsui O.S.K. Lines Ltd., before joining the policy board in April 2007.
To contact the reporter on this story: Lily Nonomiya in Asahikawa City lnonomiya@bloomberg.net
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Thursday, June 26, 2008
Fed Sounds Inflation Alarm, Moves Toward Rate Rise
By Scott Lanman
June 26 (Bloomberg) -- The Federal Reserve is sounding the alarm on inflation without committing to raise interest rates.
The Federal Open Market Committee left its benchmark rate at 2 percent yesterday and said ``upside risks'' to prices have picked up. The statement also said consumer spending is ``firming,'' while acknowledging that rising energy prices will curb growth into 2009.
The FOMC cited ``the elevated state'' of some measures of inflation expectations and dropped an April forecast of a ``leveling out'' in commodity prices. The officials want to keep their options open on rate changes in case the credit crisis worsens and the economy deteriorates after consumers spend their tax rebates, Fed watchers said.
``It is a baby step in the direction of raising rates,'' said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Greenwich, Connecticut. The central bankers signaled ``they are not expecting to tighten in the near term. That is as far as they are willing to go,'' he said.
Treasuries fell, with the yield on the benchmark 10-year note rising 3 basis points to 4.12 percent as of 7:27 a.m. in London.
The FOMC also said employment had weakened and financial markets remained under ``considerable stress,'' even as growth risks ``diminished somewhat.''
Chairman Ben S. Bernanke and his colleagues stopped short of specifying that inflation was a greater concern than growth. They reiterated language from their April meeting that the Fed will ``act as needed'' to promote both economic expansion and stable prices.
Rate Outlook
Traders trimmed bets on a rate increase in the next three months after the announcement. Odds that the Fed will keep its benchmark at 2 percent in September jumped to 66 percent from 10 percent a day earlier, according to futures contracts quoted on the Chicago Board of Trade.
``I don't think they are signaling a rate hike as a possibility at the next meeting,'' said Cary Leahey, senior economist at Decision Economics Inc. in New York. ``Before they would tighten credit, they would have a statement that would say `we do have a tightening bias' and they would say that as clearly as they can.''
Yesterday's statement reflected Fed officials' comments this month that the central bank must keep price expectations in check to avoid a spiraling in inflation. Bernanke said June 9 that officials would ``strongly resist'' a jump in those expectations.
The decision wasn't unanimous, with Dallas Fed President Richard Fisher dissenting for a fourth straight time, favoring the first rate increase in two years.
Inflation Climbs
Oil prices touched a record $139.89 June 16, extending a rally that helped push the consumer price index up 4.2 percent in the 12 months to May compared with an average of 2.7 percent over the past decade.
Dow Chemical Co. said two days ago that higher raw materials costs will cause the company to raise prices by as much as 25 percent in July, following an increase of as much as 20 percent. United Parcel Service Inc. cut its second-quarter profit forecast June 23 because of rising fuel costs and slowing U.S. growth.
American consumers foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to the Reuters/University of Michigan survey.
Fed's `Duty'
``What they're saying is, we have a duty to price stability, and we want you to know that we are mindful of that duty, but we may not think it's appropriate to act on that duty in the short run,'' said Neal Soss, chief economist at Credit Suisse in New York, who used to work as an aide to former Fed chief Paul Volcker.
Credit markets have yet to normalize and bank losses are mounting as the economic slowdown adds to stresses from the subprime mortgage collapse. The gap between investors' expectations for the Fed's main rate and the rate that banks charge each other for funds increased this month, a sign of continued turmoil.
The difference between the three-month London Interbank Offered Rate and the overnight index swap rate widened to 0.73 percentage point yesterday from 0.68 point at the end of May. Former Fed chairman Alan Greenspan said this month the credit crisis will be over when the spread narrows past 0.25 point.
The worst housing recession in a quarter century is showing few signs of ending. Reports this week showed sales of new homes extended their decline in May, consumer confidence dropped to a 16-year low and orders for durable goods stagnated.
Growth Rate
Yesterday's statement contained no mention of the contraction in gross domestic product that many officials judged likely at their April meeting. The Commerce Department today will probably lift its estimate of GDP growth for the first quarter to a 1 percent annual pace, from a previous estimate of 0.9 percent, according to a Bloomberg News survey of economists.
``I hope we'll be in good enough shape by later in the year'' that the Fed could raise rates, House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in an interview with Bloomberg Television. Frank added he was ``skeptical'' there will be sufficient improvement by then.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net
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London Bourse Extends Contracts Including Aluminum
By Jae Hur and Stuart Wallace
June 26 (Bloomberg) -- The London Metal Exchange, the world's largest marketplace for copper, lengthened the maturity of some futures contracts to as much as 10 years.
High-grade aluminum and copper contracts were extended to 123 months, from 63, and zinc and nickel to 63 months from 27, the bourse said in an e-mailed statement today. Lead was extended to 63 months, from 15. The changes take place Sept. 29.
``There has been some growing demand from investment banks and metal companies for longer prompt dates as a mine development project normally takes 4-5 years to complete and they need a benchmark forward price for financing and other purposes,'' said Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank in Seoul.
The exchange handled a record $9.5 trillion of futures and options in 2007, a third consecutive year of higher volumes. The LME is facing increased competition as other commodity bourses including the New York Mercantile Exchange plan to increase the number of metals they handle.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.netStuart Wallace at swallace6@bloombe
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June 26 (Bloomberg) -- The London Metal Exchange, the world's largest marketplace for copper, lengthened the maturity of some futures contracts to as much as 10 years.
High-grade aluminum and copper contracts were extended to 123 months, from 63, and zinc and nickel to 63 months from 27, the bourse said in an e-mailed statement today. Lead was extended to 63 months, from 15. The changes take place Sept. 29.
``There has been some growing demand from investment banks and metal companies for longer prompt dates as a mine development project normally takes 4-5 years to complete and they need a benchmark forward price for financing and other purposes,'' said Nicholas Chung, senior manager of the commodity derivatives team at Korea Development Bank in Seoul.
The exchange handled a record $9.5 trillion of futures and options in 2007, a third consecutive year of higher volumes. The LME is facing increased competition as other commodity bourses including the New York Mercantile Exchange plan to increase the number of metals they handle.
To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.netStuart Wallace at swallace6@bloombe
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Gold Rises as Euro Holds Gains Versus Dollar After Fed Decision
By Feiwen Rong
June 26 (Bloomberg) -- Gold rose in Asia as the euro traded near the highest against the dollar in more than two weeks, boosting the appeal of the precious metal as an alternative asset.
The dollar fell yesterday after the Federal Reserve gave no indication it will start reversing the most aggressive series of interest-rate cuts in two decades. Gold has gained 6.5 percent this year while the dollar has fallen 6.9 percent versus the euro.
``Gold could firm on a stronger euro,'' Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a report yesterday.
Bullion for immediate delivery was up 0.2 percent to $887.74 an ounce at 10:32 a.m. in Singapore. Silver was little changed at $16.79 an ounce at the same time.
``A choppy to weak oil price will hold back stronger gains,'' Pervan said. Crude oil in New York was little changed at $134.47 a barrel at 10:21 a.m. in Singapore. It fell yesterday on unexpected rise in the U.S. inventories which gained for the first time in six weeks because record fuel prices cut demand.
The dollar traded at $1.5666 against the euro at 10:33 a.m. in Singapore, after falling to $1.5686 yesterday, the weakest since June 9.
European Central Bank President Jean-Claude Trichet told the European Parliament in Brussels yesterday that he's leaving open the option of raising interest rates again after July to contain accelerating inflation.
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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June 26 (Bloomberg) -- Gold rose in Asia as the euro traded near the highest against the dollar in more than two weeks, boosting the appeal of the precious metal as an alternative asset.
The dollar fell yesterday after the Federal Reserve gave no indication it will start reversing the most aggressive series of interest-rate cuts in two decades. Gold has gained 6.5 percent this year while the dollar has fallen 6.9 percent versus the euro.
``Gold could firm on a stronger euro,'' Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a report yesterday.
Bullion for immediate delivery was up 0.2 percent to $887.74 an ounce at 10:32 a.m. in Singapore. Silver was little changed at $16.79 an ounce at the same time.
``A choppy to weak oil price will hold back stronger gains,'' Pervan said. Crude oil in New York was little changed at $134.47 a barrel at 10:21 a.m. in Singapore. It fell yesterday on unexpected rise in the U.S. inventories which gained for the first time in six weeks because record fuel prices cut demand.
The dollar traded at $1.5666 against the euro at 10:33 a.m. in Singapore, after falling to $1.5686 yesterday, the weakest since June 9.
European Central Bank President Jean-Claude Trichet told the European Parliament in Brussels yesterday that he's leaving open the option of raising interest rates again after July to contain accelerating inflation.
To contact the reporter for this story: Feiwen Rong in Singapore at frong2@bloomberg.net
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Copper Gains After Federal Reserve Gives No Rate-Rise Signal
By Glenys Sim
June 26 (Bloomberg) -- Copper rose for the first time in four days in Asia as the dollar fell after the Federal Reserve gave no indication that it will increase interest rates, raising the investment appeal of raw materials.
The Fed kept its benchmark rate at 2 percent yesterday and said risks to growth have diminished in the world's largest economy. Copper rallied 26 percent this year as cuts to borrowing costs drove a decline in the dollar and prompted investors to buy commodities.
``The rebound, which we're seeing across the whole metals complex, mainly has to do with the dollar's move after last night's Fed statement,'' Liang Lijuan, analyst at Yide Futures Brokerage Co., said today.
Copper for delivery in three months rose as much as $110, or 1.3 percent, to $8,425 a metric ton on the London Metal Exchange, erasing most of the 1.4 percent decline in the past three days. The contract traded at $8,420 at 10:40 a.m. Singapore time.
``The market already priced expectations of a rate hike at the next meeting but it's less certain now so we're seeing some short-covering taking place,'' said Liang.
Copper for September delivery on the Shanghai Futures Exchange added as much as 410 yuan, or 0.7 percent, to 62,690 yuan ($9,134) a ton, and stood at 62,630 yuan at 10:12 a.m. local time.
``Chinese investors are reluctant chasers of this rally,'' said Zeng Chao, chief metals analyst at Everbright Futures Co. ``Domestic stockpiles are declining and starting to get tight. However, this being the slow consumption season, it's not getting reflected in the prices.''
Among other LME-traded metals, aluminum was up 1 percent at $3,087 a ton, zinc added 2.3 percent to $1,915, lead gained 0.7 percent to $1,795, and tin rose 1.3 percent to $23,000. Nickel had not traded as of 10:40 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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June 26 (Bloomberg) -- Copper rose for the first time in four days in Asia as the dollar fell after the Federal Reserve gave no indication that it will increase interest rates, raising the investment appeal of raw materials.
The Fed kept its benchmark rate at 2 percent yesterday and said risks to growth have diminished in the world's largest economy. Copper rallied 26 percent this year as cuts to borrowing costs drove a decline in the dollar and prompted investors to buy commodities.
``The rebound, which we're seeing across the whole metals complex, mainly has to do with the dollar's move after last night's Fed statement,'' Liang Lijuan, analyst at Yide Futures Brokerage Co., said today.
Copper for delivery in three months rose as much as $110, or 1.3 percent, to $8,425 a metric ton on the London Metal Exchange, erasing most of the 1.4 percent decline in the past three days. The contract traded at $8,420 at 10:40 a.m. Singapore time.
``The market already priced expectations of a rate hike at the next meeting but it's less certain now so we're seeing some short-covering taking place,'' said Liang.
Copper for September delivery on the Shanghai Futures Exchange added as much as 410 yuan, or 0.7 percent, to 62,690 yuan ($9,134) a ton, and stood at 62,630 yuan at 10:12 a.m. local time.
``Chinese investors are reluctant chasers of this rally,'' said Zeng Chao, chief metals analyst at Everbright Futures Co. ``Domestic stockpiles are declining and starting to get tight. However, this being the slow consumption season, it's not getting reflected in the prices.''
Among other LME-traded metals, aluminum was up 1 percent at $3,087 a ton, zinc added 2.3 percent to $1,915, lead gained 0.7 percent to $1,795, and tin rose 1.3 percent to $23,000. Nickel had not traded as of 10:40 a.m. in Singapore.
To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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Crude Oil Falls for a Second Day as U.S. Fuel Demand Falters
By Christian Schmollinger
June 26 (Bloomberg) -- Crude oil fell for a second day in New York after a report yesterday showed U.S. fuel demand dropped to the lowest level since January 2007 as record prices limited purchases.
The upward price trend of oil could ease in the years ahead as U.S. gasoline use may have peaked in 2007, Daniel Yergin, chairman of Cambridge Energy Research Associates, told a congressional panel yesterday. Consumption for the week to June 20 has slipped 5 percent this year from its peak of 21.3 million barrels a day on Jan. 4, data from the Energy Department shows.
``With demand noticeably down that's a bit more of a story,'' said Gerard Burg, the energy economist at National Australia Bank Ltd. in Melbourne. ``Overall demand is declining.''
Crude oil for August delivery fell as much as 81 cents, or 0.6 percent, to $133.74 a barrel in after-hours electronic trade on the New York Mercantile Exchange. It was at $133.81 a barrel at 2:43 p.m. Singapore time. Yesterday, futures dropped $2.45, or 1.8 percent, to settle at $134.55 a barrel. Oil touched a record $139.89 on June 16.
Brent crude oil for August settlement declined as much as 76 cents, or 0.6 percent, to $133.57 a barrel on London's ICE Futures Europe exchange. It was at $133.71 a barrel at 2:43 p.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
The average retail unleaded gasoline price in the U.S. has climbed 33 percent this year, reaching a record $4.08 a gallon on June 15.
Gasoline
Gasoline consumption has averaged 9.28 million barrels a day for the past four weeks, down 2.1 percent from last year, the department said yesterday. Motor-fuel purchases fell 2.7 percent last week in the ninth consecutive decline, MasterCard Inc. said in a June 25 report.
``The Energy Department numbers have been lagging some of the other indicators of fuel demand for the past few months such as the MasterCard announcements,'' said National Australia's Burg. ``So this potentially just brings them in line.''
Gasoline for July delivery rose 1.09 cents, or 0.3 percent, to $3.4050 a gallon in New York. Yesterday, it fell 6.94 cents, or 2 percent, to settle at $3.3941 a gallon. Futures reached a record $3.5762 a gallon on June 16.
Brent crude oil for August settlement was at $133.91 a barrel, down 42 cents, on London's ICE Futures Europe exchange at 12:19 p.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
Nigerian Strike
A strike by Nigerian white-collar oil workers against Chevron Corp.'s local unit entered a third day, a union official said. Production remained unaffected.
The union and management will hold talks with Petroleum Minister H. Odein Ajumogobia tomorrow and with Abubakar Yar'Adua, head of the state-owned oil company, on June 27.
The strike will continue through the talks ``as long as we are not getting what we want,'' Jonathan Omare, secretary of the Chevron branch of the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said by telephone.
``It's possible the strike may linger but it's more an accumulation of news in Nigeria,'' Burg said. ``With the number of other outages there, it's just one more concern.''
Crude oil also fell as U.S. crude oil inventories unexpectedly increased for the first time in six weeks.
Crude stockpiles gained 803,000 barrels to 301.8 million last week, the Energy Department said. A 1.1 million-barrel drop was forecast by analysts in a Bloomberg News survey.
Fuel Inventories
Gasoline stockpiles fell 153,000 barrels to 208.8 million barrels, the department said. Analysts surveyed before the report were split over whether supplies would rise or fall.
Distillate-fuel inventories rose 2.82 million barrels to 119.4 million barrels in the week ended June 20, the seventh- straight increase, the report showed. A 2 million-barrel gain was forecast. Stockpiles last week were 1.1 percent higher than the five-year average, the department said.
Demand for distillate fuel, a category that includes heating oil and diesel, averaged 4.06 million barrels a day, down by 1.1 percent from a year earlier.
Oil was unchanged earlier yesterday after the Federal Reserve left its benchmark interest rate at 2 percent, ending the most aggressive series of rate cuts in two decades, as record energy prices threaten to increase inflation.
Futures have almost doubled over the past year as investors looking to hedge against the dollar's drop have purchased commodities, helping push oil, gold and corn to records. Rising Asian fuel consumption and falling output in the North Sea, Russia and Mexico have contributed to the rally.
``This might have impacted more of the other commodities such as gold,'' said Burg. ``It was the most likely outcome and was probably factored into the market already.''
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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June 26 (Bloomberg) -- Crude oil fell for a second day in New York after a report yesterday showed U.S. fuel demand dropped to the lowest level since January 2007 as record prices limited purchases.
The upward price trend of oil could ease in the years ahead as U.S. gasoline use may have peaked in 2007, Daniel Yergin, chairman of Cambridge Energy Research Associates, told a congressional panel yesterday. Consumption for the week to June 20 has slipped 5 percent this year from its peak of 21.3 million barrels a day on Jan. 4, data from the Energy Department shows.
``With demand noticeably down that's a bit more of a story,'' said Gerard Burg, the energy economist at National Australia Bank Ltd. in Melbourne. ``Overall demand is declining.''
Crude oil for August delivery fell as much as 81 cents, or 0.6 percent, to $133.74 a barrel in after-hours electronic trade on the New York Mercantile Exchange. It was at $133.81 a barrel at 2:43 p.m. Singapore time. Yesterday, futures dropped $2.45, or 1.8 percent, to settle at $134.55 a barrel. Oil touched a record $139.89 on June 16.
Brent crude oil for August settlement declined as much as 76 cents, or 0.6 percent, to $133.57 a barrel on London's ICE Futures Europe exchange. It was at $133.71 a barrel at 2:43 p.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
The average retail unleaded gasoline price in the U.S. has climbed 33 percent this year, reaching a record $4.08 a gallon on June 15.
Gasoline
Gasoline consumption has averaged 9.28 million barrels a day for the past four weeks, down 2.1 percent from last year, the department said yesterday. Motor-fuel purchases fell 2.7 percent last week in the ninth consecutive decline, MasterCard Inc. said in a June 25 report.
``The Energy Department numbers have been lagging some of the other indicators of fuel demand for the past few months such as the MasterCard announcements,'' said National Australia's Burg. ``So this potentially just brings them in line.''
Gasoline for July delivery rose 1.09 cents, or 0.3 percent, to $3.4050 a gallon in New York. Yesterday, it fell 6.94 cents, or 2 percent, to settle at $3.3941 a gallon. Futures reached a record $3.5762 a gallon on June 16.
Brent crude oil for August settlement was at $133.91 a barrel, down 42 cents, on London's ICE Futures Europe exchange at 12:19 p.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
Nigerian Strike
A strike by Nigerian white-collar oil workers against Chevron Corp.'s local unit entered a third day, a union official said. Production remained unaffected.
The union and management will hold talks with Petroleum Minister H. Odein Ajumogobia tomorrow and with Abubakar Yar'Adua, head of the state-owned oil company, on June 27.
The strike will continue through the talks ``as long as we are not getting what we want,'' Jonathan Omare, secretary of the Chevron branch of the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said by telephone.
``It's possible the strike may linger but it's more an accumulation of news in Nigeria,'' Burg said. ``With the number of other outages there, it's just one more concern.''
Crude oil also fell as U.S. crude oil inventories unexpectedly increased for the first time in six weeks.
Crude stockpiles gained 803,000 barrels to 301.8 million last week, the Energy Department said. A 1.1 million-barrel drop was forecast by analysts in a Bloomberg News survey.
Fuel Inventories
Gasoline stockpiles fell 153,000 barrels to 208.8 million barrels, the department said. Analysts surveyed before the report were split over whether supplies would rise or fall.
Distillate-fuel inventories rose 2.82 million barrels to 119.4 million barrels in the week ended June 20, the seventh- straight increase, the report showed. A 2 million-barrel gain was forecast. Stockpiles last week were 1.1 percent higher than the five-year average, the department said.
Demand for distillate fuel, a category that includes heating oil and diesel, averaged 4.06 million barrels a day, down by 1.1 percent from a year earlier.
Oil was unchanged earlier yesterday after the Federal Reserve left its benchmark interest rate at 2 percent, ending the most aggressive series of rate cuts in two decades, as record energy prices threaten to increase inflation.
Futures have almost doubled over the past year as investors looking to hedge against the dollar's drop have purchased commodities, helping push oil, gold and corn to records. Rising Asian fuel consumption and falling output in the North Sea, Russia and Mexico have contributed to the rally.
``This might have impacted more of the other commodities such as gold,'' said Burg. ``It was the most likely outcome and was probably factored into the market already.''
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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Asian Currencies Gain; Fed Growth Outlook May Spur Local Demand
By Aaron Pan and Clarissa Batino
June 26 (Bloomberg) -- Asian currencies gained, led by the Philippine peso, on speculation investors will buy the region's assets after the Federal Reserve said risks to growth in the world's biggest economy have diminished.
The peso, the region's worst performer this quarter, climbed after the main stock index advanced for a second day. Bangko Sentral ng Pilipinas Governor Amando Tetangco today said ``the Fed's emphasis on inflation could be positive for emerging-market economies.'' Eight of the 10 most-traded Asian currencies outside of Japan strengthened today.
The Fed is ``improving the sentiment of investors'' and buoying the peso, said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.
The currency appreciated to 44.455 a dollar as of 11:56 a.m. in Manila, according to Tullett Prebon Plc. It closed at 44.59 yesterday, according to Bankers Association of the Philippines. Today's gain is ``just a knee-jerk reaction'' and the peso may weaken to 45.85 next quarter, the East West treasurer said.
The Fed kept its benchmark rate at 2 percent yesterday. ``That gives the Philippine central bank the flexibility not to be aggressive in hiking interest rates,'' Cebrero said.
Elsewhere, the Singapore dollar gained 0.2 percent to S$1.3646, Malaysia's ringgit added 0.2 percent to 3.2561 and Thailand's baht rose 0.1 percent to 33.57.
Bank Indonesia
Indonesia's rupiah climbed to the strongest level in almost seven weeks on speculation overseas investors will buy the nation's bonds as the yield advantage over the U.S. widens.
The currency gained 1.8 percent this year as Bank Indonesia raised its benchmark interest rate to a one-year high this month after inflation accelerated to the fastest pace in 20 months in May. The central bank will next meet to decide interest rates on July 3.
``With the Fed holding the rate and if BI will raise the rate, that's good for rupiah assets,'' said Rio Lanasier, a currency trader at Bank DBS Indonesia in Jakarta. ``Mostly foreign banks sold dollars for the rupiah to get into bonds.''
The currency rose as high as 9,225, the highest level since May 9, before trading at 9,228 per dollar, compared with 9,263 late yesterday, according to data compiled by Bloomberg. The rupiah may strengthen to 9,220 between now and the end of next week, Lanasier forecast.
Rate Increase
The central bank may raise its reference rate for bill sales next week by 25 basis points to 8.75 percent, Lanasier said, pushing Indonesia's benchmark to 6.75 percentage points above the Fed's, the widest gap since 2006.
Indonesia's inflation may have quickened to 12.7 percent in June from a year earlier, compared with 10.4 percent in May, according to the median estimate of 12 economists in a Bloomberg News survey before a government report on July 1.
South Korea's won rallied on speculation the nation's foreign-exchange authorities will buy the currency to temper inflation at the fastest in seven years.
The won pared its fourth straight monthly decline after Choi Jong Ku, head of the finance ministry's international finance bureau, said this week the government will take ``continuous'' steps to stabilize the won. The local currency gained the most in three months on June 17 after Choi said the same day that the government will take ``solid'' measures to temper inflation.
`Cautious' Mood
``The mood is cautious that the authorities may step in to curb the won's loss as the dollar nears the pre-intervention level of 1,040,'' said Kim Hee, a currency dealer at state-run Korea Development Bank in Seoul. Still, ``the upward pressure for the dollar remains as importers buy dollars to pay bills.''
The won climbed 0.3 percent to 1,034.5 a dollar, according to Seoul Money Brokerage Services Ltd. The currency has fallen 4.2 percent this quarter taking its loss this year to 9.5 percent, the second-worst performance in the region.
The won also gained as overseas investors bought more local shares than they sold, ending 13 days of net sales. Fund managers outside the nation bought a net 29 billion won ($28 million) of shares today, according to Korea Exchange.
Central banks intervene in currency markets by buying or selling foreign exchange. A stronger currency helps limit inflation by reducing the cost of imports.
Taiwan's dollar was little changed at NT$30.378, while the Vietnamese dong held at 16,615.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
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June 26 (Bloomberg) -- Asian currencies gained, led by the Philippine peso, on speculation investors will buy the region's assets after the Federal Reserve said risks to growth in the world's biggest economy have diminished.
The peso, the region's worst performer this quarter, climbed after the main stock index advanced for a second day. Bangko Sentral ng Pilipinas Governor Amando Tetangco today said ``the Fed's emphasis on inflation could be positive for emerging-market economies.'' Eight of the 10 most-traded Asian currencies outside of Japan strengthened today.
The Fed is ``improving the sentiment of investors'' and buoying the peso, said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.
The currency appreciated to 44.455 a dollar as of 11:56 a.m. in Manila, according to Tullett Prebon Plc. It closed at 44.59 yesterday, according to Bankers Association of the Philippines. Today's gain is ``just a knee-jerk reaction'' and the peso may weaken to 45.85 next quarter, the East West treasurer said.
The Fed kept its benchmark rate at 2 percent yesterday. ``That gives the Philippine central bank the flexibility not to be aggressive in hiking interest rates,'' Cebrero said.
Elsewhere, the Singapore dollar gained 0.2 percent to S$1.3646, Malaysia's ringgit added 0.2 percent to 3.2561 and Thailand's baht rose 0.1 percent to 33.57.
Bank Indonesia
Indonesia's rupiah climbed to the strongest level in almost seven weeks on speculation overseas investors will buy the nation's bonds as the yield advantage over the U.S. widens.
The currency gained 1.8 percent this year as Bank Indonesia raised its benchmark interest rate to a one-year high this month after inflation accelerated to the fastest pace in 20 months in May. The central bank will next meet to decide interest rates on July 3.
``With the Fed holding the rate and if BI will raise the rate, that's good for rupiah assets,'' said Rio Lanasier, a currency trader at Bank DBS Indonesia in Jakarta. ``Mostly foreign banks sold dollars for the rupiah to get into bonds.''
The currency rose as high as 9,225, the highest level since May 9, before trading at 9,228 per dollar, compared with 9,263 late yesterday, according to data compiled by Bloomberg. The rupiah may strengthen to 9,220 between now and the end of next week, Lanasier forecast.
Rate Increase
The central bank may raise its reference rate for bill sales next week by 25 basis points to 8.75 percent, Lanasier said, pushing Indonesia's benchmark to 6.75 percentage points above the Fed's, the widest gap since 2006.
Indonesia's inflation may have quickened to 12.7 percent in June from a year earlier, compared with 10.4 percent in May, according to the median estimate of 12 economists in a Bloomberg News survey before a government report on July 1.
South Korea's won rallied on speculation the nation's foreign-exchange authorities will buy the currency to temper inflation at the fastest in seven years.
The won pared its fourth straight monthly decline after Choi Jong Ku, head of the finance ministry's international finance bureau, said this week the government will take ``continuous'' steps to stabilize the won. The local currency gained the most in three months on June 17 after Choi said the same day that the government will take ``solid'' measures to temper inflation.
`Cautious' Mood
``The mood is cautious that the authorities may step in to curb the won's loss as the dollar nears the pre-intervention level of 1,040,'' said Kim Hee, a currency dealer at state-run Korea Development Bank in Seoul. Still, ``the upward pressure for the dollar remains as importers buy dollars to pay bills.''
The won climbed 0.3 percent to 1,034.5 a dollar, according to Seoul Money Brokerage Services Ltd. The currency has fallen 4.2 percent this quarter taking its loss this year to 9.5 percent, the second-worst performance in the region.
The won also gained as overseas investors bought more local shares than they sold, ending 13 days of net sales. Fund managers outside the nation bought a net 29 billion won ($28 million) of shares today, according to Korea Exchange.
Central banks intervene in currency markets by buying or selling foreign exchange. A stronger currency helps limit inflation by reducing the cost of imports.
Taiwan's dollar was little changed at NT$30.378, while the Vietnamese dong held at 16,615.
To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.
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S.Korea to pave way for Internet-based banks
SEOUL, June 26 (Reuters) - South Korea is considering allowing the introduction of Internet-based banks to encourage competition and product diversity in the banking industry, a regulator said on Thursday.
The Financial Services Commission (FSC) said in a statement that technology development and growing access to the Internet had raised interest in the establishment of Web-based banks for cost savings and service differentiation.
An online bank, which the FSC calls an Internet primary bank, has no or very few operating offices and handles most of its business via the Internet or electronic means such as automated teller machines.
"We are studying the adoption of small specialised banks, in particular Internet primary banks, for consumers' convenience," the statement said.
South Korea is the world's most wired country, with a majority of households having access to broadband Internet.
Conglomerates and small start-ups tried to jointly set up Web-based banks in South Korea between 2001 and 2002, but cancelled the plans because of a lack of legislation supporting the business model.
The regulatory agency said it would work on details such as defining the extent of Internet banking businesses, cutting the amount of initial capital needed to set up Internet banks and how to help them secure customers.
Possible amendments to the law to support the plan would be submitted within this year, it added.
The FSC also is trying to loosen rules on the consumer finance sector, excluding credit card sales, by lowering entry barriers and allowing firms to raise their portion of lending to above half of total operations, while tightening monitoring.
The deregulation steps were one of the key campaign pledges by President Lee Myung-bak, in office for four months, to boost the financial sector and promote the country as a regional financial centre.
Lee also has pledged to speed up the privatisation of state-run banks and institutions, including Korea Development Bank and Woori Finance Holdings (053000.KS: Quote, Profile, Research, Stock Buzz).
(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner)
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The Financial Services Commission (FSC) said in a statement that technology development and growing access to the Internet had raised interest in the establishment of Web-based banks for cost savings and service differentiation.
An online bank, which the FSC calls an Internet primary bank, has no or very few operating offices and handles most of its business via the Internet or electronic means such as automated teller machines.
"We are studying the adoption of small specialised banks, in particular Internet primary banks, for consumers' convenience," the statement said.
South Korea is the world's most wired country, with a majority of households having access to broadband Internet.
Conglomerates and small start-ups tried to jointly set up Web-based banks in South Korea between 2001 and 2002, but cancelled the plans because of a lack of legislation supporting the business model.
The regulatory agency said it would work on details such as defining the extent of Internet banking businesses, cutting the amount of initial capital needed to set up Internet banks and how to help them secure customers.
Possible amendments to the law to support the plan would be submitted within this year, it added.
The FSC also is trying to loosen rules on the consumer finance sector, excluding credit card sales, by lowering entry barriers and allowing firms to raise their portion of lending to above half of total operations, while tightening monitoring.
The deregulation steps were one of the key campaign pledges by President Lee Myung-bak, in office for four months, to boost the financial sector and promote the country as a regional financial centre.
Lee also has pledged to speed up the privatisation of state-run banks and institutions, including Korea Development Bank and Woori Finance Holdings (053000.KS: Quote, Profile, Research, Stock Buzz).
(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner)
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South Korean Won Gains as Authorities May Intervene; Bonds Rise
By Kim Kyoungwha
June 26 (Bloomberg) -- South Korea's won rose on speculation the nation's foreign-exchange authorities will buy the currency to temper inflation at the fastest in seven years. Government bonds gained.
The won pared its fourth straight monthly decline after Choi Jong Ku, head of the finance ministry's international finance bureau, said this week the government will take ``continuous'' steps to stabilize the won. The local currency gained the most in three months on June 17 after Choi said that day the nation's authorities will take ``solid'' measures to temper inflation.
``The mood is cautious that the authorities may step in to curb the won's loss as the dollar nears the pre-intervention level of 1,040,'' said Kim Hee, a currency dealer at state-run Korea Development Bank in Seoul. Still, ``the upward pressure for the dollar remains as importers buy dollars to pay bills.''
The won climbed 0.4 percent to 1,034.10 per dollar as of 10:55 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency has fallen 4.2 percent this quarter taking its loss this year to 9.5 percent, the second worst performer of the 10 most-active currencies in Asia outside Japan.
The won also gained as overseas investors bought more local shares than they sold, ending 13 days of net sales. Fund managers outside the nation bought a net 29 billion won ($28 million) of shares today, according to Korea Exchange.
Central banks intervene in currency markets by buying or selling foreign exchange. A stronger currency helps limit inflation by reducing the cost of imports.
Five-year government bonds rose for a second day on optimism yields near the highest since January will lure buyers.
The yield on the 5.25 percent note due March 2013 fell 4 basis points to 5.87 percent, according to Korea Exchange. The price rose 0.18, or 18 won per 10,000 won face amount, to 99.02. A basis point is 0.01 percentage point.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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June 26 (Bloomberg) -- South Korea's won rose on speculation the nation's foreign-exchange authorities will buy the currency to temper inflation at the fastest in seven years. Government bonds gained.
The won pared its fourth straight monthly decline after Choi Jong Ku, head of the finance ministry's international finance bureau, said this week the government will take ``continuous'' steps to stabilize the won. The local currency gained the most in three months on June 17 after Choi said that day the nation's authorities will take ``solid'' measures to temper inflation.
``The mood is cautious that the authorities may step in to curb the won's loss as the dollar nears the pre-intervention level of 1,040,'' said Kim Hee, a currency dealer at state-run Korea Development Bank in Seoul. Still, ``the upward pressure for the dollar remains as importers buy dollars to pay bills.''
The won climbed 0.4 percent to 1,034.10 per dollar as of 10:55 a.m. local time, according to Seoul Money Brokerage Services Ltd. The currency has fallen 4.2 percent this quarter taking its loss this year to 9.5 percent, the second worst performer of the 10 most-active currencies in Asia outside Japan.
The won also gained as overseas investors bought more local shares than they sold, ending 13 days of net sales. Fund managers outside the nation bought a net 29 billion won ($28 million) of shares today, according to Korea Exchange.
Central banks intervene in currency markets by buying or selling foreign exchange. A stronger currency helps limit inflation by reducing the cost of imports.
Five-year government bonds rose for a second day on optimism yields near the highest since January will lure buyers.
The yield on the 5.25 percent note due March 2013 fell 4 basis points to 5.87 percent, according to Korea Exchange. The price rose 0.18, or 18 won per 10,000 won face amount, to 99.02. A basis point is 0.01 percentage point.
To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.
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Philippine Peso Advances as Fed's Growth Outlook Boosts Stocks
By Clarissa Batino
June 26 (Bloomberg) -- The Philippine peso gained on speculation investors will buy the nation's stocks after the Federal Reserve said risks to U.S. growth have diminished and inflation will moderate later this year.
The peso, the region's worst performer this quarter, climbed after the main stock index advanced for a second day. Bangko Sentral ng Pilipinas Governor Amando Tetangco today said ``the Fed's emphasis on inflation could be positive for emerging-market economies.''
Although the Fed flagged inflation risks, ``it also said that it would moderate and that risks to growth have diminished, improving the sentiment of investors'' and buoying the local currency, said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.
The currency rose to 44.475 per dollar as of 9:50 a.m. in Manila, according to Tullett Prebon Plc. It closed at 44.59 yesterday, according to Bankers Association of the Philippines. Today's gain is ``just a knee-jerk reaction'' and the peso may weaken to 45.85 next quarter, the East West treasurer said.
The Fed kept its benchmark rate at 2 percent yesterday. ``That gives the Philippine central bank the flexibility not to be aggressive in hiking interest rates,'' Cebrero said.
To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net.
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June 26 (Bloomberg) -- The Philippine peso gained on speculation investors will buy the nation's stocks after the Federal Reserve said risks to U.S. growth have diminished and inflation will moderate later this year.
The peso, the region's worst performer this quarter, climbed after the main stock index advanced for a second day. Bangko Sentral ng Pilipinas Governor Amando Tetangco today said ``the Fed's emphasis on inflation could be positive for emerging-market economies.''
Although the Fed flagged inflation risks, ``it also said that it would moderate and that risks to growth have diminished, improving the sentiment of investors'' and buoying the local currency, said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.
The currency rose to 44.475 per dollar as of 9:50 a.m. in Manila, according to Tullett Prebon Plc. It closed at 44.59 yesterday, according to Bankers Association of the Philippines. Today's gain is ``just a knee-jerk reaction'' and the peso may weaken to 45.85 next quarter, the East West treasurer said.
The Fed kept its benchmark rate at 2 percent yesterday. ``That gives the Philippine central bank the flexibility not to be aggressive in hiking interest rates,'' Cebrero said.
To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net.
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Indonesia's Rupiah Rises to Highest in Seven Weeks on Yield
By Lilian Karunungan
June 26 (Bloomberg) -- Indonesia's rupiah rose to the strongest level in almost seven weeks on speculation overseas investors will buy the nation's bonds as the yield advantage over the U.S. widens.
The currency gained 1.8 percent this year as Bank Indonesia raised its benchmark interest rate to a one-year high this month after inflation accelerated to the fastest pace in 20 months in May. The central bank will next meet to decide interest rates on July 3. The U.S. Federal Reserve kept its target rate at 2 percent yesterday.
``With the Fed holding the rate and if BI will raise the rate, that's good for rupiah assets,'' said Rio Lanasier, a currency trader at Bank DBS Indonesia in Jakarta. ``Mostly foreign banks sold dollars to get rupiah to get into bonds.''
The currency rose as high as 9,225, the highest level since May 9, before trading at 9,229 per dollar as of 9:14 a.m. in Jakarta, compared with 9,263 late yesterday, according to data compiled by Bloomberg. The rupiah may strengthen to 9,220 between now and the end of next week, Lanasier forecast.
The central bank may raise its reference rate for bill sales next week by 25 basis points to 8.75 percent, Lanasier said, pushing Indonesia's benchmark to 6.75 percentage points more than the Fed's, the widest gap since 2006.
Inflation may have quickened to 12.7 percent in June from a year earlier, compared with 10.4 percent in May, according to the median estimate of 12 economists in a Bloomberg News survey before a government report on July 1.
To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.
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June 26 (Bloomberg) -- Indonesia's rupiah rose to the strongest level in almost seven weeks on speculation overseas investors will buy the nation's bonds as the yield advantage over the U.S. widens.
The currency gained 1.8 percent this year as Bank Indonesia raised its benchmark interest rate to a one-year high this month after inflation accelerated to the fastest pace in 20 months in May. The central bank will next meet to decide interest rates on July 3. The U.S. Federal Reserve kept its target rate at 2 percent yesterday.
``With the Fed holding the rate and if BI will raise the rate, that's good for rupiah assets,'' said Rio Lanasier, a currency trader at Bank DBS Indonesia in Jakarta. ``Mostly foreign banks sold dollars to get rupiah to get into bonds.''
The currency rose as high as 9,225, the highest level since May 9, before trading at 9,229 per dollar as of 9:14 a.m. in Jakarta, compared with 9,263 late yesterday, according to data compiled by Bloomberg. The rupiah may strengthen to 9,220 between now and the end of next week, Lanasier forecast.
The central bank may raise its reference rate for bill sales next week by 25 basis points to 8.75 percent, Lanasier said, pushing Indonesia's benchmark to 6.75 percentage points more than the Fed's, the widest gap since 2006.
Inflation may have quickened to 12.7 percent in June from a year earlier, compared with 10.4 percent in May, according to the median estimate of 12 economists in a Bloomberg News survey before a government report on July 1.
To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.
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Euro May Stall at $1.5726 on Charts, Societe Generale Says
By Kosuke Goto
June 26 (Bloomberg) -- The euro's advance may stall at $1.5726 against the dollar, said Yuji Saito, head of foreign- exchange sales at Societe Generale SA, citing charts traders use to predict price movements.
The so-called resistance level of $1.5726 represents the upper side of a Bollinger band with a 21-day moving average, said Tokyo-based Saito. Resistance is a level where sellers are expected to outweigh buyers.
``The markets will be well conscious of that technical level as resistance,'' said Saito at France's second-largest bank by market value.
Europe's single currency traded at $1.5668 against the dollar as of 10:34 a.m. in Tokyo from $1.5666 in New York yesterday, when it rose to $1.5686, the highest level since June 9. The euro has gained more than 1 percent in the past week.
Bollinger bands are two standard deviations above and below the average price of a currency or security over the past 20 or 21 days. A standard deviation on a Bollinger band chart measures how tightly prices are clustered around the mean.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
To contact the reporter for this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net.
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June 26 (Bloomberg) -- The euro's advance may stall at $1.5726 against the dollar, said Yuji Saito, head of foreign- exchange sales at Societe Generale SA, citing charts traders use to predict price movements.
The so-called resistance level of $1.5726 represents the upper side of a Bollinger band with a 21-day moving average, said Tokyo-based Saito. Resistance is a level where sellers are expected to outweigh buyers.
``The markets will be well conscious of that technical level as resistance,'' said Saito at France's second-largest bank by market value.
Europe's single currency traded at $1.5668 against the dollar as of 10:34 a.m. in Tokyo from $1.5666 in New York yesterday, when it rose to $1.5686, the highest level since June 9. The euro has gained more than 1 percent in the past week.
Bollinger bands are two standard deviations above and below the average price of a currency or security over the past 20 or 21 days. A standard deviation on a Bollinger band chart measures how tightly prices are clustered around the mean.
In technical analysis, investors and analysts study charts of trading patterns and prices to forecast price changes in a security, commodity, currency or index.
To contact the reporter for this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net.
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Australian, N.Z. Dollars Rise on Reduced Bets for Fed Rate Gain
By Ron Harui and Tracy Withers
June 26 (Bloomberg) -- The Australian and New Zealand dollars climbed after the U.S. Federal Reserve gave no indication when it will begin raising interest rates after leaving them unchanged yesterday.
``The Fed has moved to neutral and maybe wasn't as aggressive as some had expected,'' said Alex Sinton, senior currency trader at ANZ National Bank Ltd. in Auckland. ``The Australian dollar has moved higher and dragged the kiwi with it,'' he said, calling New Zealand's currency by its nickname.
Australia's dollar rose to 96.02 U.S. cents, the highest since June 10, before trading at 95.92 U.S. cents at 12:42 p.m. in Sydney from 95.53 cents late in Asia yesterday. It has gained 5.1 percent this quarter and 9.6 percent this year.
New Zealand's dollar climbed to 75.74 U.S. cents from 75.60 cents late in Asia yesterday. It earlier reached 76.03 cents, the strongest since June 23. It has fallen 3.6 percent this quarter and 1.1 percent this year.
Fed Rate Bets
The Australian currency gained for a third day after Fed policy makers kept borrowing costs at 2 percent and said that ``uncertainty'' about the inflation outlook remains high. While economists were unanimous that the Fed would leave rates unchanged, some traders were expecting policy makers to signal that rates may need to rise.
Futures contracts on the Chicago Board of Trade show a 66 percent chance the Fed will hold the target rate for overnight lending between banks unchanged at the September meeting, compared with 10 percent odds the previous day. There's a 94 percent probability the Fed will keep rates on hold at its August meeting.
Benchmark interest rates are 7.25 percent in Australia and 8.25 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, making the Australian and New Zealand currencies favorites for the so-called carry trade.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.
`Through to Parity'
``We've got cash rates at 7.25 percent, so the currency really is one of the highest-yielding currencies around the globe,'' said Martin Lakos, division director at Macquarie Private Wealth in Sydney, in a Bloomberg Television interview. ``It is possible that it'll move through to parity,'' he said referring to the Australian dollar against the U.S. dollar.
Australia's dollar climbed as high as 103.65 yen, the most since Nov. 9, from 103.13 yen late in Asia yesterday. The currency has gained 13.8 percent this quarter and 5.9 percent this year against the yen. New Zealand's dollar rose to 81.77 yen from 81.60 yen. It has appreciated 4.4 percent this quarter, limiting its drop this year to 4.5 percent.
New Zealand's dollar pared today's advance after a government report showed the nation's current-account deficit narrowed less than economists expected in the first quarter as payments to foreign investors accelerated.
The gap shrank to NZ$13.79 billion ($10.5 billion) in the 12 months ended March 31 from NZ$13.84 billion in the year through December, Statistics New Zealand said in Wellington today. The median estimate of 12 economists surveyed by Bloomberg News was for a NZ$13.32 billion shortfall.
`Midst of Recession'
``There is a risk, with the economy in the midst of a recession, that investors could lose confidence in New Zealand's ability to meet its obligations, which is a big negative for the currency,'' said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney.
A separate government report tomorrow may show New Zealand's economy contracted 0.3 percent in the first three months of the year, according to the median forecast of 13 economists surveyed by Bloomberg News. Seven of the economists said the economy may also shrink in the second quarter, pushing New Zealand into its first recession since 1998.
Australian 10-year government bonds declined. The yield on the 10-year note rose 3 basis points, or 0.03 percentage point, to 6.51 percent, according to data compiled by Bloomberg. The price of the 5.25 percent bond maturing in March 2019 fell 0.2, or A$2.00 per A$1,000 face amount, to 90.383.
New Zealand government debt were little changed. The yield on the 10-year note was unchanged from yesterday at 6.42 percent and the three-year yield held at 6.48 percent. Bond yields move inversely to prices.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.
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Yen Falls to Record Low Against Euro on Lure of Higher Yield
By Stanley White and Kosuke Goto
June 26 (Bloomberg) -- The yen fell to a record low against the euro on speculation Japanese investors will use summer bonuses to buy overseas assets offering higher yields.
Japan's currency declined for a third day versus the 15- nation euro as traders forecast the European Central Bank will raise interest rates next month as the Bank of Japan keeps its benchmark rate on hold. The dollar was near the lowest in more than two weeks against the euro after the Federal Reserve gave no indication it will increase borrowing costs following yesterday's decision to keep rates at 2 percent.
``Investor outflows could weigh on the yen,'' said Katsunori Kitakura, chief treasury dealer in Tokyo at Chuo Mitsui Trust & Banking Co., Japan's seventh-largest publicly listed lender. ``With no clear guidance from the Fed, that puts the spotlight on the euro. There's no sign of a rate hike in Japan, leaving the yen at a great disadvantage.''
The yen fell to 169.27 per euro, the weakest since the currency's debut in 1999, and traded at 169.21 as of 11:45 a.m. in Tokyo from 168.90 yesterday. Japan's currency stood at 107.98 versus the dollar from 107.80. The U.S. currency traded at $1.5670 per euro after dropping yesterday to $1.5686, the lowest level since June 9. The yen may decline to 170 per euro next week, Kitakura forecast.
Against the Australian dollar, the yen declined to a seven- month low of 103.63 from 103.48 late yesterday in New York. It fell to 213.21 per British pound from 212.93.
Yield Spread
Employees at private companies may get summer bonuses totaling 14.8 trillion yen ($137 billion) in 2008, down 1.8 percent from a year earlier, according to Kazuyoshi Nakata, an economist in Tokyo at Mitsubishi UFJ Research and Consulting Co., a unit of Japan's largest publicly traded lender by assets.
The yield spread on two-year German government debt over similar maturity Japanese government notes widened to 3.72 percentage points from 3.37 percentage points a month ago.
ECB President Jean-Claude Trichet told the European Parliament in Brussels yesterday that he's leaving open the option of raising interest rates again to contain accelerating inflation.
``The ECB will raise rates in July for sure,'' said Takahide Nagasaki, senior currency strategist in Tokyo at Daiwa Securities SMBC Co., a unit of Japan's second-largest brokerage. ``In Japan, it's still hard to do so. The widening interest-rate gap will push down the yen against the euro to 170.''
Traders raised wagers the ECB will increase borrowing costs. The implied yield on the December Euribor futures contract climbed to 5.27 percent from 5 percent at the end of May.
BOJ Rates
Investors reduced bets the BOJ will raise borrowing costs this year. The odds of a Bank of Japan rate increase fell to 37 percent from 92 percent on June 11, interest-rate swaps show.
The dollar was also near a two-week low versus the Swiss franc as traders reduced bets the U.S. central bank will raise its target lending rate by a quarter-percentage point in September. Policy makers said yesterday in the statement announcing the decision to hold the fed funds target at 2 percent that ``uncertainty'' about the inflation outlook remains high.
``The trend is to sell the dollar,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``As worried as the Fed is about inflation, weakness in many parts of the economy means it won't be able to raise rates as soon as it might like.''
The U.S. currency may fall to $1.57 per euro and 107.30 yen today, he forecast.
Fed Futures
Futures on the Chicago Board of Trade show a 66 percent chance the central bank will leave its target rate for overnight lending between banks unchanged at its September meeting, compared with 10 percent odds yesterday. There's a 94 percent chance the Fed will keep rates on hold at the next meeting in August, the contracts show.
Fed Chairman Ben S. Bernanke and his colleagues refreshed their forecasts at their two-day meeting, reporting that the economy keeps expanding. At the same time, crude oil prices have almost doubled in the past year and the cost of commodities from wheat to tin jumped to unprecedented levels.
The Fed's preferred gauge of inflation, which excludes food and fuel costs, was unchanged at 2.1 percent last month, according to the median forecast of 26 economists surveyed by Bloomberg News. The Commerce Department will deliver its report tomorrow. Policy makers including Bernanke have said they prefer core inflation to be below 2 percent.
The U.S. currency has dropped 12 percent against the euro since Sept. 18, when the Fed made the first of seven reductions in the target lending rate. The dollar touched $1.6019 per euro on April 22, the weakest level on record.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net.
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June 26 (Bloomberg) -- The yen fell to a record low against the euro on speculation Japanese investors will use summer bonuses to buy overseas assets offering higher yields.
Japan's currency declined for a third day versus the 15- nation euro as traders forecast the European Central Bank will raise interest rates next month as the Bank of Japan keeps its benchmark rate on hold. The dollar was near the lowest in more than two weeks against the euro after the Federal Reserve gave no indication it will increase borrowing costs following yesterday's decision to keep rates at 2 percent.
``Investor outflows could weigh on the yen,'' said Katsunori Kitakura, chief treasury dealer in Tokyo at Chuo Mitsui Trust & Banking Co., Japan's seventh-largest publicly listed lender. ``With no clear guidance from the Fed, that puts the spotlight on the euro. There's no sign of a rate hike in Japan, leaving the yen at a great disadvantage.''
The yen fell to 169.27 per euro, the weakest since the currency's debut in 1999, and traded at 169.21 as of 11:45 a.m. in Tokyo from 168.90 yesterday. Japan's currency stood at 107.98 versus the dollar from 107.80. The U.S. currency traded at $1.5670 per euro after dropping yesterday to $1.5686, the lowest level since June 9. The yen may decline to 170 per euro next week, Kitakura forecast.
Against the Australian dollar, the yen declined to a seven- month low of 103.63 from 103.48 late yesterday in New York. It fell to 213.21 per British pound from 212.93.
Yield Spread
Employees at private companies may get summer bonuses totaling 14.8 trillion yen ($137 billion) in 2008, down 1.8 percent from a year earlier, according to Kazuyoshi Nakata, an economist in Tokyo at Mitsubishi UFJ Research and Consulting Co., a unit of Japan's largest publicly traded lender by assets.
The yield spread on two-year German government debt over similar maturity Japanese government notes widened to 3.72 percentage points from 3.37 percentage points a month ago.
ECB President Jean-Claude Trichet told the European Parliament in Brussels yesterday that he's leaving open the option of raising interest rates again to contain accelerating inflation.
``The ECB will raise rates in July for sure,'' said Takahide Nagasaki, senior currency strategist in Tokyo at Daiwa Securities SMBC Co., a unit of Japan's second-largest brokerage. ``In Japan, it's still hard to do so. The widening interest-rate gap will push down the yen against the euro to 170.''
Traders raised wagers the ECB will increase borrowing costs. The implied yield on the December Euribor futures contract climbed to 5.27 percent from 5 percent at the end of May.
BOJ Rates
Investors reduced bets the BOJ will raise borrowing costs this year. The odds of a Bank of Japan rate increase fell to 37 percent from 92 percent on June 11, interest-rate swaps show.
The dollar was also near a two-week low versus the Swiss franc as traders reduced bets the U.S. central bank will raise its target lending rate by a quarter-percentage point in September. Policy makers said yesterday in the statement announcing the decision to hold the fed funds target at 2 percent that ``uncertainty'' about the inflation outlook remains high.
``The trend is to sell the dollar,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``As worried as the Fed is about inflation, weakness in many parts of the economy means it won't be able to raise rates as soon as it might like.''
The U.S. currency may fall to $1.57 per euro and 107.30 yen today, he forecast.
Fed Futures
Futures on the Chicago Board of Trade show a 66 percent chance the central bank will leave its target rate for overnight lending between banks unchanged at its September meeting, compared with 10 percent odds yesterday. There's a 94 percent chance the Fed will keep rates on hold at the next meeting in August, the contracts show.
Fed Chairman Ben S. Bernanke and his colleagues refreshed their forecasts at their two-day meeting, reporting that the economy keeps expanding. At the same time, crude oil prices have almost doubled in the past year and the cost of commodities from wheat to tin jumped to unprecedented levels.
The Fed's preferred gauge of inflation, which excludes food and fuel costs, was unchanged at 2.1 percent last month, according to the median forecast of 26 economists surveyed by Bloomberg News. The Commerce Department will deliver its report tomorrow. Policy makers including Bernanke have said they prefer core inflation to be below 2 percent.
The U.S. currency has dropped 12 percent against the euro since Sept. 18, when the Fed made the first of seven reductions in the target lending rate. The dollar touched $1.6019 per euro on April 22, the weakest level on record.
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net.
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Oil Is Steady After Falling as U.S. Demand Drops on High Prices
By Christian Schmollinger
June 26 (Bloomberg) -- Crude oil was little changed after falling more than $2 a barrel yesterday as a report showed U.S. fuel demand fell to its lowest level since January 2007 as record prices limited purchases.
Fuel demand averaged 20.2 million barrels a day in the past four weeks, down 2.3 percent from a year earlier, the Energy Department said yesterday in a report. Consumption has slipped 5 percent this year from its peak of 21.3 million barrels a day on Jan. 4, data from the Energy Department shows. Retail gasoline prices have climbed 31 percent over that same period.
``With demand noticeably down that's a bit more of a story,'' said Gerard Burg, energy economist at National Australia Bank Ltd. in Melbourne. ``Overall demand is declining.''
Crude oil for August delivery was at $134.47 a barrel, down 8 cents, at 10:21 a.m. Singapore time in after-hours electronic trade on the New York Mercantile Exchange. Yesterday, futures dropped $2.45, or 1.8 percent, to settle at $134.55 a barrel. Oil touched a record $139.89 on June 16.
Gasoline consumption has averaged 9.28 million barrels a day for the past four weeks, down 2.1 percent from last year, the department said yesterday. Motor fuel purchases fell 2.7 percent last week, the ninth consecutive decline, MasterCard Inc. said in a June 25 report.
``The Energy Department numbers have been lagging some of the other indicators of fuel demand for the past few months such as the MasterCard announcements,'' said National Australia's Burg. ``So this potentially just brings them in line.''
Gasoline for July delivery rose 0.59 cent to $3.40 a gallon in New York. Yesterday, it fell 6.94 cents, or 2 percent, to settle at $3.3941 a gallon. Futures reached a record $3.5762 a gallon on June 16.
Brent, Nigeria
Brent crude oil for August settlement was at $134.12 a barrel, down 21 cents, on London's ICE Futures Europe exchange at 10:19 a.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
A strike by Nigerian white-collar oil workers against Chevron Corp.'s local unit entered a third day, a union official said. Production remained unaffected.
The union and management will hold talks with Petroleum Minister H. Odein Ajumogobia tomorrow and with Abubakar Yar'Adua, head of the state-owned oil company, on June 27.
The strike will continue through the talks ``as long as we are not getting what we want,'' Jonathan Omare, secretary of the Chevron branch of the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said by telephone.
``It's possible the strike may linger but it's more an accumulation of news in Nigeria,'' Burg said. ``With the number of other outages there, it's just one more concern.''
Stockpiles Gain
Crude oil also fell as U.S. crude oil inventories unexpectedly increased for the first time in six weeks.
Crude stockpiles gained 803,000 barrels to 301.8 million last week, the Energy Department said. A 1.1 million-barrel drop was forecast by analysts in a Bloomberg News survey.
Gasoline stockpiles fell 153,000 barrels to 208.8 million barrels, the department said. Analysts surveyed before the report were split over whether supplies would rise or fall.
Distillate-fuel inventories rose 2.82 million barrels to 119.4 million barrels in the week ended June 20, the seventh- straight increase, the report showed. A 2 million-barrel gain was forecast. Stockpiles last week were 1.1 percent higher than the five-year average, the department said.
Demand for distillate fuel, a category that includes heating oil and diesel, averaged 4.06 million barrels a day, down by 1.1 percent from a year earlier.
Interest Rates
Oil was unchanged earlier yesterday after the Federal Reserve left its benchmark interest rate at 2 percent, ending the most aggressive series of rate cuts in two decades, as record energy prices threaten to increase inflation.
Futures have almost doubled over the past year as investors looking to hedge against the dollar's drop have purchased commodities, helping push oil, gold and corn to records. Rising Asian fuel consumption and falling output in the North Sea, Russia and Mexico have contributed to the rally.
``This might have impacted more of the other commodities such as gold,'' said Burg. ``It was the most likely outcome and was probably factored into the market already.''
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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June 26 (Bloomberg) -- Crude oil was little changed after falling more than $2 a barrel yesterday as a report showed U.S. fuel demand fell to its lowest level since January 2007 as record prices limited purchases.
Fuel demand averaged 20.2 million barrels a day in the past four weeks, down 2.3 percent from a year earlier, the Energy Department said yesterday in a report. Consumption has slipped 5 percent this year from its peak of 21.3 million barrels a day on Jan. 4, data from the Energy Department shows. Retail gasoline prices have climbed 31 percent over that same period.
``With demand noticeably down that's a bit more of a story,'' said Gerard Burg, energy economist at National Australia Bank Ltd. in Melbourne. ``Overall demand is declining.''
Crude oil for August delivery was at $134.47 a barrel, down 8 cents, at 10:21 a.m. Singapore time in after-hours electronic trade on the New York Mercantile Exchange. Yesterday, futures dropped $2.45, or 1.8 percent, to settle at $134.55 a barrel. Oil touched a record $139.89 on June 16.
Gasoline consumption has averaged 9.28 million barrels a day for the past four weeks, down 2.1 percent from last year, the department said yesterday. Motor fuel purchases fell 2.7 percent last week, the ninth consecutive decline, MasterCard Inc. said in a June 25 report.
``The Energy Department numbers have been lagging some of the other indicators of fuel demand for the past few months such as the MasterCard announcements,'' said National Australia's Burg. ``So this potentially just brings them in line.''
Gasoline for July delivery rose 0.59 cent to $3.40 a gallon in New York. Yesterday, it fell 6.94 cents, or 2 percent, to settle at $3.3941 a gallon. Futures reached a record $3.5762 a gallon on June 16.
Brent, Nigeria
Brent crude oil for August settlement was at $134.12 a barrel, down 21 cents, on London's ICE Futures Europe exchange at 10:19 a.m. Singapore time. It fell $2.13, or 1.6 percent, to settle at $134.33 a barrel yesterday. Prices climbed to a record $139.32 on June 16.
A strike by Nigerian white-collar oil workers against Chevron Corp.'s local unit entered a third day, a union official said. Production remained unaffected.
The union and management will hold talks with Petroleum Minister H. Odein Ajumogobia tomorrow and with Abubakar Yar'Adua, head of the state-owned oil company, on June 27.
The strike will continue through the talks ``as long as we are not getting what we want,'' Jonathan Omare, secretary of the Chevron branch of the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, said by telephone.
``It's possible the strike may linger but it's more an accumulation of news in Nigeria,'' Burg said. ``With the number of other outages there, it's just one more concern.''
Stockpiles Gain
Crude oil also fell as U.S. crude oil inventories unexpectedly increased for the first time in six weeks.
Crude stockpiles gained 803,000 barrels to 301.8 million last week, the Energy Department said. A 1.1 million-barrel drop was forecast by analysts in a Bloomberg News survey.
Gasoline stockpiles fell 153,000 barrels to 208.8 million barrels, the department said. Analysts surveyed before the report were split over whether supplies would rise or fall.
Distillate-fuel inventories rose 2.82 million barrels to 119.4 million barrels in the week ended June 20, the seventh- straight increase, the report showed. A 2 million-barrel gain was forecast. Stockpiles last week were 1.1 percent higher than the five-year average, the department said.
Demand for distillate fuel, a category that includes heating oil and diesel, averaged 4.06 million barrels a day, down by 1.1 percent from a year earlier.
Interest Rates
Oil was unchanged earlier yesterday after the Federal Reserve left its benchmark interest rate at 2 percent, ending the most aggressive series of rate cuts in two decades, as record energy prices threaten to increase inflation.
Futures have almost doubled over the past year as investors looking to hedge against the dollar's drop have purchased commodities, helping push oil, gold and corn to records. Rising Asian fuel consumption and falling output in the North Sea, Russia and Mexico have contributed to the rally.
``This might have impacted more of the other commodities such as gold,'' said Burg. ``It was the most likely outcome and was probably factored into the market already.''
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
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China Stocks Rise for Third Day; Vanke, Ping An Lead Advance
By Zhang Shidong
June 26 (Bloomberg) -- China's stocks rose for a third day as some investors judged an eight-month slump overdone. China Vanke Co. and Ping An Insurance (Group) Co. led the advance.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, gained 26, or 0.9 percent, to 2,995.54 as of 10:03 a.m. local time. Almost four stocks rose for each that declined on the benchmark gauge, which has fallen 49 percent from its Oct. 16 record.
Stocks have slumped amid concern government measures to control inflation will hurt corporate profits. Consumer prices gained 7.7 percent in May, slower than April's 8.5 percent clip.
``The market has already bottomed out and the investment values stand out now,'' said Wu Youhui, a strategist at GF Securities Co. in Guangzhou. ``We've also seen a trend of decelerating inflation growth, which will be positive for the market.''
China Vanke, the country's largest publicly traded real- estate developer, gained 2.7 percent to 9.94 yuan, paring its decline this year to 45 percent. Ping An added 1.4 percent to 51.69 yuan. The stock is still down 51 percent in 2008.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
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June 26 (Bloomberg) -- China's stocks rose for a third day as some investors judged an eight-month slump overdone. China Vanke Co. and Ping An Insurance (Group) Co. led the advance.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, gained 26, or 0.9 percent, to 2,995.54 as of 10:03 a.m. local time. Almost four stocks rose for each that declined on the benchmark gauge, which has fallen 49 percent from its Oct. 16 record.
Stocks have slumped amid concern government measures to control inflation will hurt corporate profits. Consumer prices gained 7.7 percent in May, slower than April's 8.5 percent clip.
``The market has already bottomed out and the investment values stand out now,'' said Wu Youhui, a strategist at GF Securities Co. in Guangzhou. ``We've also seen a trend of decelerating inflation growth, which will be positive for the market.''
China Vanke, the country's largest publicly traded real- estate developer, gained 2.7 percent to 9.94 yuan, paring its decline this year to 45 percent. Ping An added 1.4 percent to 51.69 yuan. The stock is still down 51 percent in 2008.
To contact the reporter on this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net
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Japan's Commodities-Related Stocks Fall; Shippers Gain on Rates
By Masaki Kondo
June 26 (Bloomberg) -- Japan's commodities-related stocks fell after metals prices declined, while shipping lines gained on the first increase in cargo rates in four days.
Nippon Mining Holdings Inc., the nation's largest copper producer, and Sumitomo Metal Mining Co. slumped. Mitsui O.S.K. Lines Ltd., Japan's largest operator of iron-ore ships, led shipping lines higher. Tiremaker Bridgestone Corp. extended its decline to a sixth day after Morgan Stanley slashed its price estimate. Nippon Telegraph & Telephone Corp. jumped after UBS AG raised its price target by 16 percent.
The Nikkei 225 Stock Average slid 12.36, or 0.1 percent, to 13,817.56 as of 9:47 a.m. in Tokyo. The broader Topix index sank 4.32, or 0.3 percent, to 1,341.76. Three stocks fell for every two that gained on the Topix.
The price of crude oil dropped for the first time in four sessions to $134.55 a barrel yesterday, while gold and copper also retreated. The Baltic Dry Index, a measure of commodity- shipping costs, leapt 1.2 percent, breaking a three-day losing streak. The gauge has declined by a fifth this month.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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June 26 (Bloomberg) -- Japan's commodities-related stocks fell after metals prices declined, while shipping lines gained on the first increase in cargo rates in four days.
Nippon Mining Holdings Inc., the nation's largest copper producer, and Sumitomo Metal Mining Co. slumped. Mitsui O.S.K. Lines Ltd., Japan's largest operator of iron-ore ships, led shipping lines higher. Tiremaker Bridgestone Corp. extended its decline to a sixth day after Morgan Stanley slashed its price estimate. Nippon Telegraph & Telephone Corp. jumped after UBS AG raised its price target by 16 percent.
The Nikkei 225 Stock Average slid 12.36, or 0.1 percent, to 13,817.56 as of 9:47 a.m. in Tokyo. The broader Topix index sank 4.32, or 0.3 percent, to 1,341.76. Three stocks fell for every two that gained on the Topix.
The price of crude oil dropped for the first time in four sessions to $134.55 a barrel yesterday, while gold and copper also retreated. The Baltic Dry Index, a measure of commodity- shipping costs, leapt 1.2 percent, breaking a three-day losing streak. The gauge has declined by a fifth this month.
To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.
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Asian Stocks Rise for First Time in Six Days; Banks Lead Gains
By Chua Kong Ho and Shani Raja
June 26 (Bloomberg) -- Asian stocks rose for the first time in six days, led by financial stocks, after the Federal Reserve said risks to U.S. growth have diminished.
Commonwealth Bank of Australia, the country's second-biggest by assets, climbed the most in more than six weeks after saying it has no need to raise additional capital. St. George Bank Ltd., the fifth-largest, had its sharpest gain in a month after reiterating its goal for earnings per share. Sony Corp., which counts the U.S. as its biggest market, advanced in Tokyo after the Fed said the economy is still expanding.
Australia's biggest banks are ``in very solid shape,'' said Martin Lakos, division director at Macquarie Private Wealth in Sydney. ``From a balance sheet perspective they're still very profitable.''
The MSCI Asia Pacific Index gained 0.6 percent to 139.05 as of 10:48 a.m. in Tokyo. All 10 industry groups on the benchmark gained, led by a measure of financial shares. The index has fallen 12 percent this year.
Japan's Nikkei 225 Stock Average added 0.2 percent to 13,861.25, while Australia's S&P/ASX 200 Index gained 1.6 percent. All Asian benchmark indexes rose today apart from Malaysia, which was little changed.
U.S. stocks rose yesterday, sending the Standard & Poor's 500 Index to its best gain in two weeks, after the Federal Reserve gave no indication it will raise interest rates anytime soon.
Qantas Airways Ltd. and Korean Air Lines Co. advanced after oil fell more than $2 a barrel in New York. Mitsui O.S.K. Lines Ltd. led shipping companies higher after a measure of commodity shipping costs climbed the most in five weeks.
Centro Properties Group, the Australian-based mall owner that won a debt extension last month, surged after the Sydney Morning Herald said it will sell assets to pay off debt.
To contact the reporter for this story: Chua Kong Ho at kchua6@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
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U.S. Federal Open Market Committee June 25 Statement: Text
June 25 (Bloomberg) -- The following is the full text of the statement released today by the Federal Reserve:
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.
The committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser, Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.
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The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.
The committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser, Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.
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Fed Keeps Rate at 2%, Cites `Upside' Inflation Risks (Update5)
By Craig Torres
June 25 (Bloomberg) -- The Federal Reserve kept its benchmark rate at 2 percent and warned that faster inflation may accompany some strengthening of the economy.
``Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased,'' the Federal Open Market Committee said in a statement in Washington after a two-day meeting.
Fed Chairman Ben S. Bernanke and his colleagues ended the most aggressive monetary easing in two decades, refreshed their forecasts and reported some improvement in consumer spending. At the same time, crude oil prices have almost doubled in the past year and the cost of commodities from wheat to tin jumped to unprecedented levels.
``The Fed is more balanced now in their assessment,'' James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, said in a Bloomberg Television interview. ``A rate hike is now back on the table. If it goes weak again, it can ease.''
Stocks rose after the decision, pushing the Standard & Poor's 500 Stock Index up 0.6 percent to 1,321.97. The yield on the benchmark 10-year Treasury note rose about 1 basis point to 4.09 percent. The dollar weakened against the euro.
``The Committee expects inflation to moderate later this year and next year,'' the Fed said. ``However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.''
Next Meeting
``It is more or less a neutral statement, which is consistent with policy on hold pending more clarity,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``They are not tipping their hand for the next meeting.''
As policy makers convened, reports showed U.S. home prices fell the most on record, consumer confidence touched a 16-year low, and durable goods orders were unchanged in May. Households are also falling further behind on their debt, eroding profits at lenders. Banks and securities firms have taken almost $400 billion in asset writedowns and credit losses.
``Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters,'' the Fed said.
Continued Expansion
At the same time, the statement contained no mention of the contraction in gross domestic product that many officials judged possible at their April meeting. A government report tomorrow will probably show the economy grew at a 1 percent annual pace in the first quarter, up from an initial estimate of 0.9 percent, according to a Bloomberg News survey of economists.
Dallas Fed President Richard Fisher dissented from today's decision, preferring an increase. He dissented against the rate cut at the April meeting.
Oil prices touched a record $139.89 June 16, extending a rally that helped push the consumer price index up 4.2 percent in May compared with an average rate of 2.7 percent over the past decade. Energy costs are hurting profits and household incomes, and raising expectations for future inflation.
Dow, UPS
Dow Chemical Co. said yesterday that higher raw materials costs will cause the company to raise prices by as much as 25 percent in July, following an increase of as much as 20 percent. United Parcel Service Inc. lowered its second-quarter profit forecast on June 23 because of rising fuel costs and slowing U.S. growth.
American consumers foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to the Reuters/University of Michigan survey.
Policy makers are ``going to remain about where they are until the data come in and make a strong case to move one way or the other,'' William Poole, former president of the St. Louis Fed, said in a Bloomberg Television interview.
Home prices in 20 U.S. cities fell in April by the most on record, signaling the housing recession is far from over. The S&P/Case-Shiller home-price index dropped 15.3 percent from a year earlier. The gauge has fallen every month since January 2007. Employers have reduced payrolls for five consecutive months, helping push the unemployment rate to 5.5 percent.
Crisis Response
Central bankers reduced the target rate for overnight loans between banks by 2.25 percentage points in 2008 with a series of aggressive rate actions, including two three-quarter-point cuts. In addition, the Fed invoked emergency authority in March to start lending directly to investment banks. The central bank also provided $29 billion of financing to secure JPMorgan Chase & Co.'s takeover of Bear Stearns Cos.
The FOMC at 10:45 a.m. today held a special meeting with supervisors to discuss investment banks and their borrowing of securities and cash from the Federal Reserve, according to a notice on the central bank's website. Fed officials have given themselves until September to decide on the future of the direct loan facility.
The financial system remains under stress. The Standard and Poor's Financials Index, which includes 90 bank, brokerage and insurance stocks, fell 21 percent from May 2 to June 24.
``Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,'' American Express Co. Chief Executive Officer Kenneth Chenault said in a statement today.
Financing rates are also rising for consumers. The rate on a 30-year fixed-rate mortgage rose to 6.3 percent June 24 versus 5.79 percent at the start of the year, according to Bankrate.com.
New Projections
Fed officials discussed their new forecasts for 2008, 2009 and 2010 at the meeting. Bernanke will reveal the FOMC's new outlook for inflation, growth and employment in his semi-annual congressional testimony next month.
Wall Street analysts are divided on how higher energy costs may affect growth. The 38 percent rise in oil prices this year absorbs more consumer dollars, pulling spending away from other goods and services. If inflation is allowed to rise further, the purchasing power of incomes could fall. After tax incomes adjusted for inflation rose at a 1.8 percent rate for the 12 months ending April, versus 3.1 percent for the same period a year earlier.
The federal government has also injected $70.8 billion into the economy through tax rebates, which could lead to one or two quarters of stronger growth and add momentum to price increases.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
Read more...
June 25 (Bloomberg) -- The Federal Reserve kept its benchmark rate at 2 percent and warned that faster inflation may accompany some strengthening of the economy.
``Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased,'' the Federal Open Market Committee said in a statement in Washington after a two-day meeting.
Fed Chairman Ben S. Bernanke and his colleagues ended the most aggressive monetary easing in two decades, refreshed their forecasts and reported some improvement in consumer spending. At the same time, crude oil prices have almost doubled in the past year and the cost of commodities from wheat to tin jumped to unprecedented levels.
``The Fed is more balanced now in their assessment,'' James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis, said in a Bloomberg Television interview. ``A rate hike is now back on the table. If it goes weak again, it can ease.''
Stocks rose after the decision, pushing the Standard & Poor's 500 Stock Index up 0.6 percent to 1,321.97. The yield on the benchmark 10-year Treasury note rose about 1 basis point to 4.09 percent. The dollar weakened against the euro.
``The Committee expects inflation to moderate later this year and next year,'' the Fed said. ``However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.''
Next Meeting
``It is more or less a neutral statement, which is consistent with policy on hold pending more clarity,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. ``They are not tipping their hand for the next meeting.''
As policy makers convened, reports showed U.S. home prices fell the most on record, consumer confidence touched a 16-year low, and durable goods orders were unchanged in May. Households are also falling further behind on their debt, eroding profits at lenders. Banks and securities firms have taken almost $400 billion in asset writedowns and credit losses.
``Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters,'' the Fed said.
Continued Expansion
At the same time, the statement contained no mention of the contraction in gross domestic product that many officials judged possible at their April meeting. A government report tomorrow will probably show the economy grew at a 1 percent annual pace in the first quarter, up from an initial estimate of 0.9 percent, according to a Bloomberg News survey of economists.
Dallas Fed President Richard Fisher dissented from today's decision, preferring an increase. He dissented against the rate cut at the April meeting.
Oil prices touched a record $139.89 June 16, extending a rally that helped push the consumer price index up 4.2 percent in May compared with an average rate of 2.7 percent over the past decade. Energy costs are hurting profits and household incomes, and raising expectations for future inflation.
Dow, UPS
Dow Chemical Co. said yesterday that higher raw materials costs will cause the company to raise prices by as much as 25 percent in July, following an increase of as much as 20 percent. United Parcel Service Inc. lowered its second-quarter profit forecast on June 23 because of rising fuel costs and slowing U.S. growth.
American consumers foresee average annual inflation of 3.4 percent over the next five years, the highest expectation since 1995, according to the Reuters/University of Michigan survey.
Policy makers are ``going to remain about where they are until the data come in and make a strong case to move one way or the other,'' William Poole, former president of the St. Louis Fed, said in a Bloomberg Television interview.
Home prices in 20 U.S. cities fell in April by the most on record, signaling the housing recession is far from over. The S&P/Case-Shiller home-price index dropped 15.3 percent from a year earlier. The gauge has fallen every month since January 2007. Employers have reduced payrolls for five consecutive months, helping push the unemployment rate to 5.5 percent.
Crisis Response
Central bankers reduced the target rate for overnight loans between banks by 2.25 percentage points in 2008 with a series of aggressive rate actions, including two three-quarter-point cuts. In addition, the Fed invoked emergency authority in March to start lending directly to investment banks. The central bank also provided $29 billion of financing to secure JPMorgan Chase & Co.'s takeover of Bear Stearns Cos.
The FOMC at 10:45 a.m. today held a special meeting with supervisors to discuss investment banks and their borrowing of securities and cash from the Federal Reserve, according to a notice on the central bank's website. Fed officials have given themselves until September to decide on the future of the direct loan facility.
The financial system remains under stress. The Standard and Poor's Financials Index, which includes 90 bank, brokerage and insurance stocks, fell 21 percent from May 2 to June 24.
``Business conditions continue to weaken in the U.S. and so far this month we have seen credit indicators deteriorate beyond our expectations,'' American Express Co. Chief Executive Officer Kenneth Chenault said in a statement today.
Financing rates are also rising for consumers. The rate on a 30-year fixed-rate mortgage rose to 6.3 percent June 24 versus 5.79 percent at the start of the year, according to Bankrate.com.
New Projections
Fed officials discussed their new forecasts for 2008, 2009 and 2010 at the meeting. Bernanke will reveal the FOMC's new outlook for inflation, growth and employment in his semi-annual congressional testimony next month.
Wall Street analysts are divided on how higher energy costs may affect growth. The 38 percent rise in oil prices this year absorbs more consumer dollars, pulling spending away from other goods and services. If inflation is allowed to rise further, the purchasing power of incomes could fall. After tax incomes adjusted for inflation rose at a 1.8 percent rate for the 12 months ending April, versus 3.1 percent for the same period a year earlier.
The federal government has also injected $70.8 billion into the economy through tax rebates, which could lead to one or two quarters of stronger growth and add momentum to price increases.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net
Read more...
Fed Today, but Keep Your Eye on July 3rd...
Daily Forex Fundamentals | Written by Black Swan Capital | Jun 25 08 16:43 GMT |
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Today is the big day. In a few hours everyone will be tuning in for a first-hand report on the latest Federal Open Market Committee rate decision. All the FOMC meetings seem increasingly important, but it's those similar to today's meeting, where officials could POTENTIALLY change policy direction, that really get the market riled up.
The last three FOMC decisions, albeit all decisions to cut rates, actually sent the dollar rallying in the trading sessions that followed. And even though a rate hike today is unlikely, this meeting has the potential to send the dollar rallying again.
It seems that the dollar could only suffer in the wake of today's meeting, and the several days that follow, if the FOMC statement severely disappoints. (Keep in mind the market has built up its expectations for hawkishness.)
But when all the dust has settled, we think the difference maker is going to be the European Central Bank. The dollar will likely bounce all over the place when the FOMC decision is released today, but not until the ECB's next rate decision (July 3rd) will the dollar be able to stick to a longer-term direction.
We grabbed the following chart from the European Central Bank website just to give you an idea what they're dealing with ...
Economic concerns continue to be to the downside for Europe. And the ECB President, Jean-Claude Trichet, continues to reiterate that fact. But in recent comments he also reiterated the ECB's commitment to stabilizing prices.
Let's just say this chart, which shows prices well above their average and well above ECB comfort levels, can't possibly leave a good feeling in Trichet's stomach.
We're leaning more towards a dollar-positive outcome this afternoon than dollar-negative. But even if we're right, there's still plenty of time for fortune's to reverse. The big money rides on the ECB.
Jack Crooks
Black Swan Capital
http://www.blackswantrading.com
Black Swan Capital's Currency Snapshot is strictly an informational publication and does not provide individual, customized investment advice. The money you allocate to futures or forex should be strictly the money you can afford to risk. Detailed disclaimer can be found at http://www.blackswantrading.com/disclaimer.html
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Durable Goods Orders Flat in May
Daily Forex Fundamentals | Written by Wachovia Corporation | Jun 25 08 17:49 GMT |
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Orders for durable goods were flat in May as businesses begin to anticipate softening demand. Stripping out the volatile transportation component, orders were down 0.9 percent, while last month’s numbers were revised lower. Non-defense orders ex-aircraft were down 0.8 percent, a sign that business spending could be weak Q2.
Orders Flat, Automotive Sector Continues to Struggle
- A flat number after two consecutive monthly declines is hardly a sign of vibrant growth. Businesses are scaling back.
- New automotive orders continue to trend lower. While production cuts at auto-makers earlier this year and the incentive package rolled out this week may help reduce high inventories. We’re not looking for a turnaround anytime soon.
Ex Aircraft Orders Weak, Inventories Still Climbing
- Non-defense capital goods orders ex-aircraft were down 0.8 percent in May, on the heels of a strong 3.1 percent gain the previous month. Business spending will likely be weaker in Q2.
- The climb in inventories, up 5.1 percent since last year, is concerning. This is especially true in transportation equipment where inventories increased 0.9 percent last month alone.
Wachovia Corporation
http://www.wachovia.com
Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.
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FOMC Meeting: Speak Loudly And Carry A Small Stick
Daily Forex Fundamentals | Written by Wachovia Corporation | Jun 25 08 20:30 GMT |
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As expected, the Federal Reserve left the federal funds rate unchanged at 2 percent at today's FOMC meeting. The wording in the Fed's statement is a touch more hawkish than in previous meetings and one member of the FOMC, Richard Fisher, president of the Dallas Fed, dissented in favor of raising interest rates.
The Fed is in a tough spot, with no clear good choices to make. Raising interest rates might help curb some of the fears about escalating inflation but would not likely have a material impact on actual inflation. Absent signs that a wage-price spiral has actually taken hold, a token quarter-point hike in the federal funds rate seems like a high risk/low return proposition.
Right now, the best option for the Fed is to speak loudly and carry a small stick. The text from today's FOMC meeting does just that. The statement starts with a clearly more positive assessment of the economy. Specifically, the Fed notes that "recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending." The statement is right on the money and largely reflects stronger retail sales, which rose solidly in May and were revised up for the two previous months. While the Fed did not say it in this statement, they are readily aware that part of the recent strength in household spending is temporary and linked to the tax rebates.
The remainder of the first paragraph is similar to the previous meeting's statement, noting that "labor markets have softened further" and that "financial markets remain under considerable stress." We doubt that the Fed will begin to raise interest rates until these two factors have at least moderated to a point where they are neutral variables in the near-term outlook. In addition, the Fed added the recent "rise in energy prices" to its list of factors weighing on economic growth, joining "tight credit conditions" and "the ongoing housing contraction."
One other change worth noting is that the Fed slightly softened the wording on the housing situation to "ongoing housing contraction" from "deepening housing contraction." We noted in our June 12 Housing Chartbook that we were beginning to see some tentative signs that the housing market was bottoming out. The housing market is still contracting but sales in some of the most troubled markets, including some hard hit parts of Florida and California, have stopped falling.
The wording on inflation is clearly more hawkish than what we have seen in recent statements but the Fed gives no indication that they feel the inflation horse is already out of the barn. The statement notes that "the committee expects inflation to moderate later this year and next year." Moreover, they note that much of the heightened concern about inflation comes from continued increases in energy prices and increases in the prices of some other commodities, factors that are not directly within the Fed's control. Remember, the Fed cannot print oil or make it stop raining in the Midwest.
Keeping inflation expectations contained is the number one job for the Fed. If inflation expectations increase too dramatically, then the recent spike in food and energy prices will spill over into the prices of other goods and services. The Fed acknowledges that "some indicators of inflation expectations" have increased and that "uncertainty about the inflation outlook remains high." Those kind of statements are meant to reassure the financial markets that the Fed is cognizant of the inflation risks.
To really drive home the point, however, the Fed included a sentence at the end of the statement that succinctly summarized how conditions have changed over the past two months. "Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased." In addition, Richard Fisher dissented from the rest of the group, favoring to raise the federal funds rate at this meeting.
Summary & Conclusion
Our read on the policy statement is that the Fed feels monetary policy is currently right where they want it to be. We expect the federal funds rate to remain right where it is through the end of this year, or until the housing market bottoms and the credit markets firm up. The Fed will continue to speak loudly about the threat of inflation but they will continue to carry a small stick.
Wachovia Corporation
http://www.wachovia.com
Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.
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Economic Calendar
| Eco Data 6/26/08 |  |  |
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 22:45 | NZD | New Zealand Current account (nzd) Q1 | -1.70B | -3.41B | | |
| 06:00 | EUR | Import price index M/M May | 1.50% | 0.90% | | |
| 06:00 | EUR | Import price index Y/Y May | 6.90% | 5.70% | | |
| 08:00 | EUR | Euro-Zone M3 s.a. Y/Y May | 10.40% | 10.60% | | |
| 08:00 | EUR | Euro-Zone M3 s.a. 3m May | 10.40% | 10.70% | | |
| 12:30 | USD | U.S. GDP annualised Q1 F | 1.00% | 0.90% | | |
| 12:30 | USD | U.S. GDP deflator Q1 F | 2.60% | 2.60% | | |
| 12:30 | USD | U.S. PCE core Q/Q Q1 F | 2.10% | 2.10% | | |
| 12:30 | USD | U.S. PCE Q1 F | 3.50% | 3.50% | | |
| 12:30 | USD | U.S. Jobless claims | 375K | 381K | | |
| 12:30 | USD | U.S. Personal consumption Q1 | 1.00% | 1.00% | | |
| 14:00 | USD | U.S. Existing home sales May | 4.95M | 4.89M | | |
| 14:00 | USD | U.S. Existing home sales M/M May | 1.20% | -1.00% |
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Daily Market Commentary - Fundamental & Technical Outlook
Daily Forex Fundamentals | Written by GCI Financial | Jun 25 08 16:38 GMT |
€
The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5535 level and was capped around the $1.5615 level. Most traders expect the Federal Open Market Committee will keep the overnight call rate unchanged at 2.00% today and signal that inflation poses more of a threat than a slowdown in economic growth. Some traders believe the FOMC will move rates higher this year while others believe the Fed will take a wait-and-see approach before adjusting borrowing costs. The Fed is also expected to acknowledge the beleaguered U.S. housing sector, ongoing credit market dislocations, and weakness in the employment sector. Data released in the U.S. today May durable goods orders unchanged m/m and off 0.1% y/y while the ex-transportation component was of 0.9% m/m. Also, May building permits were revised to -0.4% from -1.3% and May new home sales were off 2.5% to a 512,000 unit annualized pace. In eurozone news, the European Central Bank announced it will hold a press conference after its 7 August Governing Council meeting. The ECB traditionally holds a telephone conference after some summer rate-setting meetings and this has led to speculation that the presumed +25bps rate hike to 4.25% in July will not be a one-off move. ECB's Wellink reported Dutch inflation may top 3% in Q3 while ECB President Trichet reiterated he does not "envisage a series of increases (in official interest rates)." ECB's Noyer reported "Issuance of credit remains dynamic and there is no concrete threat of a (further) credit crunch." Data released in the eurozone today saw EMU-15 April factory orders up 2.5% m/m and 11.7% y/y, the fastest growth pace in six months. Euro bids are cited around the $1.5230 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥108.05 level and was supported around the ¥107.65 level. Traders continued to buy U.S. dollars ahead of today's interest rate decision from the Federal Open Market Committee. Technically, today's intraday low was right around the 38.2% retracement of the move from ¥108.55 to ¥107.10. Data released in Japan today saw the May merchandise trade surplus shrink for the third consecutive month, printing at ¥365.61 billion and off 7.6% y/y. Traders are curious to see how these data impact the April - June GDP data that are due in early August. Other data released last night saw the May corporate services price index climb +0.2% m/m and 0.6% y/y, the eighteenth consecutive monthly increase. The Nikkei 225 stock index lost 0.14% to close at ¥13,829.92. Dollar bids are cited around the ¥103.00/ 101.35 levels. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥168.45 level and was supported around the ¥167.60 level. The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥213.20 and ¥103.95 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8653 in the over-the-counter market, down from CNY 6.8699 and the pair's lowest close since the yuan revaluation of July 2005. It was reported that China's foreign reserves totaled US$ 1.76 trillion at the end of April.
₤
The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9660 level and was capped around the $1.9745 level. Sterling could not maintain intraday gains notched after it was reported that the CBI June retail sales survey found 39% of respondents said H1 June sales were lower than one year ago while 30% indicated they improved, for an ensuing net balance of -9% - up from -14% in May and better than expected. These data suggest retail sales remain relatively weak. Bank of England Deputy Governor Gieve reported he expects a "downturn in economic activity over the rest of the year." On the political front, London's High Court rejected a legal move to force the British government to hold a referendum on the European Union's Lisbon Treaty. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7920 level and was supported around the ₤0.7890 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0435 level and was supported around the CHF 1.0375 level. U.S. dollar bids are cited around the CHF 1.0250 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6235 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 2.0470 level.
GCI Financial
http://www.gcitrading.com
DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Daily Forex Technicals | Written by Global Forex Trading | Jun 25 08 01:42 GMT |
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€
The euro came off vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5535 level and was capped around the $1.5615 level. Most traders expect the Federal Open Market Committee will keep the overnight call rate unchanged at 2.00% today and signal that inflation poses more of a threat than a slowdown in economic growth. Some traders believe the FOMC will move rates higher this year while others believe the Fed will take a wait-and-see approach before adjusting borrowing costs. The Fed is also expected to acknowledge the beleaguered U.S. housing sector, ongoing credit market dislocations, and weakness in the employment sector. Data released in the U.S. today May durable goods orders unchanged m/m and off 0.1% y/y while the ex-transportation component was of 0.9% m/m. Also, May building permits were revised to -0.4% from -1.3% and May new home sales were off 2.5% to a 512,000 unit annualized pace. In eurozone news, the European Central Bank announced it will hold a press conference after its 7 August Governing Council meeting. The ECB traditionally holds a telephone conference after some summer rate-setting meetings and this has led to speculation that the presumed +25bps rate hike to 4.25% in July will not be a one-off move. ECB's Wellink reported Dutch inflation may top 3% in Q3 while ECB President Trichet reiterated he does not "envisage a series of increases (in official interest rates)." ECB's Noyer reported "Issuance of credit remains dynamic and there is no concrete threat of a (further) credit crunch." Data released in the eurozone today saw EMU-15 April factory orders up 2.5% m/m and 11.7% y/y, the fastest growth pace in six months. Euro bids are cited around the $1.5230 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥108.05 level and was supported around the ¥107.65 level. Traders continued to buy U.S. dollars ahead of today's interest rate decision from the Federal Open Market Committee. Technically, today's intraday low was right around the 38.2% retracement of the move from ¥108.55 to ¥107.10. Data released in Japan today saw the May merchandise trade surplus shrink for the third consecutive month, printing at ¥365.61 billion and off 7.6% y/y. Traders are curious to see how these data impact the April - June GDP data that are due in early August. Other data released last night saw the May corporate services price index climb +0.2% m/m and 0.6% y/y, the eighteenth consecutive monthly increase. The Nikkei 225 stock index lost 0.14% to close at ¥13,829.92. Dollar bids are cited around the ¥103.00/ 101.35 levels. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥168.45 level and was supported around the ¥167.60 level. The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥213.20 and ¥103.95 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8653 in the over-the-counter market, down from CNY 6.8699 and the pair's lowest close since the yuan revaluation of July 2005. It was reported that China's foreign reserves totaled US$ 1.76 trillion at the end of April.
₤
The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9660 level and was capped around the $1.9745 level. Sterling could not maintain intraday gains notched after it was reported that the CBI June retail sales survey found 39% of respondents said H1 June sales were lower than one year ago while 30% indicated they improved, for an ensuing net balance of -9% - up from -14% in May and better than expected. These data suggest retail sales remain relatively weak. Bank of England Deputy Governor Gieve reported he expects a "downturn in economic activity over the rest of the year." On the political front, London's High Court rejected a legal move to force the British government to hold a referendum on the European Union's Lisbon Treaty. Cable bids are cited around the US$ 1.9360/ 1.9100 levels. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7920 level and was supported around the ₤0.7890 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0435 level and was supported around the CHF 1.0375 level. U.S. dollar bids are cited around the CHF 1.0250 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6235 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 2.0470 level.
GCI Financial
http://www.gcitrading.com
DISCLAIMER : GCI's Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Daily Forex Technicals | Written by Global Forex Trading | Jun 25 08 01:42 GMT |
The dollar plummeted on Tuesday on news the Conference Board's consumer confidence index collapsed to a 16-year low in June, but it reduced losses on the day. The FOMC will leave rates unchanged on Wednesday, and probably for the rest of the year, but look for what they have to say. Keep an eye on the volatile durable goods orders and the new homes sales; the data should be bad but it’s probably discounted and the dollar should attempt to bounce.
Euro/dollar
The euro/dollar has been alternating up and down days, and Tuesday should be the down day. My model went long and the pair must break out of an inside range before the direction becomes clearer.
Good support is seen at 1.5510. Below 1.5470, the next levels are 1.5430,1.5380 and 1.5305.
Strong resistance is at 1.5620. Above 1.5650, euro/dollar sees additional resistance at 1.5727.
Oscillators are rising.
NEAR-TERM: Mixed to slightly bearish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bullish
Dollar/yen
Dollar/yen attempted breaks both ways on Tuesday, but when the dust settled, it remained around the 107.95 50-point pivot, which targets 107.45 and 108.45. My model remains short, but sideways trading is likely
Initial support is at 107.45. Strong support is at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. Distant support is at 105.60.
Above 108.45, further resistance is pegged at 109.15 from a 50-point pivot, which targets 109.65 and 108.65.
Oscillators are mixed.
NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Mixed
Sterling/dollar
Sterling/dollar made a mild recovery on Tuesday, but got stuck in an inside range. I expect only choppy trading on Wednesday with a bias on the downside.
Immediate support is now seen at 1.9650. Below 1.9605, the next level is 1.9560. This is followed by 1.9500.
Initial resistance now comes at 1.9720. Above 1.9760, further resistance comes at 1.9800, 1.9890 and 1.9940.
Oscillators are mixed.
NEAR-TERM: Mixed with downside bias
MEDIUM-TERM: Mixed
LONG-TERM: Mixed
Dollar/Swiss franc
Dollar/Swiss is still alternating up and down days, and Wednesday should be an up day, if this silly pattern continues. My model remains long.
Initial resistance remains at 1.0490. Above 1.0540, resistance is at 1.0622.
Immediate support is still seen at 1.0400. Below 1.0336, further support comes at 1.0290.
Oscillators are mixed.
NEAR-TERM: Mixed with upside bias
MEDIUM-TERM: Mixed
LONG-TERM: Bullish
Cornelius Luca
Global Forex Trading
http://www.gftforex.com
DISCLAIMER: This forum and the information provided here should not be relied on as a substitute for extensive independent research before making your investment decisions. Global Forex Trading is merely providing this column for your general information. The views of the author are not necessarily those of Global Forex Trading, its owners, officers, agents or employees. In addition, any projections or views of the market provided by the author may not prove to be accurate. Global Forex Trading and Cornelius Luca will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained in this column. Global Forex Trading and Cornelius Luca do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.
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