Friday, September 26, 2008

Yam Hears Echoes of Markets Betrayed in Rescue of Wall Street

By Aaron Pan and Jake Lee

Sept. 26 (Bloomberg) -- Joseph Yam, ridiculed a decade ago for directing $15 billion of government stock purchases to defend the Hong Kong dollar, can relate to U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke as they attempt to rescue Wall Street from collapse.

Yam, chief executive of the Hong Kong Monetary Authority since 1993, favors U.S. government intervention to cure a seizure in credit markets. He also wants regulators to safeguard the public by tightening bank industry rules and issuing ``health warnings'' on investments they consider risky.

``If the market is failing then authorities have the responsibility to put it right,'' Yam, 60, said in an interview this week on the 56th floor of the tallest building in Hong Kong as the clouds of typhoon Hagupit swept across the city. ``The market does not exist to serve the interests of financial intermediaries. It exists to serve the public.''

Yam offers a unique perspective on the credit crunch having guided Hong Kong through the Asian financial crisis that started in 1997 and a subsequent economic slump that wiped 65 percent off home prices in five years. The longest-serving head of a central bank in a global finance hub also manages the $181 billion pool of assets that backs the Hong Kong dollar's fixed exchange rate.

Yam's purchase of stocks to restore confidence in the Hong Kong dollar in August 1998 was criticized at the time by former Federal Reserve Chairman Alan Greenspan, who said the intervention eroded the HKMA's credibility.

U.S. Bailout

Ten years later, Paulson and Bernanke's $700 billion plan to bail out banks by purchasing their troubled assets is under fire from some U.S. lawmakers. Senator John Cornyn, a Republican from Texas, said ``as long as this is portrayed as a bailout for Wall Street, it's a loser.''

Presidential candidates Barack Obama and John McCain say any proposal must include provisions for recouping government money and returning it to taxpayers.

The HKMA recovered the HK$118 billion ($15 billion) spent on its intervention within two and a half years, by selling shares and collecting dividends, and still held stock worth HK$110 billion. The Hang Seng Index has almost tripled from its low in August 1998.

HKMA rules requiring homebuyers pay at least 30 percent of a property's value as a deposit helped the banking industry survive the city's housing crash. Hong Kong's mortgage delinquency rate reached 1.4 percent in 2001, compared with more than 6 percent in the U.S. currently.

`Wild Conditions'

``Yam will be celebrated for overseeing the economy during some wild conditions,'' said Tim Condon, head of Asia research in Singapore at ING Groep NV, the biggest Dutch finance company. ``His place in history is assured and he won't have to worry about having to defend his actions of 10 years ago.''

Yam says confidence in Hong Kong's fixed exchange rate is so solid that there is no pressure on it to weaken, even as a slide in stock markets causes currencies across Asia to decline. The city's currency has been fixed at about HK$7.8 per U.S. dollar since 1983, a year before the U.K. signed an agreement to transfer Hong Kong to Chinese sovereignty in 1997, and is allowed to trade 5 cents either side of that level.

The Hong Kong dollar's 0.3 percent gain since June 30 compares with declines of 10 percent in the South Korean won and 9 percent in the Indian rupee. The currencies depreciated even as the Bank of Korea spent a record $20.9 billion and the Reserve Bank of India $7.9 billion buying their currencies in August, according to HSBC Holdings Plc.

`Heaven Help Us'

``If the U.S. plan is not enacted as soon as possible, with the speed of financial markets today, heaven help us all because it will be a severe drag on the global economy,'' Hong Kong Chief Secretary Henry Tang said in a separate interview. ``People around the world will end up footing the bill.''

Yam's critics say the peg distorts markets and has fueled inflation as the Hong Kong dollar followed the U.S. currency lower, making imported goods more expensive. Consumer prices rose 6.3 percent in July from a year earlier, the biggest increase in more than a decade, before government rent waivers reduced it to 4.6 percent last month.

``It's ironic that Hong Kong is described as the freest economy in the world when there's still a currency peg in place,'' said Willy Wo-Lap Lam, adjunct professor of history at the Chinese University of Hong Kong. ``It comes down to a lack of political courage from the Hong Kong bureaucrats.''

`Alphabet Soup'

The credit crisis is likely to make governments even more cautious towards market reforms, ING's Condon says. Lehman Brothers Holdings Inc. filed for protection from creditors this month in the biggest bankruptcy in history and the U.S. government took over the world's biggest insurer and its two largest mortgage-finance companies, Fannie Mae and Freddie Mac.

The HKMA pledged this week to support more than 10,000 individuals who say they suffered losses on investments in credit-linked securities arranged by Lehman. Yam also had to reassure depositors that Bank of East Asia Ltd. has ``ample capital,'' after a run at the city's third-largest lender. Yam favors tighter regulation of financial products.

``What's happening is a result of financial innovation getting out of control,'' said Yam. ``You have an alphabet soup that is too thick that you can't see the bottom and when you finish you've had too much,'' he said, referring to derivatives such as collateralized debt obligations, or CDOs, and credit- default swaps, or CDS.

Asian central banks have tightened controls on corporate debt since 1997, built up more than $4 trillion in reserves and set up an $80 billion pool among 13 Asian countries that can be used to protect currencies.

Greenspan Criticism

A decade ago, Yam said his stock purchases would hit speculators ``where it hurts'' by causing losses on short positions on the city's shares and currency. His success earned him the nickname ``Yambo'' after the movie about the vengeful Vietnam veteran ``Rambo.'' A short position profits from declines in a security.

Greenspan slammed the move, telling members of the House Banking Committee the step ``won't succeed'' and that it eroded ``some of the extraordinary credibility'' of the HKMA.

Yam responded by writing a letter to his U.S. counterpart on Sept. 17, 1998, blaming a ``sophisticated assault'' on the city by finance companies acting in concert and calling for world leaders to regulate against such attacks.

``I hated having to intervene in the markets,'' Yam said in this week's interview. ``I'm a believer in free markets and at the time I felt like I was betrayed by a best friend.''

Shielding the City

Yam's management of the peg has shielded the city against the worst effects of the current crisis this month, according to John Greenwood, the chief international economist at Invesco Asset Management in London. Greenwood designed the 25-year-old Hong Kong dollar peg.

``It's extraordinary how stable the peg has been,'' he said. ``If in addition to panic over the equity and bond markets, Hong Kong had had to deal with a currency crisis like other Asian economies, that would really have intensified the problems.''

Tang, Hong Kong's No. 2 official, said the U.S. must take ``leadership in terms of cleaning up its own house.'' Yam says regulators need to ensure more transparency, rigorous debt ratings and minimum standards for assets sold to investors.

``You need regulators to take a view,'' said Yam. ``You need a health warning.''

To contact the reporters on this story: Aaron Pan in Hong Kong at Apan8@bloomberg.net; Jake Lee in Hong Kong at jlee127@bloomberg.net.

Dollar Drops, Set for Weekly Decline, as U.S. Debates Rescue

By Stanley White and Ron Harui

Sept. 26 (Bloomberg) -- The dollar fell, heading for a second weekly decline against the yen, as U.S. lawmakers disagreed over a finance industry rescue plan and Washington Mutual Inc. became the nation's biggest bank to collapse.

The greenback was on course for a weekly loss against the euro after a group of Republicans opposed to the Treasury's $700 billion asset-purchase plan entered negotiations with an alternative proposal. The yen headed for weekly gains against the Australian and New Zealand dollars as investors pared so- called carry trades on concern the talks will drag on.

``The U.S. needs to act quickly, because the financial system and the dollar are at risk,'' said Akio Shimizu, chief manager of currency trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan's largest publicly listed lender. ``Congressional discussions over the rescue package aren't going smoothly at all.''

The dollar declined to 105.90 yen at 11:41 a.m. in Tokyo from 106.56 late yesterday in New York, on course for a 1.4 percent decline this week. It also fell to $1.4667 per euro from $1.4609 yesterday and $1.4466 on Sept. 19. The euro bought 155.33 yen, down 0.2 percent from late yesterday and little changed for the week.

The Australian dollar bought 88.61 yen, down 1.1 percent from a week ago, while the New Zealand dollar fell 1.7 percent to 72.78 yen.

New Proposal

In carry trades investors get funds in countries with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 7 percent in Australia and 7.5 percent in New Zealand. The risk is that currency moves erase profits.

The new proposal to ease a U.S. credit crisis came after President George W. Bush met with Republican presidential candidate John McCain and Democratic rival Barack Obama to discuss the financial-markets rescue, according to Senate Banking Committee Chairman Christopher Dodd.

Dodd, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke had been pursuing a plan that would use taxpayers' money to buy troubled assets from financial companies. The rival proposal calls for a mortgage-backed security insurance fund financed by premiums from the holders of those securities. Paulson rejected the latter, according to House Financial Services Committee Chairman Barney Frank.

Washington Mutual

The U.S. government closed Seattle-based Washington Mutual, which faced $19 billion of mortgage-related losses, after customer withdrew $16.7 billion since Sept. 15, the Office of Thrift Supervision said in a statement. JPMorgan Chase & Co., the third-biggest U.S. bank by assets, agreed to acquire WaMu's deposits and branches for $1.9 billion.

``This is a negative story for the dollar,'' said Motonari Ogawa, director of currency trading in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. ``News about Washington Mutual will make the market nervous and people will doubt whether a U.S. rescue plan will work.''

The yen may extend gains as the VIX volatility index closed above 30 for nine straight days, showing markets are facing a shock similar to the 1997 Asian currency crisis and 2001 terrorist attacks, according to JPMorgan Chase & Co.

The VIX index, a Chicago Board Options Exchange gauge reflecting expectations of stock market price changes and a barometer of risk aversion, was at 32.82 late in New York yesterday headed for its fifth weekly gain. It rose to 42.16 on Sept. 18, the highest since October 2002.

``This indicates risk aversion, which in the current environment could support the yen,'' said Yen Ping Ho, a currency strategist at JPMorgan Chase in Singapore. ``Japanese investor buying of foreign assets has also slowed recently, which suggests less support against the dollar-yen's downside.''

Portfolio Flows

Japanese investors were net sellers of 606.9 billion yen ($5.73 billion) of foreign securities in the week ended Sept. 20, based on reports from designated major investors released by the Finance Ministry in Tokyo today. They sold 654.6 billion yen more overseas assets than they bought the previous week.

The collapse of Lehman Brothers Holdings Inc. and the U.S. government takeover of insurer American International Group Inc. have helped cause credit markets to seize up. The three-month London interbank offered rate, or Libor, for dollars rose to 3.77 percent yesterday, the highest level relative to the Fed's target rate on record.

``The credit channel is blocked up,'' said Stephen Malyon, co-head of currency strategy in Toronto at Scotia Capital Inc., a unit of Canada's third-largest bank by assets. ``Odds favor the next move by the Fed will be a cut. It surely will hurt the dollar.''

Futures contracts on the Chicago Board of Trade showed an 86 percent chance that the Fed will cut the 2 percent target rate for overnight lending between banks by a quarter-percentage point on Oct. 29, compared with zero chance a month ago.

The dollar has fallen 5.4 percent against the euro since touching a one-year high of $1.3882 on Sept. 11. The dollar reached $1.6038 on July 15, the weakest level since the European currency made its debut in 1999.

To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net Ron Harui in Singapore at rharui@bloomberg.net

Korean Won Ends 3-Day Drop on U.S. Plan; Bonds Post Weekly Loss

By Kim Kyoungwha

Sept. 26 (Bloomberg) -- South Korea's won rose on speculation U.S. lawmakers will agree on a $700 billion plan to rescue financial firms, reviving investor appetite for riskier emerging-market assets. Bonds were set for a weekly loss.

The currency ended a three-day decline as Finance Minister Kang Man Soo said the government will take pre-emptive steps to tackle a shortage of U.S. dollars in the nation's financial system. U.S. Senate Banking Committee Chairman Christopher Dodd said Republicans and Democrats agreed on a ``set of principles'' for a financial-rescue package.

``The market is pricing in optimism that the U.S. rescue plan will be passed by the Congress, which will help ease a global shortage of funds,'' said Lee Myung Hoon, a currency dealer with Industrial Bank of Korea in Seoul. ``The minister's remarks are also a boost to a market facing a lack of dollars.''

The won rose 0.2 percent to 1,155.75 against the dollar as of 11:13 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency declined 1.3 percent on the week, taking this year's loss to 19 percent, the worst among the 10 most-active Asian currencies outside Japan.

``The government will check the situation every day and make efforts until the markets return to normal,'' Kang said today, adding there's a ``significant'' dollar shortage in foreign-exchange markets.

South Korea's currency and swap markets are experiencing a dollar shortage as local companies, which expect the U.S. currency to strengthen against the won, don't want to sell their dollars now. The financial crisis is making it more difficult for firms worldwide to secure dollars as bankers hoard cash.

Fund Squeeze

Local-currency bonds headed for a second weekly loss on concern that brokerage firms, squeezed by a shortage of funds, will continue to sell government debt.

``Until concerns over brokerages' funding difficulty eases, the bond market may find it hard to rebound strongly,'' said Hong Sung Koo, a fund manager with Daishin Securities Co. in Seoul. ``Ahead of quarter-end book closing, banks are more cautious about lending.''

Korean companies have held a combined $1.4 billion of risky assets from Lehman Brothers Holdings Inc. and Merrill Lynch & Co., according to data provided by the Financial Supervisory Commission. Lehman filed for bankruptcy protection this month.

The yield on the 5.5 percent note due June 2011 jumped 13 basis points this week to 5.96 percent, according to data compiled by Bloomberg News. 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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Australia, N.Z. Dollars Headed for Weekly Drops Against Yen

By Candice Zachariahs

Sept. 26 (Bloomberg) -- The Australian and New Zealand dollars were set for weekly declines against the yen as delays to a U.S. $700 billion banks rescue plan curbed demand for higher-yielding overseas assets funded out of Japan.

The Australian dollar rose against the greenback this week and New Zealand's currency retreated as U.S. lawmakers debated a Treasury proposal to use taxpayers' funds to buy soured assets from financial companies. Australia's currency surged 3.7 percent against the dollar on Sept. 19 on reports that the U.S. government would take action to ease a financial crisis that forced Lehman Brothers Holdings Inc. to file for bankruptcy.

``We bounced sharply last week as the market anticipated some positive news out of the U.S. bailout proposals,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. ``We haven't had a clear-cut proposal out of the U.S. yet. It's an ongoing debate and so we haven't really had the conditions to drive it on.''

The Australian dollar rose 0.1 percent to 88.61 yen at 12:08 p.m. in Sydney from 88.53 in late Asian trading yesterday, paring its decline from 89.60 in New York late on Sept. 19. It traded at 83.67 U.S. cents from 83.57 cents in Asia yesterday and 83.40 in New York last week.

New Zealand's dollar rose 0.4 percent to 72.79 yen from 72.51 yen late in Asia yesterday and 74.04 in New York on Sept. 19. It bought 68.71 U.S. cents from 68.46 yesterday and 68.90 last week in New York.

The currencies fell against the yen this week as the VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock market price changes and a barometer of risk aversion, rose to 35.72 on Sept. 23, close to its highest since October 2002.

Carry Trades

Benchmark interest rates are 7 percent in Australia and 7.5 percent in New Zealand, compared with 0.5 percent in Japan and 2 percent in the U.S., luring investors to the South Pacific nations' assets. The currencies are favorites with investors using carry trades to seek higher returns using funds from a country with low borrowing costs. The risk is that exchange-rate fluctuations erase profits.

New Zealand's currency rose against the dollar and yen today after a government report showed that the economy contracted less than economists forecast in the second quarter.

Gross domestic product fell 0.2 percent from the first quarter, when it declined 0.3 percent, signaling the nation's first recession in a decade. The median expectation in a Bloomberg News survey of 13 economists was for a 0.5 percent contraction.

Volatile Markets

The Australian and New Zealand dollars have been volatile this week as U.S. lawmakers debated plans to buy assets from financial institutions at above-market prices to spur lending.

``You've had risk aversion swing around from optimism to pessimism based on the rescue package whether it'll go through or not,'' said Besa Deda, acting chief economist and strategist at St. George Bank Ltd. in Sydney. ``Financial markets are still reasonably illiquid and that's exacerbating the volatility.''

The Australian currency may bounce to 85 cents on the passage of the rescue deal, said Gibbs, who recommends selling the currency if it rallies.

Australian government bonds rose. The yield on the 10-year note fell 3 basis points, or 0.03 percentage point, to 5.693 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.221, or A$2.21 per A$1,000 face amount, to 96.542.

New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 6.990 percent today from 6.995 yesterday.

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

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Rio to Seek `Significant' 2009 Iron Ore Price Rise, RBC Says

By Jesse Riseborough

Sept. 26 (Bloomberg) -- Rio Tinto Group, the world's second- largest iron ore exporter, may seek a significant rise in prices from Asian steelmakers next year as it battles a $122 billion takeover bid from BHP Billiton Ltd., RBC Capital Markets said.

``Mounting a strong takeover defense, we believe Rio Tinto will play hard ball again and push for a significant price increase,'' RBC analysts led by Sydney-based Lee Bowers said in an e-mailed report. ``We see a very real risk that the contract negotiations are again drawn out towards mid-2009.''

A takeover of Rio Tinto by rival BHP, the world's largest mining company, would create the world's biggest exporter of iron ore, providing suppliers with greater influence in annual negotiations with steelmakers, RBC said. BHP and Rio this year won a record increase from mills of as much as 97 percent.

``A combination of declining Chinese mine grades, increasing Indian export regulation, an evolving iron ore marketing landscape and ongoing rail and port infrastructure constraints should serve to keep iron ore markets finely balanced,'' RBC said in the report dated Sept. 24.

The broker is forecasting a 15 percent gain in prices for the year starting April 1, 2009. Iron ore prices, which have risen for six straight years to a record, may rise 18 percent next year, Goldman Sachs JBWere Pty said Sept. 16.

To be sure, producers may win smaller-than-expected price increases next year as the global credit crisis prompts steelmakers to cut output, according to a Bloomberg survey published Sept. 22. Five of nine analysts surveyed may trim their forecasts for annual iron-ore price rises next year of 15 percent to 30 percent. Three analysts plan to leave their estimates unchanged, and one said producers won't win any increase at all.

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

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AWB Says Class Action Dismissed in U.S. Court

By Madelene Pearson

Sept. 26 (Bloomberg) -- AWB Ltd., Australia's largest wheat exporter, said a class action brought against it by two Iraqi widows, was dismissed by the U.S. District Court for the Southern District of New York.

The plaintiffs have 30 days to lodge an appeal, the Melbourne-based company said today in a statement to the Australian stock exchange.

``AWB has previously stated that it was of the opinion that the case was ill-conceived and that it would vigorously defend the action,'' it said in the statement.

AWB was among 2,200 companies named in a report for making illegal payments to the former regime of Saddam Hussein in Iraq. The exporter, which won the dismissal of a lawsuit on behalf of U.S. wheat growers in March, still faces one class action in Australia and two in the U.S., the company said.

AWB rose 0.7 percent to A$2.97 at 10:18 a.m. in Sydney.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net

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Gold Heads for Second Weekly Increase as Rescue Talks Continue

By Glenys Sim

Sept. 26 (Bloomberg) -- Gold rose, heading for a second weekly gain, as the dollar fell amid ongoing negotiations on a $700 billion bailout of financial institutions that would use U.S. taxpayers' money to help revive credit markets.

Bullion has climbed 0.9 percent this week as the dollar lost 1.3 percent against the euro amid skepticism the plan could avert a recession. The collapse of Washington Mutual Inc., touted as the biggest bank failure in U.S. history, also kept gold supported.

``There's still a lot of uncertainty out there and with many Asian markets out in turns next week, there's some risk aversion trade coming in,'' said Zhu Lv, research manager at Shanghai Tonglian Futures Co.

Bullion for immediate delivery gained as much as 0.7 percent to $883.90 an ounce, and traded at $878.74 an ounce at 9:48 a.m. in Singapore. Silver for immediate delivery was up 1 percent at $13.34 an ounce.

Markets in China, the world's largest gold consumer after India, are closed next week for the National Day holiday.

``Gold may meet some resistance at the $900-$920 level because these haven investors are usually buying on panic, not as a longer-term investment,'' said Zhu.

The dollar headed for a second weekly decline against the yen and was on course for a weekly loss against the euro, as the Treasury's asset-purchase proposal hit a snag after a group of Republicans offered a different solution.

Gold for December delivery added 0.2 percent to $884 an ounce in after-hours electronic trading on the Comex division of the New York Mercantile Exchange, and gold for June delivery on the Tokyo Commodity Exchange fell 1.3 percent to 2,994 yen a gram ($879 an ounce) at 9.49 a.m. Singapore time.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

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Korea's National Pension Posts -0.99% Return in January-August

By Saeromi Shin

Sept. 26 (Bloomberg) -- South Korea's National Pension Service, the country's largest investor, posted negative returns for the first eight months of the year after global stock markets were roiled by credit turmoil.

The pension fund's return averaged a negative 0.99 percent between January and August, the Ministry for Health, Welfare and Family Affairs said in a statement today. It forecast annual returns to fall from the previous year, its first drop since 2005.

``Global financial markets are facing a big crisis because of the U.S. credit crunch,'' Park Hae Choon, the fund's president, told reporters in Seoul yesterday. ``Market stabilization may not come easily despite a string of measures taken by the U.S. government.''

South Korea's benchmark Kospi index fell 22 percent in the eight months as the worst U.S. housing recession since the Great Depression and a resulting global credit crisis slowed the world economy, threatening to affect the nation's overseas shipments. The measure is headed for its first yearly decline since 2002.

The state-linked fund incurred a combined $66 million in realized losses from its investments in Lehman Brothers Holdings Inc., Merrill Lynch & Co. and American International Group Inc., according to the press release. It had a realized loss of $38 million from its holdings in the two biggest U.S. mortgage financiers Fannie Mae and Freddie Mac.

Equities Rout

South Korean bonds, whose positive returns buffered the fund from equity losses, accounted for 72 percent of the fund's 228 trillion won in total assets as of the end of August, while local stocks took up 13 percent, according to the statement.

The value of the fund's local equities declined 20.7 percent, while the return from local bonds was a positive 3.4 percent.

The slump in global stock markets has weighed on overseas pension funds. The California Public Employees' Retirement System, the largest U.S. public pension fund, had a negative 0.8 percent return for the April-June period. Netherlands-based ABP posted a negative 5.1 percent return on investment in the first half.

National Pension is forecasting its 2008 annual returns to come in the range of negative 4.52 percent to positive 5.8 percent. It may be the fund's first year-on-year decline since 2005, after posting a return of 7.05 percent in 2007 and 5.91 percent in 2006.

In July, Park said the fund will buy as much as 9 trillion won ($7.8 billion) of the nation's stocks in the second half.

Risk Management

Going forward, the global liquidity squeeze, combined with bankruptcy risks from financial institutions and weak investors' sentiment, may delay the recovery of the world economy, the NPS said in its statement. Under such circumstances, the fund will strengthen its risk management and consider cutting its targeted weighting for overseas stocks this year, it said.

``We may spend less on overseas shares than initially planned, and instead put the money into local bonds or other alternative investments,'' said Hong Sung Gi, head of the fund's Investment Strategy Division.

So-called alternative investments include possible purchases of shares in Daewoo Shipbuilding & Marine Engineering Co. and state-owned Woori Finance Holdings Co. and investment in social infrastructure and real estate, Hong said.

The pension fund said on Aug. 19 it may spend as much as 1.5 trillion won to make a joint bid for Daewoo. The fund has been in talks with companies that have shown interest, including Posco.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net.

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Asian Stocks Decline After Bailout Imperiled; Mitsui Slides

By Kyung Bok Cho and Patrick Rial

Sept. 26 (Bloomberg) -- Asian stocks fell for a fourth day after talks on a U.S. financial rescue plan stalled, Washington Mutual Inc. became the nation's biggest bank failure and shipping rates slumped the most in 23 years.

Shinhan Financial Group Ltd. fell 2.5 percent on concern the credit crisis is deepening after Republicans splintered over the proposed $700 billion bailout and WaMu was seized by regulators. Mitsui O.S.K. Lines Ltd., Japan's largest operator of dry-bulk ships, lost 3.8 percent.

``The assumption is that the bailout will take longer than expected, which is negative,'' said Tsuyoshi Shimizu, a senior fund manager at Mizuho Asset Management Co., which oversees $26 billion. ``The longer it takes to pass something, the more victims we're going to see.''

The MSCI Asia Pacific Index fell 0.2 percent to 114.58 at 11:16 a.m. in Tokyo, erasing an earlier 0.9 percent advance and paring this week's gain to 0.4 percent.

Japan's Nikkei 225 Stock Average lost 0.2 percent to 11,983.34. New Zealand's NZX 50 Index declined 0.4 percent after government data showed the economy contracted in the second quarter, driving the nation into its first recession in a decade.

Standard & Poor's 500 Index futures slid 1.2 percent in after-hours trading after U.S. Senate Banking Committee Chairman Christopher Dodd said the agreement he had reached with Republicans was undermined by a different proposal offered by a group of House Republicans led by Representative Eric Cantor.

If Treasury Secretary Henry Paulson backs Cantor's plan, negotiations would ``have to start all over again,'' Dodd said.

Banks Decline

The S&P 500 rose 2 percent yesterday as investors speculated Congress would agree on the $700 billion bailout of financial institutions to help revive credit markets.

Shinhan, which runs South Korea's third-largest bank, declined 2.5 percent to 42,900 won. Woori Finance Holdings Co., which controls the second biggest, slid 3.4 percent to 12,950 won.

JPMorgan Chase & Co. , the third-biggest U.S. bank by assets, agreed to pay $1.9 billion for the deposits of WaMu after the U.S. government closed Seattle-based Washington Mutual. WaMu had ``insufficient liquidity'' and was in an ``unsound'' condition, the Office of Thrift Supervision said in a statement.

Mitsui O.S.K. declined 3.8 percent to 972 yen. Hanjin Shipping Co., the largest South Korean shipping line, slipped 3.9 percent to 28,650 won.

The Baltic Dry Index lost 7.3 percent yesterday, bringing its three-day slide to 16 percent, the steepest decline since at least 1985, on weaker demand for steel from Chinese construction companies. The price to lease a capesize vessel has fallen 22 percent this week, according to the Baltic Exchange.

Takeda Pharmaceutical Co. gained 2.9 percent after announcing a $472 million share buyback.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net

Australia Stocks: Alumina, Aquarius, Babcock, Foster's, Sino

By Shani Raja

Sept. 26 (Bloomberg) -- The S&P/ASX 200 Index rose 21.40 points, or 0.4 percent, to 4,948.80 at 11:45 a.m. in Sydney. The broader All Ordinaries Index added 19.20 points, or 0.4 percent, to 4,980, while the futures index expiring in December advanced 0.3 percent to 5,010.

Gold producers: Sino Gold Mining Ltd. (SGX AU) slumped 41 cents, or 8.5 percent, to A$4.39, the second-biggest loser on the benchmark. St. Barbara Ltd. (SBM AU), aiming to become Australia's third-largest gold producer, dropped 1.5 cents, or 4.2 percent, to 34.5 cents, the most since Sept. 16.

Gold futures for December delivery fell 1.5 percent to $882 an ounce in New York on speculation a U.S. plan to ease the credit crunch will stabilize financial markets and reduce the appeal of the precious metal as a haven.

Financial stocks: National Australia Bank Ltd. (NAB AU), the nation's largest lender by assets, advanced 35 cents, or 1.4 percent, to A$25.34. Commonwealth Bank of Australia (CBA AU) gained 64 cents, or 1.5 percent, to A$44.69, the highest since Sept. 8.

U.S. stocks advanced, led by banks, as Congress neared an agreement on a $700 billion bailout of financial institutions to help revive lending and credit markets. The Standard & Poor's 500 Index increased 23.31 points, or 2 percent, to 1,209.18.

Alumina Ltd. (AWC AU), partner in the world's biggest producer of the material used to make aluminum, slumped 38 cents, or 9.9 percent, to A$3.45, the index's worst performer. The company sold A$266 million ($223 million) in shares to individual investors to help fund an expansion in Brazil.

Aquarius Platinum Ltd. (AQP AU), a producer of the metal in South Africa and Zimbabwe, fell for the third day, plunging 60 cents, or 7.6 percent, to A$7.25, the lowest in almost two years and the benchmark's third-biggest loser.

Platinum and palladium dropped for a second day in three on concern that demand for the metals used in car and truck parts may slow as orders for U.S. durable goods fell more than twice as much as forecast last month.

Australian Infrastructure Fund (AIX AU), which invests in transport infrastructure, added 8 cents, or 3.6 percent, to A$2.32, the highest since Sept. 17. The company said it expects Perth Airport to benefit from Western Australia's resources boom, while passenger growth at domestic airports across the country is anticipated to continue growing.

Babcock & Brown Ltd. (BNB AU), a manager of infrastructure assets including power stations, rose for the sixth straight day, soaring 26 cents, or 11 percent, to A$2.63, the index's best performer. The company's shares were boosted by Australia's ban on short selling and takeover speculation.

Foster's Group Ltd. (FGL AU) rose 30 cents, or 5.6 percent, to A$5.65, the most since April 2. Deutsche Bank AG bought shares of Foster's and now owns 5.3 percent of the company, amid speculation Australia's largest brewer may be acquired. Separately, Foster's named Ian Johnston as chief executive officer as the company continues to review its global wine unit.

Pan Australian Resources Ltd. (PNA AU), an Australian copper and gold mining company, rallied 4 cents, or 6.1 percent, to 60 cents, the most in more than a month. Managing Director Gary Stafford told Bloomberg TV yesterday that the company was starting to see Chinese demand return.

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net.

Most Japan Stocks Fall on Lower Shipping Rates, Bailout Doubts

By Patrick Rial

Sept. 26 (Bloomberg) -- Most Japanese shares fell, led by shipping companies, as cargo rates plunged. Lenders pared gains as the biggest bank failure in history coincided with conflict over the passage of a $700 billion financial rescue package.

Mitsui O.S.K. Lines Ltd., Japan's second-biggest bulk carrier, fell to the lowest in almost two years. Mizuho Financial Group Inc. pared a 2.6 percent advance to gain 0.4 percent as a deal struck by lawmakers yesterday on the financial bailout appeared to be in jeopardy. Sumitomo Mitsui Financial Group Inc. was unchanged following an earlier 2.6 percent advance after regulators seized Washington Mutual Inc.

The Nikkei 225 Stock Average fell 23.19, or 0.2 percent, to 11,983.34 at the 11 a.m. break in Tokyo. It earlier rose and fell as much as 0.6 percent. The broader Topix index added 0.86, or 0.1 percent, to 1,154.67. About two shares dropped for each that climbed on the Topix, which headed for a 0.5 percent weekly gain.

Mitsui O.S.K. lost 3.8 percent to 972 yen, the lowest since November 2006. Kawasaki Kisen Kaisha Ltd., the country's third- biggest shipping line, plunged 6.4 percent to 676 yen, the steepest drop in six weeks.

The Baltic Dry Index, a measure of commodity-shipping rates, dropped 7.3 percent yesterday, bringing its three-day slide to 16 percent, the most since at least 1985, on weaker demand for steel from Chinese construction companies.

`Complete Recession'

``Further declines in the Baltic will push the shipping industry into a complete recession,'' said Yoshihisa Miyamoto, an analyst in Tokyo at Okasan Securities Co. ``Investors who sell the shipping stocks short stand to make a lot of money.''

Mizuho, Japan's second-largest listed bank, rose 0.4 percent to 465,000 yen. Sumitomo Mitsui, the third biggest, fell 0.4 percent to 684,000. T&D Holdings Inc., Japan's largest publicly traded life insurer, added 0.7 percent to 5,920 yen, retreating from a 2.7 percent climb earlier.

U.S. lawmakers agreed on principles for a plan to let the Treasury buy troubled assets of financial firms, Senate Banking Committee Chairman Christopher Dodd said yesterday. Republicans offered a new plan late last night that seeks ``temporary tax relief'' provisions aimed at allowing financial companies to free up capital. Dodd, a Democrat, said returning to negotiations could delay passage of a bill.

WaMu Seizure

WaMu, the biggest U.S. thrift bank, was seized by the Federal Deposit Insurance Corp. as credit downgrades spurred a collapse of the lender riddled with subprime losses. JPMorgan Chase & Co. will buy deposits and branches, bringing the bank's size up one notch to No. 2 among U.S. lenders.

CSK Holdings Corp. fell 9.4 percent to 1,646 yen after the software developer reversed its full-year forecast to a loss, citing unprofitable projects.

Furukawa Electric Co., whose products include optical fiber cables and air conditioner parts, slumped 7.6 percent to 463 yen after Goldman, Sachs & Co. lowered the shares to ``neutral'' as demand for copper pipes and industrial materials has weakened.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

Standard & Poor's Lowers Market-Value Guidelines for S&P 500

By Chan Tien Hin

Sept. 26 (Bloomberg) -- Standard & Poor's cut the market- value ranges for inclusion in its three main U.S. indexes after this year's rout wiped $1.8 trillion off the nation's shares.

Companies that join the Standard & Poor's 500 Index must be worth $4 billion or more, it said in a statement yesterday, down from at least $5 billion. The S&P MidCap 400's range was lowered to between $1 billion and $4.5 billion from $1.5 billion to $5.5 billion earlier. The changes became effective yesterday.

The S&P SmallCap 600 guideline is now $250 million to $1.5 billion, compared with $300 million to $2 billion before.

The S&P 500 is down 18 percent this year on concern more than $521 billion in credit losses and writedowns at financial firms globally and a slowing economy are curbing profits.

S&P, a unit of New York-based McGraw-Hill Cos., uses the figures as guidelines, not requirements, for index inclusion.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur thchan@bloomberg.net

Read more...

Dollar Rallies After Word Congress Has Agreed On Fundamentals Of Bailout

Daily Forex Fundamentals | Written by DailyFX | Sep 26 08 02:07 GMT |

Dollar Rallies After Word Congress Has Agreed On Fundamentals Of Bailout
Euro: Fundamentals Fade, Euro/Dollar Rally May Be Running Out Of Gas
British Pound Tumbles Despite Hawkish Commentary And Rebound In Risk Appetite

Dollar Rallies After Word Congress Has Agreed On Fundamentals Of Bailout

The U.S. dollar was relatively strong through Thursday on speculation the U.S. Congress will approve a $700bn plan that will enable banks to clean up their balance sheets from leveraged investments in mortgage backed securities. Indeed, traders are betting that the measures proposed to the U.S. congress by the U.S. Treasury Secretary Henry Paulson and the Federal Reserve Chairman Ben Bernanke could lead to a world wide recovery in the appetite for risky assets like stocks and higher yielding currencies. To some extent, this explains why we saw the Dow Jones rallying more than 300 points on Thursday and the USD/JPY rising to as high as 107 yen per dollar from a low of 105.35 on Wednesday. In addition, a rapid weakening of economic growth in Europe continues to benefit the U.S. dollar against the sterling and the euro. At the time of this report the GBP/USD is being quoted at 1.8375 dollars per sterling from 1.8446 on Wednesday. Nonetheless, despite the recent wave of dollar strength, the U.S. economy could slow down faster than many investors expect. The U.S. Commerce Department said today in Washington that sales of new homes fell to a 17 year low. In fact, sales dropped 11.5 percent in August to the lowest annual rate since the 1991. The Federal Reserve has been taking a number of actions to increase liquidity and stabilize markets and the $700 billion dollar rescue plan, if approved, is likely to help the demand for housing in the form of lower mortgage rates. However, much more is needed since the U.S. economy will continue to slide until we see a much larger correction in the supply side of the housing sector in the form of lower prices. Currently, the average American can't afford to pay for a mortgage and we are still far from reaching a bottom in the U.S. housing market.

Euro: Fundamentals Fade, Euro/Dollar Rally May Be Running Out Of Gas

A steady and deep selloff was in store for the euro Thursday as disappointing data put the currency in juxtaposition to the rebound in confidence behind the US dollar. The morning began with comments made by ECB Governing Council member Nout Wellink. Not sharing the same confidence that his colleague Bonello expressed yesterday, Wellink (who also happens to be the head of the Basel Committee on Banking Supervision) said he expected market uncertainty and volatility to last for ‘some time.' While European policy board members are not mute on the severity of the recent financial crisis, there comments often deflect expectations for problems to intensify in the Euro Zone economy. While much of the crisis that has developed in the US has been generated by a panic, there were still fundamentals to support the fears. The ECB has been promoting stability through verbal reassurances and coordinated liquidity injections; but should conditions worsen, the weakened economy and ailing domestic financial sector could still deteriorate on its own (indeed, there is not likely to be any specific aid earmarked in the US bailout plan for the EU). From the economic docket, a few high profile indicators generated interest from the fundamental crowd. The GfK consumer confidence survey offered a surprise in an unexpected improvement – the first in five months. After investors and business leaders reported a pessimistic outlook on the deterioration in the financial sector, consumers were seemingly more concerned with the drop in energy costs. However, even officials at GfK found this unusual given the dour outlook for the economy and trouble in the credit market; and the group lowered its expectations for consumption this year. A little later, the M3 money supply report (a favored gauge of inflation) slowed to its slowest pace of growth since October of 2006 as bank lending and consumer spending cooled. As this was a reading for August, the next reading is likely to be even lower. Looking ahead, only the German import inflation indicator holds prominence, but the country's preliminary September may also hit the wires before the end of the week. As ECB President Trichet holds adamantly to inflation, weaker numbers may finally encourage rate cuts.

British Pound Tumbles Despite Hawkish Commentary And Rebound In Risk Appetite

The UK has a significant stake in the outcome of the financial market rescue plan in the US. While the details are certainly not expected to help the European economy directly, the stability proffered to the global credit markets could quite possibly help avert a severe recession. Currently, the UK is on track for its first recession since the early 1990s; and a plunge in the housing market and contraction in consumer spending are leading the way. As long as financial turmoil freezes credit, rising default rates and expensive mortgages will prevent a recovery in the real estate market and British consumers (one of the most indebted peoples in the industrial world) will have to throttle back on spending. Therefore, as market-wide risk appetite responds to the details of the plan that makes it through Congress, the pound will respond as fundamental market participants weigh the ultimate impact on the ailing UK economy. Another direct concern for sterling traders during this period of financial uncertainty is the outlook for monetary policy. Overnight index swaps are pricing over 100 basis points of easing from the MPC through the coming year. However, the BoE has held firm on keeping rates at 5.00 percent. Adding to the hawkish front today, committee member Kate Barker expressed her concern over inflation at a decade high – though she did remark that a sharp drop in growth could lead the to inflation to undershoot the central bank's target going forward. Despite Barker's (and many others') inflation warnings though, the market still sees cuts.

A Recession Raises The Probability Of Deep Rate Cuts For New Zealand

The slowing in global growth has claimed another casualty. Statistics New Zealand confirmed what many analysts and traders had expected today, that the economy had tipped into a recession through the first half of this year. While this second quarter contraction was more modest that what policy officials had expected, it was nonetheless the first official recession for the economy in 10 years. Looking at the details of the report, all of the sectors that RBNZ Governor Alan Bollard said were holding up inflation six months to a year ago are now solidly in the red. Construction activity dropped 3.8 percent through the period, consumer spending fell 1.9 percent and financial services contracted 0.7 percent. This certainly will put a damper on the broader carry trade as the 150 basis points of easing expected from New Zealand over the coming year could be dealt in quick order. With the return potential from the carry strategy dropping fast, a recovery could be delayed even if risk eases.

DailyFX

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Forex Exchange Morning Report

Daily Forex Fundamentals | Written by Westpac Institutional Bank | Sep 26 08 02:06 GMT |

News And Views

The sharp equity rally on optimism over a deal on the bailout package by Monday helped USD post moderate gains despite dismal US economic data. Lawmakers left a bipartisan meeting offering no details but confident that they had a plan that would pass House and Senate. The DJIA opened firmly and held its gains to around 180pts in late trade. This came despite worse than consensus reading on jobless claims (493K), Aug durable goods orders (-4.5%) and new home sales (-11.5%). Money markets remained very tight. Despite the improved risk environment (at least for equities), NZD/USD lost about 50 pips to 0.6830 in late NY.

AUD/USD traded to its 0.8427 high after the US durable goods and claims data but eased to 0.8355 amid broad USD demand.

EUR/USD generally trended lower as US equity sentiment improved, losing about a cent to the low 1.4600s. Its NY high of around 1.4735 printed soon after the woeful US housing data.

USD/JPY rallied as far as 107.02 from 105.80 in early NY on optimism over the bailout plan and its implications for equities. The pair retreated to 106.30-40 however as money markets showed no signs of improvement and equities cooled a little.

US new home sales fall 11.5% in Aug, to a new cycle low of 460k annualised, compared to the July 2005 peak of 1389k: that's a fall of exactly two thirds or 67% over the past three years. In August, the declines were steepest in the West (-36.1%) which provides some support for our view that new home sales are being cannibalised by existing home sales. In the West, S&P-Case Shiller have reported established house price declines of as much as 30% yr, which builders simply can't compete with, so potential new home buyers are instead snapping up pre-loved bargains. Hence existing home sales bottomed out nearly a year ago, whereas the downtrend in new home sales remains as steep as ever.

US durable goods orders fell 4.5% in Aug, their first decline since April, driven lower by sharply weaker Boeing foreign demand; and autos, which slumped 8.1% in the month. But even excluding transport, orders were soft, with the core capital goods component reversing all of the prior two months' gains in August. Defence orders, up 9.4%, actually flattered the report to some extent. There have been grounds to suspect that recent resilience in orders (i.e. prior to August) reflected strength of demand from outside the United States; if that is correct then the support for the economy that we have seen from solid net export growth in recent quarters might now be dissipating.

US initial jobless claims jumped 32k to 493k last week but the Labor Dept attributed some of that increase to dislocation caused by Hurricane Ike. Together, Gustav a few weeks back and more recently Ike accounted for about 50k claims spread over recent weeks. But even without that weather impact, there has been an underlying trend higher in initial claims which suggests that the monthly job statistics will soon be painting a more depressed picture of labour market conditions.

Japanese corporate service prices dip in Aug. The corporate services price index (CSPI) slipped 0.4%mth but base effects saw the annual pace edge up to 1.4%yr from 1.3%yr.

Euroland money supply growth continued to decelerate in Aug, to 8.8% yr, as did the pace of growth of bank loans to households and businesses, down from 9.4% yr to 8.8% yr. In Nov last year, M3 growth peaked at 12.3% yr, so there has been a significant unwind of the upside risk to inflation that the European Central Bank attributes to rapid money supply growth. In other news German GfK consumer confidence edged up from 1.6 to 1.8 in October (actually surveyed early September, so prior to the latest financial market turmoil). That compares to a reading of 6.7 a year ago.

Outlook

NZ's Q2 GDP data today are in close focus despite the lack of timeliness. Ahead of the release we are inclined to sell NZD/USD especially with dairy prices slammed by the Chinese milk scandal. AUD/NZD remains a buy on dips, targeting 1.25.

Events Today

Date	Country	Release	Last	Forecast
26-Sep	NZ	Q2 GDP %qtr	–0.3%	–0.7%
	US	Q2 GDP Revision (F)	3.30%	3.30%
		Sep UoM Consumer Sent (F) Fedspeak: Bullard	73.1	70
	Jpn	Aug National CPI %yr	2.30%	2.10%
	Ger	Sep Tokyo CPI %yr Sep CPI %yr	1.3% 3.1%	1.2% 2.9%
28-Sep	NZ	Daylight Savings begins – clocks go forward 1 hour
29-Sep	NZ US	Aug Merchandise Trade NZDm	–781	–900
		Aug Personal Income	–0.7%	0.3%
		Aug Personal Spending	0.2%	0.1%

Westpac Institutional Bank
http://www.wib.westpac.co.nz/

Disclaimer

All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. © 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.

Foreign Exchange Market Commentary

Daily Forex Technicals | Written by HY Markets | Sep 26 08 02:36 GMT |

EUR/USD closed lower on Thursday as it consolidated some of Monday's rally. The high-range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are overbought and are turning neutral hinting that a short-term top might be in or is near. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted. If it renews this week's rally, the 50% retracement level of the July-September decline crossing is the next upside target.

USD/JPY closed higher on Thursday and above the 10-day moving average crossing signalling that a short-term bottom has likely been posted. A short covering decline tempered early losses and the mid-range close sets the stage for a steady opening on Friday. Stochastics and the RSI are diverging and are turning bullish signalling that sideways to higher prices are possible near-term. Closes above the 20-day moving average crossing are needed to confirm that a short-term bottom has been posted. If it renews the decline off August's high, May's low crossing is the next downside target.

GBP/USD posted a key reversal down on Thursday after testing the 50% retracement level of the July- September decline crossing. The low-range close sets the stage for a steady to lower opening on Friday. Additional weakness on Friday would confirm today's key reversal down thereby increasing the odds that this month's rally has ended. Stochastics and the RSI are overbought and are turning neutral to bearish hinting that a short-term top might be in or is near. Closes below the 20-day moving average crossing are needed to confirm that a short-term top has been posted.

USD/CHF closed unchanged on Thursday due to profit taking as it consolidates some of Monday's decline. The mid-range close sets the stage for a steady opening on Friday. Stochastics and the RSI are overbought but remain neutral to bearish signalling that sideways to lower prices are possible near-term. If it renews this week's decline, the 62% retracement level of the July-September rally crossing is the next downside target. Closes above the 20-day moving average crossing would confirm that a short-term bottom has been posted.

HY Markets
http://www.hymarkets.com

Daily Technical Analysis

Daily Forex Technicals | Written by FX Instructor | Sep 26 08 02:22 GMT |

EURUSD Outlook

The EURUSD made indecisive movement by opened and closed at almost the same price yesterday (1.4613 and 1.4617). The pair attempted to pushed lower, bottomed at 1.4560 but further bearish momentum was rejected as the pair closed higher. Early today in Asian session the pair was traded softly higher around 1.4660 at the time I wrote this comment. My model is mixed with neutral bias. Immediate support is seen at 1.4603 followed by 1.4560 (yesterday's low). CCI just cross -100 line up on 4h chart suggesting a potential bullish pressure testing 1.4770 resistance area.

EURUSD Daily Supports and Resistances:

S1= 1.4529
S2= 1.4441
S3= 1.4322
R1= 1.4736
R2= 1.4855
R3= 1.4943

GBPUSD Outlook

The GBPUSD break out to the downside from the ranging area of 1.8642 and 1.8472 yesterday. The pair bottomed at 1.8305 and closed at 1.8381. However the pair was traded softly higher around 1.8420 at the time I wrote this comment. My model goes mixed with downside bias. Immediate resistance is seen at 1.8467. Initial support at 1.8380 followed by 1.8305 (yesterday's low). CCI about to cross 100 line down on daily chart suggesting a potential bearish view.

GBPUSD Daily Supports and Resistances:

S1= 1.8235
S2= 1.8089
S3= 1.7873
R1= 1.8597
R2= 1.8813
R3= 1.8959

USDJPY Outlook

The USDJPY continued it's bullish momentum yesterday. The pair topped at 107.01 and closed at 106.47. However the pair was corrected lower early today in Asian session, traded around 105.90 at the time I wrote this comment. My model is mixed with downside bias. Immediate resistance is seen at 106.50. Initial support at 105.50 followed by 104.70. CCI just cross -100 line down on 4h chart suggesting a potential downside pressure.

USDJPY Daily Supports and Resistances:

S1= 105.61
S2= 104.76
S3= 104.06
R1= 107.16
R2= 107.86
R3= 108.71

USDCHF Outlook

The USDCHF current bullish momentum was softly corrected yesterday but bearish momentum was also seemed very limited. My model is mixed with neutral bias. I am expecting a ranging market between 1.0943 and 1.0800. A break out from that ranging area would give us a clearer direction. CCI in oversold area on daily chart.

USDCHF Daily Supports and Resistances:

S1= 1.0815
S2= 1.0737
S3= 1.0674
R1= 1.0956
R2= 1.1019
R3= 1.1097

FX Instructor LLC
www.fxinstructor.com

The information has been prepared for information purposes only. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. This information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. FXInstructor LLC assumes no responsibilities for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person's reliance upon this information. FXInstructor LLC does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. FXInstructor LLC shall not be liable for any indirect, incidental, or consequential damages including without limitation losses, lost revenues or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results

Australian Dollar Crosses: Strength To Continue

Daily Forex Technicals | Written by DailyFX | Sep 26 08 02:15 GMT |

The Australian Dollar crosses are consolidating following large rallies from significant lows. The consolidation should lead to additional strength.

AUDCHF

I showed the daily chart last week and longer term downtrend, mentioning that 'as long as price is below the line drawn off of the November 2007 and July 2008 highs, the trend is considered down. Potential resistance is in the .9320-.9616 zone.' A correction is underway as there are 5 waves up from .8620. A B wave is underway now and may be complete .8992. Coming under there should find Fibonacci support at .8950 or .8871. Wave C would then end above .9293. .9476 is the 61.8% of 1.0047-.8620 and is potential resistance.

AUDCAD

The long term triangle appears to be playing out. 'The AUDCAD will eventually drop below the 2006 low of .8118 to complete wave C of the triangle.' The rally from .8386 is considered corrective but may not be the entire correction of the drop from .9853 since the rally failed to retrace even 38.2%. Favor the downside as long as price is below .8878 but be cognizant of the fact that a larger correction could play out and reach .9090 or .9265 (50% and 61.8%).

AUDNZD

The AUDNZD rally from 1.1811 is probably a 5th wave that will complete a larger C wave before a significant top and reversal. The advance should continue over the next several weeks (and perhaps longer) and break above 1.2968

DailyFX

Disclaimer

Forex Technicals: The Day Ahead, September 26

Daily Forex Technicals | Written by DailyFX | Sep 26 08 02:18 GMT |

Patterns are not clear at the current juncture, which is the hallmark of a correction. Still, coming under 1.4600 in the EURUSD indicates additional bearish potential.

EURUSD

On balance, the EURUSD ended little changed today (25th) but the intraday moves were large. This action is often indicative of at least a short term change in trend. Coming under 1.46 today is a sign of weakness and indicates to me that a larger decline is underway, perhaps as an X wave. It is possible that 1.4871 marks the top of wave B within the A-B-C decline that is underway from 1.6040. I do not view this count as probable given the structure in the other USD pairs. A deeper correction of the 1.3877-1.4871 advance is preferred although structure is not clear at the moment (it rarely is during a correction). If the decline extends, then look for support at the short term trendline and 1.4250 (the 61.8% of 1.3877-1.4871).

USDJPY

Echoing yesterday's sentiments… 'I am not confident at all in the USDJPY bearish bias against 106.90. Bears may have their day as long as price is below the short term trendline but the technical picture lacks clarity at this point. Also favoring USDJPY upside is the recent spike in volatility. Spikes in volatility usually mark USDJPY bottoms, at least for a few weeks anyway.' I didn't have to wait long to be proved wrong. The USDJPY spiked through 107 today. Since the decline from 108 is not an impulse, expect a push above there next week. 105.44 should remain intact.

GBPUSD

The advance from 1.7443 is in 3 waves but probably only the first leg of a larger correction. I favor this scenario because the breakdown that led to the decline to 1.7443 was from a triangle. Breaks from triangles often lead to a retracement that brings price back to the center of the triangle (at least). In this case, the center of the triangle is near the 61.8% of the entire decline from 2.1160; at 1.9658. Near term, weakness is favored in an X wave. 1.7904 is the 61.8% of the rally from 1.7443.

USDCHF

The USDCHF decline from 1.1422 is in 3 waves and possibly the first wave of a triangle of flat. In either case, the ensuing advance should retrace a good portion of the decline. The 61.8% of the decline is at 1.1135. This is also where the advance from 1.0799 would be equal to the 1.0686-1.0940 advance.

USDCAD

The USDCAD bounce from 1.03 may be a small 4th wave within the impulsive drop from 1.0827. Tracing out this 4th and then a 5th wave would confirm my longer term bearish stance. Expect resistance near 1.05 (38.2% Fibo is at 1.0493 and former 4th wave is at 1.0519) if needed. It is also possible that a 4th wave is complete at a triangle.

AUDUSD

The AUDUSD B wave is underway towards the Fibonacci zone (.8247-.8076). There is a count (not shown), that treats the top at .524 as the end of an expanded flat. Both counts warrant positioning for a decline now, against .8524.

NZSDUSD

A B wave correction is probably also underway in the NZDUSD. The 3 wave rally from .6435 could be wave A of either a flat or triangle. In both cases, a large portion of the advance from .6435 would be retraced.