N.Z. Home-Building Approvals Decline 6% in December

By Tracy Withers

Jan. 30 (Bloomberg) -- New Zealand home-building approvals fell to a record low in December as a prolonged recession and the prospect of job losses keeps consumers out of the property market.

Approvals fell 6 percent from November when they gained 4 percent, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. There were 1,113 approvals, the lowest since records began in 1982, the agency said.

Declining demand for homes adds to signs that the recession which began in the first quarter of last year will extend into the first half of 2009. Reserve Bank Governor Alan Bollard yesterday slashed the benchmark interest rate to a record low and urged lenders to pass on lower costs to consumers in order to stimulate the economy.

New Zealand’s jobless rate rose to a five-year high of 4.2 percent in the third quarter and may climb to 7.5 percent by mid- 2010, the government said this month.

Excluding apartments, approvals fell for an eighth month in December, dropping 0.7 percent, the statistics agency said.

The value of approvals for home-building, alterations and additions fell 19 percent in December from a year earlier, the agency said. Still, the value of non-residential approvals rose 16 percent led by factories and office buildings.

A collapse in the housing market last year led the economy into recession. Home-building approvals fell 28 percent in 2008 to a 15-year low of 18,456, the agency said, citing unadjusted figures. Excluding apartments, 2008 approvals declined 30 percent to a record-low 16,158.

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

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Pakistan May Keep Interest Rates Unchanged as Inflation Eases

By Khalid Qayum and Farhan Sharif

Jan. 30 (Bloomberg) -- Pakistan’s central bank may keep its benchmark interest rate unchanged at a decade high as inflation eases from a 30-year record.

State Bank of Pakistan will maintain its discount rate for commercial lenders at 15 percent, according to eight out of nine analysts in a Bloomberg News survey. The new central bank governor Salim Raza, who took charge on Jan. 2 replacing Shamshad Akhtar, is due to release his first semi-annual monetary policy statement in Karachi tomorrow.

“The central bank won’t change interest rates because inflationary and deficit pressures are receding,” said Muzzammil Aslam, an economist at KASB Securities Ltd. in Karachi. “The central bank will wait for a couple of months to confirm data that this trend is continuing before cutting interest rates by as much as 400 basis points by July to boost growth.”

Former governor Akhtar increased the discount rate four times last year to slow inflation and build Pakistan’s foreign- exchange reserves, hurting an economy that is predicted by the central bank to grow at the slowest pace in seven years.

The State Bank of Pakistan last raised the discount rate by 2 percentage points, the most in more than a decade, on Nov. 12. The increase was part of conditions for an International Monetary Fund loan.

South Asia’s second-biggest economy was forced to seek $7.6 billion funds from the IMF in November to avoid defaulting on its debt after its foreign reserves shrunk to $3.5 billion as of Nov. 1 from $14.2 billion a year earlier. Reserves climbed to $6.6 billion on Jan. 17 after the country received a $3.1 billion first installment of the IMF loan.

IMF Bailout

The central bank promised the IMF as part of the rescue package to raise borrowing costs if Pakistan’s foreign reserves drop too low.

Higher borrowing costs have helped tame inflation, which accelerated to near a three-decade high of 25 percent in October. Consumer prices increased 23.34 percent in December and inflation is forecast to average 22 percent in the fiscal year ending June 30, according to Dec. 6 central bank report.

Inflation may average around 19 percent this year, KASB’s Aslam said. “The incremental impact of any further rate hike is not going to be significant on inflation because commodity prices have already reduced,” he said.

Pakistan’s rupee plunged 22 percent in 2008, the current account deficit widened to a record and the fiscal deficit reached a 10-year high. The crisis mounted after the Pakistan Peoples Party-led government, which came to power in March, was paralyzed for almost six months on political wrangling.

Economic growth, which averaged 6.8 percent in past five years, is expected to weaken to 3.5 percent this fiscal year from 5.8 percent last year, the central bank has said.

Contributor                   Key Rate

BMA Capital                   Unchanged
Global Securities             Unchanged
Invisor Securities            Unchanged
JS Global Capital             Unchanged
Foundation Securities         Unchanged
KASB Securities               Unchanged
Invest Capital                Unchanged
AKD Securities                Cut by 1.5 percentage point
Atlas Capital                 Unchanged

For Related News and Information: Bloomberg stories on Pakistan’s economy: TNI PAK ECO BN Stories on Pakistan’s central bank: TNI PAK CEN For sovereign credit ratings CSDR

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Bollard Says New Zealand Has Scope for More Rate Cuts

By Tracy Withers

Jan. 30 (Bloomberg) -- The Reserve Bank of New Zealand, which reduced interest rates to a record low this week, has scope for further cuts amid the deepening global slowdown, Governor Alan Bollard said.

“Lest there be any doubt, the tool box is by no means empty,” Bollard said in a speech today in Christchurch. “If we need to, there is still room for us to cut the cash rate further in response to adverse economic developments.”

Yesterday, Bollard slashed the benchmark rate by 1.5 percentage points to 3.5 percent as New Zealand’s economy sinks deeper into a recession that the governor said could last at least 18 months. He has pared borrowing costs by 4.75 percentage points since July, the most aggressive reductions behind Moldova among 54 central banks monitored by Bloomberg.

Bollard “is prepared to take interest rates well into uncharted territory,” said Khoon Goh, senior economist at ANZ National Bank Ltd. in Wellington, who expects the key rate will be cut to 2.75 percent in March.

New Zealand’s dollar fell to 50.95 U.S. cents at 2 p.m. in Wellington from 51.34 cents just before Bollard’s comments, extending its decline since yesterday’s rate cut to 3.9 percent. The benchmark NZX 50 stock index fell 0.5 percent to 2,757.55.

“New Zealand policy makers still have some ammunition up their sleeve,” said Goh, who added the extent of further reductions after March will depend on signs of a deeper slump.

Global Slump

The International Monetary Fund this week said world growth will be 0.5 percent in 2009, the weakest postwar pace. Exports are equivalent to about 30 percent of New Zealand’s gross domestic product.

“We have done a lot already and it will take some time for these actions to have their full effect,” Bollard said in notes of his speech e-mailed to Bloomberg News. “We are entering the year well-positioned on the monetary policy, liquidity policy and prudential policy fronts.”

The economy fell into a recession in the first quarter of last year amid a housing slowdown and soaring energy costs. The worldwide credit freeze and subsequent global slump have damped exports and stalled investment, and may prolong the recession until the second half of 2009, Bollard said yesterday.

“In the near term, there will be considerable downward pressure on the domestic downturn already well under way, with weakness in household expenditure, the export sector and activity likely to persist through the year,” he said today.

Tax Cuts, Spending

The government this month said the economy may stand still this year and the jobless rate could climb to an 11-year high. It is cutting income taxes and plans extra spending on roads, houses and schools to generate jobs and boost investment.

“The remedial efforts we have taken in New Zealand have probably been about as successful as might be expected,” Bollard said.

Still, companies, banks and consumers have a role to play to help the economy in its eventual recovery, he said.

“Households and firms should not pull down the shutters and banks should continue to lend on sound business propositions,” he said. “New Zealand’s economy and financial system are relatively well-placed to weather the adjustment. We should be watchful for the opportunities and mindful of the risks of defeatism.”

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

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Australian Lending Declines for First Time Since 1992

By Jacob Greber

Jan. 30 (Bloomberg) -- Australian bank lending unexpectedly fell in December for the first time since 1992 as borrowing by companies slumped, increasing pressure on the central bank to cut interest rates next week.

Total credit provided by banks and other finance companies declined 0.3 percent from the previous month, the Reserve Bank of Australia said in Sydney today. The median estimate of 19 economists surveyed by Bloomberg was for a 0.5 percent gain.

Miners BHP Billiton Ltd. and Rio Tinto Group are among companies that have cut investment spending and fired workers, adding to signs Australia’s economy is headed for its first recession in almost two decades. Central bank Governor Glenn Stevens has slashed borrowing costs by three percentage points since early September and will cut the benchmark rate by one point next week, according to investors.

“We hadn’t expected such a big slump in business lending,” said Helen Kevans, an economist at JPMorgan Chase & Co. in Sydney. “Investment plans are being scaled back and postponed given expectations for weaker global growth.

“This gives the Reserve Bank more scope to cut rates aggressively” next week, Kevans added.

Lending to businesses shrank 1.1 percent in December, the biggest drop since that month in 1992, according to data on the central bank’s Web site. Corporate borrowing rose 8 percent from a year earlier.

The Australian dollar fell to 64.63 U.S. cents at 12:06 p.m. in Sydney from 64.81 cents just before the report was released. The two-year government bond yield dropped 5 basis points to 2.43 percent. A basis point is 0.01 percentage point.

Reluctant to Borrow

Total credit rose 6.7 percent in December from a year earlier, the smallest annual increase since April 1994.

“People are reluctant to take on additional credit,” said JPMorgan’s Kevans. “A lot of households are boosting precautionary savings rather than taking on extra loans.”

Credit provided to consumers for purchases other than housing tumbled 1.1 percent from a month earlier and fell 5.2 percent on the year, today’s report showed.

Loans to consumers to buy houses rose 0.4 percent for an annual gain of 7.6 percent.

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net

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Japan’s Jobless Rate Surges to 4.4%; Household Cut Spending

By Toru Fujioka

Jan. 30 (Bloomberg) -- Japan’s unemployment rate rose in December as plunging exports prompted companies to cut output and workers, indicating consumer spending will weaken further.

The jobless rate climbed to 4.4 percent from 3.9 percent in November, the statistics bureau said today in Tokyo. The median estimate of 35 economists surveyed by Bloomberg was for 4.1 percent. Household spending fell 4.6 percent from a year earlier.

Manufacturers from Sony Corp. to Toyota Motor Corp. are reducing production and firing workers as exports drop at a record pace. The manufacturing slump could lead to “significant” job losses, the government said this month.

“We’re going to see further deterioration in the labor market,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. “More companies will realize they need to fire workers and that will weaken consumer spending and deepen the recession.”

The ratio of jobs available to each applicant dropped for a 11th month to 0.72, the lowest since November 2003, the Labor Ministry said today.

Some 400,000 non-regular workers will be out of jobs by the end of March, the Japan Manufacturing Outsourcing Association reported this week, which was about five times more than a December estimate by the Labor Ministry.

“This deep recession could compel companies to cut full- time workers,” said Noriaki Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “The jobless rate could rise to around 5 percent, giving us more reasons not to expect consumer spending to support the economy.”

Yokogawa Electric Corp. proposed to its labor union that the 6,000 workers take a furlough for an average of three days a month by the end of June, company spokesman Koichi Uemura said this week.

The number of job advertisements fell 28.7 percent last month, the steepest decline since November 1992, according to the Association of Job Journals of Japan. The ratio of university graduates who have found a job dropped for the first time in five years to 80.5 percent, the Labor Ministry said.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

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Davos Man Finds BRICs of Little Help in Crisis: William Pesek

Commentary by William Pesek

Jan. 30 (Bloomberg) -- The subprime crisis is containable. Asia has decoupled from the West. Europe’s banks are sound. Japan is a haven from turmoil. The worst is over.

To the list of faulty bits of conventional wisdom, add that the BRICs will save the world.

Actually, far from being immune from the world’s troubles, the BRICs -- Brazil, Russia, India and China -- are, to differing degrees, feeling the pain.

There’s still ample speculation about the four holding their own. It’s worth questioning the theory as the World Economic Forum holds its annual meeting in Davos, Switzerland. “Davos Man,” that composite of corporate chieftains, politicians and celebrities who gather in the snow each year, had a lot to do with hyping the BRICs.

These fast-growing nations have vast potential, and the Davos set isn’t wrong to expect great things. Ten years from now, the BRICs may comprise the core of the world economy. Lost in the excitement over these rising superstars is that they need growth from the external sector to get there. We can kiss that phenomenon goodbye for a while.

That increasing realization helps explain why equities in the BRICs fell 58 percent last year, exceeding the 42 percent drop in the MSCI World Index. A key reason is concern about their ability to stand alone as the world swoons.

Growth Trajectory

Jim O’Neill, the Goldman Sachs Group Inc. chief economist who coined the BRICs acronym, says the group will cushion the developed world’s recession. The Montreal-based Center for Research on Globalization says the contribution of the BRICs to world growth may reach 70 percent in 2009.

The trouble is, the trajectory of global growth will make it difficult for any economy, rich or poor, to maintain healthy growth. No economy, no matter the promise, can escape this crisis.

A year ago, many thought China’s 10 percent growth was sacrosanct. Now officials in Beijing are working up Keynesian- style stimulus packages the likes of which the developing world has never seen. The specter of a Chinese recession is very real.

Plunging oil prices are denting Russia’s designs on regaining the world status lost during the tumultuous 1990s. The average 7 percent growth over the last decade has given way to recession. Russia, the largest oil exporter after Saudi Arabia, expects its economy to shrink 0.2 percent this year.

Limited Room

It’s not without irony that Russian Prime Minister Vladimir Putin was asked to open the Davos confab. Putin probably envisioned a very different 2009 back in June, when his Davos invite came. At the end of June, a barrel of crude oil went for $100 more than it does now. Talk about reining in your ambitions.

Indian exporters have shed as many as 1 million jobs, more than 15 times a December estimate, amid the most protracted decline in overseas sales in a decade, says the Commerce Ministry. Bond investors are getting antsy about India’s fiscal outlook.

“India has very limited room to use fiscal policy given its huge and persistent budget deficits, and so we think the bulk of the stimulus will have to be provided by monetary policy,” says Win Thin, senior foreign-exchange strategist at Brown Brothers Harriman & Co. in New York.

In this credit crisis, one has to wonder if lower interest rates will be enough.

The economy has held its ground reasonably well. The Mumbai attacks in November that killed 164 people in hotels, a railway station, a Jewish center and a hospital capped a year of violence across the second-most-populous nation. Its economic costs are still being counted. The same is true of the fraud inquiry at software-services provider Satyam Computer Services Ltd.

Brazilian Growth

Brazil also has held up well. Yet the global slump will reduce consumption, and growth will slow to 2 percent this year from 5.6 percent in 2008, according to the median estimate in a central bank survey of about 100 economists on Jan. 23.

Even if one, two or three of the four BRICs avoid a formal recession, that’s hardly a boon for global growth. The odds favor BRIC economies having a tougher 2009 than today’s conventional wisdom suggests.

Many economists are writing off 2009. Even if stimulus efforts in the U.S., Europe and Japan are sufficient, they will take considerable time to kick in. Job and market losses will mount in the meantime.

The state of the world economy won’t make Davos Man happy. Public discourse has firmly shifted from the wonders of free markets and globalization to whether Europe’s social-welfare systems are a better way to go.

Never mind the risks of Brazil, Russia, India or China shunning free markets. The battle for the soul of capitalism is being waged in the U.S. and U.K., of all places. Out is Milton Friedman’s brand of laissez-faire capitalism, in is a serious discussion about nationalizing banks and companies.

It’s enough to make Davos Man feel like he has been hit by a brick. In this case, make that BRICs.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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Energy Resources Profit Almost Triples on Insurance

By Angela Macdonald-Smith

Jan. 30 (Bloomberg) -- Energy Resources of Australia Ltd., producer of more than a 10th of the world’s mined uranium, said full-year profit almost tripled to a record, boosted by an insurance settlement.

Net income gained to A$221.8 million ($144 million) in the year ended Dec. 31, from A$76.1 million a year earlier, Darwin-based Energy Resources said today in a statement to the Australian stock exchange. Sales jumped 91 percent to A$691.7 million.

Energy Resources, controlled by Rio Tinto Group, made an after-tax gain of A$131.4 million after settling claims for damage and business interruptions from Tropical Cyclone Monica in April 2006 and “extreme” rainfall in February 2007. The average price the company, known as ERA, got for its uranium oxide jumped 30 percent even as spot prices fell.

“ERA expects sales tons in 2009 to be slightly higher than in 2008, possibly accompanied by a modest replenishment of inventory,” it said. “The outlook for uranium mining appears positive.”

Energy Resources dropped as much as 58 cents, or 3.1 percent, to A$18.42 in Sydney trading, compared with a decline of as much as 0.6 percent in the exchange’s benchmark index. The shares were at A$18.72 at 10:36 a.m. local time.

Earnings before one-time items rose 56 percent to A$119 million. Full-year production of 5,339 metric tons was similar to the previous year’s 5,412 tons.

Resources at the Ranger mine in the Northern Territory, ERA’s only producing site, more than doubled to 115,000 tons of contained uranium oxide after the discovery in the Ranger 3 Deeps area. Reserves at Ranger fell 11 percent to 43,966 tons, while reserves at the undeveloped Jabiluka deposit rose 15 percent to 67,700 tons.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net

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EDF Wins French Approval to Develop Nuclear Reactor

By Tara Patel

Jan. 30 (Bloomberg) -- Electricite de France SA, Europe’s biggest power producer, won French government approval to develop a second new generation nuclear reactor, with rival GDF Suez SA to invest in the project.

The Evolutionary Power Reactor, or EPR, will be built at an existing nuclear site at Penly, in northern France starting in 2012, French President Nicolas Sarkozy said in an e-mailed statement yesterday.

EDF, which is based in Paris, will have majority control over a company created to spearhead the project to which GDF Suez “will be associated,” the statement said.

The reactor, the country’s 60th, is targeted for completion in 2017 and other investors may also participate, the statement said. “The government acknowledges the willingness of GDF Suez to lead develop and operate the next EPR.”

The decision ends months of speculation about which utility would pilot the project and where it would be located. EDF began construction of a new-generation 1,650-megawatt EPR at Flamanville in Normandy more than a year ago. The reactor is designed by Areva SA, the world’s biggest builder of atomic plants. EDF, which has estimated the cost of that at 4 billion euros ($5.2 billion), plans similar models in the U.K. and the U.S., and has started developing a pair in China.

Both EDF Chief Executive Officer Pierre Gadonneix and GDF Suez SA CEO Gerard Mestrallet had signaled their interest in overseeing the project.

Increased Competition

EDF, which operates 58 atomic plants in France, will partner with other investors in the plan “in particular GDF Suez,” the state-controlled utility said in a separate e-mailed statement today.

GDF Suez operates seven atomic reactors in Belgium through its Electrabel SA unit. The European Commission has put pressure on the French government to increase competition on the national power market, now dominated by former monopoly holder EDF.

EDF signed a deal with Enel SpA in 2007 giving Italy’s largest utility a 12.5 percent stake in the Flamanville generator and an option to invest in five more plants in France. EDF has put Italy on its list of countries, including China, the U.K. and U.S., where it wants to expand nuclear operations.

GDF Suez has agreements to use power from two French reactors run by state-controlled EDF at Tricastin and Chooz. Mestrallet has said he wants to operate EPRs by 2020 and that France is “obviously a priority.”

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

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Korean Won Heads for Worst Start to Year Since 1991 on Economy

By Kim Kyoungwha

Jan. 30 (Bloomberg) -- South Korea’s won fell for a second day on speculation tighter global credit markets and sliding exports will curb the supply of dollars needed to meet payments on imports and foreign debt.

The currency has dropped 9 percent this month, its worst start to a year since at least 1991, as the economy heads for its first recession in a decade. Bank of Korea Governor Lee Seong Tae said today the bank may use “more active measures” to improve the flow of funds and ease the credit crunch.

“There’s a general feeling that demand for dollars is outweighing supplies given concern that January may see a trade deficit,” said Jeff Kim, a currency dealer with Korea Exchange Bank in Seoul. “The decline in stocks is also unnerving currency players.”

The won fell 0.3 percent to 1,382.70 per dollar as of 9:41 a.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The Kospi stock index fell 0.9 percent, ending a two-day advance.

South Korea posted a current-account shortfall of $6.41 billion in 2008, the first deficit in 11 years, as higher oil prices and the weaker won drove up the cost of imported goods, a central bank report showed today.

The economy shrank 5.6 percent in the last quarter from the previous three months, the biggest contraction since the Asian financial crisis a decade ago, as exports, business investment and consumer spending plunged.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net.

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Japanese Repatriate Money, Reinvest in Bonds, Yen: Chart of Day

By Yumi Ikeda and Nate Hosoda

Jan. 30 (Bloomberg) -- Japanese investors are bringing back money from abroad as a “once-in-a-century” financial crisis prompts them to buy the yen and domestic government bonds, said Hajime Takada, chief strategist at Mizuho Securities Co.

The CHART OF THE DAY shows Japan’s 10-year yield dropped from a three-month high of 1.63 percent on Oct. 14 to 1.265 percent yesterday. On Jan. 21, the yen climbed to the highest per dollar since July 1995 and the strongest in almost seven years versus the euro.

Japanese investors’ net sales of foreign bonds totaled 236.8 billion yen ($2.6 billion) in December, the first time since August that selling exceeded buying, according to a Jan. 13 report by the Ministry of Finance in Tokyo.

“People may easily think it’s time to buy Japan’s government bonds as we are in a once-in-a-century crisis,” said Takada, who works at a unit of Japan’s second-largest banking group. Non-Japanese investors from overseas are also buying yen assets as the currency rises, Takada said.

The yen climbed to 87.13 against the dollar on Jan. 21 and advanced to 112.12 per euro. Japan’s currency traded at 90.09 per dollar and 116.62 per euro as of 7:55 a.m. in Tokyo.

Should the yen extend gains, threatening exporters’ profits “the Bank of Japan may come under pressure to cut interest rates again and even return to a zero interest-rate policy by next month,” Takada said. The central bank cut the overnight call target to 0.1 percent from 0.3 percent on Dec. 19.

To contact the reporter on this story: Yumi Ikeda in Tokyo at yikeda4@bloomberg.net; Nate Hosoda in Tokyo at nhosoda@bloomberg.net

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Australia, N.Z. Dollars Drop on Rate Cut, Deeper U.S. Slump

By Candice Zachariahs

Jan. 30 (Bloomberg) -- New Zealand’s dollar touched its lowest in six years and the Australian currency also fell as U.S. equities slid and yesterday’s interest-rate cut in New Zealand reduced the appeal of the two South Pacific nations’ assets.

New Zealand’s dollar declined as home-building approvals fell to a record low in December and Finance Minister Bill English said the nation faces a “tough” year ahead. The currencies were lower as U.S. equities ended a four-day rally after a report showed a record 4.776 million Americans collected unemployment benefits in the week ended Jan. 17.

“The New Zealand dollar has a long way to fall,” said Cameron Bagrie, chief economist at ANZ National Bank Ltd. in Wellington. “The Reserve Bank of New Zealand has more work ahead of it.”

New Zealand’s dollar dropped to 50.90 U.S. cents, the lowest since December 2002, as of 12:17 p.m. in Sydney and has fallen 11 percent this month. It slid for a third day to 46.17 yen and has fallen 12 percent in January. It traded at NZ$1.2662 per Australian dollar after touching NZ$ 1.2804, the lowest since August 2008 yesterday.

The currency may trade as low as 40 cents against the greenback and NZ$1.35 versus the Australian dollar, Bagrie said.

Australia’s currency declined 0.9 percent to 64.99 U.S. cents from 65.57 cents late in Asia yesterday and has fallen 6 percent this month. The currency slipped 6.4 percent against the yen in January to 58.46 yen.

Home-building approvals fell 6 percent from November when they gained 4 percent, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. There were 1,113 approvals, the lowest since records began in 1982, it said.

Lower Rates

New Zealand’s dollar was at its lowest in a week versus the yen as central bank Governor Alan Bollard yesterday signaled further reductions after cutting the cash rate to a record 3.5 percent.

“Given the economic outlook the official cash rate is going to 2.5 percent,” ANZ’s Bagrie said.

Higher interest rates in Australia and New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attract investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Commodities

The South Pacific currencies are likely to remain under pressure in February and March as Japanese investors repatriate funds ahead of their fiscal year-end on March 31, wrote Sydney- based John Horner and New York-based Adam Boyton, currency strategists at Deutsche Bank AG, in a note dated yesterday. “We remain bearish” on the Australian and New Zealand dollars, particularly against the yen, they wrote.

Traders are betting the Reserve Bank of Australia will lower its benchmark 1 percentage point to 3.25 percent when it meets Feb. 3, according to a Credit Suisse index based on overnight swaps trading. The RBA has cut its cash target 3 percentage points since September to boost domestic demand as a global slowdown weighs on equity and commodity prices.

Rio Tinto Group, the world’s third-largest mining company, yesterday agreed to cut coking coal prices for India’s JSW Steel Ltd. by 43 percent for the last three months of an annual contract after global demand slumped.

Australia, the world’s biggest coal exporter, relies on raw materials for 60 percent of export revenue.

Coking coal producers from Australia, Canada and Russia start talks with steelmakers this month in Japan to settle annual prices for the year starting April 1, the Tex Report said Jan. 16. JPMorgan Chase & Co. on Jan. 15 predicted a 55 percent decline to $135 a ton for 2009 contracts.

Australian government bonds declined for a second day with the yield on the 10-year note rising eight basis points, or 0.08 percentage point, to 4.16 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.726, or A$7.26 per A$1,000 face amount, to 118.916.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped to 3.25 percent from 3.33 yesterday.

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

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Yen May Rise Through March on Inflows, Barclays Says

By Garfield Reynolds and Stanley White

Jan. 30 (Bloomberg) -- The Japanese yen may extend gains through to the end of the country’s fiscal year on March 31 as exporters buy the currency to hedge revenues and money managers bring funds home amid the global slump, Barclays Capital said.

The yen also may strengthen as investors unwind so-called carry trades, where they borrowed in the currency to invest in nations where benchmark interest rates exceed Japan’s 0.1 percent. Barclays reiterated its forecast for the yen to rise to 84 in three months, according to the report.

“We expect even further yen appreciation toward the Japanese fiscal year end in March as both corporate hedging and investor repatriation flows support the currency,” Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital, wrote in a note to clients. “We believe the dollar will decline.”

The Japanese currency traded at 89.74 per dollar as of 9:27 a.m. in Tokyo from 90.03 late yesterday in New York. The yen has gained 1 percent against the greenback this month, following a 23 percent rally last year, as $1 trillion in losses on mortgage-related securities at financial institutions worldwide and a seizure in credit markets prompted investors to reduce their holdings of riskier assets.

Japan’s Finance Ministry is unlikely to shield the country’s exporters from a rising currency by ordering the Bank of Japan to intervene and sell the yen, Barclays said.

There’s too much risk of political backlash from the U.S., which has given its carmakers federal aid as they struggle with declining sales during the worst global recession since the Great Depression, Umemoto said.

To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net.

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Oil Is Steady After U.S. Supplies Climb as Recession Deepens

By Mark Shenk and Samantha Zee

Jan. 30 (Bloomberg) -- Crude oil in New York was little changed after U.S. crude stockpiles increased more than forecast and government reports signaled the U.S. recession will deepen, curbing fuel demand.

Inventories climbed 1.9 percent to 338.8 million barrels last week, the highest since August 2007, an Energy Department report showed yesterday. Orders for U.S. durable goods fell in December for a fifth consecutive month and the number of Americans receiving unemployment benefits soared to a record, figures from the Labor and Commerce Departments showed.

“The negative numbers in the inventory report are leading prices lower,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “We had more bad jobless numbers today and orders for durable goods were down 2.6 percent, which put more weight on the economy and the oil market.”

Crude oil for March delivery dropped 4 cents to $41.40 a barrel at 8:26 a.m. Singapore time on the New York Mercantile Exchange.

Yesterday, futures for March delivery fell 72 cents, or 1.7 percent, to settle at $41.44 a barrel in New York. Prices are down 7.1 percent this year and are 55 percent lower than a year earlier.

Bolstering prices in the past day are signs the United Steelworkers union will reject the third contract offer from Royal Dutch Shell Plc covering workers at U.S. refineries with almost two-thirds of the country’s capacity. The current agreement expires Feb. 1.

‘A Real Threat’

Failure to reach a new accord “poses a real threat of strike action,” Gary Beevers, the Steelworkers’ international vice president in charge of the talks, said in a written message to union members. The offer will be “rejected at the appropriate time,” Beevers said.

BP Plc, Europe’s second-largest oil company, said it may shut four U.S. refineries with union workers that can process 1.3 million barrels a day of crude oil if the steelworkers’ union goes on strike. Exxon Mobil Corp. and Shell are preparing to keep their U.S. plants running if there is a work stoppage.

Gasoline futures for February delivery rose 4.74 cents, or 4 percent, to $1.2309 a gallon in New York yesterday, the highest settlement since Nov. 14. Heating oil for February increased 0.68 cent, or 0.5 percent, to settle at $1.4283 a gallon.

Federal Reserve officials warned of a prolonged global economic slowdown that may push the U.S. to the brink of deflation. For the first time during the credit crisis, the Federal Open Market Committee’s statement this week indicated concern that the worldwide economy weakening “significantly,” with “some risk” that inflation would remain below ideal rates.

Shrinking GDP

U.S. gross domestic product will contract 1.6 percent, Japan’s will shrink 2.6 percent and the euro area will decline 2 percent in 2009, the International Monetary Fund said earlier this week.

“The IMF numbers show why, despite relatively good compliance, it’s still a struggle for OPEC,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. “It will probably be well into the second half of the year before we get evidence of a recovery.”

The Organization of Petroleum Exporting Countries won’t hesitate to cut output further if prices keep falling, the group’s secretary general, Abdalla el-Badri, said at the World Economic Forum today in Davos, Switzerland. Current prices below $50 a barrel are “too low” because they don’t allow producers to invest in expanding capacity, he said.

OPEC set a production ceiling of 24.845 million barrels a day as of Jan. 1 for its 11 members with quotas, 4.2 million barrels a day lower than its output in September. Iraq is the only member not subject to the group’s quotas.

Oil Demand

U.S. oil demand may fall for several years because of energy efficiency measures, Merrill Lynch said in a report. Oil prices may reach a trough in the first half of this year before rebounding as investment cutbacks create a supply shortage, Merrill analysts led by Francisco Blanch said in the report.

Crude oil supplies at Cushing, Oklahoma, where oil that’s traded on Nymex is stored, climbed 0.9 percent to 33.5 million barrels last week, the highest since at least April 2004, when the department began keeping records, according to the report.

The price of oil for delivery next December is 34 percent more than for the current month, increasing the opportunity for traders to profit from storing crude for later use. This structure, in which a future month’s price is higher than the one before it, is known as contango.

Brent crude oil for March settlement rose 50 cents, or 1.1 percent, to end the session at $45.40 a barrel on London’s ICE Futures Europe exchange yesterday.

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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Dollar, Yen Gain Versus Euro as Slowdown Spurs Demand for Haven

By Ron Harui and Stanley White

Jan. 30 (Bloomberg) -- The dollar headed for its largest monthly gain against the euro since October on speculation growing evidence of a global slowdown will increase the appeal of the currency to investors as a haven.

The euro is poised for the biggest loss versus the yen in three months after Austria’s Der Standard newspaper reported that billionaire George Soros said the euro may not “survive” unless the European Union pushes for a global plan to deal with toxic debt. Japan’s currency is set for a monthly advance versus Australia’s dollar as slowing growth prompts investors to repatriate funds from higher-yielding assets.

“For many investors the strategy is simple: avoid risk,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “That means funds are flowing back into the dollar and the yen. We can’t expect any good economic news from the U.S. or other major economies.”

The dollar rose to $1.2898 per euro as of 10:04 a.m. in Tokyo from $1.2954 late in New York yesterday. It has risen 8.3 percent this month, extending a 4.4 percent rally last year. The greenback fell to 89.58 yen from 90.03 yen. It was down 1.1 percent against the yen in January after a 19 percent decrease in 2008. The euro fell to 115.43 yen from 116.60 yen, following a 22 percent depreciation last year.

The euro weakened against 11 of the 16 most-active currencies this month. There’s a need for a global “agreement on how to share the burden of lost capital, and every country should be involved,” Soros told the Austrian newspaper. “Otherwise even more countries will suffer,” he said. “If the EU doesn’t do it, the euro may not survive the crisis.”

Soros’ ‘Record’

Soros, who made $1 billion breaking the Bank of England’s defense of the pound in 1992, told reporters this week he exited bets against sterling after it dropped to $1.40. The pound increased 0.5 percent to $1.4319 today.

“Given Soros’ track record, it emboldened people to shoot the euro,” said Neil Jones, head of hedge fund sales in London at Mizuho Corporate Bank.

Europe’s inflation rate probably dropped to 1.4 percent in January from 1.6 percent in December and the unemployment rate likely rose to 7.9 percent in December from 7.8 percent in November, according to Bloomberg surveys of economists. The reports are due for release at 11 a.m. in Luxembourg today.

Yen Versus Peso

The yen rose 1.1 percent to 58.10 versus the Australian dollar from 58.71 late in New York yesterday. Japan’s current- account surplus makes the yen attractive to investors in times of turmoil, as it means the country doesn’t rely on overseas lenders.

“We like selling dollar-yen,” analysts led by Jim McCormick, London-based global head of foreign exchange and local-markets strategy at Citigroup Inc., wrote in a research note yesterday. “Structural yen appreciation has yet to run its course as there remains scope for investors to unwind shorts.”

A short position is a bet that an asset will decline.

The Japanese currency will probably extend gains through to the end of the country’s fiscal year on March 31 as exporters buy the yen to hedge revenues and money managers bring funds home amid the global slump, according to Barclays Capital.

The yen also may gain as investors reduce so-called carry trades, where they borrowed in the currency to invest in nations where benchmark interest rates exceed Japan’s 0.1 percent.

“We expect even further yen appreciation toward the Japanese fiscal year end in March, as both corporate hedging and investor repatriation flows support the currency,” Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital said, confirming a research note dated yesterday. “We believe the dollar will decline to 84 yen in three months.”

U.S. gross domestic product contracted at a 5.5 percent annual rate from October through December, the biggest drop since 1982, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due later today in Washington.

The Federal Reserve held its target lending rate in a range of zero to 0.25 percent yesterday and said it’s prepared to purchase Treasury securities to resuscitate lending.

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

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Australia Stocks: Alesco, Aquarius, BHP, Nexus, Newcrest, Rio

By Shani Raja

Jan. 30 (Bloomberg) -- The S&P/ASX 200 Index fell 0.9 percent to 3,496 at 12:20 p.m. in Sydney. The broader All Ordinaries Index declined 0.8 percent to 3,434.40, while the futures contract expiring in March slipped 1.8 percent to 3,454.

The following companies were among the most active shares in the market today. Stock symbols are in parentheses.

Mining shares: Mining stocks fell after a measure of six metals traded in London dropped 2.2 percent. Copper lost 3 percent, zinc 2.2 percent, and nickel 3 percent.

BHP Billiton Ltd. (BHP AU), the world’s largest mining company, declined 2.1 percent to A$30.02, the most since Jan. 23. Rio Tinto Group (RIO AU), the third biggest, fell 3.6 percent to A$39.24.

JSW Steel Ltd., India’s third-largest steelmaker, said Rio agreed to cut coking coal prices by 43 percent for the last three months of an annual contract that expires March 31, after global demand slumped. Separately, Rio de Janeiro state rejected the iron-ore export terminal projects proposed by BHP, Ferrous Resources do Brasil Ltda. and an ArcelorMittal joint venture.

Precious metals producers: Gold producers rallied as gold rose 1.9 percent to $906.50 an ounce in New York after a slide in U.S. equity markets sparked demand for the precious metal as a store of value.

Newcrest Mining Ltd. (NCM AU) gained 3 percent to A$31.31. Sino Gold Mining Ltd. (SGX AU), owner of China’s second-largest gold mine, surged 10 percent to A$5.17, the highest since Sept. 23. Aquarius Platinum Ltd. (AQP AU), the producer of the precious metal in South Africa and Zimbabwe, rallied 4.5 percent to A$3.97.

Alesco Corp. (ALS AU), an Australian building materials and home products maker, tumbled 9.7 percent to A$2.15, the most since Dec. 15. Citigroup Inc. said in a note today that it expects a deceleration in the company’s earnings to continue.

Biota Holdings Ltd. (BTA AU), the developer of the influenza treatment Relenza, soared 13 percent to 50 cents, the highest since Oct. 7, after saying the U.K. will boost its stockpiles of the product.

Nexus Energy Ltd. (NXS AU) rose 10 percent to 48 cents, the most since Nov. 25 and the benchmark’s best performance. Royal Dutch Shell Plc Chief Financial Officer Peter Voser declined to comment on reports of a possible bid for Nexus, the developer of the proposed Crux natural gas liquids venture off northern Australia.

Orica Ltd. (ORI AU), the world’s largest explosives maker, advanced 1.9 percent to A$13.35. The company said first-quarter profit is ahead of last year’s and restated a forecast for an eighth year of growth.

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

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Asian Stocks Fall on Renewed Recession Concern; Toshiba Plunges

By Shani Raja

Jan. 30 (Bloomberg) -- Asian stocks fell for the first time in four days, led by banks and technology companies, as a record slump in Japanese production and lower profit forecasts renewed concern that the global recession is deepening.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, slumped 4.7 percent as reports showed the country’s factory output slumped 9.6 percent in December and unemployment surged. Toshiba Corp., Japan’s No. 1 chipmaker, and Nintendo Co., which makes the Wii game console, tumbled more than 12 percent after reducing earnings forecasts. Rio Tinto Group, the world’s third- biggest mining company, fell 3.1 percent on lower metal prices.

The MSCI Asia Pacific Index dropped 1.9 percent to 83.10 as of 10:47 a.m. in Tokyo. The measure snapped a three-day, 5.8 percent climb that came as the U.S., Japan and Australia widened efforts to end the global financial crisis that has dragged the world’s largest economies into recession.

“Expectations for government measures have been fully priced into the market, and investor focus is returning to the deterioration of the global economy,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $53 billion, said in an interview with Bloomberg Television.

Five stocks declined for each that rose on the MSCI gauge, which has fallen 5.6 percent this month. The Nikkei 225 Stock Average gained 1.8 percent, while Australia’s S&P/ASX 200 Index fell 1 percent to 3,490.00.

The Standard & Poor’s 500 Index dropped 3.3 percent in New York yesterday, breaking a four-day winning streak, as reports showed new home sales fell to an all-time low and the number of Americans receiving jobless benefits surged to a record.

Record Decline

The MSCI Asia Pacific Index’s declines this year extended last year’s record 43 percent tumble. The slump has cut the average valuation of companies on the benchmark measure by 38 percent in the past year to 10 times reported profit.

Mitsubishi UFJ lost 4.7 percent to 502 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, slumped 4.1 percent to 235 yen.

Japanese manufacturers cut production by 9.6 percent last month as recessions in the U.S. and Europe and a slowdown in China weakened demand for Japanese cars and electronics, the Trade Ministry said today. The drop eclipsed November’s record 8.5 percent decline.

Toshiba tumbled 16 percent to 325 yen after reversing its full-year profit outlook to a loss as the global recession damped demand for chips used in consumer electronics. Nintendo tumbled 12 percent to 28,300 yen after cutting cut its full-year net income forecast by 33 percent.

Kyocera Corp., the world’s fourth-largest solar-cell maker, dropped 5 percent to 5,920 yen. The company slashed its full- year profit target by 64 percent, citing a downturn in the global electronics market.

Rio fell 3.5 percent to A$39.29. BHP Billiton Ltd., the world’s largest mining company lost 1.7 percent to A$30.13. A measure of six metals traded in London dropped 2.2 percent, with both copper and nickel falling 3 percent.

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

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Japan Stocks Drop as Recession Deepens, Nintendo Cuts Forecast

By Masaki Kondo

Jan. 30 (Bloomberg) -- Japanese stocks slumped, trimming gains on the Nikkei 225 Stock Average’s best week this year, as a record drop in factory production and forecast cuts at Toshiba Corp. and Nintendo Co. pointed to a worsening recession.

Nintendo tumbled 12 percent after lowering its sales target for the Wii game machine and projecting its first profit drop in five years. Toshiba Corp., Japan’s largest chipmaker, plunged 11 percent after forecasting a record loss and Goldman Sachs Group Inc. said the company may have to raise new capital. Fanuc Ltd., the world’s No. 1 industrial-robot maker, dived 6.3 percent after manufacturers cut production at an unprecedented pace last month.

The Nikkei 225 sank 248.44, or 3 percent, to 8,002.80 as of 10:05 a.m. in Tokyo, ending a three-day advance. The broader Topix index fell 20.29, or 2.5 percent, to 798.18. The Nikkei headed for a 3.3 percent weekly gain, the most since the period ended Dec. 19, on optimism President Barack Obama’s stimulus package will ease the global recession.

“Expectations for government measures have been fully priced into the market, and investor focus is returning to the deterioration of the global economy,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $53 billion, said in an interview with Bloomberg Television.

The Nikkei is set to lose 9.6 percent in January, the steepest monthly drop since October, on concern waning demand will cripple company earnings and as Royal Bank of Scotland Group Plc’s loss forecast sparked concern the global financial crisis will deepen. The Topix was set for a 7.1 percent slide this month.

Worsening Recession

Japanese companies reporting third-quarter results posted a 24 percent tumble in net income for the quarter, Shinko Research Institute Co. said today in a report. The Nikkei lost a record 42 percent last year as the world’s biggest economies slipped into recession, and statistics released today showed Japan’s is headed for its worst contraction in the post-World War II period.

Factory output sank by a record 9.6 percent last month from November, the Trade Ministry said today before markets opened. Separate reports from the statistics bureau showed Japan’s unemployment rate jumped to 4.4 percent last month from 3.9 percent in November, while household spending fell 4.6 percent from a year earlier.

Wii Sales

Nintendo, the world’s biggest maker of handheld game players, tumbled by its daily limit of 12 percent to 28,300 yen in Osaka. The company yesterday cut its annual net income target by a third, saying it will book a 200 billion yen ($2.23 billion) foreign- exchange loss. The result prompted HSBC Securities Japan Ltd. to lower its rating on the stock to “neutral” from “overweight.”

Toshiba sank 11 percent to 343 yen, the sharpest plunge since October 1987. The company yesterday reversed its profit forecast to a net loss of 280 billion yen in the year to March 31. Goldman Sachs Group Inc. chopped its rating on the stock to “sell” from “neutral,” saying the bigger-than-expected loss will drive down the company’s net worth per share by more than a half at the end of March from a year earlier.

Fanuc slid 6.3 percent to 5,480 yen, en route for the biggest drop since Jan. 9. Kyocera Corp., the world’s largest solar-cell maker, sank 5.3 percent to 5,900 yen after saying net income fell 32 percent in the nine months ended Dec. 31. Kao Corp., Japan’s biggest maker of household goods, sank 8.7 percent to 2,200 yen after cutting its full-year net income forecast 13 percent.

Nikkei futures expiring in March sank 2.4 percent to 8,000 in Osaka and dived 2.7 percent to 7,995 in Singapore.

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

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Asian Stocks Fall on Renewed Recession Concern; Toshiba Plunges

By Shani Raja

Jan. 30 (Bloomberg) -- Asian stocks fell for the first time in four days, led by banks and technology companies, as a record slump in Japanese production and lower profit forecasts renewed concern that the global recession is deepening.

Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, slumped 4.7 percent as reports showed the country’s factory output slumped 9.6 percent in December and unemployment surged. Toshiba Corp., Japan’s No. 1 chipmaker, and Nintendo Co., which makes the Wii game console, tumbled more than 12 percent after reducing earnings forecasts. Rio Tinto Group, the world’s third- biggest mining company, fell 3.1 percent on lower metal prices.

The MSCI Asia Pacific Index dropped 1.9 percent to 83.10 as of 10:47 a.m. in Tokyo. The measure snapped a three-day, 5.8 percent climb that came as the U.S., Japan and Australia widened efforts to end the global financial crisis that has dragged the world’s largest economies into recession.

“Expectations for government measures have been fully priced into the market, and investor focus is returning to the deterioration of the global economy,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $53 billion, said in an interview with Bloomberg Television.

Five stocks declined for each that rose on the MSCI gauge, which has fallen 5.6 percent this month. The Nikkei 225 Stock Average gained 1.8 percent, while Australia’s S&P/ASX 200 Index fell 1 percent to 3,490.00.

The Standard & Poor’s 500 Index dropped 3.3 percent in New York yesterday, breaking a four-day winning streak, as reports showed new home sales fell to an all-time low and the number of Americans receiving jobless benefits surged to a record.

Record Decline

The MSCI Asia Pacific Index’s declines this year extended last year’s record 43 percent tumble. The slump has cut the average valuation of companies on the benchmark measure by 38 percent in the past year to 10 times reported profit.

Mitsubishi UFJ lost 4.7 percent to 502 yen. Mizuho Financial Group Inc., Japan’s second-largest bank, slumped 4.1 percent to 235 yen.

Japanese manufacturers cut production by 9.6 percent last month as recessions in the U.S. and Europe and a slowdown in China weakened demand for Japanese cars and electronics, the Trade Ministry said today. The drop eclipsed November’s record 8.5 percent decline.

Toshiba tumbled 16 percent to 325 yen after reversing its full-year profit outlook to a loss as the global recession damped demand for chips used in consumer electronics. Nintendo tumbled 12 percent to 28,300 yen after cutting cut its full-year net income forecast by 33 percent.

Kyocera Corp., the world’s fourth-largest solar-cell maker, dropped 5 percent to 5,920 yen. The company slashed its full- year profit target by 64 percent, citing a downturn in the global electronics market.

Rio fell 3.5 percent to A$39.29. BHP Billiton Ltd., the world’s largest mining company lost 1.7 percent to A$30.13. A measure of six metals traded in London dropped 2.2 percent, with both copper and nickel falling 3 percent.

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

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British Pound Has Surged This Morning - Will the Rally Continue?

Daily Forex Technicals | Written by DailyFX | Jan 29 09 15:00 GMT |

The British pound has enjoyed three consecutive sessions of strong rallies that have brought many of the sterling crosses to significant levels of technical resistance. While short-term momentum is still in the single currency's favor, it cannot be ignored that the pound is just off of recent record lows. Our DailyFX Analysts offer their outlooks for the pound and what they think is the best set up among the crosses. Currency Strategist - Terri Belkas My picks: Long GBP/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 1 Day - 1 Week GBP/USD has broken above trendline resistance from the January 9 high, leaving potential open for further gains toward the confluence of the 61.8% fib of 1.5350-1.3503 and the 78.6% fib of 1.4982-1.3503 at 1.4643/62. However, an additional region of immediate resistance at 1.4413/26 has prevented the rally from continuing and has pushed GBP/USD back into a trading range of approximately 1.41-1.44. At this point, I think it may be more prudent to set a buy order near 1.4110 with a stop below 1.3979 and an initial target of 1.4371 (top of the range) and secondary target of 1.4473/1.4500 (January 13, 15 lows). Currency Analyst - David Rodriguez My picks: Flat the GBP/USD Expertise: System Trading Average Time Frame of Trades: 2-10 weeks Last week I moved to tighten risk on my previous GBP/USD short position, and that saved me from substantial losses. Indeed, I'm currently flat the GBP/USD after having moved my stop on my short above 1.4000. My bias is now bullish the GBP/USD based on a substantial shift in sentiment, but risk/reward is currently not there to support a GBP/USD long. I'll stay flat the Sterling until I see better opportunities. Currency Analyst - Ilya Spivak My picks: Short GBPUSD (pending) Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months Last week, GBPUSD dropped below support at the bottom of a Falling Wedge formation that contained prices since late October but risk-reward looked far from favorable. Sterling would find initial support in the 1.3680-1.4050 congestion area that has held up sterling since 1985 and bounce higher, rising for another test of support-turned-resistance at the Wedge bottom. Positioning now looks to be showing the makings of an Advance Block formation, with confirmation pending on a bearish close for the current candle. If this materializes, look to go short GBPUSD eyeing the continuation of the broader down trend. Currency Analyst - John Rivera My picks:Long GBP/USD Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days My short GBP/USD call last week proved to be profitable as the pair would go and set a fresh 23 year low with a drop to 1.3503. However, since then it has rallied over 800 pips as traders viewed the selloff as overdone. Therefore, we could see the pair look to trade back into the 1.4500 - 1.5500 range that we saw from November through January. However, before, I go long I would like to see the 20-Day SMA cleared at 1.4484. If resistance holds it may change my bias with a BoE rate decision looming next week, so look for any pre-decision rhetoric from committee members as to future direction. Economists are forecasting a 50 bps cut and as we get closer we may see the Sterling weaken. Currency Analyst - David Song My picks: Remain Short GBP/CHF Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2- 10 Days After reaching a high of 1.8706 in December, the GBPCHF broke below major support levels throughout December, and the lack of momentum to retrace the selloff in the previous month continues to favor a bearish forecast for the pair. I have been short the pound-franc since price action broke below the 50.0% Fib on 12/17, and I will continue to hold a bearish outlook for the pair as the Swiss franc continues to benefit from safe haven flows. I will continue to hold my target at the January low of 1.5364, but we may see the pair remain range-bound over the remainder of the week before it continues to move lower. Currency Analyst - Joel S. Kruger My picks: Buy GBP/USD @1.4385, for 1.5000; stop at 1.4040 Expertise: Technical Analysis Average Time Frame of Trades: 1-3 Days Price action thus far today has been quite interesting with the pair initially trading lower to take out the previous daily low, ending a sequence of 4 consecutive daily higher lows, before reversing sharply to trade back towards daily opening levels. While the overall trend is indeed grossly bearish, our outlook for the pair remains constructive with inter-day studies still showing plenty of room for corrective upside before bear trend continuation. Recently, much of the broad based USD busying has come in the European session before a US session, which over the past week, has been selling USDs more aggressively. While the pullback to 1.4070 is concerning, we will wait to see if that level is tested again in the US session. Our contention is that the 1.4070 level will hold and the market will eventually trade back above 1.4375 (28Jan high) to keep the recovery structure intact. Fundamental Catalyst - The UK currency has been decimated over the past several months on the back of a global financial crisis and an ongoing deterioration within the local data. Sterling has been the currency of choice to play long USD positions through, bearing the brunt off the global macro slowdown. Much of the depreciation in the currency has also been exacerbated by a divergence in monetary policy between the Bank of England and the ECB in which the UK central bank has been vastly more accommodative. Eurozone data had not been showing the kind of weakness as was seen in the UK which translated into a more balanced ECB policy. However, we are starting to see a shift in the fundamentals, with the Eurozone deterioration starting to gain more traction. This should ultimately take some pressure off of Cable as traders begin to liquidate long EUR/GBP positions. Cable has also been very sensitive to risk aversion and therefore any sense of stability within the financial markets is sure to benefit the beleaguered currency. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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