Daily Forex Analysis

Daily Forex Technicals | Written by FOREXYARD | Sep 05 08 08:01 GMT |

Headlines Nonfarm Payrolls On Tap Market Trend EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP Daily Trend Weekly Trend Resistance 1.4375 1.7670 107.35 1.2065 0.8250 0.8205 1.4355 1.7650 107.15 1.2045 0.8230 0.8185 1.4325 1.7620 106.85 1.2015 0.8200 0.8155 Support 1.4265 1.7560 106.25 1.1055 0.8140 0.8095 1.4235 1.7530 105.95 1.1025 0.8110 0.8065 1.4215 1.7510 105.75 1.1005 0.8090 0.8045 Economic News USD - USD Appreciates in Expectation of Today's Announcement. Yesterday, the greenback saw over 300 pips worth of gain against the EUR, as the cross dropped from a 1.4522 level at the beginning of the trading day, down to 1.4211 - making an 11 month low. The USD also continued its appreciation vs. the GBP; however this rally did not affect the USD\JPY pair, as the USD lost about 200 pips against the JPY. The USD rose during yesterday's session despite some concerning data that was published from the U.S. economy. The Automatic Data Processing has announced a 33K drop forecast for the Non-Farm Employment Change. However, it appears that the market has limited its reaction to the survey as it has failed to accurately estimate the actual figures over the past few months. The Revised Non-Farm Productivity and the Unemployment Claims also pointed out that the U.S economy is far from fully recovering, as the unemployed individuals in the U.S. are consistently growing, currently measured at 444K. The only good news for the USD was the better- than- forecasted result on the Non-Manufacturing Purchasing Manager's Index that showed that the non-manufacturing industry has slightly expanded during July. In conclusion, two factors have joined together to strongly support the USD. The first one was the poor Euro-Zone data, which is continuing to prove that the most sustained global concerns are now coming from the European nations, and not from the U.S. The second factor is what is known as the "herd effect". The current USD bullish trend appears to be so enduring that investors are seeing potential for unlimited profits and are so anxious to join the fest that they are becoming almost oblivious to the economic indicators. In this turn of events, only a major combination of unfortunate data from the U.S., along with a series of positive signals from the Euro-Zone, could initiate a long-lasting reversal for the EUR/USD pair. As for today, at least for one trading session, everything is prone to change. Today is the first Friday of the month, and as such, the U.S Non-Farm Employment Change will be announced at 12:30 GMT. Unlike yesterday's data, this indicator will not be overlooked by investors. This is because it is a leading indicator of consumer spending, which accounts for a majority of overall economic activity, and also because it is published much earlier than the other leading indicators, and as so, investors often plan their weekly and monthly strategies based on this survey's result. This is why an immediate reaction to this survey's figures will take place. Analysts have forecasted a 73K drop in the number of employed people during July, and such a result is very likely to generate a bearish impact on USD pairs. However, in case of better- than- expected figures, the USD might extend its sharp bullish rally, and in its center, the EUR/USD might drop to levels around 1.4100. EUR - Will the US Nonfarm Payrolls Figures Help the EUR? Yesterday, the EUR suffered from falling trends against all the major currencies, including a 300 pips slide against the USD. The EUR/USD is now traded around the 1.4250 level, which reflects an almost 1,800 pips drop that the pair saw during the last five weeks. It appears that the EUR is nurturing its deterioration in every opportunity it gets as unfortunate data is published on a daily basis from the Euro-Zone. In addition, the European Central Bank (ECB) is adding fuel to the high flames with decreasing growth forecasts for the region. The German economy, which is considered to be the Euro-Zone's strongest, seems like it has entered a slowing phase, and as a result, is pulling the entire region into recession. Yesterday, the German Factory Orders survey fell by 1.7% in July as opposed to the previous month, continuing a series of negative data from Germany. Soon after, the ECB announced that it leaves the interest rates intact at 4.25%. However, at the press conference that was held shortly after the interest rates announcement, ECB chiefs have mentioned that the EUR is still effectively overvalued despite its recent fall, boosting the USD against the EUR. Furthermore, the ECB has readjusted its growth expectations for the next year- and- a- half. For the year 2008, the ECB predicts a 1.1% growth rate, and a rate of 1.2% for 2009. Only three months ago the ECB published 1.8% growth rate estimations for 2008, and 1.5% estimations for 2009. All of the above was interpreted by investors as an excellent opportunity to extend their short positions on the EUR, and the result was a sharp drop against all the major currencies. Looking ahead to today, various economic indicators will be published from the Euro-Zone; the German Industrial Production will be the most affecting indicator. Analysts are expecting a 0.5% drop in June as opposed to May, and another bearish inclination is likely to take place for the EUR. However, the U.S Non-Farm Employment Change will definitely be the most affecting global event today, and traders are well advised to follow its results as it seems to be the only thing that might generate a minor bearish correction for the USD, which would mean a rising trend for the EUR. JPY - Powerful Upswing for the JPY. Yesterday the JPY rose against all of its major currency counterparts. The JPY rose over 200 pips against the USD, and over 600 pips against the EUR, as the EUR/JPY saw a 13 month low, reaching beneath the 151.00 level. It seems that investors were bailing out of more leveraged carry trades, and began borrowing Yen at low rates in order to buy higher yielding currencies and commodities. Moreover, not only did the JPY appreciate against the major currencies such as the EUR and the GBP, it was also the only currency to appreciate against the USD. Analysts also estimate that the Euro-Zone's economic uncertainty has lead investors to seek out for other prospects aside from the EUR. The first choice was of course the USD, which initiated its current bullish trend. Since the U.S. economy is far from being a stabile economy to rely on recently, the JPY has suddenly became a very attractive prospect. Late at night, during early Asian trading, the Japanese Capital Spending was published, demonstrating a 6.5% decrease from the first quarter of the year. This turned a minor bearish correction for the JPY during the night. Today, the JPY will be absent from the economic calendar, and traders should follow overseas events in order to determine the JPY's direction for today. Special attention should be given to the U.S Non-Farm Employment Change that will be published at 12:30 GMT, and will be today's leading publication which will also affect the Yen's crosses. OIL - OPEC Scheduled Meeting to Discuss Potential Cuts to Oil Production. Dodging storms and defying international conflict, oil prices have continued to sink. Prices dropped over a buck last night to hit $107.71 this morning. Market analysts are expecting this price to continue further down this weekend to eventually sag below the $100 mark, in which case OPEC will meet to discuss a cut in production. OPEC, which produces 40% of the global energy supply, has stated that market volatility is still high and they will consider waiting for more stability before making any cuts, but if prices continue to fall, they will do just that. Another major factor affecting oil prices is the strengthening dollar. As it appreciated even more yesterday, dollar-based commodities witnessed price drops. If the dollar continues its upward swing, the prices of these commodities, given the stagnating economy, may see this as a persisting trend. The impact of today's Non-Farm Employment Change figures on the USD will no doubt have an effect on oil prices, but the decrease in demand for energy and the worldwide economic slowdown will most likely continue their downward push on crude oil's price until reaching a point where producers would intervene with production cuts. Technical News EUR/USD The pair is in a bearish formation and the daily studies are strengthening the notion that the pair's direction is down. The hourly confirm the bearish notion as the 4 Hour RSI has failed to cut the 80 level from the bottom section. It appears that the EUR/USD is heading towards 1.4000 GBP/USD The pair is consolidating at the 1.7590 level after the sharp drop from 1.7900. The momentum is bearish and the next key level will reach a 1.7500 level. If a breach through that level will occur a stronger bearish move will be validated that might take the pair to new lows. USD/JPY A mild bearish channel is forming On the 4 Hour chart with 104.50 as a support barrier which is going to be tested, probably today. In case of a breach the pair might be in its way to 103.00. Going short might be preferable after the breach through the support level will take place. USD/CHF The dailies and the 4 hour charts are bullish, so this pair is expected to continue its upward movement. This pair will probably target the 113.00 level and entering a long position on a dip will create a good opportunity for some profit taking. The Wild Card Oil It has been nothing but bearish momentum for this commodity in the past 5 days, and this downtrend appears to be continuing at full throttle. forex traders should note that Oil is breaking one support level after another and no halt appears to be in sight. The next target price should be around $100 a barrel. Indicators Date Time (GMT) Country Event Period Previous Forecast 9/05 08:00 USD Italian Trade Balance -0.06B -1.00B 10:00 EUR German Industrial Production m/m 0.2% -0.5% 11:00 CAD Employment Change -55.2K 9.0K 11:00 CAD Unemployment Rate 6.1% 6.2% 12:30 USD Unemployment Rate 5.7% 5.7% 12:30 USD Average Hourly Earnings m/m 0.3% 0.3% 14:00 CAD Ivey PMI 65.5 61.7 09/06 06:30 EUR ECB President Trichet Speaks - - FOREXYARD

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Forex Technical Analytics

Daily Forex Technicals | Written by FOREX Ltd | Sep 05 08 07:49 GMT |

CHF The pre-planned breakout variant for buyers was realized with attainment of minimal presupposed target. OsMA trend indicator having marked vagueness of bullish development with general bearish party advantage is not clear concerning certain choice of planning priorities for today. Hence in the current situation according to the chosen strategy we presuppose the possibility of cross range movement with rate return to 1.1010/30 supports, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term buyers positions on condition of formation of topping signals the targets will be 1.1070/90, 1.1140/60, 1.1190/1.1210 and/or further breakout variant up to 1.1250/70, 1.1300/20. An alternative for buyers will be below 1.0960 with targets 1.0900/20, 1.0840/60. GBP The pre-planned sales from key resistance level range were realized with attainment of basic presupposed targets. OsMA trend indicator having marked relative rise in bearish activity gives reasons to stick to early chosen planning priorities for today as well. Hence taking into account rising chart indicator position we assume the possibility of reaching 1.7690/1.7710 range resistance levels, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For short-term sales on condition of formation of topping signals the targets will be 1.7610/30, 1.7540/60, 1.7480/1.7500 and/or further breakout variant up to 1.7420/40, 1.7340/60, 1.7260/80. An alternative for buyers will be above 1.7760 with targets 1.7720/40, 1.7800/20. JPY The pre-planned positions for sale from key resistance level range were realized with overlap of presupposed targets. OsMA trend indicator having marked essential rise in bearish activity confirms the early chosen bearish planning priorities for today as well. Hence and rising direction of chart indicator we presuppose the possibility of pair return to 107.20/40, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For sales on condition of formation of topping signals the targets will be 106.60/80, 106.00/20, 105.60/80 and/or further breakout variant up to 105.00/20, 104.40/60, 103.80/104.00. An alternative for buyers will be above 107.80 with targets 108.20/40, 108.80/109.00. EUR The pre-planned breakout variant for sales was realized with overlap of assumed targets. OsMA trend indicator having marked significant increase in bearish activity gives reasons to turn priorities of planning in favor of sales. At the moment taking into account the rising chart indicator position we presuppose pair return to resistance range 1.4370/90, where it is recommended to evaluate the activity development of both parties according to the charts of shorter time interval. For sales on condition of formation of topping signals the targets will be 1.310/30, 1.4250/70 and/or further breakout variant to 1.4190/1.4210, 1.4120/40. An alternative for sells will be below 1.4440 with targets 1.4480/1.4500, 1.4540/60, 1.4600/20. FOREX Ltd www.forexltd.co.uk

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Daily Forex Analysis

Daily Forex Technicals | Written by FOREXYARD | Sep 05 08 08:01 GMT |

Headlines Nonfarm Payrolls On Tap Market Trend EUR/USD GBP/USD USD/JPY USD/CHF AUD/USD EUR/GBP Daily Trend Weekly Trend Resistance 1.4375 1.7670 107.35 1.2065 0.8250 0.8205 1.4355 1.7650 107.15 1.2045 0.8230 0.8185 1.4325 1.7620 106.85 1.2015 0.8200 0.8155 Support 1.4265 1.7560 106.25 1.1055 0.8140 0.8095 1.4235 1.7530 105.95 1.1025 0.8110 0.8065 1.4215 1.7510 105.75 1.1005 0.8090 0.8045 Economic News USD - USD Appreciates in Expectation of Today's Announcement. Yesterday, the greenback saw over 300 pips worth of gain against the EUR, as the cross dropped from a 1.4522 level at the beginning of the trading day, down to 1.4211 - making an 11 month low. The USD also continued its appreciation vs. the GBP; however this rally did not affect the USD\JPY pair, as the USD lost about 200 pips against the JPY. The USD rose during yesterday's session despite some concerning data that was published from the U.S. economy. The Automatic Data Processing has announced a 33K drop forecast for the Non-Farm Employment Change. However, it appears that the market has limited its reaction to the survey as it has failed to accurately estimate the actual figures over the past few months. The Revised Non-Farm Productivity and the Unemployment Claims also pointed out that the U.S economy is far from fully recovering, as the unemployed individuals in the U.S. are consistently growing, currently measured at 444K. The only good news for the USD was the better- than- forecasted result on the Non-Manufacturing Purchasing Manager's Index that showed that the non-manufacturing industry has slightly expanded during July. In conclusion, two factors have joined together to strongly support the USD. The first one was the poor Euro-Zone data, which is continuing to prove that the most sustained global concerns are now coming from the European nations, and not from the U.S. The second factor is what is known as the "herd effect". The current USD bullish trend appears to be so enduring that investors are seeing potential for unlimited profits and are so anxious to join the fest that they are becoming almost oblivious to the economic indicators. In this turn of events, only a major combination of unfortunate data from the U.S., along with a series of positive signals from the Euro-Zone, could initiate a long-lasting reversal for the EUR/USD pair. As for today, at least for one trading session, everything is prone to change. Today is the first Friday of the month, and as such, the U.S Non-Farm Employment Change will be announced at 12:30 GMT. Unlike yesterday's data, this indicator will not be overlooked by investors. This is because it is a leading indicator of consumer spending, which accounts for a majority of overall economic activity, and also because it is published much earlier than the other leading indicators, and as so, investors often plan their weekly and monthly strategies based on this survey's result. This is why an immediate reaction to this survey's figures will take place. Analysts have forecasted a 73K drop in the number of employed people during July, and such a result is very likely to generate a bearish impact on USD pairs. However, in case of better- than- expected figures, the USD might extend its sharp bullish rally, and in its center, the EUR/USD might drop to levels around 1.4100. EUR - Will the US Nonfarm Payrolls Figures Help the EUR? Yesterday, the EUR suffered from falling trends against all the major currencies, including a 300 pips slide against the USD. The EUR/USD is now traded around the 1.4250 level, which reflects an almost 1,800 pips drop that the pair saw during the last five weeks. It appears that the EUR is nurturing its deterioration in every opportunity it gets as unfortunate data is published on a daily basis from the Euro-Zone. In addition, the European Central Bank (ECB) is adding fuel to the high flames with decreasing growth forecasts for the region. The German economy, which is considered to be the Euro-Zone's strongest, seems like it has entered a slowing phase, and as a result, is pulling the entire region into recession. Yesterday, the German Factory Orders survey fell by 1.7% in July as opposed to the previous month, continuing a series of negative data from Germany. Soon after, the ECB announced that it leaves the interest rates intact at 4.25%. However, at the press conference that was held shortly after the interest rates announcement, ECB chiefs have mentioned that the EUR is still effectively overvalued despite its recent fall, boosting the USD against the EUR. Furthermore, the ECB has readjusted its growth expectations for the next year- and- a- half. For the year 2008, the ECB predicts a 1.1% growth rate, and a rate of 1.2% for 2009. Only three months ago the ECB published 1.8% growth rate estimations for 2008, and 1.5% estimations for 2009. All of the above was interpreted by investors as an excellent opportunity to extend their short positions on the EUR, and the result was a sharp drop against all the major currencies. Looking ahead to today, various economic indicators will be published from the Euro-Zone; the German Industrial Production will be the most affecting indicator. Analysts are expecting a 0.5% drop in June as opposed to May, and another bearish inclination is likely to take place for the EUR. However, the U.S Non-Farm Employment Change will definitely be the most affecting global event today, and traders are well advised to follow its results as it seems to be the only thing that might generate a minor bearish correction for the USD, which would mean a rising trend for the EUR. JPY - Powerful Upswing for the JPY. Yesterday the JPY rose against all of its major currency counterparts. The JPY rose over 200 pips against the USD, and over 600 pips against the EUR, as the EUR/JPY saw a 13 month low, reaching beneath the 151.00 level. It seems that investors were bailing out of more leveraged carry trades, and began borrowing Yen at low rates in order to buy higher yielding currencies and commodities. Moreover, not only did the JPY appreciate against the major currencies such as the EUR and the GBP, it was also the only currency to appreciate against the USD. Analysts also estimate that the Euro-Zone's economic uncertainty has lead investors to seek out for other prospects aside from the EUR. The first choice was of course the USD, which initiated its current bullish trend. Since the U.S. economy is far from being a stabile economy to rely on recently, the JPY has suddenly became a very attractive prospect. Late at night, during early Asian trading, the Japanese Capital Spending was published, demonstrating a 6.5% decrease from the first quarter of the year. This turned a minor bearish correction for the JPY during the night. Today, the JPY will be absent from the economic calendar, and traders should follow overseas events in order to determine the JPY's direction for today. Special attention should be given to the U.S Non-Farm Employment Change that will be published at 12:30 GMT, and will be today's leading publication which will also affect the Yen's crosses. OIL - OPEC Scheduled Meeting to Discuss Potential Cuts to Oil Production. Dodging storms and defying international conflict, oil prices have continued to sink. Prices dropped over a buck last night to hit $107.71 this morning. Market analysts are expecting this price to continue further down this weekend to eventually sag below the $100 mark, in which case OPEC will meet to discuss a cut in production. OPEC, which produces 40% of the global energy supply, has stated that market volatility is still high and they will consider waiting for more stability before making any cuts, but if prices continue to fall, they will do just that. Another major factor affecting oil prices is the strengthening dollar. As it appreciated even more yesterday, dollar-based commodities witnessed price drops. If the dollar continues its upward swing, the prices of these commodities, given the stagnating economy, may see this as a persisting trend. The impact of today's Non-Farm Employment Change figures on the USD will no doubt have an effect on oil prices, but the decrease in demand for energy and the worldwide economic slowdown will most likely continue their downward push on crude oil's price until reaching a point where producers would intervene with production cuts. Technical News EUR/USD The pair is in a bearish formation and the daily studies are strengthening the notion that the pair's direction is down. The hourly confirm the bearish notion as the 4 Hour RSI has failed to cut the 80 level from the bottom section. It appears that the EUR/USD is heading towards 1.4000 GBP/USD The pair is consolidating at the 1.7590 level after the sharp drop from 1.7900. The momentum is bearish and the next key level will reach a 1.7500 level. If a breach through that level will occur a stronger bearish move will be validated that might take the pair to new lows. USD/JPY A mild bearish channel is forming On the 4 Hour chart with 104.50 as a support barrier which is going to be tested, probably today. In case of a breach the pair might be in its way to 103.00. Going short might be preferable after the breach through the support level will take place. USD/CHF The dailies and the 4 hour charts are bullish, so this pair is expected to continue its upward movement. This pair will probably target the 113.00 level and entering a long position on a dip will create a good opportunity for some profit taking. The Wild Card Oil It has been nothing but bearish momentum for this commodity in the past 5 days, and this downtrend appears to be continuing at full throttle. forex traders should note that Oil is breaking one support level after another and no halt appears to be in sight. The next target price should be around $100 a barrel. Indicators Date Time (GMT) Country Event Period Previous Forecast 9/05 08:00 USD Italian Trade Balance -0.06B -1.00B 10:00 EUR German Industrial Production m/m 0.2% -0.5% 11:00 CAD Employment Change -55.2K 9.0K 11:00 CAD Unemployment Rate 6.1% 6.2% 12:30 USD Unemployment Rate 5.7% 5.7% 12:30 USD Average Hourly Earnings m/m 0.3% 0.3% 14:00 CAD Ivey PMI 65.5 61.7 09/06 06:30 EUR ECB President Trichet Speaks - - FOREXYARD

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Japan's 2Q Ministry of Finance Capex Survey: Summary (Table)

By Minh Bui

Sept. 5 (Bloomberg) -- Following is the summary table for Japan's Financial Statements of Corporations by Industry for the second quarter from the Ministry of finance in Tokyo.

===============================================================================
                             2Q       1Q       4Q       3Q       2Q       1Q
                            2008     2008     2007     2007     2007     2007
===============================================================================

To contact the reporter on this story:
Minh Bui in Tokyo at  mbui@bloomberg.net

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Philippine Inflation Accelerates; Fastest in 16 Years

By Karl Lester M. Yap

Sept. 5 (Bloomberg) -- Philippine inflation accelerated to the fastest pace in more than 16 years, adding pressure on the central bank to increase borrowing costs further in October.

Consumer prices climbed 12.5 percent in August from a year earlier after rising a revised 12.3 percent in July, the National Statistics Office said in Manila today. That matches the median estimate in a Bloomberg News survey of 13 economists.

Central bank Governor Amando Tetangco has raised the benchmark interest rate three times since early June to rein in surging food and oil prices even as growth slowed. The $144 billion economy expanded at the weakest pace in three years in the second quarter as consumer spending waned.

``Despite the economic slowdown, there is still room for further rate hikes until the end of the year,'' said Jonathan Ravelas, a strategist at Manila-based Banco de Oro Unibank Inc. ``The central bank must be proactive as inflation expectations are still higher. It may peak only in the fourth quarter.''

Bangko Sentral ng Pilipinas increased the overnight borrowing rate by 0.25 percentage point to 6 percent on Aug. 28. It will meet twice more this year to decide on borrowing costs.

``Monetary policy needs to be appropriately tight to stabilize inflation,'' Tetangco said on Aug. 31.

The central bank in July increased its 2008 inflation estimate to a range of 9 percent to 11 percent, from a previous prediction of 7 percent to 9 percent, citing a weak peso and higher food, transportation and energy costs.

Oil, Rice

Domestic oil prices jumped about a quarter this year as crude rose to a record, fanning costs and wages. The government has approved higher transport fares, increased salaries for state workers and raised the minimum wage for employees in non- government companies.

The cost of rice, the staple food of the more than 91 million Filipinos, rose 43.2 percent in the 12 months to Aug. 26.

The peso has declined 12 percent against the dollar this year, making imports more expensive. The Philippines purchases almost all of its oil abroad and is the world's biggest buyer of rice.

Food, beverage and tobacco costs rose 17.2 percent last month from a year earlier, slowing from a 17.8 percent gain in July, today's report showed. Food accounts for half of the consumer-price index. Fuel, electricity and water inflation accelerated to 7.2 percent. Services costs climbed 13.5 percent.

To contact the reporter for this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net



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Hong Kong Growth Forecasts Cut for 2008, 2009 at Goldman Sachs

By Stephanie Wong

Sept. 5 (Bloomberg) -- Goldman Sachs Group Inc. cut Hong Kong growth forecasts for 2008 and 2009 as it expects consumption growth to slow more than earlier predicted amid a softer labor market.

It cut 2008 and 2009 growth forecasts to 4.2 percent and 4 percent from 5.2 percent and 5 percent, it said in a report dated today. Hong Kong will escape recession because of negative real interest rates, the report said.

To contact the reporter on this story: Stephanie Wong in Hong Kong at swong139@bloomberg.net



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South Korea Economy Grew 0.8%, as Initially Estimated

By William Sim

Sept. 5 (Bloomberg) -- South Korea's economy grew 0.8 percent in the second quarter from the previous three months, unchanged from an initial estimate, the central bank said.

Gross domestic product rose 4.8 percent from a year earlier, the bank said in Seoul. That's the weakest pace in more than a year and the same as the preliminary reading published July 25.

Household spending fell 0.2 percent last quarter, more than the first estimate of a 0.1 percent decline. Rising fuel costs and a weaker won are fanning the fastest inflation in almost 10 years, eroding the purchasing power of Korean consumers, who are burdened by record debt.

``Domestic demand will remain weak for a long time,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. ``The economy will likely slow gradually as exports cool in coming months amid a global economic slowdown.''

Net exports -- the difference between exports and imports -- powered half the growth in the second quarter, contributing 0.4 percentage point to the increase.

Domestic demand rose 0.2 percent from the previous quarter, less than the initial estimate of a 0.3 percent gain, today's report showed. Construction investment decreased 1 percent.

The Kospi index fell 1.7 percent to 1,401.94 at 9:24 a.m. in Seoul, in line with regional share-market declines. The won dropped 0.8 percent to 1,138.35 versus the dollar.

The government announced this week tax cuts of about $20 billion over the next five years.

``Tax cuts will lift household spending a bit and have a positive effect on economic growth to some extent,'' Jung Yung Taek, a statistics official at the central bank, told reporters.

Bank of Korea Governor Lee Seong Tae last month raised the benchmark interest rate to an eight-year high of 5.25 percent, saying inflation poses a greater threat than the cooling economy.

Yesterday, Lee said the bank will shift its focus to supporting economic growth if inflation moderates.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net.



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Euro Heads for Weekly Drop as Slowdown Spreads Across Europe

By Stanley White

Sept. 5 (Bloomberg) -- The euro slid against the dollar, heading for its biggest weekly decline in a month, on signs a global economic slowdown is spreading through Europe.

The currency headed for its biggest weekly decline versus the yen in more than a year after European Central Bank President Jean-Claude Trichet said the economy is ``weak'' and Luxembourg Finance Minister Jean-Claude Juncker said the euro is ``overvalued.'' The yen jumped to two-year highs against the Australian and New Zealand dollars as declines in stocks and commodities prompted investors to reduce holdings of higher- yielding assets funded in the Japanese currency.

``The euro may fall further as Trichet's comments cause people to lower expectations for an interest-rate increase,'' said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital Inc., a unit of Britain's third-biggest lender. ``The yen is also a beneficiary as falling commodities point to a global recession, and that's decreasing risk appetite.''

The euro fell to $1.4268 at 9:59 a.m. in Tokyo, from $1.4325 yesterday. It earlier touched $1.4214, the weakest since Oct. 24. The euro slid to 150.60 yen, the lowest since Aug. 17, 2007, before trading at 152.30 yen from 153.40 yen. It fell 4.6 percent this week. The yen reached 105.69 per dollar, the highest since July 17, and traded at 106.72 from 107.08. The euro may decline to $1.40 in six months, Umemoto said.

Carry Trades

The Australian dollar dropped 3.7 percent to 87.10 yen from late Asian trading yesterday. It touched 85.88 yen, the lowest since July 2006. New Zealand's dollar slumped 4.2 percent to 71.05 yen, reaching 69.96, the lowest since July 2006. The UBS Bloomberg Constant Maturity Commodity Index reached a seven- month low and the Standard & Poor's 500 Index tumbled the most in three months.

In carry trades, investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent benchmark interest rate compares with 4.25 percent in Europe, 7 percent in Australia and 8 percent in New Zealand. The risk to these trades is that currency moves may erase profits.

South Korea's won fell, headed for its biggest weekly loss since August 1998, on speculation global investors are shunning the nation's assets as the economy slows. The currency fell 0.9 percent to 1,139.20 per dollar as of 9:45 a.m. in Seoul, extending this week's decline to 4.4 percent.

The yen held gains after a government report showed capital spending by Japanese businesses unexpectedly fell in the three months ended June 30.

The euro dropped for a seventh day against the dollar, its longest decline since October 2006. The ECB yesterday kept its main refinancing rate at a seven-year high of 4.25 percent and Trichet told a press conference growth risks are on the ``downside.''

`Effectively Overvalued'

Europe's currency extended its decline after Luxembourg Juncker told reporters the currency is ``effectively overvalued.'' The euro has dropped more than 10 percent against the dollar from the record high of $1.6038 set on July 15.

``Juncker's comments pushed the euro lower,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. ``It's a bit of an overshoot. It reflected a market that really wants to buy dollars.''

The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, rose 0.2 percent to 78.795 after yesterday touching 79.077, the highest in almost a year.

Nonfarm Payrolls

U.S. nonfarm payrolls probably shrank by 75,000 last month, following a drop of 51,000 in July, according to the median forecast of 76 economists surveyed by Bloomberg News. The Labor Department's report is due at 8:30 a.m. in Washington.

``The dollar faces downside risks against the yen,'' said Tohru Sasaki, chief strategist in Tokyo at JPMorgan Chase & Co. and a former chief currency trader at the Bank of Japan. ``A worse-than-expected payrolls number would stoke fears about a global recession.''

The dollar may fall to 103.70 yen in the next few days, he said.

Sterling fell for a ninth day, reaching a two-year low of $1.7558 after the Bank of England yesterday kept its target lending rate at 5 percent. Policy makers judged the fastest inflation in more than a decade outweighed the risk that the British economy is sinking into a recession.

`Financial Tsunami'

The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' said Bill Gross, co-chief investment officer of Newport California-based Pacific Investment Management Co., manager of the world's biggest bond fund, on the firm's Web site yesterday.

The ECB lowered its 2008 economic growth forecast yesterday to about 1.4 percent from 1.8 percent and its 2009 prediction to 1.2 percent from 1.5 percent. The central bank raised its inflation forecast for this year to 3.5 percent from 3.4 percent and 2.6 percent from 2.4 percent for 2009.

Banks in the U.K., Spain and Ireland that have relied on the ECB for low-cost funding will have to pay more as it tightens lending rules to prevent abuses.

The ECB will increase the so-called `haircut' on most asset-based securities from Feb. 1 to 12 percent from as little as 2 percent, the central bank said yesterday. That means it will lend just 88 percent of the value of the paper.

``The liquidity situation continues to be severe and this could be one reason for the euro to weaken,'' said Masafumi Yamamoto, head of foreign exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader. ``This also focuses attention on the divergence in banks and economies in the euro region.''

The euro may fall to $1.40 this month after breaking below a cloud on its weekly ichimoku chart used to show support levels, he said.

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net

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Korean Won Has Biggest Weekly Loss Since 1998 as Growth Slows

By Kim Kyoungwha and Judy Chen

Sept. 5 (Bloomberg) -- South Korea's won fell, headed for its biggest weekly loss since August 1998, on speculation global investors are shunning the nation's assets as Asia's fourth- largest economy sputters.

It will be the sixth straight week the Korean currency has declined, the longest losing streak since April 2001, and takes this year's loss to 18 percent, the worst performance in Asia. Gross domestic product increased 0.8 percent in the second quarter, the slowest pace in more than a year, central bank data confirmed today.

``Market players are cautious about unrest in global financial markets which is strengthening sentiment for the dollar,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. ``Importers' deals and stock sales are knocking the wind out of the won.''

The currency fell 0.9 percent to 1,139.20 per dollar as of 9:45 a.m. in Seoul, extending this week's decline to 4.4 percent, according to Seoul Money Brokerage Services Ltd. The won will trade between 1,128 and 1,145 today, Kim said.

Overseas investors sold more Korean shares than they bought on all but four trading days since the start of last month, Korea Exchange data shows.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.

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Australia's S&P/ASX Falls to 4-Week Low; Westfield, BHP Decline

By Ian C. Sayson

Sept. 5 (Bloomberg) -- Australia's stocks fell, with the benchmark index heading to its lowest in more than four weeks, after the U.S. reported rising job claims and metal prices declined.

Westfield Group, the world's biggest shopping center owner by market value, declined 2.5 percent on concern a global slowdown will hurt sales and profit. BHP Billiton Ltd., the world's largest miner, fell for the sixth-day, its longest losing streak this year, on speculation demand for metals will weaken.

The S&P/ASX 200 Index slipped 122.10, or 2.5 percent, to 4,857.40 as of 10:49 a.m. in Sydney, heading for its lowest close since Aug. 5. The S&P/ASX 200 Index futures contract due in September plunged 2.8 percent to 4,860 while the All Ordinaries Index declined 121.80, or 2.4 percent to 4,929.10.

Westfield, which has malls in 13 U.S. states, fell 2.3 percent to A$17.24. BHP Billiton dropped 1.4 percent to A$36.59, a four-week low.

To contact the reporter on this story: Ian C. Sayson in Manila at isayson@bloomberg.net



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Asia Stocks Fall for Fifth Day on Growth Concerns; Honda Drops

By Chua Kong Ho

Sept. 5 (Bloomberg) -- Asian stocks fell for a fifth day, extending a global rout, after rising U.S. jobless claims deepened concern a global economic slowdown is cutting demand for the region's exports.

Honda Motor Corp., which gets more than half its sales from North America, slid 2.8 percent after U.S. unemployment claims rose to the highest in almost five years. Santos Ltd., Australia's No. 3 oil and gas producer, sank 2.8 percent as crude oil fell to the lowest in more than five months. Sony Corp., the world's second-largest maker of consumer electronics, dropped 3 percent after announcing a worldwide computer recall.

``Sentiment is terrible,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. ``You've got this ongoing correction in commodity prices, issues regarding financials, and concerns about profit downgrades in economically-sensitive companies.''

The MSCI Asia Pacific Index lost 1.4 percent to 117.53 at 9:29 a.m. in Tokyo. The measure is headed for a 6.3 percent decline this week and its lowest since July 19, 2006. Nine of the 10 industry groups on the index fell, with about 50 stocks declining for every one that rose.

The region's benchmark index has tumbled 25 percent this year, almost twice the drop in the S&P 500, as a global slowdown cuts demand for television sets and cars made in Asia.

Japan's Nikkei 225 Stock Average fell 2.6 percent to 12,228.48. Australia's S&P/ASX 200 Index dropped 2.5 percent. Westfield Group, which owns 55 U.S. malls, sank 1.8 percent.

U.S. Unemployment

South Korea's Kospi Index retreated 1.8 percent. Hyundai Motor Co. declined 4.8 percent after Yonhap News reported labor union members rejected an initial pay agreement reached by labor leaders and management.

U.S. stocks tumbled, sending the Standard & Poor's 500 Index down 3 percent for the longest stretch of losses since January, after initial claims for jobless benefits exceeded forecasts and a decline in oil pushed energy producers lower. S&P futures were little changed today.

The number of people staying on jobless rolls rose to 3.435 million in the U.S., the highest since November 2003, in the week ended Aug. 23, the Labor Department said yesterday. Oil traded at $106.50 a barrel at 8:56 a.m. in Tokyo, after falling 1.3 percent yesterday.

AMP is ``underweight'' Asian, Australian and emerging market shares and has been increasing exposure to cash and bonds since mid-August, said Oliver.

To contact the reporter for this story: Chua Kong Ho in Shanghai at kchua6@bloomberg.net;

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Japan Stocks Plunge, Set for Weekly Decline, on U.S. Jobs, Yen

By Masaki Kondo

Sept. 5 (Bloomberg) -- Japan's stocks tumbled, headed for the worst weekly slump in a year, after jobless claims in the U.S. rose to a five-year high, deepening concern demand for Japanese- made goods will fall in the world's largest economy.

Komatsu Ltd., the world's second-biggest maker of earthmoving equipment, tumbled 4.7 percent, set for the worst week in eight years. Mazda Motor Corp., Japan's fourth-biggest automaker, sank 6.5 percent after the yen rose against the euro and dollar, cutting the value of overseas sales. Resona Holdings Inc. fell 9.4 percent after Bill Gross, manager of the world's biggest bond fund, warned of a ``financial tsunami.''

``There is an ongoing move in the market where investors are factoring in a worsening global economy,'' Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., said in an interview with Bloomberg Television.

The Nikkei 225 Stock Average declined 344.60, or 2.7 percent, to 12,213.06 as of 9:48 a.m. in Tokyo. The broader Topix index fell 32.83, or 2.7 percent, to 1,168.82, set for the biggest slump since March 17. The Topix was headed for a 6.9 percent weekly drop, the worst since Aug. 17 last year.

The number of people staying on jobless rolls rose to 3.435 million in the U.S., the highest since November 2003, in the week ended Aug. 23, the Labor Department said yesterday. First-time claims for unemployment benefits increased last week, while economists had expected claims to fall.

The European Central Bank lowered its economic growth projection for 2008 to 1.4 percent from 1.8 percent and its 2009 forecast to 1.2 percent from 1.5 percent. The yen rose against the euro to a level not seen in more than a year and appreciated versus the dollar to as much as 105.69, the strongest since July 17. A stronger local currency reduces Japanese companies' repatriated overseas sales.

Europe's Slowdown

Japanese businesses cut investment in the second quarter amid record oil and commodity prices and a global slowdown that damped demand for the country's exports, the Ministry of Finance said today.

Komatsu dropped 4.7 percent to 1,915 yen, headed for a 17 percent weekly drop, the most since October 2000. Mazda dived 6.5 percent to 529 yen. Nintendo Co., the world's biggest maker of handheld game players, lost 3.8 percent to 51,300 yen in Osaka trading after Nikko Citigroup Ltd. lowered its rating on the stock to ``hold'' from ``buy,'' saying earnings will peak out this business year.

Daiwa Securities Group Inc., Japan's second-largest brokerage, said yesterday a slowdown in Europe's economy will likely drive down profit at Japanese companies more than it had previously estimated.

Resona, Japan's fourth-biggest bank, plunged 9.4 percent to 92,000 yen, the lowest since August 2003. Mizuho Financial Group Inc., the second largest, dropped 5.2 percent to 418,000 yen and its affiliate Shinko Securities Co. lost 4.3 percent to 292 yen.

Gross, co-chief investment officer of Pacific Investment Management Co., yesterday said the U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami.''

Nikkei futures expiring in September retreated 2.9 percent to 12,220 in Osaka and slumped 3 percent to 12,215 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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Japan Capital Spending Fell Last Quarter on Oil Costs

By Jason Clenfield

Sept. 5 (Bloomberg) -- Japanese businesses cut investment in the second quarter amid record oil and commodity prices and a global slowdown that damped demand for the country's exports.

Capital spending excluding software fell 7.6 percent in the three months ended June 30, a fifth straight quarterly decline, the Ministry of Finance said today in Tokyo. Profits fell 5.2 percent. The government will use today's report to revise its gross domestic product figures on Sept. 12.

Stocks fell and bonds rose on concern the drop in spending will delay a recovery after the world's second-largest economy shrank the most in seven years last quarter. U.S. jobless claims fell more than economists estimated and German factory orders declined, reports showed yesterday, indicating the global slowdown may deepen.

``The headline number is extremely bad,'' Koji Shimamoto, chief strategist at BNP Paribas in Tokyo, told Bloomberg Television. ``Not only the U.S., but Japan, Europe and emerging economies are also experiencing a downturn, fueling concern that global growth will slow further.''

The Nikkei 225 Stock Average slid 2.5 percent to 12,248.83 as of 9:22 a.m. in Tokyo, after yesterday closing at the lowest level in five months. The yield on Japan's 10-year bond fell 6.5 basis points to 1.435 percent.

Weakening demand at home and abroad has damped demand for Japanese products, and record energy and material costs have eroded profits, reducing the incentive for companies to spend.

Nippon Paper

Nippon Paper Group Inc. and Oji Paper Co. will this month reduce output of paper used in catalogs because of weaker demand from Japanese retailers and real estate companies, the Nikkei newspaper reported, without saying where it got the information.

Business spending, which was calculated in the preliminary gross domestic product report using incomplete data, fell 0.2 percent from the previous quarter. Shimamoto said today's numbers show the government will probably have to revise down the capital spending component of the revised GDP report.

Still, oil prices have eased 26 percent since reaching a record in July, improving the outlook for Japanese businesses whose profits have declined for four quarters. After contracting in the three months through June, the world's second-largest economy has shown signs of recovery: exports, industrial production and housing starts all rose in July.

``I think we've seen the worst of it,'' Takuji Okubo, senior economist at Merrill Lynch & Co. in Tokyo, said before today's report. Concern about a sharp slowdown among emerging markets is ``overdone,'' he said, citing growth in China, which has overtaken the U.S. as Japan's top export customer.

OECD

The Organization for Economic Cooperation and Development said this week that Japan would outpace every major economy in recovering from the global slowdown. Japan's economy shrank an annualized 2.4 percent last quarter, according to the government's preliminary report released Aug. 13, led by a drop in exports and consumer spending.

Bank of Japan Governor Masaaki Shirakawa said last week the economy is ``unlikely to experience a deep adjustment phase.'' He said Japan is more resilient than in previous slowdowns because companies have shed excess workers, capacity and debt.

Sanyo Electric Co., Japan's largest maker of rechargeable batteries, said this week it will build a new domestic factory to meet demand for batteries used in portable electronics. The company is already working on construction of another plant near Osaka that will start operations in the first half of 2009.

``Japan hasn't had the credit crisis and it hasn't had the collapse in housing prices that are the bigger problems in the U.S. and much of Europe,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. ``The economy will pick up as the inflation shock fades. The second-quarter data were clearly as bad as it gets.''

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



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Yen, South Korean Won, Indonesian Rupiah: Asia Currency Preview

By Bob Chen

Sept. 5 (Bloomberg) -- The following events and economic reports may influence trading in Asian currencies today.

Exchange rates are from the previous session.

Japanese yen: The Finance Ministry will release quarterly capital expenditure data at 8:50 a.m. in Tokyo.

Finance Minister Bunmei Ibuki, Economic and Fiscal Policy Minister Kaoru Yosano and Chief Cabinet Secretary Nobutaka Machimura will hold briefings after a cabinet meeting this morning. Machimura will hold a second briefing at 4 p.m. in Tokyo.

The yen was at 108.22 a dollar at 8:30 a.m. in New York.

South Korean won: The central bank will release a report on economic growth for the second quarter at 8 a.m. local time. Governor Lee Seong Tae said yesterday the central bank has enough foreign-currency reserves to help protect the economy from external shocks and there is no need to worry that the country is facing a financial crisis.

The won was at 1,129.

Taiwan dollar: Consumer prices in August rose 5 percent from a year earlier, cooling from a 14-year high of 5.92 percent in July, according to a Bloomberg News survey of economists before the government reports the data at 4 p.m.

The Taiwan dollar was at NT$31.761.

Philippine peso: Annualized inflation quickened to 12.5 percent in August, from 12.2 percent in July, a Bloomberg News survey showed before a government report at 9 a.m. The central bank will report today foreign-exchange reserves for August.

The peso was at 46.54.

Thai baht: The central bank is scheduled to report the nation's foreign-exchange reserves as of Aug. 29 at 2:30 p.m. in Bangkok. Reserves were at $101.7 billion at the end of the previous week.

The baht was at 34.44.

Indonesian rupiah: The central bank said yesterday it remains ``on alert'' to fight inflation after raising its benchmark interest rate by a quarter-percentage point to 9.25 percent, the fifth increase since May. The central bank may report as early as today the nation's foreign-exchange reserves as of Aug. 31. They climbed to $60.56 billion in July from $59.45 billion the previous month.

The rupiah was at 9,254.

Indian rupee: Wholesale prices rose 12.34 percent in the week ended Aug. 23 from a year earlier, after increasing 12.40 percent the previous week, Trade Minister Kamal Nath said yesterday after trading hours.

The rupee was at 44.375.

To contact the reporter on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.



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Euro Trades at Lowest Level Since October as ECB Cites Weakness

By Stanley White and Ye Xie

Sept. 5 (Bloomberg) -- The euro fell to the lowest level since October against the dollar after European Central Bank President Jean-Claude Trichet said that the region is in an ``episode of weak activity.''

The 15-nation euro also slumped to the lowest level versus the yen in a year as Luxembourg Finance Minister Jean-Claude Juncker said the currency is ``overvalued.'' The yen jumped to the highest in more than a month against the U.S. dollar and hit two-year highs against the Australian and New Zealand dollars on speculation a global slowdown and commodity declines will lead to a reduction in holdings of higher-yielding assets.

``The euro may fall further as Trichet's comments cause people to lower expectations for an interest-rate increase,'' said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital Inc., a unit of Britain's third-biggest lender. ``The yen is also a beneficiary as falling commodities point to a global recession, and that's decreasing risk appetite.''

The euro fell to $1.4266 at 8:29 a.m. in Tokyo, from $1.4325 yesterday. It earlier touched $1.4214, the weakest since Oct. 24. The euro slid to 150.60 yen, the lowest since Aug. 17, 2007, before trading at 152.00 yen from 153.40 yen. The yen reached 105.69 per dollar, the highest since July 17, and traded at 106.57 from 107.08. The euro may decline to $1.40 in six months, Umemoto said.

Carry Trades

The Australian dollar dropped 3.7 percent to 87.04 yen from late Asian trading yesterday. It touched 85.88 yen, the lowest since July 2006. New Zealand's dollar slumped 4.3 percent to 71.02 yen, reaching 69.96, the lowest since July 2006. The UBS Bloomberg Constant Maturity Commodity Index reached a seven- month low and the Standard & Poor's 500 Index tumbled the most in three months.

In carry trades, investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent benchmark interest rate compares with 4.25 percent in Europe, 7 percent in Australia and 8 percent in New Zealand. The risk to these trades is that currency moves may erase profits.

The yen was little changed after a government report showed capital spending by Japanese businesses unexpectedly fell in the three months ended June 30.

The euro dropped for a seventh day against the dollar, its longest decline since October 2006. The ECB kept its main refinancing rate at a seven-year high of 4.25 percent to curb inflation running at the fastest pace in more than 16 years even amid signs of a deepening economic slowdown. The ``upside risks to price stability prevail'' and growth risks are on the ``downside,'' Trichet said at a press conference.

`Effectively Overvalued'

Europe's currency extended its decline after Luxembourg Juncker told reporters the currency is ``effectively overvalued.'' The euro has dropped more than 10 percent against the dollar from the record high of $1.6038 set on July 15.

``Juncker's comments pushed the euro lower,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. ``It's a bit of an overshoot. It reflected a market that really wants to buy dollars.''

The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, rose 0.2 percent to 78.795 after yesterday touching 79.077, the highest in almost a year.

U.S. payrolls probably shrank by 75,000 last month, following a drop of 51,000 in July, according to the median forecast of 76 economists surveyed by Bloomberg News. The Labor Department's report is due at 8:30 a.m. in Washington.

Sterling fell for a ninth day, reaching a two-year low of $1.7558 after the Bank of England yesterday kept its target lending rate at 5 percent. Policy makers judged the fastest inflation in more than a decade outweighed the risk that the British economy is sinking into a recession.

`Financial Tsunami'

The U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami,'' said Bill Gross, co-chief investment officer of Newport California-based Pacific Investment Management Co., manager of the world's biggest bond fund, on the firm's Web site yesterday.

``The market remains fearful of another `credit event,''' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``Demand for safe-haven currencies should rise. Tightening credit standards force hedge funds out of these carry positions.''

The ECB lowered its 2008 economic growth forecast yesterday to about 1.4 percent from 1.8 percent and its 2009 prediction to 1.2 percent from 1.5 percent. The central bank raised its inflation forecast for this year to 3.5 percent from 3.4 percent and 2.6 percent from 2.4 percent for 2009.

``It's very tough for them to cut rates,'' said Jens Nordvig, a senior currency strategist in New York at Goldman Sachs Group Inc. ``It's difficult for the dollar rally to have another leg.''

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.netYe Xie in New York at yxie6@bloomberg.net

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Australian, New Zealand Dollars Slump to 2-Year Lows Versus Yen

By Chris Young

Sept. 5 (Bloomberg) -- The Australian and New Zealand dollars slumped to their lowest levels in more than two years against the yen as a slide in U.S. stocks spurred traders to sell higher-yielding assets financed in Japan's currency.

The currencies also fell to their weakest in more than a year against the U.S. dollar as concern global economic growth is slowing pushed down prices for commodities the nations sell. The Australian and New Zealand dollars declined the most since March against the yen as the Standard & Poor's 500 Index tumbled the most in three months, discouraging so-called carry trades.

``They're incredible moves, everything is working against the Australian and New Zealand dollars,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. ``There's U.S. dollar strength across the board, equity market weakness so carry-trade sentiment is poor, and because this means downward revisions to global growth, as commodity currencies they're also suffering.''

The Australian dollar fell 3.8 percent to 86.96 yen as of 9:51 a.m. in Sydney, from 90.40 yen late in late Asia. The currency has dropped 6.8 percent from a week ago, poised for its seventh weekly loss. It earlier touched 85.88 yen, the lowest since July 2006. The currency dropped 2 percent to 81.72 U.S. cents, after touching 81.03 cents, the weakest since August 2007.

New Zealand's dollar slumped 4.1 percent to 71.11 yen, reaching 69.96, the lowest since July 2006. It lost 2.7 percent to 66.64 U.S. cents, touching 65.94 cents, the least since November 2006.

Stocks Slide

Investors sold the Australian and New Zealand dollars and returned money borrowed in Japan as the S&P 500 slid 3 percent, the most since June 6, after an increase in U.S. jobless claims heightened concern the economic slump is deepening.

The Australian and New Zealand currencies, known as the Aussie and Kiwi, are favorites of so-called carry trades because the nations' benchmark interest rates are 7 percent and 8 percent, respectively, compared with 0.5 percent in Japan and the Federal Reserve's target of 2 percent.

In carry trades, investors get funds in a country with low borrowing costs and buy assets where returns are higher. The risk to these trades is that currency moves may erase profits.

The Aussie extended its loss against the U.S. dollar this quarter to about 15 percent, the worst performer of the 16 most- traded currencies, and the Kiwi stretched its losses to almost 13 percent, the second-biggest drop, as the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities slid for a fifth day to its lowest since Feb. 13.

Bonds Gain

Raw materials account for about 60 percent of Australia's exports and sales of commodities such as lumber make up 70 percent of New Zealand's overseas shipments.

Australian government bonds gained, pushing the yield on the 10-year bond down 12 basis points, or 0.12 percentage point, to 5.65 percent, the lowest since March 2007, according to data compiled by Bloomberg. The price of the 5.25 percent bond maturing in March 2019 rose 0.898, or A$8.98 per A$1,000 face amount, to 96.885.

New Zealand's 6 percent bond due December 2017 rose for a third day, pushing the yield down 3 basis points to 5.93 percent, the lowest since April 2007.

To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.

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Crude Oil Falls as Weakening Euro Declines Against U.S. Dollar

By Mark Shenk and Samantha Zee

Sept. 5 (Bloomberg) -- Crude oil fell for a sixth straight session to its lowest in more than five months as the euro accelerated its decline against the dollar, curbing the appeal of commodities as an inflation hedge.

Oil has tumbled more than 6 percent so far this week as the euro dropped to the weakest this year against the U.S. currency amid signs that Europe's economy is slowing. Investors looking to hedge against the dollar's decline earlier this year helped lead crude oil, gold, corn and gasoline to records.

``We are continuing to see investors exit the commodity trade as a result of the dollar's strength and a flight to quality in treasuries,'' said John Kilduff, senior vice president of risk management at MF Global Inc. in New York. ``Also, demand is terrible because of the weak economy.''

Crude oil for October delivery fell 45 cents to $107.44 a barrel at 8:46 a.m. Sydney time on the New York Mercantile Exchange. Yesterday, oil fell $1.46, or 1.3 percent, to settle at $107.89 a barrel in New York.

Prices, which are up 44 percent from a year ago, are down 27 percent from the record $147.27 reached July 11.

The euro fell to $1.4334 against the U.S. dollar from $1.4498 yesterday. It touched $1.432, the lowest since Dec. 21. The European currency has dropped for six straight days.

Luxembourg Finance Minister Jean-Claude Juncker, who chairs a group of counterparts from the euro-area, said the economic situation in Europe is ``not good'' and the European Union will cut its growth forecasts this month.

The European Commission's 2008 gross domestic product forecast will be cut to as low as 1 percent when it publishes new predictions next week, Juncker told reporters in Luxembourg yesterday. It previously forecast growth of 1.7 percent.

Oil Stockpiles

Crude-oil stockpiles fell 1.9 million barrels to 303.9 million barrels in the week ended Aug. 29, the department said in its weekly report yesterday. Analysts surveyed by Bloomberg News were split over whether the report would show an increase or drop. Platforms in the Gulf and refineries in coastal areas shut as Hurricane Gustav approached Louisiana.

``It's rather telling that the market can't go higher on this bullish report,'' said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky. ``Traders are taking the numbers with an appropriate grain of salt. Tropical storms impact the arrivals of tankers and refinery activity.''

Prices fell as low as $105.46 on Sept. 2, the lowest since April, after Hurricane Gustav, the most powerful storm since Katrina and Rita in 2005, caused little damage to Gulf of Mexico production. The Gulf is responsible for more than one-fifth of U.S. oil production.

The Organization of Petroleum Exporting Countries, the supplier of 40 percent of the world's oil, will probably keep producing at a record pace. The 13-nation group will reject calls from Venezuela and Iran to trim supplies at its Sept. 9 meeting in Vienna, according to 29 of the 32 energy analysts surveyed by Bloomberg News.

OPEC Quotas

The OPEC members with quotas produced about 592,000 barrels a day more than their official limit of 29.673 million last month, according to Bloomberg estimates. Iraq has no quota. All the countries except Saudi Arabia are pumping at close to capacity to meet rising demand and compensate for declining supplies from Nigeria, Iran and Venezuela.

BP Plc and its billionaire partners in TNK-BP, Russia's third-largest oil company, agreed to oust the chief executive officer and expand the board to resolve an eight-month dispute that threatened the British company's future in the country.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net; Samantha Zee in Los Angeles at szee@bloomberg.net.

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Australia Stocks Update: S&P/ASX 200 Falls 68.30 to 4,911.20

By Darren Boey

Sep. 5 (Bloomberg) -- Australia's benchmark stock index, the S&P/ASX 200 Index, fell 1.37 percent at 10:05 a.m.

The index of 200 companies traded on the Australian Stock Exchange fell 68.30 to 4,911.20. Among the stocks in the index, 7 rose, 117 fell and 76 were unchanged.

Declines in the S&P/ASX 200 Index were led by Bhp Billiton Ltd, Commonwealth Bank Of Australia and Australia & New Zealand Banking Group Ltd. About 88.18 million shares changed hands on the Australian Stock Exchange.

Bhp Billiton Ltd, which fell 71 cents to A$36.40, was the most active stock by value in Australia.

The next most-active issues were Australia & New Zealand Banking Group Ltd, which fell 59 cents to A$16.33, and Commonwealth Bank Of Australia, which fell A$1.30 to A$41.60.



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Japan's Stock Futures Drop on U.S. Unemployment, Stronger Yen

By Masaki Kondo

Sept. 5 (Bloomberg) -- Japan's stock futures tumbled after jobless claims in the U.S. rose to a five-year high, deepening concern demand for Japanese-made goods will fall in the world's largest economy.

U.S.-traded receipts of Honda Motor Co. sank 4.1 percent from the closing share price in Tokyo yesterday. Canon Inc. slumped 3.9 percent after the yen strengthened against the euro and dollar, cutting the value of overseas sales. Mizuho Financial Group Inc. dropped 4.9 percent after Bill Gross, manager of the world's biggest bond fund, warned of a ``financial tsunami.'' Sony Corp. lost 3.4 percent after a worldwide computer recall.

``There is an ongoing move in the market where investors are factoring in a worsening global economy,'' Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., said in an interview with Bloomberg Television.

Nikkei 225 Stock Average futures expiring in September closed at 12,235 in Chicago, 2.7 percent lower than 12,580 earlier in Osaka and 2.8 percent down from 12,590 in Singapore. The Bank of New York Japan ADR Index, which tracks American depositary receipts of Japanese companies, slumped 3.4 percent.

Yesterday, the Nikkei retreated 1 percent to 12,557.66 in Tokyo. The broader Topix index dropped 1.6 percent to 1,201.65, the lowest close since March 19.

The number of people staying on jobless rolls rose to 3.435 million in the U.S., the highest since November 2003, in the week ended Aug. 23, the Labor Department said yesterday. First-time claims for unemployment benefits increased last week, while economists had expected claims to fall.

`Financial Tsunami'

European Central Bank lowered its economic growth projection for 2008 to 1.4 percent from 1.8 percent and its 2009 forecast to 1.2 percent from 1.5 percent. The yen rose against the euro to a level not seen in more than a year and appreciated versus the dollar to as much as 105.69, the strongest since July 17.

A stronger local currency reduces Japanese companies' repatriated overseas sales.

Gross, co-chief investment officer of Pacific Investment Management Co., yesterday said the U.S. government needs to start using more of its money to support markets to stem a burgeoning ``financial tsunami.''

Sony yesterday recalled about 440,000 units of its Vaio notebook computers, citing a risk of overheating that may lead to burns. The company didn't provide an estimated cost for the recall.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.



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Economic Calendar Eco Data 9/5/08

GMT Ccy Events Actual Consensus Previous Revised 23:50 JPY Japan Business capex Q1 2.50% -4.90% 10:00 EUR Germany Industrial prod'n M/M Jul -0.50% 0.20% 11:00 CAD Canada Net change in employment Aug 8.0K -55.20K 11:00 CAD Canada Unemployment rate Aug 6.20% 6.10% 12:30 USD U.S. Non-farm payrolls Aug -75.0K -51.0K 12:30 USD U.S. Unemployment rate Aug 5.70% 5.70% 12:30 USD U.S. Avg. hourly earnings M/M Aug 0.30% 0.30% 14:00 CAD Canada Ivey PMI Aug 62.5 65.5

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