Friday, March 26, 2010

U.S. Said to Widen Homeowner Aid, Subsidize Mortgage Reductions

By Rebecca Christie and Kate Andersen Brower

March 26 (Bloomberg) -- The Obama administration plans to announce programs to help homeowners avoid foreclosure, including subsidies for borrowers who owe more than their home is worth.

The plan, to be unveiled today, would expand Treasury Department and Federal Housing Administration programs and use funds from the $700 billion Troubled Asset Relief Program, according to two administration officials. The administration faced a week of criticism from lawmakers and watchdog groups who say the government hasn’t helped enough homeowners stave off foreclosure.

“It’s almost like a triage policy,” said Eric Barden, chief investment officer of Barden Capital Management in Austin, Texas. “It limits the losses of the most overvalued properties and it also limits the losses to the borrowers that are in the most distress.”

Foreclosures are expected to climb to 4.5 million this year from 2.8 million in 2009, according to RealtyTrac Inc., an Irvine, California-based research firm. The administration of President Barack Obama and banks including Wells Fargo & Co. and Bank of America Corp. have so far fallen short of meeting goals of the government’s foreclosure-prevention program, according to a report by Neil Barofsky, the TARP special inspector general.

The new plan would increase payments to lenders that modify second mortgages, an official said. Banks’ unwillingness to write down second liens has helped block efforts to prevent foreclosures, said Josh Rosner, managing director at Graham, Fisher & Co. The Washington Post reported earlier on the administration’s plan.


The administration will propose allowing more mortgages to be refinanced into FHA guarantee programs if the borrower is current on the loan, one of the officials said. The lender would have to cut the amount owed by at least 10 percent to less than the value of the home. The first and second mortgages combined would have to be no more than 115 percent of the home’s value.

“Banks continue to carry second liens on their books at vastly inflated value,” Rosner said. “If the government reduced their ability to overinflate these assets, the banks would be more willing to engage in principal reductions.”

The Treasury would help unemployed homeowners reduce mortgage payments for at least three months while they look for work, the officials said. If homeowners don’t find a job in that time, or if they find a new job at a lower salary, they will be evaluated for further assistance.

Critics, including consumer groups and Republican lawmakers, said the administration hasn’t yet done enough.

Larger Issues

“As long as the administration continues to sidestep the larger issues such as job creation and how they intend to deal with Fannie and Freddie, subsequent misadventures into the mortgage market will continue to be an exercise in futility,” Representative Darrell Issa of California said yesterday in a statement.

Earlier this week, the administration said it wasn’t yet ready to restructure Fannie Mae and Freddie Mac, the government- backed mortgage companies that have been in conservatorship since 2008.

Existing incentives will be expanded for borrowers with FHA-guaranteed loans, and relocation assistance payments will be doubled for borrowers who have to move out of residences. Servicers will be required to consider principal writedowns when modifying loans and the Treasury will offer incentives for principal reductions.

“We continue to support the government’s efforts to prevent foreclosures,” said Kevin Waetke, a spokesman for Wells Fargo, the biggest U.S. mortgage lender. “The federal programs, coupled with our own, are helping struggling American homeowners to reach more affordable mortgage payments and to remain in their homes. We will review the details of the programs as soon as we receive them and will work to implement them by this fall.”

Thursday, March 18, 2010

Canada Dollar Drops for First Time in March as Crude Oil Falls

By Allison Bennett and Chris Fournier

March 18 (Bloomberg) -- Canada’s dollar depreciated against its U.S. counterpart for the first time this month as crude oil, the nation’s biggest export, and stocks declined.

Canada’s currency, nicknamed the loonie for the image of the aquatic bird that adorns the C$1 coin, earlier traded within one cent of parity with the greenback for a second day. The loonie yesterday touched C$1.0071, its strongest level against the greenback since July 23, 2008.

“Base metals, oil, and equity markets were all down today,” said Matthew Strauss, senior currency strategist in Toronto at Royal Bank of Canada. “There wasn’t a fundamental reason for dollar-Canada to push towards parity.”

The Canadian currency depreciated 0.4 percent to C$1.0141 at 5 p.m. in Toronto, from C$1.0104 yesterday. It earlier reached C$1.0090. One Canadian dollar buys 98.61 U.S. cents.

Crude oil for April delivery fell 0.9 percent to $82.14 a barrel on the New York Mercantile Exchange. Copper futures for May delivery fell 0.4 percent on New York’s Comex. The S&P/TSX Composite Index, Canada’s equity benchmark, weakened 0.5 percent.

The Canadian dollar tends to track movements in stocks and commodities.

The yield on Canada’s two-year security declined three basis points, or 0.03 percentage points, to 1.56 percent. The 1.5 percent note due in March 2012 gained 7 cents to C$99.91.

‘Bearish Tone’

“The Canadian dollar is driven by other majors like the euro, which has accelerated through stops below $1.3650,” said Christian Dupont, a currency trader at Desjardins Group in Montreal. Currency markets have “an already bearish tone due to the Greek situation that looks less clear every day.” Stops are automatic trading orders designed to limit losses.

The euro fell 0.9 percent to $1.3611 as Greek Prime Minister George Papandreou set a one-week deadline for the European Union to create a financial aid mechanism for Greece and challenged Germany to give up its doubts about a rescue package.

Papandreou said he may turn to the International Monetary Fund to overcome Greece’s debt crisis unless leaders agree to set up a lending facility at a summit March 25-26. The IMF option has already been dismissed by European Central Bank President Jean-Claude Trichet and French President Nicolas Sarkozy, who say it would show the EU can’t solve its own crises.

‘Bit of a Breather’

“There’s so much contradictory news coming out of Greece,” said Eric Lascelles, chief economics and rates strategist at Toronto-Dominion Bank. “There’s moderate safe haven effect that’s favoring the U.S. dollar. It really seems to be a risk off day.”

The Canadian currency has gained in 13 of the last 16 sessions, and appreciated 2.1 percent against the greenback since March 2, when the Bank of Canada said the nation’s inflation and economic output have been higher than expected. The comments spurred speculation the central bank will raise benchmark interest rates before the Federal Reserve.

“The market is taking a little bit of breather after such a one-way move,” said Steve Butler, director of foreign- exchange trading in Toronto at Bank of Nova Scotia. “You can’t go one way all the time.”

Canada’s dollar rose to par with the greenback in September 2007 for the first time in three decades amid booming demand for raw materials. It was last at parity on July 22, 2008, and then lost 18 percent that year as the credit crisis crushed demand for commodities.

A report tomorrow is expected to show that the nation’s consumer prices rose 1.4 percent from a year earlier, the fifth straight gain, according to the median forecast of 19 economists in a Bloomberg survey.

Wednesday, March 17, 2010

BOJ’s Loan Program Stymied as Credit Demand Wanes (Update1)

By Mayumi Otsuma and Aki Ito

March 18 (Bloomberg) -- The Bank of Japan’s decision to double the size of a liquidity program for banks may prove more effective in placating the government than stemming deflation.

The bank yesterday increased its three-month lending facility for banks to 20 trillion yen ($221 billion), a “monetary easing” that may help reduce borrowing costs and bolster corporate sentiment, Governor Masaaki Shirakawa said at a Tokyo press briefing.

There’s little sign that the initial effort helped the economy: bank lending has fallen for three straight months, prices tumbled by a record and wages dropped. Where the initiative did win plaudits is among politicians -- Prime Minister Yukio Hatoyama, facing a July parliamentary upper house election as his poll numbers subside, welcomed the move.

“You can provide liquidity to banks but they don’t have to lend,” Joseph Stiglitz, the Columbia University economist and Nobel laureate, said in an interview when asked whether the BOJ is doing enough to defeat deflation. Central banks in Japan and the U.S. “have to rethink the fundamentals” and work with governments to force banks to extend more credit, he said.

Japan is in a type of “liquidity trap” where extra cash injections may not have much impact, according to Stiglitz, 67, a former White House Council of Economic Advisers chairman.

Companies from Toshiba Corp. to Sony Corp. are refraining from boosting their capital spending even after Japan’s economy pulled out of its worst recession in the postwar era.

Avoided ‘War’

The BOJ’s move is “a signal of cooperation, but it’s not effective expansionary monetary policy” because demand remains too low for companies to increase investment, said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. Hatoyama “is under extreme pressure going into the election, and it would be a declaration of war toward the government” had the central bank done nothing, he said.

Japan’s benchmark overnight lending rate was kept at 0.1 percent by the board yesterday.

Stocks climbed and the yen weakened after the decision. Japan’s currency traded at 90.60 late yesterday in Tokyo from 90.37 before the announcement. It was at 90.39 as of 9:05 a.m. in Tokyo today. The Nikkei 225 Stock Average rose 1.2 percent, before retreating 0.2 percent in early trading today.

More to Come

The government may keep pressing the BOJ to do more, and next month offers a fresh opportunity to take additional steps. The bank will have updated economic projections and quarterly surveys of business and household confidence. Yesterday’s decision left monthly government bond purchases at 1.8 trillion yen, and the term of the loan program for banks at three months.

Hatoyama told reporters yesterday that he hopes the central bank will take action to defeat deflation, and that the BOJ’s step was in line with what the Cabinet anticipated. Finance Minister Naoto Kan said the decision shows the bank is “stepping up efforts to fight deflation.”

Kan has been leading calls for monetary action as his ability to inject fiscal stimulus is constrained by record public debt. Shirakawa, for his part, said yesterday that “monetary policy alone can’t beat deflation.”

“I wish there was a miracle, but all we can do is persist with our efforts” to reverse the drop in prices, which will “take time,” the governor said.

Next Move

Shirakawa’s next move may be to extend the period of the loans to six months or a year, said Yasunari Ueno, chief market economist at Mizuho Securities Co. in Tokyo.

Other options include increasing the sovereign bond purchases, specifying conditions needed for ending the current monetary policy, and adopting an inflation target, a measure that Kan has been pushing for.

A price target would “put out a trigger point for inflation, and until we get there” the central bank should keep adding cash to the banking system, said Robert Feldman, head of economic research at Morgan Stanley in Tokyo.

Board members Miyako Suda and Tadao Noda opposed yesterday’s credit expansion. Both said in the past month that they expect the economy to keep improving, and Noda said further monetary easing would have limited impact because short-term interest rates are already very low.

Yields on three-month discount bills issued by the government were unchanged at 0.12 percent yesterday, according to Bloomberg data.

Manufacturers’ Confidence

Deflation persists even as the export-led recovery gains momentum. A Finance Ministry and Cabinet Office survey today showed that large firms were optimistic about the outlook for a third straight quarter. Sentiment among manufacturers with more than 1 billion yen ($11 million) in capital was 4.3 points this quarter, compared with 13.2 points in the previous three months. A number greater than zero means optimists outnumber pessimists.

The gross domestic product deflator, a broad measure of prices, tumbled a record 2.8 percent in the fourth quarter. Consumer prices slid for 11 straight months to January, while factory output climbed in the same period -- increases that haven’t been enough to prompt companies to expand.

Toshiba plans to slash capital spending by 41 percent this fiscal year, the company said in January. Sony said last month that capital investment for this fiscal year will probably be 34 percent less than a year earlier.

Not all analysts say the bank’s action will be fruitless.

“The headlines about further monetary easing might help to keep inflation expectations positive,” said Julian Jessop, chief international economist at Capital Economics Ltd. in London. The move “should also maintain the weaker bias in the yen, especially when other major central banks are perceived to be heading for the exit.”

Wednesday, March 10, 2010

Yen Falls as Stocks Rise, Investors Seek High-Yield Currencies

By Ben Levisohn

March 10 (Bloomberg) -- The yen declined against all of its major counterparts as stocks rose, driving investor demand for currencies tied to growth, including the Norwegian krone and Brazilian real.

The dollar fell against 12 of the 16 most-traded currencies tracked by Bloomberg as crude oil touched a two-month high, boosting the currencies of commodity producers. The euro gained, touching the strongest level versus the yen in two weeks, after Portugal’s cost of borrowing declined in a sign that investors are less worried about Greece’s debt crisis spreading.

“The currency market is comfortable tracking along the stock market, and that’s driving the yen lower,” said John Norris, senior market strategist for Brewer Investment Group in Chicago. “If the Standard & Poor’s 500 Index gets above its January high, that opens the door for a further rise in the euro.”

The yen depreciated 1 percent to 123.58 per euro from 122.35 yesterday at 4:22 p.m. in New York and weakened 0.6 percent to 90.51 per dollar, from 89.97. The euro strengthened 0.4 percent to $1.3656.

Norway’s krone was the top performer against the U.S. dollar as stocks gained, with the S&P 500 Index advancing 0.5 percent. Crude oil for April delivery climbed as much as 1.9 percent to touch $83.03 a barrel, the highest since Jan. 11, before trading at $81.93. Oil is Norway’s biggest export. The krone appreciated 0.6 percent to 5.8666 per dollar.

A government report showed China’s exports climbed 46 percent in February, the most in three years.

Australian Dollar, Real

The yen fell versus Australia’s dollar and Brazil’s real as better-than-expected economic data spurred carry trades, in which investors buy higher-yielding assets with amounts borrowed in nations with low interest rates. The benchmark of 0.1 percent in Japan makes the yen a popular source of funds to invest at higher returns in Australia, where the central-bank target is 4 percent, and Brazil, where it’s 8.75 percent.

The Japanese currency depreciated 0.7 percent to 82.78 per Australian dollar and touched 83.32, the weakest since Jan. 21. It dropped 1 percent to 51.18 yen to the real.

“Conditions will continue to improve on the risk-sentiment front, and the emerging-market currencies and commodity-linked currencies are likely to outperform over the coming weeks,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo Mitsubishi UFJ Ltd. in London.

No Collapse

Former European Commission President Romano Prodi said the worst of Greece’s financial crisis is over and other European nations won’t follow in its path.

“I don’t think there is any reason to think the euro system will collapse or will suffer greatly because of Greece,” Prodi, who is also a former Italian prime minister, said in an interview in Shanghai today.

The yield premium that investors demand to hold Portugal’s 10-year bonds over German bunds fell 7 basis points after the Iberian nation auctioned 990 million euros ($1.4 billion) of 3.85 percent bonds due in 2021, more than the 750 million euros targeted. “The Greek thing has faded, and they don’t have a new club to pound the euro with here,” said David Rolley, who helps oversee $106 billion as co-head of global fixed-income in Boston at Loomis Sayles & Co. “It’s a little bit of relief rally, but this isn’t a one-act play. There will be many more opportunities to see what the market is for Mediterranean debt securities.”

Implied Volatility Falls

One-month implied volatility on euro-dollar options fell to almost an eight-week low. Traders expect swings of 9.85 percent, the lowest since Jan. 15, according to Bloomberg data. Reduced volatility indicates less probability of currency fluctuations that may erode profit on investments.

“Volatilities are collapsing,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “They’re a symbol for the perception of risk, and people think nothing can happen.”

Canada’s dollar touched the highest level against its U.S. counterpart in almost five months as investors bet the nation’s economy will be among the strongest during the recovery.

The currency, nicknamed the loonie for the image of the waterfowl on the C$1 coin, appreciated as much as 0.4 percent to C$1.0217, the strongest level since Oct. 15.

The Swiss franc pared an advance against the euro after reaching the highest level in a year, amid speculation the nation’s central bank sold the currency to damp its appreciation.

The franc was little changed at 1.4613 per euro, from 1.4623 yesterday. It touched 1.4611, the strongest since March 2009, and earlier weakened 0.1 percent to 1.4630.

“Looking at the chart, it would certainly suggest official activity,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London.

New Zealand Dollar

Swiss National Bank spokesman Nicolas Haymoz declined to comment on the currency movements. Margaret Critchlow, a spokeswoman for the Bank for International Settlements, said she was “not aware” of any franc intervention.

New Zealand’s dollar erased gains versus the dollar and pared an advance against the yen after Reserve Bank Governor Alan Bollard left the nation’s benchmark interest rate at a record low of 2.5 percent and said economic growth may remain subdued. The currency, known as the kiwi, fell 0.1 percent to 70.23 U.S. cents and rose 0.5 percent against the yen to 63.56, after earlier rising 1.7 percent.

Tuesday, March 9, 2010

Dollar Falls as Stock Gains Encourage Demand for Riskier Assets

By Ben Levisohn

March 9 (Bloomberg) -- The dollar fell against the currencies of commodity-exporting nations including Brazil and Canada as advancing stocks encouraged demand for assets that historically benefit as global growth rebounds.

The yen rose against most of its major counterparts on speculation Japanese companies are bringing home overseas earnings before the nation’s fiscal year ends this month. The pound weakened versus all 16 of the most-traded currencies after Fitch Ratings said the U.K.’s debt profile has deteriorated “pretty sharply.”

“It’s relatively risk-friendly environment,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “The late trading rise in European equity markets promoted risk tolerance in currencies, and the currencies most closely correlated with growth are benefiting.”

The dollar depreciated 0.4 percent to 89.97 yen at 4:09 p.m. in New York, from 90.31 yesterday. It rose 0.3 percent to $1.3598 against the euro, from $1.3634. Europe’s common currency declined 0.6 percent to 122.36 yen, from 123.13.

Australia’s currency rose 0.5 percent to 91.38 U.S. cents, from 90.92 yesterday. Brazil’s real gained 0.7 percent to 1.7757 per dollar, from 1.7885 yesterday.

The greenback fell versus the real for the ninth time in 10 days as rising stock markets spurred carry trades, in which investors buy higher-yielding assets with amounts borrowed in nations with low interest rates. The benchmark of zero to 0.25 percent in the U.S. makes the dollar a popular source of funds to invest at higher returns in countries such as Brazil, where the central bank target is 8.75 percent.

Near Year’s High

The Standard & Poor’s 500 Index gained as much as 0.6 percent today, one year after it closed at a 12-year low. The equity benchmark has rallied 69 percent since then. It closed today at 1,140.45, within 1 percent of its 52-week high of 1,150.45 in January.

The yen rose versus the dollar on speculation Japanese companies are bringing overseas profits home before the nation’s fiscal year ends on March 31.

“Japanese repatriation flows are likely to continue for the next few weeks until fiscal year-end at the end of March,” Aroop Chatterjee, a currency strategist at Barclays Plc in New York, wrote in a report today. “These flows are likely to cap dollar-yen rallies and potentially limit the upside of other yen crosses.”

Seven-Week High

The Australian dollar touched its strongest level in seven weeks versus the greenback, 91.48 U.S. cents, as a measure of job vacancies jumped by the most in more than a decade, prompting speculation that the central bank will raise interest rates next month.

Swaps traders are betting on a 30 percent chance the Reserve Bank of Australia will increase its benchmark rate when it meets April 6, according to a Credit Suisse AG index. That’s up from a 25 percent chance yesterday.

The pound slid after Fitch said the U.K. needs to make a stronger fiscal adjustment to help reduce its debt ratio. Adjustments to revenue and spending plans are taking place at “too slow” a pace, Brian Coulton, head of global economics at Fitch, said in a presentation in London. Britain should cut its deficit to 3 percent of gross domestic product by March 2015 instead of the planned 4.4 percent, he said.

“Investors quickly connected the dots to see that a rudderless government is the most likely outcome in the forthcoming election, further hampering sterling,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group LLC in Greenwich, Connecticut.

Fitch on Greece

The euro dropped versus the yen and the dollar after Fitch Director Christopher Pryce said at a conference in London that while the outlook for Greece is “probably OK” in the short term, prospects in the next six to nine months are less certain. There are “clearly already the beginnings of dissent within the Greek cabinet,” Pryce said.

“Over the past few days there was optimism that the austerity packages announced would lead to underlying improvement,” said Todd Elmer, global market currency strategist at Citigroup Inc. in New York. “‘Concerns over solvency in euro area will linger, and that will weigh on the euro.”

The euro pared its loss versus the yen after the European Commission said in a draft report Greece is on course to meet its budget goals in 2010. The report will be discussed by European Union finance ministers at a regular meeting in Brussels next week.

All six major European currencies tracked by Bloomberg, including Sweden’s krona and Norway’s krone, fell versus the dollar and the yen today.

Krona, Krone

The krona fell 0.7 percent to 12.61 yen, from 12.70 yesterday. Sweden’s currency dropped 0.4 percent to 7.1337 per dollar, from 7.1067. The krone declined 0.6 percent to 15.24 yen, from 15.33. Norway’s currency was down 0.2 percent to 5.9040 against the dollar, from 5.8915.

Chile’s peso weakened for the first time in six days as a drop in copper, the country’s biggest export, curbed a rally that was fueled by speculation the government would repatriate overseas savings to fund reconstruction after last month’s earthquake.

The peso slid 0.7 percent to 512.23 per dollar, from 508.76 yesterday. The currency is up 2.4 percent against the greenback this month, the best performance among six major Latin American currencies tracked by Bloomberg, after Chile was struck by an 8.8-magnitude earthquake on Feb. 27.

Sunday, March 7, 2010

Yen Falls Versus Euro as Recovery Signs Increase Yield Demand

By Yoshiaki Nohara and Ron Harui

March 8 (Bloomberg) -- The yen fell to a two-week low against the euro as signs the global economic recovery is gaining momentum boosted demand for higher-yielding assets.

The yen dropped against 15 of its 16 major counterparts after Japanese exports grew in January for a second month and before data today economists said will show German industrial output rose. Australia’s dollar touched the strongest in six weeks against the U.S. currency as risk sentiment improved after French President Nicolas Sarkozy said yesterday the euro region is ready to rescue Greece.

“We are seeing a classic reversal of the yen, having been the preeminent safe-haven currency in recent weeks,” said Ray Attrill, global research director at Forecast Ltd. in Sydney. “The U.S. dollar is generally being sold off because of an improvement in risk appetite. The yen is being sold off even more.”

Japan’s currency fell to 123.64 per euro as of 10:01 a.m. in Tokyo from 123.00 in New York on March 5. It earlier touched 123.69, the weakest since Feb. 23. The yen was at 90.39 per dollar from 90.28 after reaching 90.68, the lowest since Feb. 23. The euro rose to $1.3656 from $1.3626. Australia’s currency was at 90.87 U.S. cents from 90.77 cents after climbing to 91.06, the most since Jan. 21.

The yen dropped as Japan’s current-account surplus was 899.8 billion yen ($9.9 billion) from a year earlier, when it was in deficit, the Ministry of Finance said in Tokyo today. Exports surged 41 percent on an annual basis.

‘Risk Sentiment’

German industrial production rose 1 percent in January after falling 2.6 percent the previous month, according to a Bloomberg News survey before the Economy Ministry report today.

“Risk-taking sentiment is getting better, given some optimism over the global rebound,” said Akane Vallery Uchida, a currency strategist at Royal Bank of Scotland Group Plc in Tokyo. “It’s an environment where the yen is likely to be sold against growth-sensitive currencies such as the Australian dollar.”

The Nikkei 225 Stock Average rose 1.5 percent, and the MSCI Asia Pacific Index of regional shares gained 1.1 percent.

The euro advanced against the dollar for a second day after Sarkozy voiced his support for Greece.

“I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said in Paris after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.”

‘Supportive Words’

Sarkozy’s comments are among the strongest by a European Union leader to signal the bloc would bail out Greece if necessary as officials strive to warn investors against making further bets against the euro and Greek bonds. Papandreou’s government last week passed a further round of austerity measures and sold 5 billion euros ($6.8 billion) in government debt.

“The important thing is that almost everyone now agree that the Greek government has done as much as they can at this stage,” Erik F. Nielsen, chief European economist in London at Goldman Sachs Group Inc., wrote in an e-mailed note yesterday. “So, the measures were appropriately met with an avalanche of supportive words from the rest of Europe.”

Futures traders decreased bets the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 66,770 on March 2, compared with net shorts of 71,623 a week earlier.

Japan’s Companies

Losses in the yen were tempered on speculation Japanese companies will bring home overseas earnings before the fiscal year ends this month.

“One source of yen buying is corporate repatriation,” Geoffrey Yu, a currency strategist in London at UBS AG, wrote in a research note dated today. “Companies with overseas earnings may be looking to repatriate the majority of their 2009 earnings for various purposes.”

Large Japanese manufacturers expected the yen to average 91.16 per dollar in the six months that started Oct. 1, 2009, according to the Bank of Japan’s quarterly Tankan survey. The currency has averaged 90.12 since the start of the Japanese fiscal second half.

Japanese companies said they remain profitable as long as the yen trades at 92.90 per dollar or weaker, according to a Cabinet Office survey on Feb. 19. That’s stronger than the 97.33 breakeven point they provided last year. Japan’s fiscal year ends on March 31.

Thursday, March 4, 2010

Australian, N.Z. Dollars Weaken on Concern Over Slower Growth

By Candice Zachariahs

March 4 (Bloomberg) -- The Australian and New Zealand dollars declined as concern over slowing growth in Europe damped demand for higher-yielding currencies.

New Zealand’s currency dropped toward a decade low against Australia’s dollar and slid against all 16 major counterparts on bets its central bank will keep the target rate at a record low when it meets March 11. The euro declined from a two-week high against the U.S. dollar on expectations the European Central Bank will maintain stimulus measures as Greece struggles to cut its budget deficit.

“The euphoria post the Greek austerity package last night is really fading,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Hong Kong. “The euro is struggling to sustain its gains, which is weighing on the Aussie generally.”

Australia’s dollar fell 0.5 percent to 90.17 U.S. cents as of 4:17 p.m. in Sydney from 90.59 cents yesterday, when it climbed to 90.86 cents, the strongest since Jan. 25. It traded at 79.77 yen from 80.14 yen.

New Zealand’s dollar fell 0.3 percent to NZ$1.3073 per Australian dollar and yesterday dropped to NZ$1.3102, the weakest level since November 2000. The kiwi dollar slid 0.7 percent to 68.97 U.S. cents, and declined 0.7 percent to 61.02 yen.

“The kiwi is being sold heavily on the cross against the Aussie,” said Tim Kelleher, vice-president of institutional banking and markets in Auckland at Commonwealth Bank of Australia, the nation’s biggest lender. The New Zealand dollar may slide toward NZ$1.35 and then NZ$1.38 per Aussie, he said.

Exports, Resistance

Australia’s economy grew at the fastest pace in almost two years, a government report showed yesterday, underscoring the central bank’s March 2 decision to increase the target interest rate for the fourth time since October to 4 percent. New Zealand’s benchmark is at 2.5 percent.

The Aussie snapped four days of gains against the greenback after reaching so-called resistance near 90.65 U.S. cents, its 100-day moving average, said Trinh.

“Certainly that’s the key level of resistance and Aussie has to close above there to get the short-term market bulled up,” she said.

Declines in the currency were limited as a government report showed the nation’s trade deficit narrowed more than economists forecast on rising exports of iron ore.

The nation’s trade shortfall shrank to A$1.18 billion ($1.07 billion) in January from a revised A$2.17 billion in December, the Bureau of Statistics said in Sydney. Economists forecast a A$1.6 billion gap, according to a Bloomberg News survey. Exports rose 1 percent to A$20.1 billion, the report showed.

Australian government bonds rose. The yield on 10-year notes fell two basis points, or 0.02 percentage point, to 5.47 percent, according to data compiled by Bloomberg. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.09 percent from 4.11 yesterday.

Tuesday, March 2, 2010

Euro Rises From 10-Month Low as Greece to Set New Deficit Cuts

By Ben Levisohn and Inyoung Hwang

March 2 (Bloomberg) -- The euro rose from its lowest level against the dollar since May after the Greek government said it will announce new deficit cuts tomorrow, increasing speculation that a solution to its debt crisis may be nearing.

The Canadian dollar surged after the nation’s central bank said inflation and economic output have been higher than policy makers expected. The euro appreciated against the pound for a fifth consecutive day as Greek bonds advanced after Prime Minister George Papandreou told his party’s parliamentarians that “painful” decisions are coming.

“The talk that Greece will announce new deficit cuts is giving market fundamental reason to rally euro,” said Kathy Lien, director of currency research, with online currency trader GFT Forex, in New York. “Any hint of a bailout or new deficit cuts is enough to push it higher.”

The euro gained 0.3 percent to $1.3606 at 4:10 p.m. in New York. It earlier fell as much as 0.9 percent to $1.3436, the lowest level since May. It gained 0.5 percent against the pound, to 90.95, and traded at 120.75 yen.

Euro-dollar “made a marginal new low this morning and has so far not sustained the move,” Citigroup Inc. technical analysts led by Tom Fitzpatrick in New York wrote in a report today. “The failure to sustain the move to a new trend low this morning is beginning to suggest a turn back up is the risk as was the case at the start of March 2009.”

New Measures

The Greek government will announce as much as 4.8 billion euros ($6.5 billion) of additional deficit cuts tomorrow ahead of a March 16 deadline, bowing to pressure from the European Union and investors to do more to tame the region’s biggest shortfall, a person familiar with the plan said.

The new measures will include higher tobacco, alcohol and sales taxes and deeper cuts in public workers’ bonus payments, said the person, who declined to be identified because the details aren’t public.

“The news has provided some support for the euro,” said Meg Browne, a vice president of foreign exchange research in New York at Brown Brothers Harriman & Co. “The mid-March deadline for Greece will be calming for the markets. We could get a correction to $1.38-$1.40.”

The announcement would come two days before Papandreou meets Germany’s Angela Merkel and may help the chancellor justify aiding Greece to taxpayers and political opponents who say the country shouldn’t be bailed out after living beyond its means.

“The government is forced to ask all Greeks to contribute,” Papandreou said in Athens. “Now we need the support of our [European] partners. To provide it they must convince their citizens, from whom they are also asking for sacrifices, that the Greeks are doing what must be done.”

Credit-Default Swaps

The euro strengthened as credit-default swaps linked to Greek government bonds tumbled 31.5 basis points to 313 basis points, the lowest since Jan. 18, according to CMA Datavision prices.

“Greek CDS have come in sharply,” said Alan Ruskin, head of international currency strategy in North America at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “The Greeks and the core countries like Germany and France will reach an agreement and that will likely place a floor on the euro- dollar.”

The Canadian dollar gained 0.8 percent to C$1.0333 against the greenback as the Bank of Canada signaled rate increases in coming months. The target rate for overnight loans between commercial banks remained at 0.25 percent at today’s meeting, where it’s been since April, as predicted by all 22 economists surveyed by Bloomberg.

‘Fiscal Fears’

“Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity,” the Ottawa-based bank said in a statement. Fourth quarter growth came from “vigorous domestic spending and further recovery in exports.”

The pound fell for a sixth day versus the dollar, its longest run of declines in more than 16 months, amid concern Britons may fail to elect a government with a large enough majority to cut the country’s deficit.

Sterling yesterday had its biggest drop against the dollar since Oct. 23, based on closing prices, as a Feb. 28 YouGov Plc poll showed the Conservative lead narrowed to two percentage points. That suggested Prime Minister Gordon Brown’s Labour Party would still win the largest number of seats and retain power given the way both parties’ voters are distributed.

The Tory lead was five points in the poll published late yesterday by ComRes Ltd. Elections must be held by June.

“The fiscal fears are shifting from Europe to the U.K.,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York. “There is a higher probability that Labor may win and that means they may try to cheapen themselves out of the problem.”

Sterling has fallen 5.9 percent this year, the worst performance among the Group of 10, according to the Bloomberg Correlation-Weighted Currency Indices. The pound dropped 0.3 percent today, according to the index, the second-worst after New Zealand’s dollar.