By Matthew Brown and Ron Harui
Nov. 23 (Bloomberg) -- The dollar fell for the first time in three days against the euro on speculation the Federal Reserve will keep its stimulus measures in place and ensure interest rates remain low.
The U.S. currency slid against 15 of its 16 major counterparts after Fed Bank of St. Louis President James Bullard said in New York yesterday that he supported extending the central bank’s purchases of mortgage-backed securities beyond the first quarter of next year. The yen weakened as commodities and stocks advanced, boosting demand for higher-yielding assets such as the South African rand.
“The central bank language at the moment is still pretty dovish and that’s making riskier assets more attractive than the dollar into the end of the year,” said Mark O’Sullivan, director of dealing in London at Currencies Direct Ltd.
The dollar weakened to $1.4965 per euro as of 8:05 a.m. in London, from $1.4862 in New York last week. The yen depreciated to 132.84 versus the euro, from 132.09, and was at 88.77 per dollar, from 88.88. The South African rand was the biggest gainer versus the dollar, strengthening 1.3 percent to 7.5124.
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, declined 0.7 percent to 75.101. It slid to 74.679 on Nov. 16, the lowest level since August 2008.
Fed’s Bullard
U.S. policy makers repeated on Nov. 4 that they will complete the Fed’s planned $1.25 trillion in purchases of mortgage securities by March and said they will buy $175 billion of agency debt, down from a previous maximum of $200 billion. They kept their benchmark rate in a range of zero to 0.25 percent and repeated borrowing costs will stay low for an “extended period.”
In his speech, Bullard said “unemployment is high, and labor markets are lagging,” while repeating his view that economic recovery in the U.S. has started.
Futures contracts on the Chicago Board of Trade on Nov. 20 showed a 32 percent chance the Fed raise rates by June, down from 68 percent odds a month ago.
The yen and dollar also declined as gold climbed to a record and shares advanced for the first time in three days. Bullion for immediate delivery rose as much as 1.5 percent to $1,167.88 an ounce, and the MSCI World Index gained 0.9 percent.
Benchmark interest rates are as low as zero in the U.S. and 0.1 percent in Japan, compared with 3.5 percent in Australia, attracting investors to the South Pacific nation’s higher- yielding assets.
Futures traders decreased bets the euro will strengthen against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed on Nov. 20.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 11,956 on Nov. 17, compared with 25,173 a week earlier.
Monday, November 23, 2009
Monday, November 16, 2009
Bernanke Says ‘Not Obvious’ Asset Prices Misaligned (Update2)
By Scott Lanman
Nov. 16 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said it’s “not obvious” that asset prices in the U.S. are out of line with underlying values after a 64 percent jump in the Standard & Poor’s 500 Index from its March low.
“It is inherently extraordinarily difficult to know whether an asset’s price is in line with its fundamental value,” he said today in response to audience questions after a speech in New York. “It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.”
The U.S. central bank chief didn’t address asset prices outside of the country. Financial officials in Japan and China, Asia’s two largest economies, said this week that the Fed’s interest-rate policy risks spurring speculative capital that may inflate asset prices and derail the global economic recovery.
“The best approach here if at all possible is to use supervisory and regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset-price bubble bursts in the future,” Bernanke said.
Bernanke said in his speech that the “headwinds” of reduced bank lending and a weak labor market will probably restrain the pace of the U.S. economic recovery, warranting continued low borrowing costs. Bernanke also said the Fed is “attentive” to changes in the dollar’s value and “will help ensure that the dollar is strong.”
Stocks in the U.S. extended gains after his comments, while the dollar slumped against the euro for a second day as traders doubted Bernanke can do much to bolster the currency.
Stocks Rose
The S&P 500 Index rose today 1.5 percent to 1,109.30. The price of gold has climbed 55 percent in the past year to $1,142.65 an ounce, reaching a record today for the fourth time in six sessions. Crude oil is up 77 percent in 2009.
The dollar weakened to $1.4974 per euro from $1.4903 on Nov. 13.
The U.S. economy has suffered two booms and busts in asset prices -- one in technology stocks and the other in housing -- in 10 years. Economists have blamed former Fed Chairman Alan Greenspan for standing aside in the first, and aiding the second by keeping interest rates too low earlier this decade.
On the possibility of using interest rates to pop bubbles, “we can never say never,” Bernanke said today. “We have to keep an open mind.”
In some markets, including U.S. stocks, gold and oil, “there may not necessarily be a bubble, but you certainly have valuations that are above where near-term conditions would suggest they’re going to be at,” said Keith Hembre, chief economist at U.S. Bancorp’s FAF Advisors Inc. in Minneapolis, which oversees $103 billion.
‘Robust Improvement’
“They’re certainly priced for robust improvement,” said Hembre, who previously worked at the Fed.
Bank of Japan Governor Masaaki Shirakawa said earlier today that emerging economies “might overheat and experience financial turmoil,” while Liu Mingkang, China’s top banking regulator, yesterday called risks from low rates and the dollar’s weakness “new, real and insurmountable.”
“The continuous depreciation in the dollar, and the U.S. government’s indication that, in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” Liu, chairman of the China Banking Regulatory Commission, said in Beijing.
Donald Tsang, the chief executive of Hong Kong, said Nov. 13 that record-low U.S. interest rates are encouraging investors to borrow dollars cheaply to invest in Asian stock markets, driving up asset prices in Korea, Taiwan, Singapore and Hong Kong “to levels that are incompatible or inconsistent with the economic fundamentals.”
Nov. 16 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said it’s “not obvious” that asset prices in the U.S. are out of line with underlying values after a 64 percent jump in the Standard & Poor’s 500 Index from its March low.
“It is inherently extraordinarily difficult to know whether an asset’s price is in line with its fundamental value,” he said today in response to audience questions after a speech in New York. “It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system.”
The U.S. central bank chief didn’t address asset prices outside of the country. Financial officials in Japan and China, Asia’s two largest economies, said this week that the Fed’s interest-rate policy risks spurring speculative capital that may inflate asset prices and derail the global economic recovery.
“The best approach here if at all possible is to use supervisory and regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset-price bubble bursts in the future,” Bernanke said.
Bernanke said in his speech that the “headwinds” of reduced bank lending and a weak labor market will probably restrain the pace of the U.S. economic recovery, warranting continued low borrowing costs. Bernanke also said the Fed is “attentive” to changes in the dollar’s value and “will help ensure that the dollar is strong.”
Stocks in the U.S. extended gains after his comments, while the dollar slumped against the euro for a second day as traders doubted Bernanke can do much to bolster the currency.
Stocks Rose
The S&P 500 Index rose today 1.5 percent to 1,109.30. The price of gold has climbed 55 percent in the past year to $1,142.65 an ounce, reaching a record today for the fourth time in six sessions. Crude oil is up 77 percent in 2009.
The dollar weakened to $1.4974 per euro from $1.4903 on Nov. 13.
The U.S. economy has suffered two booms and busts in asset prices -- one in technology stocks and the other in housing -- in 10 years. Economists have blamed former Fed Chairman Alan Greenspan for standing aside in the first, and aiding the second by keeping interest rates too low earlier this decade.
On the possibility of using interest rates to pop bubbles, “we can never say never,” Bernanke said today. “We have to keep an open mind.”
In some markets, including U.S. stocks, gold and oil, “there may not necessarily be a bubble, but you certainly have valuations that are above where near-term conditions would suggest they’re going to be at,” said Keith Hembre, chief economist at U.S. Bancorp’s FAF Advisors Inc. in Minneapolis, which oversees $103 billion.
‘Robust Improvement’
“They’re certainly priced for robust improvement,” said Hembre, who previously worked at the Fed.
Bank of Japan Governor Masaaki Shirakawa said earlier today that emerging economies “might overheat and experience financial turmoil,” while Liu Mingkang, China’s top banking regulator, yesterday called risks from low rates and the dollar’s weakness “new, real and insurmountable.”
“The continuous depreciation in the dollar, and the U.S. government’s indication that, in order to resume growth and maintain public confidence, it basically won’t raise interest rates for the coming 12 to 18 months, has led to massive dollar arbitrage speculation,” Liu, chairman of the China Banking Regulatory Commission, said in Beijing.
Donald Tsang, the chief executive of Hong Kong, said Nov. 13 that record-low U.S. interest rates are encouraging investors to borrow dollars cheaply to invest in Asian stock markets, driving up asset prices in Korea, Taiwan, Singapore and Hong Kong “to levels that are incompatible or inconsistent with the economic fundamentals.”
Wednesday, November 11, 2009
U.K. Unemployment Rises Least in 18 Months as Recession Eases
By Jennifer Ryan and Svenja O’Donnell
Nov. 11 (Bloomberg) -- U.K. unemployment rose at the slowest pace in 18 months in October, bolstering government claims that efforts to lift the economy out of recession are working.
Claims for jobless benefits increased by 12,900, the least since April 2008, the Office for National Statistics said in London today. The median forecast in a Bloomberg News survey of 20 economists was an increase of 20,000. The number of people seeking work in the three months through September rose 30,000, the smallest increase since the period through May 2008.
Prime Minister Gordon Brown is counting on an economic revival to narrow the Conservative lead over his Labour Party before a general election due by June 2010. Economists expect unemployment to keep rising long after the economy returns to growth, casting doubt over the strength of the recovery.
“I think we probably are out of the woods but I’m not convinced how sustainable it is,” said George Buckley, chief U.K. economist at Deutsche Bank AG. “We see a recovery that peters out next year.”
Nov. 11 (Bloomberg) -- U.K. unemployment rose at the slowest pace in 18 months in October, bolstering government claims that efforts to lift the economy out of recession are working.
Claims for jobless benefits increased by 12,900, the least since April 2008, the Office for National Statistics said in London today. The median forecast in a Bloomberg News survey of 20 economists was an increase of 20,000. The number of people seeking work in the three months through September rose 30,000, the smallest increase since the period through May 2008.
Prime Minister Gordon Brown is counting on an economic revival to narrow the Conservative lead over his Labour Party before a general election due by June 2010. Economists expect unemployment to keep rising long after the economy returns to growth, casting doubt over the strength of the recovery.
“I think we probably are out of the woods but I’m not convinced how sustainable it is,” said George Buckley, chief U.K. economist at Deutsche Bank AG. “We see a recovery that peters out next year.”
Tuesday, November 3, 2009
English Says N.Z. Jobless Rate Will Peak at About 7% (Update1)
By Tracy Withers
Nov. 4 (Bloomberg) -- New Zealand’s jobless rate will probably peak at about 7 percent some time in 2010, less than the 8 percent the government previously expected, Finance Minister Bill English said.
The unemployment rate is lagging the economic recovery and it will take some time to level off, English said in an e-mailed statement. A report tomorrow will probably show the rate was 6.4 percent in the third quarter, according to the median forecast in a Bloomberg survey.
New Zealand’s economy grew for the first time in six quarters in the three months ended June 30, and the Treasury Department this week said the recovery is likely to accelerate in the second half of 2009. The New Zealand currency’s 25 percent surge against the U.S. dollar the past six months is a “head wind” for exports, English said.
New Zealand’s dollar bought 71.98 U.S. cents at 9.03 a.m. in Wellington trading from 71.82 cents in late New York trading yesterday.
“Clearly the dollar is stronger than we would expect at this point in the economic cycle,” English said in his Focus on Finance statement.
The government’s plan to control public spending and reduce debt will reduce the pressure on the exchange rate, he said.
Lower costs will make exporters more competitive and allow them to take advantage as key global markets show signs of recovery, English said.
Nov. 4 (Bloomberg) -- New Zealand’s jobless rate will probably peak at about 7 percent some time in 2010, less than the 8 percent the government previously expected, Finance Minister Bill English said.
The unemployment rate is lagging the economic recovery and it will take some time to level off, English said in an e-mailed statement. A report tomorrow will probably show the rate was 6.4 percent in the third quarter, according to the median forecast in a Bloomberg survey.
New Zealand’s economy grew for the first time in six quarters in the three months ended June 30, and the Treasury Department this week said the recovery is likely to accelerate in the second half of 2009. The New Zealand currency’s 25 percent surge against the U.S. dollar the past six months is a “head wind” for exports, English said.
New Zealand’s dollar bought 71.98 U.S. cents at 9.03 a.m. in Wellington trading from 71.82 cents in late New York trading yesterday.
“Clearly the dollar is stronger than we would expect at this point in the economic cycle,” English said in his Focus on Finance statement.
The government’s plan to control public spending and reduce debt will reduce the pressure on the exchange rate, he said.
Lower costs will make exporters more competitive and allow them to take advantage as key global markets show signs of recovery, English said.
Monday, November 2, 2009
Australia Will Raise Key Rate to at Least 3.5% (Update2)
By Jacob Greber
Nov. 3 (Bloomberg) -- Australia’s central bank will raise its benchmark interest rate today by at least a quarter percentage point, the second increase in four weeks, amid signs the economy is strengthening, economists and traders say.
Reserve Bank Governor Glenn Stevens will boost the overnight cash rate target to 3.5 percent from 3.25 percent at 2:30 p.m. in Sydney, according to 18 of 22 economists surveyed by Bloomberg News. The rest expect a half-point increase. Futures traders are betting on a quarter-point boost.
Keeping borrowing costs at “very low levels” may be “imprudent” and threaten its inflation target, the bank said last month, amid surging consumer confidence, house price gains and Chinese demand for natural resources. Stevens, the first Group of 20 policy maker to raise borrowing costs since the height of the global recession, has also signaled this year’s 29 percent gain in the nation’s currency may help contain inflation.
“The case for a larger-than-expected increase is always strongest at the early stages of the tightening cycle,” said Bill Evans, chief economist at Westpac Banking Corp. in Sydney, who predicts a half-point gain. “The risks of tightening too slowly are also high when policy is at its most stimulatory since imbalances are more likely to emerge.”
The Australian dollar rose for a second day to 90.80 U.S. cents as of 1:13 p.m. in Sydney from 90.40 in New York yesterday.
Australia’s economy is growing faster and generating more jobs than Treasurer Wayne Swan forecast six months ago, helped by A$20 billion ($18 billion) in government cash handouts to consumers and Stevens’ record interest-rate cuts between September 2008 and April, when he slashed the benchmark rate by 4.25 percentage points to a half-century low of 3 percent.
Economic Growth
Stevens raised the rate by a quarter point Oct. 6. The only other countries to raise borrowing costs this year are Israel and Norway.
Gross domestic product will expand 1.5 percent in the 12 months to June 30, 2010, Treasurer Wayne Swan said yesterday after scrapping his May prediction of a 0.5 percent contraction. GDP will accelerate to 2.75 percent the following fiscal year, he said. The economy grew 1 percent in the first six months of this year.
Unemployment is also expected to peak at 6.75 percent in the second quarter of next year, well below the 8.5 percent rate Swan forecast in May for the three months through June 30, 2011.
“The Australian economy has turned out to be quite a lot stronger than we thought,” Reserve Bank Assistant Governor Philip Lowe said last month. “It’s entirely appropriate we go back to a more normal setting in monetary policy. And that’s the process that’s under way.”
House Prices
There are also signs of a surge in some asset prices. A report published yesterday showed Australian house prices jumped 4.2 percent in the three months through September from the previous quarter, when they rose by the same amount. The nation’s benchmark S&P/ASX 200 index of stocks has climbed more than 20 percent this year.
Stevens should raise borrowing costs today to keep a lid on an “irrational exuberance” in the housing market that is “arguably now out of line,” Mark Joiner, National Australia Bank Ltd.’s chief financial officer, told the Australian Financial Review in an interview published on Oct. 31.
Still, Stevens has scope to limit today’s increase to a quarter-point move, which would add A$50 to monthly repayments on an average A$300,000 home loan.
Reports published in recent days show bank lending unexpectedly fell in September for the first time in nine months amid weaker demand for business credit, and manufacturing growth slowed in October.
Inflation Slows
The consumer price index rose in the third quarter by an annual 1.3 percent, the smallest gain since the second quarter of 1999, after advancing 1.5 percent in the previous three months, a government report showed on Oct. 28.
Inflation isn’t “sufficiently high to justify the Reserve Bank accelerating to a half-point hike,” said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney.
Investors are certain Stevens will raise the overnight cash rate target by a quarter point, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. They expect only an 8 percent chance of a half-point increase, the index showed at 8:33 a.m.
The Reserve Bank, which scrapped its forecast in August for the economy to contract this year, will publish revised predictions on Nov. 6. Its most recent estimate was for GDP to expand 2.25 percent in 2010 and 3.75 percent in 2011.
“The Reserve Bank’s rate hikes will come regularly -- at every meeting until February -- but in small steps,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. “There is little to be gained from spooking the horses” today with a half-point gain.
Nov. 3 (Bloomberg) -- Australia’s central bank will raise its benchmark interest rate today by at least a quarter percentage point, the second increase in four weeks, amid signs the economy is strengthening, economists and traders say.
Reserve Bank Governor Glenn Stevens will boost the overnight cash rate target to 3.5 percent from 3.25 percent at 2:30 p.m. in Sydney, according to 18 of 22 economists surveyed by Bloomberg News. The rest expect a half-point increase. Futures traders are betting on a quarter-point boost.
Keeping borrowing costs at “very low levels” may be “imprudent” and threaten its inflation target, the bank said last month, amid surging consumer confidence, house price gains and Chinese demand for natural resources. Stevens, the first Group of 20 policy maker to raise borrowing costs since the height of the global recession, has also signaled this year’s 29 percent gain in the nation’s currency may help contain inflation.
“The case for a larger-than-expected increase is always strongest at the early stages of the tightening cycle,” said Bill Evans, chief economist at Westpac Banking Corp. in Sydney, who predicts a half-point gain. “The risks of tightening too slowly are also high when policy is at its most stimulatory since imbalances are more likely to emerge.”
The Australian dollar rose for a second day to 90.80 U.S. cents as of 1:13 p.m. in Sydney from 90.40 in New York yesterday.
Australia’s economy is growing faster and generating more jobs than Treasurer Wayne Swan forecast six months ago, helped by A$20 billion ($18 billion) in government cash handouts to consumers and Stevens’ record interest-rate cuts between September 2008 and April, when he slashed the benchmark rate by 4.25 percentage points to a half-century low of 3 percent.
Economic Growth
Stevens raised the rate by a quarter point Oct. 6. The only other countries to raise borrowing costs this year are Israel and Norway.
Gross domestic product will expand 1.5 percent in the 12 months to June 30, 2010, Treasurer Wayne Swan said yesterday after scrapping his May prediction of a 0.5 percent contraction. GDP will accelerate to 2.75 percent the following fiscal year, he said. The economy grew 1 percent in the first six months of this year.
Unemployment is also expected to peak at 6.75 percent in the second quarter of next year, well below the 8.5 percent rate Swan forecast in May for the three months through June 30, 2011.
“The Australian economy has turned out to be quite a lot stronger than we thought,” Reserve Bank Assistant Governor Philip Lowe said last month. “It’s entirely appropriate we go back to a more normal setting in monetary policy. And that’s the process that’s under way.”
House Prices
There are also signs of a surge in some asset prices. A report published yesterday showed Australian house prices jumped 4.2 percent in the three months through September from the previous quarter, when they rose by the same amount. The nation’s benchmark S&P/ASX 200 index of stocks has climbed more than 20 percent this year.
Stevens should raise borrowing costs today to keep a lid on an “irrational exuberance” in the housing market that is “arguably now out of line,” Mark Joiner, National Australia Bank Ltd.’s chief financial officer, told the Australian Financial Review in an interview published on Oct. 31.
Still, Stevens has scope to limit today’s increase to a quarter-point move, which would add A$50 to monthly repayments on an average A$300,000 home loan.
Reports published in recent days show bank lending unexpectedly fell in September for the first time in nine months amid weaker demand for business credit, and manufacturing growth slowed in October.
Inflation Slows
The consumer price index rose in the third quarter by an annual 1.3 percent, the smallest gain since the second quarter of 1999, after advancing 1.5 percent in the previous three months, a government report showed on Oct. 28.
Inflation isn’t “sufficiently high to justify the Reserve Bank accelerating to a half-point hike,” said David de Garis, a senior economist at National Australia Bank Ltd. in Sydney.
Investors are certain Stevens will raise the overnight cash rate target by a quarter point, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange. They expect only an 8 percent chance of a half-point increase, the index showed at 8:33 a.m.
The Reserve Bank, which scrapped its forecast in August for the economy to contract this year, will publish revised predictions on Nov. 6. Its most recent estimate was for GDP to expand 2.25 percent in 2010 and 3.75 percent in 2011.
“The Reserve Bank’s rate hikes will come regularly -- at every meeting until February -- but in small steps,” said Stephen Walters, chief economist at JPMorgan Chase & Co. in Sydney. “There is little to be gained from spooking the horses” today with a half-point gain.
Wednesday, October 28, 2009
Dollar ‘Over-Owned,’ Will Fall to Record, Gross Tells CNBC
By Ruby Madren-Britton
Oct. 28 (Bloomberg) -- The dollar is an over-owned currency and likely to fall to an all-time low against major counterparts, Pacific Investment Management Co.’s Bill Gross said in an interview on CNBC.
“The Chinese, the Asians, have owned too many dollars for too long,” said Gross, a founder and co-chief investment officer of the world’s biggest manager of bond funds. “The dollar becomes more and more owned and less and less desirable, so ultimately the direction is down. I don’t sense stability in the dollar.”
The U.S. currency stands a chance of moving “substantially lower” unless the Chinese decide the world has renormalized enough that they can start seeking higher-yielding assets, Gross said. Global investors have much less tolerance for risk as the world recovers from the financial crisis, Gross said.
A weaker dollar is positive as it rebalances production levels in the U.S. and Asia, Gross said. With “half the earnings” of the Standard & Poor’s 500 Index coming from overseas, U.S. stocks have been propelled by a weaker dollar, according to Gross.
“The extent that the dollar goes up, it reverses all of those positive trends,” he said.
The Dollar Index, which the ICE uses to gauge the greenback against currencies including the euro, yen and pound, increased 0.2 percent today to 76.289. It reached an all-time low of 70.698 in March 2008.
The six-month rally in high-risk assets is likely at its peak as U.S. economic growth lags behind historical averages, according to Gross.
Gross made the forecast yesterday in commentary posted on Newport Beach, California-based Pimco’s Web site. The company predicts a “new normal” in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.
Oct. 28 (Bloomberg) -- The dollar is an over-owned currency and likely to fall to an all-time low against major counterparts, Pacific Investment Management Co.’s Bill Gross said in an interview on CNBC.
“The Chinese, the Asians, have owned too many dollars for too long,” said Gross, a founder and co-chief investment officer of the world’s biggest manager of bond funds. “The dollar becomes more and more owned and less and less desirable, so ultimately the direction is down. I don’t sense stability in the dollar.”
The U.S. currency stands a chance of moving “substantially lower” unless the Chinese decide the world has renormalized enough that they can start seeking higher-yielding assets, Gross said. Global investors have much less tolerance for risk as the world recovers from the financial crisis, Gross said.
A weaker dollar is positive as it rebalances production levels in the U.S. and Asia, Gross said. With “half the earnings” of the Standard & Poor’s 500 Index coming from overseas, U.S. stocks have been propelled by a weaker dollar, according to Gross.
“The extent that the dollar goes up, it reverses all of those positive trends,” he said.
The Dollar Index, which the ICE uses to gauge the greenback against currencies including the euro, yen and pound, increased 0.2 percent today to 76.289. It reached an all-time low of 70.698 in March 2008.
The six-month rally in high-risk assets is likely at its peak as U.S. economic growth lags behind historical averages, according to Gross.
Gross made the forecast yesterday in commentary posted on Newport Beach, California-based Pimco’s Web site. The company predicts a “new normal” in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.
Tuesday, October 27, 2009
Yen Rises as Economic Concerns Damp Demand for Higher Yields
By Yasuhiko Seki and Ron Harui
Oct. 28 (Bloomberg) -- The yen gained against major counterparts on speculation the global economic recovery will slow, reducing demand for high-yielding assets.
The yen traded near a one-week high against the euro before reports this week forecast to show German consumer prices and unemployment worsened, backing the case for the European Central Bank to keep interest rates low. Australia’s dollar fell toward a one-week low after a government report showed annual inflation slowed, easing pressure on the central bank to accelerate interest-rate increases.
“As the market shifts attention to the sustainability or the strength of a recovery from a cyclical upturn, the mood of euphoria may wane,” said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second- largest bank. “The risk of unwinding, of a capital flight into higher-yielding currencies, may increase.”
The yen rose to 135.55 per euro as of 10:03 a.m. in Tokyo from 135.89 in New York yesterday, after earlier reaching 135.43, the highest level since Oct. 21. Japan’s currency fetched 91.50 per dollar from 91.80. The dollar traded at $1.4813 per euro from $1.4804 yesterday, when it touched $1.4770, the strongest level since Oct. 13.
Australia’s currency lost 0.2 percent to 91.47 U.S. cents. It fell 0.6 percent to 83.60 yen.
The Conference Board’s consumer confidence index dropped to 47.7 in October from a revised 53.4 in the previous month, the New York-based research group reported yesterday. The median forecast of 74 economists in a Bloomberg survey was for an advance to 53.5.
German Prices
The German jobless rate probably rose to 8.3 percent in October from 8.2 percent in the previous month, according to a Bloomberg News survey of economists before the report tomorrow.
German consumer prices, calculated using a harmonized European Union method, fell 0.1 percent in October from a year earlier after slipping 0.5 percent in September, according to a Bloomberg News survey of economists. The Federal Statistics Office in Wiesbaden will release the report later today.
“We expect German CPI to remain weak,” Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, wrote in a research note yesterday. “We continue to target the euro- dollar back at $1.45 in one month as sentiment is clearly showing signs of strain.”
The ECB will maintain its benchmark interest rate at 1 percent through the second quarter of 2010, a separate Bloomberg survey showed. The central bank next meets on Nov. 5.
Australia’s consumer price index advanced 1 percent from the second quarter, when it gained 0.5 percent, the Bureau of Statistics said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.9 percent increase. Prices gained 1.3 percent from a year earlier.
Unsustainable Rally
The yen rose against all 16 of the most-active currencies on speculation a rally in stocks and commodities can’t be sustained.
The six-month rally in shares and raw materials is probably at its peak as U.S. growth lags behind historical averages, according to Bill Gross at Newport Beach, California-based Pacific Investment Management Co.
Gross, a founder and co-chief investment officer of the world’s biggest manager of bond funds, has predicted a “new normal” in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.
“What has happened is that our ‘paper asset’ economy has driven not only stock prices, but all asset prices higher than the economic growth required to justify them,” Gross wrote yesterday on Pimco’s Web site.
The Standard & Poor’s 500 Index slipped 0.3 percent to 1,063.41 yesterday in New York. The Nikkei 225 Stock Average fell 0.8 percent today.
Geithner Comments
Adding to signs the recovery will be slow, Japan’s retail sales fell for a 13th month in September, the Trade Ministry said today in Tokyo. Sales slid 1.4 percent from a year earlier,. The median estimate of 13 economists surveyed by Bloomberg was for a 1.6 percent decline.
Gains in the dollar may be tempered after U.S. Treasury Secretary Timothy Geithner said he expects the government will receive repayment “relatively quickly” from most of the big banks helped by the $700 billion financial rescue program.
“I expect you’re going to see a lot of the rest of the money out in the system there come back relatively quickly,” Geithner said yesterday in New York at a conference of the Securities Industry and Financial Markets Association. The organization is a trade group that includes Goldman, Sachs & Co., Banc of America Securities LLC and State Street Corp.
Oct. 28 (Bloomberg) -- The yen gained against major counterparts on speculation the global economic recovery will slow, reducing demand for high-yielding assets.
The yen traded near a one-week high against the euro before reports this week forecast to show German consumer prices and unemployment worsened, backing the case for the European Central Bank to keep interest rates low. Australia’s dollar fell toward a one-week low after a government report showed annual inflation slowed, easing pressure on the central bank to accelerate interest-rate increases.
“As the market shifts attention to the sustainability or the strength of a recovery from a cyclical upturn, the mood of euphoria may wane,” said Masahide Tanaka, senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second- largest bank. “The risk of unwinding, of a capital flight into higher-yielding currencies, may increase.”
The yen rose to 135.55 per euro as of 10:03 a.m. in Tokyo from 135.89 in New York yesterday, after earlier reaching 135.43, the highest level since Oct. 21. Japan’s currency fetched 91.50 per dollar from 91.80. The dollar traded at $1.4813 per euro from $1.4804 yesterday, when it touched $1.4770, the strongest level since Oct. 13.
Australia’s currency lost 0.2 percent to 91.47 U.S. cents. It fell 0.6 percent to 83.60 yen.
The Conference Board’s consumer confidence index dropped to 47.7 in October from a revised 53.4 in the previous month, the New York-based research group reported yesterday. The median forecast of 74 economists in a Bloomberg survey was for an advance to 53.5.
German Prices
The German jobless rate probably rose to 8.3 percent in October from 8.2 percent in the previous month, according to a Bloomberg News survey of economists before the report tomorrow.
German consumer prices, calculated using a harmonized European Union method, fell 0.1 percent in October from a year earlier after slipping 0.5 percent in September, according to a Bloomberg News survey of economists. The Federal Statistics Office in Wiesbaden will release the report later today.
“We expect German CPI to remain weak,” Brian Kim, a currency strategist in Stamford, Connecticut, at UBS AG, wrote in a research note yesterday. “We continue to target the euro- dollar back at $1.45 in one month as sentiment is clearly showing signs of strain.”
The ECB will maintain its benchmark interest rate at 1 percent through the second quarter of 2010, a separate Bloomberg survey showed. The central bank next meets on Nov. 5.
Australia’s consumer price index advanced 1 percent from the second quarter, when it gained 0.5 percent, the Bureau of Statistics said in Sydney today. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.9 percent increase. Prices gained 1.3 percent from a year earlier.
Unsustainable Rally
The yen rose against all 16 of the most-active currencies on speculation a rally in stocks and commodities can’t be sustained.
The six-month rally in shares and raw materials is probably at its peak as U.S. growth lags behind historical averages, according to Bill Gross at Newport Beach, California-based Pacific Investment Management Co.
Gross, a founder and co-chief investment officer of the world’s biggest manager of bond funds, has predicted a “new normal” in the global economy that will include heightened government regulation, lower consumption, slower growth and a shrinking global role for the U.S. economy.
“What has happened is that our ‘paper asset’ economy has driven not only stock prices, but all asset prices higher than the economic growth required to justify them,” Gross wrote yesterday on Pimco’s Web site.
The Standard & Poor’s 500 Index slipped 0.3 percent to 1,063.41 yesterday in New York. The Nikkei 225 Stock Average fell 0.8 percent today.
Geithner Comments
Adding to signs the recovery will be slow, Japan’s retail sales fell for a 13th month in September, the Trade Ministry said today in Tokyo. Sales slid 1.4 percent from a year earlier,. The median estimate of 13 economists surveyed by Bloomberg was for a 1.6 percent decline.
Gains in the dollar may be tempered after U.S. Treasury Secretary Timothy Geithner said he expects the government will receive repayment “relatively quickly” from most of the big banks helped by the $700 billion financial rescue program.
“I expect you’re going to see a lot of the rest of the money out in the system there come back relatively quickly,” Geithner said yesterday in New York at a conference of the Securities Industry and Financial Markets Association. The organization is a trade group that includes Goldman, Sachs & Co., Banc of America Securities LLC and State Street Corp.
Subscribe to:
Posts (Atom)