FOREX TRADES BANK

Forex: US Empire State manufacturing index not as gloomy as numbers suggest – Capital Economics

2012-09-17T21:30:00.000+05:00

FXstreet.com (Barcelona) - The fall in the US Empire State manufacturing index in September to a 3.5 year low of -10.4, from -5.9 in August, is probably overdoing some of the gloom. Nonetheless, industry is clearly struggling to cope with the overseas slowdown.

The headline index is derived from a separate question on general business conditions and is prone to swings in optimism/pessimism. A weighted average of the sub-indices, which mimics the way the ISM index is calculated, is a more robust indicator of actual trends. This average did fall, however, though from only from 0.0 to -1.0. That was largely due to a plunge in the new orders index, to -14.0 from -5.5, and a fall in the employment index, to +4.3 from +16.5.

According to the Analyst Team at Capital Economics, "That leaves this survey broadly consistent with the national ISM manufacturing index nudging down a touch in September, from August's 49.6. In other words, industrial output is hardly growing at all, but it is not plunging, as the headline index of the Empire State survey would appear to suggest."
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

TABLE - Pakistan economic indicators - Sept 17

2012-09-17T21:24:00.001+05:00

DAILY INDICATORS
    
                                 FRIDAY        PREVIOUS
 Floating Interbank Rate (Rs/$)  94.56/94.61   94.57/94.62
 Rupee/US$ (kerb market)         94.70/94.90   94.60/94.85
 Karachi 100-share index         15,449.60     15,306.51
 Gold (Karachi) Rs/10 gm         53,314        52,114
    
                CENTRAL BANK AUCTIONS
 
 Treasury bill auction results:                      
 Cut-off yield (pct) at auction on       Sept 5      Aug 17
 Three-months bills                      10.2748     10.4115
 Six-month bills                         10.3111     10.4442
 12-month bills                          10.3549     10.4894
 Pakistan Investment Bond (PIB) auction              
 results                                             
 Cut-off yield (pct) at auction on       Aug 15      July 18
 11.25 percent coupon, three-year PIB    11.2994     12.6680
 11.50 percent coupon, five-year PIB     11.6990     13.0717
 11.75 percent coupon, seven-year PIB    -------     -------
 12.00 percent coupon, 10-year PIB       12.0487     13.3296
 12.50 percent coupon, 15-year PIB       -------     -------
 13.00 percent coupon, 20-Year PIB       No Bids     13.3503
                                         Received    
 13.75 percent coupon, 30-year PIB       -------     -------
    
                  WEEKLY INDICATORS
     
 Week ending                       Sept 7       Aug 31
 Total liquid frx reserves        $14.828 bln  $14.821 bln
 Forex held by central bank       $10.432 bln  $10.394 bln
 Forex held by commercial banks    $4.396 bln   $4.427 bln
    
                  MONTHLY INDICATORS
     
                                LAST          PVS
 Consumer price index   Aug     n/a           n/a
 Change mth/mth (pct)   Aug     0.9           0.2
 Change yr/yr (pct)     Aug     9.1           9.60
 Wholesale price index  Aug     n/a           n/a
 Change mth/mth (pct)   Aug     1.0           0.4
 Change yr/yr (pct)     Aug     7.7           7.2
 Trade Balance          July    $-1.605 bln   $-1.838 bln
 Exports                July    $2.057 bln    $2.141 bln
 Imports                July    $3.662 bln    $3.979 bln
    
                  ANNUAL INDICATORS
 
 FISCAL YEAR                         2011/12       2010/11
 Population (millions)               *178.91       175.31
 Per capita income                   $1,372        $1,258
 External debt (billion dlr)         *$65.753      $66.457
 Total F.debt as pct of GDP          n/a           n/a
 Domestic debt (billion rupees)      *7,880        *7.726
 Total domestic debt as pct of GDP   n/a           n/a
 Gross domestic product growth       *3.7 pct      3.0 pct
 Manufacturing sector growth         *3.6 pct      3.1 pct
 Services sector growth              *4.0 pct      4.4 pct
 Agricultural sector growth          *3.1 pct      2.4 pct
 Commodity producing sector growth   *3.3 pct      1.5 pct
 Average consumer price inflation    *10.8 pct     n/a
 Fiscal deficit (pct of GDP)         *5.0 pct      5.5 pct
 Trade balance (FBS July-June)       $-21.271 bln  $-15.604 bln
 Exports                             $23.641 bln   $24.810 bln
 Imports                             $44.912 bln   $40.414 bln
 Current a/c balance                 $4.52 bln     $214 mln    
                                                   
  * = provisional
  SBP = State (central) Bank of Pakistan
  FBS = Federal Bureau of Statistics

FOREX-U.S. dollar hovers near 7-month low; euro gains

2012-09-17T21:02:00.003+05:00

NEW YORK, Sept 17 (Reuters) - The dollar hovered near a seven-month low against major currencies o n M onday after the Federal Reserve's announcement of aggressive monetary easing last week dampened the outlook for the U.S. currency.

Some near-term recovery could be likely, however, given the dollar's 3 percent drop so far this month, which may have been too far, too fast. The move pushed the euro to a four-month high against the dollar and the yen to a seven-month high.

The Fed pledged last week to continue buying mortgage bonds until unemployment falls significantly. The aggressive move came a week after the European Central Bank unveiled a new bond-buying program to address the region's debt crisis.

"The outlook for the dollar has definitely been damaged by the policy actions by both central banks -- the Fed and the ECB," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

The dollar index, which measures the U.S. unit's value against a basket of currencies, stood at 78.789, not far from the 78.601 set on Fr iday, a level last seen in late February.

The euro rose 0.2 percent to $1.3151 in volatile trading, having hit $1.3169 on Reuters data, the highest since early May and rebounding from a session low of $1.3082.

The common currency has gained 9 percent since hitting a two-year low around $1.2040 in July. Traders said some investors may be tempted to book some profits at current higher levels, though any pullback is expected to be limited.

"The euro is still likely to move a bit higher. The momentum is not over yet," said Steve Barrow, head of G10 currency research at Standard Bank.

"It may see a dip down toward $1.30 again but it won't go much below that," he said. "I would be more inclined to buy on dips than to sell on strength." He expects the euro to rise toward $1.3250-$1.3300 over the next week or so.

The euro also hit an eight-month high against the safe-haven Swiss franc at 1.21849 francs on EBS.
Markets are waiting to see if Spain will ask for help to tackle its debt. Some analysts said Madrid appeared to be paving the way for requesting such assistance after it said it would set clear deadlines for structural reforms by month-end.

The yen weakened broadly, with the euro rising 0.7 percent to 103.65 yen and the dollar gaining 0.6 percent to 78.84 yen, a one-week high.

The Japanese government last week lowered its growth outlook for the second month in a row, putting pressure on the central bank to ease monetary policy again, not least to weaken the yen. The Bank of Japan ends a two-day meeting on Wednesday.

The yen was hurt by the downgrade of Japan's economic outlook and "the view that the BOJ's next move could be further quantitative easing," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

"After the weekend, traders are beginning to position themselves for what might happen later this week."
Investors are also watching how Japanese authorities might respond to the yen's latest rise versus the dollar, sparked by the Fed's action. Market jitters about the potential for yen-selling intervention by Japanese authorities helped limit the dollar's drop last week.

US Session: Orders and Options Watch

2012-09-17T21:00:00.003+05:00

EUR: Although the single currency rose again around New York opening and some offers at 1.3165-70 were filled, defensive offers are still noted at 1.3175-80 (related to 1.3180 barrier) and also ahead of next barrier at 1.3200 with more buy stop orders above there but fresh offers should emerge further out at 1.3240-50. On the downside, bids from various parties are lined up at 1.3080-90 with stops building up below 1.3075, more buying interests are tipped at 1.3050 and further out at 1.3020-30 with more stop orders building up below 1.2990-00.

GBP: The British pound moved higher again in New York morning and offers at 1.6255-60 were filled, however, offers from UK clearer are still noted at 1.6265-70 (for protection of 1.6275 barrier) and more defensive sell orders are likely to emerge ahead of 1.6300 with buy stop orders expected above there. On the downside, renewed buying interests should emerge around 1.6215-25 and further out at 1.6185-95, followed by larger buy orders located at 1.6145-55 with stops building up below 1.6130 and 1.6100.

CHF: The greenback met renewed selling interests just below indicated offers at 0.9300 and more selling interests are expected around 0.9340-50 with more stops placed above latter level, standing offers are tipped further out at 0.9390-00 and also at 0.9420-30 with stops building up above 0.9430 and 0.9450, followed by combination of offers and stops at 0.9480-90. On the downside, some light bids from Swiss names are reported at 0.9245-50 with some stops from short-term specs placed below 0.9240 but fresh demand from same names should emerge around 0.9220-30 with more stops placed below 0.9200.

JPY: Dollar has rallied after breaking 78.50 in part due to market rumors of possible monetary action by BOJ and offers at 78.65-70 were filled, however, selling interests from exporters are still noted at 78.95-00 with stop building up above 79.05-10 but more offers are tipped further out at 79.30-40. On the downside, bids are raised to 78.50 and also at 78.20-25 with some stops placed below 78.10-15, more bids are reported at 78.00 with some stops placed below 77.90-95 but fresh bids are tipped at 77.70-80 and also at 77.50, option defensive buy orders from semi-official names remain at 77.05-15 with stops placed below sizeable barrier at 77.00.

Rupee trims gains after RBI keeps rates on hold

2012-09-17T20:58:00.000+05:00

MUMBAI: The rupee retreated from a four-month high hit earlier in the session on Monday after the central bank kept interest rates on hold, dashing some of the positive impact from the government's big bang reforms.

The Reserve Bank of India disappointed investors by keeping its key repo rate on hold, choosing instead to inject more liquidity by lowering the banks' cash reserve ratio by 25 basis points.

The decision cut some of the rupee's gains, although investors still greeted with optimism the measures announced by India on Thursday and Friday, which included raising diesel prices and steps to attract foreign direct investment.

"Overall there may be some disappointment after today's RBI announcement but I would still expect any rupee bounce to be sold into, particularly after the positive reforms announced around FDI and diesel prices etc," said Jonathan Cavenagh, currency strategist at Westpac Banking Corp.

"The market has been starved of good domestic news out of India for a long time, hence the positive sentiment in recent session can run further in our view."

At 1.25 p.m. local time, the rupee was at 54.03/04 per dollar, weakening sharply from a session high of 53.66 hit earlier in the session that had marked its strongest level since May 15.

Despite higher-than-expected August inflation data on Friday, some investors had hoped the RBI could cut rates as early as Monday given the central bank was believed to be on hold until the government acted on fiscal reforms.

Last week's actions failed to spur the RBI to act to boost India's flagging economic growth, but analysts still remained optimistic about the rupee's outlook.

The government's big bang reforms, including opening up the retail and aviation sectors to foreign direct investment, are expected to usher in flows from overseas, which should help narrow down the country's current account deficit, which hit a record $21.7 billion in the March quarter.

India's benchmark stock index rose to a new 14-monnth high earlier in the session before also giving up some of its gains.

Provisional exchange data showed foreign investors bought a net Rs 28.3 billion($520.08 million) in domestic stocks on Friday, their biggest single day purchase since July 3.

The government's long-awaited action comes shortly after the Federal Reserve announced a new asset purchase programme that could usher a period of global liquidity.

Analysts say both actions together could provide a major push to the beleaguered rupee, which has rallied as much as 3.2 percent against the dollar since its Thursday close but is still down around 12 per cent from levels seen last September.

"These reform moves are necessary to help reverse the drastic FDI contraction seen thus far this year into India," Nizam Idris and Teresa Lam, strategists at Macquarie Bank, said in a research note.

Macquarie advised investors to go long on the rupee versus the dollar, while HSBC BSE 0.24 % raised its rupee forecast to 52 to the dollar by-end December from 57 previously.

FOREX-Euro advances to 4-mth highs vs dollar on German ruling

2012-09-12T23:24:00.001+05:00

* Dollar index falls to new four-month low * German court verdict underpins demand for riskier assets
*
More gains expected in anticipation of further Fed easing

The euro climbed to a four-month peak against the dollar on Wednesday after Germany's Constitutional Court approved the euro zone's new rescue fund and budget pact, mitigating concerns about the region's three-year-old debt crisis.

While the court approval was made under certain conditions, it was enough to lift market sentiment, boosting global stocks and reducing borrowing costs for Spain and Italy.

The euro climbed to $1.2936, its highest since mid-May, blowing past reported option barriers at $1.2900. The single euro zone currency has risen more than 7 percent since it hit a two-year low of around $1.2040 in July, boosted after the European Central Bank's pledge to do whatever it takes to preserve the currency.

More gains are expected if the Federal Reserve opts to implement further monetary easing on Thursday, leaving the euro with the potential to test the $1.30 level.

"The euro continues to be in steady favor as a series of events have proven to be supportive, including today's ruling by Germany's top constitutional court," said Samarjit Shankar, managing director of global strategy at BNY Mellon in Boston.

Germany's Constitutional court said on Wednesday the European Stability Mechanism could go ahead but with the condition that any German contribution above 190 billion euros would require prior approval by the lower house of parliament.

Positive momentum continued for the euro as well as higher-yielding currencies following the European Central Bank's unveiling of plans last week to lower the borrowing costs of indebted euro zone countries via bond purchases.

But analysts and traders still worried that the depth of the euro zone's debt problems could temper the euro's rise.

"It is now time to take stock. How much further can the Euro rally?," asked Jens Nordvig, head of G10 FX strategy at Nomura Securities in New York.

He believed that there would be fewer positive European catalysts from here on and said "the short-squeeze on the euro is now in its final phase, and we will be looking for fresh short opportunities."

Traders reported another options barrier at $1.2950 and cited chart resistance at the May 11 high of $1.2958. The euro traded well above a low of $1.2815 hit on caution just ahead of the court decision.

The euro was last up 0.4 percent versus the dollar at $1.2904.

It also rose to its highest in more than two months against the Japanese yen of 100.64 yen. In midday New York trading, it was at 100.44, yen, up 0.5 percent.

Currency markets showed little reaction to the killing of the U.S. ambassador to Libya and three other embassy staff on Wednesday, which pressured crude oil futures.

A potential source of disruption for the euro, however, is a general election in the Netherlands on Wednesday, though polls indicate radical anti-euro parties have lost the momentum they had just a month ago.

DOLLAR FALLS BEFORE FED The dollar fell to a four-month low against a basket of currencies before Thursday's Federal Reserve decision, with the dollar index dropping to 79.522.

BNY Mellon's flows data showed that the dollar was the most sold sold currency across the board on Wednesday, with sterling and the Canadian and New Zealand dollars the most bought.

The Fed looks set to launch a third round of bond purchases this week to try to drive borrowing costs lower and boost a flagging economy, especially after weak jobs data last week.

However, analysts said expectations for more QE were already high which may limit the currency's drop.

The dollar extended losses following a warning from Moody's on Tuesday that the United States could lose its triple-A debt rating if next year's government budget talks do not produce policies that gradually cut the country's debt.

The dollar also fell to a four-month low against the Swiss franc of 0.9337 franc, while the higher-yielding Australian dollar hit a three-week high of US$1.0507.

The Swiss National Bank is expected to keep its target range for the Swiss franc LIBOR unchanged and retain its cap on the euro/Swiss franc currency pair at 1.20 francs when it announces its monetary policy decision on Thursday.

The yen held near a 3-1/2-month high against the broadly weak dollar, trading at 77.88 per dollar. Focus on potential Fed action this week compared to a Bank of Japan viewed to be on the sidelines should keep pressure on the dollar for now.

MONEY MARKETS-European dlr funding costs cheapest in 15 months

2012-09-12T23:16:00.003+05:00

A barometer of dollar funding risk reached its best levels in more than a year helped by the prospect of European Central Bank intervention but was seen stabilising from current levels.

The ECB's promise to buy bonds of struggling euro zone states, as well as expectations the Federal Reserve may soon embark in a third round of quantitative easing, has improved sentiment towards riskier assets generally, underpinning European stock markets and Italian and Spanish sovereign debt.

That backdrop has driven the STOXX Europe 600 banking index to its highest in nearly 6 months, reduced the perceived risk attached to owning debt issued by certain European banks and made it less costly for euro zone banks to access dollar funding.

The three-month euro/dollar currency basis swap , which shows the rate charged when swapping euro interest payments on an underlying asset into dollars, was at its tightest since June 2011.

"That is a proxy of European risk appetite and the narrowing in basis is a reflection of decreased tail risks following the ECB's new support measures " Simon Peck, rate strategist at RBS said.

"Today we have seen three-month euro/dollar cross currency basis move a further two basis points tighter as we have successfully navigated the German constitutional court vote on the legality of the ESM and ... another tail risk."

Spanish and Italian bonds rallied and German debt prices fell on Wednesday after Germany's top court gave the green light to the euro zone's new bailout fund, prompting relief the bloc's rescue plans remained on track..
The three-month euro/dollar currency basis swap narrowed to minus 25 basis points from minus 27 bps the day prior, having reached minus 160 bps in November last year when the euro zone debt crisis escalated.
RBS's Peck said there was limited scope for further tightening.

"The narrow levels at the moment are really (based) on happy outcomes for the likes of Spain and Greece but there remain very sizeable risks that we will not see such good outcomes," Ciaran O'Hagan, strategist at Societe Generale said.

Analysts say intervention will not provide a quick fix and some flag the inherent contradictions in the ECB's strategy.

For the central bank to intervene in the market, countries have to ask for a bailout first. But for Spain to seek financial help, it would have to be losing access to financial markets, meaning its borrowing costs would have to be at prohibitive levels, analysts say.

Spain's Prime Minister Mariano Rajoy suggested as much when he earlier said his government continues to study the price of seeking assistance but improved market conditions may make aid unnecessary.

The one-year euro/dollar currency basis swap was also at its narrowest since July 2011 at minus 29 bps, but one money market trader said he expected it to stabilise at around -25 bps given potential risks ahead.

"The whole feel-good factor has come back to markets," the trader said. "How long it will last, I am not 100 percent sure."

Dollar Gains Ground On Stronger US Economic Data

2010-02-18T00:26:00.002+05:00

NEW YORK (Dow Jones)--The dollar's rally picked up steam Wednesday morning in New York, hitting a two-week high against the yen, after stronger U.S. economic data fueled bets the Federal Reserve will tighten monetary policy sooner than previously anticipated.
The dollar jumped to the highest level since Feb. 3 against the yen, rising as high as Y91.12. Demand for the greenback pushed the euro well below the $1.37 level, on the back of data that showed that U.S. housing starts in January climbed to the strongest level since July 2009, while industrial production beat analysts' estimates.
"The data show that the economy will rebound in the U.S. before it does in Europe and Japan," said Sebastien Galy, currency strategist at BNP Paribas in New York. Based on that stronger U.S. economic data, "the market is also making a bet that the Fed will tighten [monetary] policy before the [central banks] in Europe and Japan."
Rising U.S. Treasury yields, in the wake of the economic data, is also adding more pressure on the yen and the euro, making dollar-denominated assets more attractive, traders said. Yields on the 10-year U.S. Treasury notes rose 3.8 basis points to yield 3.706%.
Wednesday morning in New York, the euro was at $1.3707 from $1.3772 late Tuesday, according to EBS via CQG. The dollar was at Y90.98 from Y90.11, while the euro was at Y124.70 from Y124.08. The U.K. pound was at $1.5780 from $1.5787. The dollar was at CHF1.0708 from CHF1.0660.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 79.952 from 79.630.
U.S. January industrial production came in slightly better than expected as the factory sector paces the recovery. Production last month increased by 0.9%, with manufacturing up 1.0%. Economists had expected a 0.8% increase. December output was revised to 0.7%; originally, production was reported rising 0.6%.
Earlier, data showed U.S. housing starts climbed 2.8% to a seasonally adjusted 591,000 annual rate compared to the prior month, the Commerce Department said Wednesday. Economists surveyed by Dow Jones Newswires forecast a 5.9% increase in January housing starts, to an annual rate of 590,000. The pace of 591,000 was the strongest since July 2009.
Investors are now eyeing the release of the minutes from the last Federal Open Market Committee meeting, scheduled to be released at 2 p.m. EST.
The dissent vote in the last FOMC's rate-setting meeting "will be the focus" of investors' attention, said Kasper Kirkegaard, a currency analyst at Danske Bank in Copenhagen. However, Kirkegaard said it was unlikely to be "a market mover" event.
"We've already seen [Federal Reserve's chairman] Ben Bernanke outlining some of the Fed's thoughts about exit strategy, hence we do not expect many surprises from the minutes," he said.
Meanwhile, the Bank of England's Monetary Policy Committee was unanimous in its decision to suspend its bond-buying program in February, but for some members it was a close call, meeting minutes released Wednesday showed.
The MPC judged that "a case could be made" for extending its GBP200 billion quantitative easing policy of buying gilts with freshly created central bank money, and said it could extend it in future, if conditions warranted it.

Canada Morning

The Canadian dollar was slightly lower Wednesday morning after stronger U.S. economic data triggered demand for the greenback.
"We do not think for one moment that the recent uncertainties that have spooked risk assets have disappeared permanently, but, for the moment, the lull in risk aversion should allow the Canadian dollar more room to explore the lower end of the recent trading range against the dollar," TD Securities strategists wrote in a note to clients. "The low 1.04 area has proven to be a source of support for the U.S. dollar in previous phases of softness."

FACTBOX-China, the U.S. Treasury's top foreign creditor

2010-02-11T02:42:00.000+05:00

WASHINGTON, Feb 10 (Reuters) - Senior Chinese military officers have recommended Beijing "dump" some U.S. Treasury bonds to punish the Obama administration for Washington's latest round of planned arms sales to Taiwan.

Luo Yuan, a major general in the People's liberation Army, was quoted in an official publication saying bond sales could be part of a package of economic "counter punches" over the arms sales.
Speculation of how China might use its position as America's top foreign creditor to influence Washington has risen steadily as U.S. deficits have swelled and tensions grow over the restricted valuation of the yuan. Following are some key facts about China's Treasury and dollar asset holdings:
* China's holdings of U.S. Treasury debt dipped to $789.6 billion in November from $798.9 billion, a month-on-month decline of $9.3 billion or 1.1 percent. It remains the largest holder of Treasuries, ahead of Japan, which held $757.3 billion in November.
* China's holdings of Treasuries has nearly doubled in the last two years. Beijing held $421.1 billion in Treasuries in March 2007, before the financial crisis emerged, compared to Japan's $611.2 billion, which made it the largest Treasury debt holder at that time. China's Treasury holdings peaked at $801.5 billion in May 2009.
* China's foreign exchange reserves, the world's largest, rose $453 billion in 2009 to $2.4 trillion. While China does not provide a breakdown of its reserves holdings, analysts believe about two thirds is held in dollar assets. A move to punish the United States by selling Treasuries or other holdings would undoubtedly hurt the value of this stockpile.
* China has attributed about $71 billion of the 2009 reserve gains to changes in foreign exchange rates and rises in asset values, citing in particular gains in non-dollar assets. The State Administration of Foreign Exchange has said the appreciation of its non-dollar holdings "has definitely led to growth in outstanding foreign exchange reserves calculated in dollars." Chinese officials also had expressed concerns the dollar's decline last year was hurting its reserves value.
* China held $1.205 trillion worth of U.S. long-term and short term securities, including Treasuries, as of June 2008, according to the Treasury's latest annual data on foreign portfolio holdings. At the end of June 2008, China's forex reserves stood at $1.809 trillion, so the dollar portion stood at almost exactly two thirds at that time.
* China's first purchase of long-term U.S. Treasury bonds and notes from U.S. sources was recorded in March 1985, with gross purchases of $29 million and gross sales to U.S. investors of $11 million that month. China's monthly gross purchases topped $1 billion for the first time in May 1992 and topped $5 billion in September 1996. They exceeded $10 billion in January 2000 and $20 billion in August 2002, peaking at $40.47 billion in June 2009. That same month, China sold $13.85 billion in long-term Treasuries to U.S. investors.
* In November, China's gross long-term Treasury purchases were $28.45 billion with gross sales of $13.51 billion to U.S. investors. Total November purchases of U.S. Treasuries by all foreigners from U.S. sources totaled $1.194 trillion, while sales to U.S. residents were $1.076 trillion.

FACTBOX-China, the U.S. Treasury's top foreign creditor

2010-02-11T02:33:00.002+05:00

WASHINGTON, Feb 10 (Reuters) - Senior Chinese military officers have recommended Beijing "dump" some U.S. Treasury bonds to punish the Obama administration for Washington's latest round of planned arms sales to Taiwan.
Luo Yuan, a major general in the People's liberation Army, was quoted in an official publication saying bond sales could be part of a package of economic "counter punches" over the arms sales.
Speculation of how China might use its position as America's top foreign creditor to influence Washington has risen steadily as U.S. deficits have swelled and tensions grow over the restricted valuation of the yuan. Following are some key facts about China's Treasury and dollar asset holdings:
* China's holdings of U.S. Treasury debt dipped to $789.6 billion in November from $798.9 billion, a month-on-month decline of $9.3 billion or 1.1 percent. It remains the largest holder of Treasuries, ahead of Japan, which held $757.3 billion in November.
* China's holdings of Treasuries has nearly doubled in the last two years. Beijing held $421.1 billion in Treasuries in March 2007, before the financial crisis emerged, compared to Japan's $611.2 billion, which made it the largest Treasury debt holder at that time. China's Treasury holdings peaked at $801.5 billion in May 2009.
* China's foreign exchange reserves, the world's largest, rose $453 billion in 2009 to $2.4 trillion. While China does not provide a breakdown of its reserves holdings, analysts believe about two thirds is held in dollar assets. A move to punish the United States by selling Treasuries or other holdings would undoubtedly hurt the value of this stockpile.
* China has attributed about $71 billion of the 2009 reserve gains to changes in foreign exchange rates and rises in asset values, citing in particular gains in non-dollar assets. The State Administration of Foreign Exchange has said the appreciation of its non-dollar holdings "has definitely led to growth in outstanding foreign exchange reserves calculated in dollars." Chinese officials also had expressed concerns the dollar's decline last year was hurting its reserves value.
* China held $1.205 trillion worth of U.S. long-term and short term securities, including Treasuries, as of June 2008, according to the Treasury's latest annual data on foreign portfolio holdings. At the end of June 2008, China's forex reserves stood at $1.809 trillion, so the dollar portion stood at almost exactly two thirds at that time.
* China's first purchase of long-term U.S. Treasury bonds and notes from U.S. sources was recorded in March 1985, with gross purchases of $29 million and gross sales to U.S. investors of $11 million that month. China's monthly gross purchases topped $1 billion for the first time in May 1992 and topped $5 billion in September 1996. They exceeded $10 billion in January 2000 and $20 billion in August 2002, peaking at $40.47 billion in June 2009. That same month, China sold $13.85 billion in long-term Treasuries to U.S. investors.
* In November, China's gross long-term Treasury purchases were $28.45 billion with gross sales of $13.51 billion to U.S. investors. Total November purchases of U.S. Treasuries by all foreigners from U.S. sources totaled $1.194 trillion, while sales to U.S. residents were $1.076 trillion.

Canada Bonds End Lower; Short End Underperforms Longer Issues

2010-02-11T02:31:00.002+05:00

TORONTO (Dow Jones)--Canadian bonds ended lower Wednesday, with the short end of the yield curve selling off sharply along with U.S. Treasurys as comments from U.S. Federal Reserve Chairman Ben Bernanke incited speculation that the Fed could embark on monetary tightening earlier than previously expected.

1.50s 2012   100.33     dn     0.13  1.34% vs 1.28% 
   2.00s 2014    97.67     dn     0.33  2.52% vs 2.45% 
   3.75s 2019   102.50     dn     0.46  3.43% vs 3.38% 
   5.00s 2037   115.74     dn     0.68  4.04% vs 4.01% 
   10-Yr Spread to U.S. 10-Yr:    -27 vs -26

"I would say all the action is Fed related today," said James Price, senior vice-president and director of fixed-income at MacQuarie Private Wealth.
In prepared testimony before the House Financial Services Committee, Bernanke suggested the rate paid to banks on excess reserves held at the central bank may for a time replace the Fed funds rate as the main operating target for policy.
As part of the Fed's plans to end its liquidity programs, Bernanke also said the central bank could "before long" increase the spread, or difference, between the discount rate it charges banks for emergency loans and the Fed funds rate.
"We initially had Bernanke speaking, saying there's a chance we might see the discount rate start to move higher, as opposed to the fed funds rate," said MacQuarie's Price.
"He almost immediately backtracked by saying this doesn't mean we're going to be in all-out-tightening mode. Nonetheless, he said it, and that had the short end underperforming right off the bat and the curve flattening," Price said.
A tepidly received auction of $25 billion of 10-year U.S. Treasury notes also weighed on North American bond markets Wednesday.
The Bank of Canada reported an average yield of 1.875% at an auction of C$3.2 billion (US$3.0 billion) of 1.75% non-callable government bonds due March 1, 2013.
With the issue of the new bonds, the outstanding total of 1.75% bonds due March 1, 2013, will be C$6.4 billion.
"To be honest, I think most people were watching the Treasury side of the equation more than the homegrown," said MacQuarie's Price. "Our supply is still relatively constricted compared to theirs, so the bearish talk we hear on the Street because of excessive Treasury supply doesn't necessarily apply to us."
The weakness in the front end of the yield curve resulted in significant flattening of the Canadian yield curve Wednesday, with the spread between two-year and 30-year bonds moving to 270 basis points from 274 Tuesday.
Price said he expects further flattening of the yield curve in response to the prospect of central bank tightening. The Bank of Canada, and, to a lesser extent, the U.S. Federal Reserve both have some room to tighten interest rates in the coming months, he said.
"I think they've got room to start lifting the short-term rates, or at least hinting that they're going to lift, and still be very accommodative," he said.
In domestic data on Wednesday, Canada's trade deficit widened to C$246 million (US$230 million) in December from an upwardly revised C$201 million the previous month. The market had expected a C$100 million deficit.
On Thursday, the new housing price index for December will be released.

Forex Review - Greece Again Rattles the Euro

2010-02-11T02:30:00.000+05:00

written by: Ron Finberg , Trading Analyst

Today’s Action

Well, so much for yesterday’s rally. Once again Greece hits the headlines, as yesterday’s denial of a German assisted bailout is finally registered by the market. Nonetheless, some of the losses were pared after new French reports signaled help was on the way.
First, a recap of the numbers: (as of 20:30 GMT)
EURUSD : 1.3740 (-40 pips)
GBPUSD : 1.5588 (-116 pips)
AUDUSD : 0.8758 (-20 pips)
USDCAD : 1.0620 (-62 pips)
GOLD : 1070.00 (- $5.50)
CRUDE OIL : 74.50 (+ $0.50)
S&P 500 :1065 (-2.75 points)
What’s really going on?
Yesterday, we questioned whether yesterday’s risk appetite rally was anything more than a bounce combined with short covering. The answer came quickly as Forex traders wasted no time in a return to selling the euro. What today’s trading reveals is that Forex traders aren’t ready to move on, and are worried about the fallout that would occur if Greece would go bankrupt. On a side note, a CNBC interviewee had a grat quote about yesterday saying that Greece has been on the brink of economic collapse for the past 100 years, and they have always seemed to roll along.
Also occurring today were Trade Balance numbers from China, the US, and Canada. The US numbers showed a greater than expected deficit, but also revealed export growth. Dollar bulls used the growing export numbers as an excuse to buy dollars. As a result, the EURUSD traded down to a low of 1.3680, after being above 1.3800 yesterday.

Pound hit by BoE Inflation Report

The big loser today was the pound. The GBPUSD is down over 100 pips on the day to 1.5585, as the BoE’s inflation report appears to have convinced Forex traders that the BoE may reinstate its QE policies. The BoE’s outlook was for worse than expected UK growth in 2011 and low inflation levels. On the positive side (and this initially led to gains in the pound), BoE Governor Mervyn King believed that the UK will continue its gradual recovery and risks of another economic contraction appeared limited.
In the past, the BoE has had a habit of being conservative and attempting to lower market expectations. If so, the pound could be in line for an upside move, if we do in fact see better than expected economic numbers released.

Using Fibs in the Direction of the Daily Trend

2010-02-09T05:59:00.000+05:00

Students Question:
I would enter at 1.3600, place a stop at 1.3400 and sell at 1.4000. Does this seem reasonable?

Instructor's Response:
Good work on the 1:2 Risk Reward Ratio.

While your understanding of Fibs is good and the Fib line that you have drawn is valid, the first point we as traders must take into consideration is the direction of the Daily trend and how to use Fib levels to get us into a trade in that direction.

The higher probability trade will be to wait for the current downtrend to bottom out and stall. Then draw a Fib line from the Swing High to the Swing low so we can identify a potential fib retracement level for a short entry on the pair.

Take a look at the second chart below for a visual...

After this current bearish move ends, using Fib levels, we would wait for the pair to retrace into the "sell zone" and stall at one of the Fib levels. Then a short position could be taken with a stop above the highest penetration of a Fib level by price.

The Trend Trader For Forex Trading on Tuesday, February 9, 2010

2010-02-09T05:55:00.002+05:00

The Trend Trader helps to identify the current trend status of your favorite forex markets. It not only helps us to stay on the right side of market direction, but also helps us avoid those without a trend. You can even use the grid as a spread matrix too - buying strength and selling weakness. Before you place your next trade, be sure to consult the Trend Trader.

The Trend Trader for Forex
For Trading On Tuesday, February 9, 2010

Presented by the Pattern Trapper - PatternTrapper.com - 952-892-5550
Trend Trader readings are based on Daily Pivot calculations. For a detailed explanation Click Here!

THE BIG SIX	Close	% Change	3x1	7x5	Minor Trend	Major Trend	Trend Reading
AUDUSD - Aust Dollar / US Dollar	0.8647	− 0.42	0.8672	0.8729			Bearish
EURUSD - Euro / US Dollar	1.3649	− 0.20	1.3704	1.3762			Bearish
GBPUSD - British Pound / US Dollar	1.5584	− 0.35	1.5683	1.5755			Bearish
USDCAD - US Dollar / Canadian Dollar	1.0757	+ 0.45	1.0710	1.0678			Bullish
USDCHF - US Dollar / Swiss Franc	1.0732	+ 0.08	1.0697	1.0671			Bullish
USDJPY - US Dollar / Japanese Yen	89.253	+ 0.02	89.392	89.684			Bearish
ALL OTHERS
AUDCAD - Aust Dollar / Canadian Dollar	0.9299	0.00	0.9292	0.9334			Neutral
AUDCHF - Aust Dollar / Swiss Franc	0.9277	− 0.36	0.9280	0.9311			Bearish
AUDJPY - Aust Dollar / Japanese Yen	77.170	− 0.41	77.490	78.262			Bearish
AUDNZD - Aust Dollar / New Zealand $	1.2655	+ 0.55	1.2600	1.2552			Bullish
CADCHF - Canadian Dollar / Swiss Franc	0.9973	− 0.38	0.9982	0.9985			Bearish
CADJPY - Canadian Dollar / Japanese Yen	82.944	− 0.44	83.434	83.926			Bearish
CHFJPY - Swiss Franc / Japanese Yen	83.147	− 0.08	83.526	83.908			Bearish
EURAUD - Euro / Australian Dollar	1.5782	+ 0.22	1.5800	1.5762			Neutral
EURCAD - Euro / Canadian Dollar	1.4679	+ 0.24	1.4682	1.4709			Bearish
EURCHF - Euro / Swiss Franc	1.4649	− 0.12	1.4668	1.4678			Bearish
EURDKK - Euro / Danish Krone	7.4441	− 0.01	7.4445	7.4446			Bearish
EURGBP - Euro / British Pound	0.8756	+ 0.13	0.8738	0.8731			Bullish
EURJPY - Euro / Japanese Yen	121.819	− 0.20	122.482	123.241			Bearish
EURNOK - Euro / Norwegian Krone	8.1654	− 0.19	8.1799	8.1815			Bearish
EURNZD - Euro / New Zealand Dollar	1.9975	+ 0.72	1.9908	1.9815			Bullish
EURSEK - Euro / Swedish Krona	10.1550	− 0.21	10.1721	10.1611			Bearish
GBPAUD - British Pound / Aust Dollar	1.8020	+ 0.07	1.8077	1.8055			Bearish
GBPCAD - British Pound / Canadian $	1.6763	+ 0.10	1.6799	1.6839			Bearish
GBPCHF - British Pound / Swiss Franc	1.6725	− 0.27	1.6796	1.6842			Bearish
GBPJPY - British Pound / Japanese Yen	139.094	− 0.35	140.127	141.026			Bearish
GBPNZD - British Pound / New Zealand $	2.2805	+ 0.61	2.2772	2.2673			Bullish
NZDCAD - New Zealand $ / Canadian $	0.7344	− 0.48	0.7376	0.7417			Bearish
NZDCHF - New Zealand $ / Swiss Franc	0.7327	− 0.84	0.7362	0.7405			Bearish
NZDJPY - New Zealand $ / Japanese Yen	60.940	− 0.87	61.496	62.198			Bearish
NZDUSD - New Zealand $ / US Dollar	0.6828	− 0.94	0.6882	0.6950			Bearish
SGDJPY - Singapore Dollar/Japanese Yen	62.665	− 0.11	62.890	63.223			Bearish
USDDKK - US Dollar / Danish Krone	5.4535	+ 0.21	5.4318	5.4097			Bullish
USDHKD - US Dollar / Hong Kong Dollar	7.7708	+ 0.01	7.7702	7.7689			Bullish
USDNOK - US Dollar / Norwegian Krone	5.9814	+ 0.02	5.9671	5.9439			Bullish
USDSEK - US Dollar / Swedish Krona	7.4405	+ 0.01	7.4244	7.3798			Bullish
USDSGD - US Dollar / Singapore Dollar	1.4237	+ 0.14	1.4207	1.4171			Bullish

Statement of disclaimer: This information was compiled from sources believed to be reliable, but its accuracy cannot be guaranteed. There is substantial risk of loss in trading futures, forex. ETFs, and stocks. There is no warranty, express or implied, in regards to the fitness of this information for any particular purpose. Past performance is not a guarantee of future results. All materials are copyright © 2010 by Bob Hunt. No part of these resources may be reproduced, stored or transmitted without the prior written permission of the copyright holder.

New York Session

2010-02-09T05:54:00.002+05:00

The NY session was lacking in news and economic events and it looked as if short-covering (taking profit on short positions) was the flavor. Risk went on an absolute rollercoaster and US equities would eventually falter into the close, settling -0.9% lower. EUR/JPY was tied close to the risk hip and the cross was taken for a ride from a NY open by 122.10 to a session high around 122.50 and back down towards 121.80 by the time the dust settled. EUR/USD, meanwhile, was well bid early on (good buying interest) and rocketed to a high near 1.3712 before collapsing to the 1.3650/40 lows as the close neared. Ostensibly the market failed to take out notable stop loss orders that had been lurking above the 1.3720 zone. We would expect the prior overnight lows around 1.3620 to attract now.

The commodity complex posted a major headfake. Gold (XAU/USD) had initially rallied into the highs just below the crucial $1075 zone but the level proved insurmountable and the precious metal would eventually follow the risk trade lower into the $1063 zone. This kept the so-called commodity currencies trading with an overall offered tone (good amount of selling interest). AUD/USD plunged from session highs just above 0.8700 to trade by 0.8630/40 as we write. USD/CAD was a one way ride up. The pair started out trading near 1.0680 and would end nearly 100 pips higher on the day. The meltdown in commodities coupled with credit rating concerns regarding a major Canadian bank spooked USD/CAD shorts.

The biggest piece of news now in Asia looks to be Japanese machine tool orders. While this is likely to have little fundamental impact on the yen, the overall tone to risk could move on a number that diverges significantly from last month’s 63.4% annual run-rate. Waning risk appetite should see the yen crosses follow lower.

Equity Markets Finding Support but Need Catalyst for Rally

2010-02-09T05:52:00.002+05:00

U.S. equity markets are trading slightly better at the mid-session, but seem to be lacking a catalyst to drive it sharply higher. An easing of investor risk sentiment helped to support equity prices overnight, but the lack of follow-through to the upside, helped limit early gains. Traders are hoping for more concrete evidence that a resolution has been reached regarding the deficit situation in the Euro Region.

Appetite for risk is likely to rise once the situation in Greece stabilizes and the Euro begins to rally. Optimism that a viable solution could be reached to assure investors that Greece would adhere to its budget, should help to drive investor confidence up. It looks as if today will be choppy until investors decide whether to embrace risk or repel it.

March Treasury Bonds are trading lower at the mid-session. The overnight and midday weakness is being triggered by a combination of falling demand for lower risk assets and the new supply of debt which is ready to come to the market courtesy of the U.S. Treasury. Overnight support held this morning at a 50% level at 118’24. A failure to hold this level is likely to trigger an acceleration to the downside.

The weaker Dollar is helping to buoy April Gold following a strong overnight rally. Some traders also believe that the gold market overreacted to the downside last week. A combination of oversold conditions and a successful test of a retracement level at $1049.60 could help to give Gold a boost into the close. Furthermore, growing deficits in most major economies is renewing talk of a major developing inflationary situation. Some gold investors believe that central banks will be forced to print money to cover their deficits. This will weaken paper money, making hard assets more valuable.

The weaker Dollar and increased demand for higher risk is helping to drive up March Crude Oil at the mid-session. The supply and demand situation remains bleak so this market will be more sensitive to currency movement. Look for a surge to the upside if the Dollar trades lower into the close.

The U.S. Dollar is trading lower at the mid-session as tensions eased regarding the fiscal problems in Greece. Some traders feel that a resolution will be reached which may involve aid or stronger assurances that Greece will strictly follow its newly proposed budget.

The March Euro experienced a choppy two-sided trade early in the session. Continue to look for volatility, highlighted by a choppy trade until the European Central Bank, European Union or International Monetary Fund offers a viable solution to the Euro Region’s fiscal problems.

Volatility and choppiness is affecting the British Pound at the mid-session. Besides the weak economy, investors are now having to deal with the possibility that the U.K. will suffer the same fate as Portugal, Spain and Greece and have its debt rating reduced because of its huge budget deficit. Furthermore, news that the June election could result in neither party receiving a majority is also hurting the British Pound.

The March Japanese Yen is little changed at the mid-session, but this trading pattern could shift quickly if risk aversion returns to the markets. Budget problems in Europe, the U.K. and the United States may encourage traders to seek the safety of the lower yielding Asian currencies. The Japanese Yen is taking its clues from the stock market today.

The direction of the March Swiss Franc is being determined by the movement in the Euro. A weaker Euro will increase the chances of a Swiss Bank intervention, thereby strengthening the Dollar versus the Swiss Franc. A short-covering rally in the Euro will help underpin the Swiss Franc.

Stronger gold and crude oil should be helping to underpin the March Canadian Dollar, but it looks as if the choppy equity markets are exerting a larger influence on this currency. Look for the Canadian Dollar to remain buoyed as long as it is getting support from the commodity complex. A bullish turnaround in the stock market will help strengthen the Canadian Dollar late in the session. Some traders feel that dovish comments from Bank of Canada deputy governor Duguay are helping to limit gains. He reiterated that interest rates will hold steady until at least the end of the second quarter. Furthermore, he emphasized a weaker Canadian Dollar scenario is necessary to keep the economic recovery on course.

India GDP Growth May Rise To 7.2% In 2009-10: Govt

2010-02-09T05:51:00.000+05:00

(RTTNews) - India's economy is likely to grow 7.2% in the 2009-10 fiscal year, advance estimates of the Central Statistical Organization showed on Monday. The economy had expanded 6.7% in 2008-09.
For the fiscal year ending on March 31, the financing, insurance, real estate & business services sector is forecast to show the biggest growth of 9.9%, slightly less than the 10.1% logged in the previous year.

Manufacturing, one of the key sectors driving GDP growth, is expected to grow a robust 8.9%, much greater than the 3.2% recorded for the previous fiscal.

Mining and quarrying, utilities as well as trade, hotels, transport and communication are expected to show more than 8% growth each in 2009-10. However, construction sector is forecast to show only 6.5% expansion compared to 5.9% in the previous year. Further, farm output is expected to shrink 0.2% in 2009-10 after growing 1.6% in the previous year.

Sri Lankan President's Challenger General Fonseka Arrested, Reports Say

2010-02-09T05:50:00.000+05:00

General Sarath Fonseka, who lost to president Mahinda Rajapaksa in the presidential election, was arrested at his office in Colombo on Monday night, reports quoting witnesses said.

Gen Fonseka was meeting a number of politicians who had supported his candidacy, when he was taken into custody in a "very disgraceful manner," witnesses said.

Reports say the arrest was not unexpected, as government was mulling a court martial against Fonseka on charges of plotting to overthrow the administration.

Rajapaksa defeated his main challenger and former army commander General Sarath Fonseka in the elction held last month. Fonseka rejected the outcome alleging vote-rigging and lodged several objections with the electoral commission.

Within a week of his re-election, Rajapaksa dismissed 12 senior military officers for being a "threat to national security" and hatching "political conspiracy" during the presidential elections.

Euro Weakens As Negative Bets Hit Record Highs

2010-02-09T05:48:00.002+05:00

NEW YORK (Dow Jones)--Lingering concerns about the fiscal health of weaker nations in the euro zone kept the common currency near an eight-month low against the dollar Monday.
Pressure on the common currency showed no signs of letting up after data indicated that bets against the euro in the futures markets reached record highs. A meeting of finance ministers of the Group of Seven leading economies in Canada over the weekend did little to shift the negative sentiment on the euro.
Data from the Commodity Futures Trading Commission indicate a record amount of bets against the euro--called shorts--among speculators using futures contracts, said Camilla Sutton, currency strategist at Scotia Capital in New York.
Speculative bets against the euro are now at a higher level than at the peak of the financial crisis in 2008, she said, at $7.6 billion as of last Tuesday, the most recent day the weekly data were compiled.
Because the euro has slipped further since then in daily trading, bets in futures markets against the euro have likely increased, Sutton said.
"The data just really reflect how negative sentiment has turned" against the euro, Sutton said. "Very quickly, we've not only gone from" bets in favor but "to record bets against the euro."
The euro will remain under significant pressure until euro-zone officials detail to markets how they will deal with weaker member states. Until then, uncertainty will reign, Sutton said, keeping the euro depressed.
Late afternoon Monday in New York, the euro was at $1.3659 from $1.3663 late Friday, according to EBS via CQG. The dollar was at Y89.30 from Y89.38, while the euro was at Y121.97 from Y122.14. The U.K. pound was at $1.5598 from $1.5613. The dollar was at CHF1.0722 from CHF1.0729.
The Dollar Index, which tracks the U.S. currency against a trade-weighted basket of currencies, was 80.350 from 80.323.
As a result, Deutsche Bank's PowerShares US Dollar Index Bearish (UDN) exchange-traded fund was up 0.04% from late Friday, while its PowerShares US Dollar Index Bullish (UUP) was down 0.04%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of ICE's Dollar Index.
To see the euro's moves against the dollar, please see chart at:
http://www.dowjoneswebservices.com/chart/view/3407
In the absence of major economic data, currencies traded within hair-thin ranges and the underlying malaise in the euro zone was still the overriding factor driving currencies Monday.
"The sentiment is still bearish for the euro and positive for the dollar," said Carol Hurley, senior market strategist at brokerage firm Lind-Waldock in Chicago. "The comments from the G-7 put some stabilization into the markets...but lacked substance as far as a formal plan to fix some of these debt issues, so the market is still searching for safety.
A statement from euro-zone members of the G-7 finance ministers--that they would "continue to monitor" Greece's implementation of a belt-tightening plan--didn't ease investor worry over sovereign debt, analysts said.
"Debt concerns in the euro zone seem set to persist and [to] undermine the euro," said Steve Barrow, head of G10 strategy at Standard Bank in London.
The G-7 finance ministers from the leading industrialized economies disappointed hopes of a new initiative for resolving the problem of large budget deficits in peripheral euro-zone countries.
Instead, nothing new was said on the matter. European officials once again suggested that a bailout isn't on the European Union's agenda.
"The seriousness of the European crisis is certainly graver than the Dubai World crisis," said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn. "To an extent, this panic has become embedded in the markets' expectations. What remains to be seen is how the Greek public deals with [the country's budget-deficit plan]."
Some unions in Greece have threatened to protest budget-cutting plans. Meanwhile, a measure passed in Portugal on Friday to extend the spending powers of its regional governments unnerved markets.
Investors also cast nervous eyes to sterling, which had been under earlier pressure before rebounding along with the euro in late-morning trading because of fiscal issues in the U.K., including high deficits and the possibility of political gridlock if upcoming elections result in a hung Parliament, as recent polls suggest is increasingly possible.
A hung Parliament, in which one party doesn't have a clear majority, could mean that the slim budgets that are necessary to cut U.K. deficits will have a hard time getting passed, said Altaz Dagha, currency strategist at Lloyds TSB in London.
The Bank of England's announcement last week that it wouldn't extend its bond-buying program, known as quantitative easing, but would leave the door open to future purchases, would continue to weigh on sterling, analysts said.

Value-added gemstones to fetch huge forex

2010-02-09T05:47:00.000+05:00

PESHAWAR: NWFP Governor Owais Ahmed Ghani has said that vast potential existed for earning foreign exchange through exploration of precious stones on scientific lines and ensuring their value addition, which require institutionalised initiatives on fast-track basis.

Speaking at diploma awarding ceremony of the graduates of Gemology Training Course at the Governor’s House, Monday, he said: “We need to establish a centre of excellence in this sector under the aegis of the University of Engineering & Technology and develop skilled manpower.”

The six-month course, which was fourth of its nature, was meant for students from Fata and was arranged by the NWFP University of Engineering & Technology through the sponsorship of USAID. All 15 graduates from Fata were awarded diplomas on the occasion.

The governor, who is also the Chancellor of the NWFP University of Engineering & Technology, said attracting

international buyers was a sensitive matter and to attain recognition there was a dire need to establish a gems certification and evaluation laboratory in the provincial metropolitan.

Owais Ghani also lauded the USAID for sponsoring the training saying that it would go a long way towards generating job opportunities for youth and encouraging export of value-added precious stones instead of rough material.

“We need to move from practices of exporting precious stones in rough forms to an internationally recognised level of quality material,” he said.

In fact, he said, huge deposits of different kinds of minerals exist in the NWFP and Fata and we also need support and sponsorship for their development and exploitation. He appreciated the enthusiastic approach of the NWFP University of Engineering & Technology for promoting skilled manpower and assured every possible help and support in its efforts for further up-grading the educational facilities.

Vice Chancellor of the university Syed Imtiaz Hussain Gilani said the university had been promoting knowledge in the gemstones sector for quite some time and three batches of the series had already passed out.

Sheheryar Khan, director, Fata Development and Livelihood Development Project, highlighted importance of the course and said that community participation was the focal point of the programme.

Later, the governor awarded certificates to the graduates. US Consul General in Peshawar, Ms Candace Putnam, attended the ceremony the officials of Fata Secretariat and USAID besides the senior members of the faculties of the NWFP University of Engineering & Technology.

WORLD FOREX: Euro Sinks; Dollar, Yen Gain On Debt Concerns

2010-02-06T16:09:00.002+05:00

NEW YORK (Dow Jones)--The euro sank Friday as sovereign debt weighed heavily on markets, with investors focused on fiscal issues in deficit-laden Greece spreading to Portugal and other euro-zone economies.
After fleeing from riskier assets for most of the New York session, investors made a last-minute attempt to bid U.S. stocks and commodities higher, but the euro benefited only marginally after a volatile day in which the common currency tumbled to a near 12-month low against the yen and the lowest level since May against the dollar.
"The markets are betting on a situation that I don't think will happen, which is a more extreme situation of default or an economy leaving the euro area," said Carlos Almeida Andrade, chief economist of Banco Esprito Santo in Lisbon.
That said, the euro could still decline to $1.30, or "a little bit further," he said, as investors weigh whether belt-tightening plans in Greece, Portugal and Spain will stop a possible contagion from infecting the entire euro zone.
Late Friday in New York, the euro was at $1.3663, down from $1.3741 late Thursday, according to EBS via CQG. The dollar was at Y89.38, up from Y88.94, while the euro was at Y122.14, down from Y122.20. The U.K. pound was at $1.5631, down from $1.5750. The dollar was at CHF1.0729, up from CHF1.0655.
The Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.323, up from 79.907. The index on Friday hit its highest level since July.
As a result, Deutsche Bank's PowerShares US Dollar Index Bearish (UDN) exchange-traded fund was down 0.56% from late Thursday, while its PowerShares US Dollar Index Bullish (UUP) was up 0.38%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of ICE's Dollar Index.
"The risk aversion and concern over sovereign credit has replaced the euphoria that economies were coming out of the doldrums," leading investors to the safety of the dollar and yen, said John McCarthy, manager of currency trading at ING Capital Markets in New York. "Risk is being sold off," he said.
European Central Bank President Jean-Claude Trichet on Friday rejected the idea that there could be an extraordinary meeting of the ECB amid concerns about the heavily indebted countries in the euro zone.
Trichet was asked about the possibility of such a meeting held this weekend as he arrived for a weekend Group of Seven meeting of finance officials, to which he responded, "No, it's untrue."
The euro took a hit earlier after Portugal's parliament approved Friday an amendment of a regional finance law that could add to the country's rising budget deficit. The euro sank further after the Portuguese legislators passed the measure, despite the Finance Ministry's appeal to the contrary.
"There's some uncertainty that stems from that vote, having gone the way it did," said Brian Kim, currency strategist at UBS AG in New York. "In an environment where the sovereign risk is at the forefront, any uncertainty on the political aspect adds to negative pressure."
Demand for the common currency has dried up amid worries that ballooning budget deficits in the peripheral nations of the euro zone will stall economic growth and keep the European Central Bank from lifting key interest rates, resulting in the bank possibly lagging the U.S. Federal Reserve when it comes to tightening monetary policy.
Investors earlier shrugged off mixed U.S. employment data showing that the U.S. economy continued to shed jobs in January, while the unemployment rate unexpectedly improved. Instead, investors focused squarely on the euro-zone debt woes, analysts said.
The U.S. unemployment rate fell to 9.7% in January from an unrevised 10% in December, the Labor Department said Friday; economists had expected a rise.
Nonfarm payrolls fell by 20,000 compared with a revised 150,000 decline in December. Economists had expected payrolls to be flat. The December figure was revised sharply from an originally reported 85,000 drop.

A “Must Know” Strategy for Investing in Volatile Markets

2010-02-02T21:12:00.001+05:00

This week, Safe Haven Investor editor Kent Lucas looks at “dollar cost averaging,” a tried and true approach to investing in these volatile times.

For the past few weeks, there has been a lot of discussion about the stock market’s direction and what could be the extent of this correction we’re apparently in the middle of.
The correction has been officially identified by many market professionals. Last week I too discussed it, in light of the market’s (rich) valuation and historical perspective. I then mentioned in my “What to do?” concluding thoughts the concept of “taking advantage of lower prices to pick up solid long-term holdings...”
Well, that phrase could use further elaboration. I gave you some broad words of solid wisdom, and today I will try to explain in more detail.
There is a well-known tactic that long-term investors use for building their positions over time. I’m sure some of you are at least familiar with what is known as “Dollar Cost Averaging” or “DCA.” (I really hope most of you are already incorporating dollar cost averaging into your stock purchasing methodology.) In fact, through direct investment plans, IRAs and 401(k) type programs, you may be doing DCA and might not know it. And with less visibility and the markets going up and down so much, DCA makes more sense now for most investing efforts.
Let’s look a little closer at some Safe Haven Investor examples to better convey the importance of (and strategy behind) dollar cost averaging.

DCA Defined

Dollar Cost Averaging is a sound buying (and selling) strategy that works well when stocks prices are moving up and down.
Let’s say you were a long-term reader of Safe Haven Investor and back in November of 2008, you took our advice and added HudBay Minerals (HBM:TSX) to your portfolio.
HudBay Minerals is a Canadian integrated mining company that has been a great addition to the Safe Haven portfolio, up 113% since we recommended it on Nov. 7, 2008. But I don’t want to talk about that awesome return – I want to talk about DCA.
On that date the HBM price was $6 a share. You could have made a lump-sum or “one time” purchase, say of $3,000 worth, for 500 shares.
That’s great, but sometimes you gradually want to add to your position. Perhaps you don’t have all the money at once, or you want to do it monthly or quarterly. Deducting a set dollar amount out of your monthly paycheck to purchase shares is a common example. That, simply, is dollar cost averaging.
With dollar cost averaging, you add to (or reduce, if the case may be) a position periodically, effectively “averaging” your total dollar cost. This works great if you’re buying a stock and the price tends to be lower than your “one time” price

This is kind of important. If you have a comfortable and ongoing strategy of dollar cost averaging, than you pay less attention to dips in the stocks you are buying. As long as you are still comfortable with the investment rationale behind buying the stock, and nothing material has changed with the company and its fundamentals, then dollar cost averaging will let you buy with confidence. As Peter Lynch suggests, “The key to making money in stocks is not to get scared out of them.”

On the other hand, if the stock starts rising, then your average cost could be higher. But in this environment, if that happened to be the case, I might not mind paying a higher price when there is a near-term risk of the stock dropping down lower. If the stock does go higher, you are buying fewer shares at that higher price with the same dollar amount.
Also, if there is a chance your investment (temporarily) turns sour, at least you will be entering at a lower and lower base, allowing the opportunity for positive returns sooner.

The HudBay Example

Back to HudBay for a moment. In the chart below, using $3,000, we compare a lump-sum purchase at $6/share vs. dollar cost averaging for six months since the Nov. 7 recommendation.

With Dollar Cost Averaging, our “average” price would have been $5.17, allowing us to own 528.6 shares, compared to a lump-sum purchase on Nov. 7, 2008, where the “average” price was $6, giving us 500 shares.
Having an average price of $5.17 vs. $6 is a major difference! Actually, by dollar cost averaging, you would have been up 16% already, which over the long run and with larger dollar amounts would have a meaningful impact on your portfolio. And in HudBay’s case, this is before the stock doubled and made its run to the low teens.
So, now you know about Dollar Cost Averaging – which in this market could serve you well.

FOREX: Ringgit Closes Easier Against Dollar

2010-02-02T21:04:00.002+05:00

KUALA LUMPUR, Feb 2 (Bernama) -- The ringgit closed easier against the U.S. dollar as market players retreated following a speculation that the central bank may raise interest rate earlier than expected, a dealer said.

As at 5 pm, the local currency declined to 3.4170/4200 against the greenback compared to last Friday's close of 3.4060/4110.

The local market which was closed on Monday for the Federal Territory Day holiday, saw the local currency also declining due to a stronger US dollar which has been gaining strength from positive signs of recovery in the US economy.

Recently, Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz was reported saying that there was a need to look at normalising interest rates due to other risks of financial imbalances.

She said should interest rates go too low and (remain so) too long, it could result in people moving outside the formal financial system to enhance their returns on savings and result in taking higher risks without realising it and this may result in problems later on.

The ringgit, meanwhile was higher against other major currencies.

It appreciated to 2.4195/4240 against the Singapore dollar from 2.4256/4319 last Friday and rose against the Japanese yen to 3.7694/7753 from 3.7748/7820 previously.

The ringgit was also higher versus the Euro to 4.7561/7613 from last Friday's 4.7602/7679 and gained against the British pound to 5.4388/4453 from 5.5078/5173 previously

FOREX-Euro up vs dlr as Greek vs German spreads narrow

2010-02-02T20:58:00.002+05:00

* Euro rises but gains limited on Greece concerns * Aussie falls as RBA surprises, holds rates at 3.75 pct
* Market awaits White House adviser Volcker's testimony (Recasts, updates prices, adds comment, changes dateline, previous LONDON)
NEW YORK, Feb 2 (Reuters) - The euro hung on to gains against the dollar as the New York session opened on Tuesday, supported by a narrowing in Greek government bond yield spreads over German debt as investors awaited the European Commission's reaction to Greece's plan to fix its finances.
Greek Prime Minister George Papandreou said the level of Greek and euro zone bond spreads was completely unjustified, keeping up the rhetoric against speculators he blames for targeting his country. For more see [ID:nATH005160] and [ID:nATH005161].
The comments came ahead of the publication on Wednesday of EU recommendations to Athens on its austerity plan.
The Australian dollar fell after the Reserve Bank of Australia surprised investors by leaving its benchmark interest rate unchanged at 3.75 percent. There had been almost universal consensus the central bank would hike to 4 percent. [ID:nRBA]
"Bond market fears over Greece reached a high last Thursday and have since fallen back," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto. "This hints that the market is stabilizing and that much of the bad news is now priced in."
In early New York trade, the euro EUR= had pared earlier losses to trade 0.1 percent higher on the day at $1.3938, recovering from a seven-month low hit on Monday.
Greek 10-year yield spreads over Bunds were at 351 basis points, off a session low of 327. Last week, the spread expanded beyond 400 basis points, its widest since Greece adopted the euro in 2001.
The slide in confidence in Greece triggered selling in its government bonds, blowing out its yield spread with German bond.
For a graphic on the euro/dollar exchange rate and Greek spreads, click here
But euro gains were capped by concern that deficits in other euro zone countries, such as Portugal, would keep investors wary of taking big positions in the euro zone common currency.
"Sentiment remains fragile despite the strong U.S. GDP data last week and the Greek situation is still in the background, making investors cautious," said Paul Robson, currency strategist at RBS.
Underlining the possibility that fiscal woes may extend beyond Greece, European Central Bank Governing Council member Vitor Constancio said on Tuesday Portugal's economy required "significant adjustments". [ID:nLSB002240]
The dollar index, a calculated measure of the dollar's performance against six currencies, slipped 0.1 percent to 79.162 .DXY, but was still near a six-month high hit on Monday. The dollar was 0.1 percent lower against the yen at 90.52 yen JPY=.
AUSSIE DOWN
The Australian dollar AUD= fell to a low of US$0.8780 before paring losses to trade at US$0.8825, down 1 percent in the global session after the RBA decision.
The Australian dollar held above $0.8735, which analysts said was a key level to watch, given that a fall below that level would take the currency to its lowest in four months.
Some analysts said a general improvement in risk sentiment, albeit slight, would limit Aussie losses in the near term while they expected the currency to remain in demand, particularly given the RBA left possibility open for future rate hikes.
"Investors may look to use the dip ... as a buying opportunity given that broader 'risk' sentiment appears to be improving and positioning is not stretched," Citi analysts said in a note.
"This suggests there may only be limited scope for stop-loss-driven selling and position unwinding to drive AUD lower. On balance, we believe it is unwarranted to shift away from a positive view on AUD."
Risk sentiment will be under scrutiny later when White House adviser Paul Volcker appears before the Senate Banking Committee to defend the administration's proposal to limit risk-trading by banks, which spooked investors and triggered a sell-off in equities when it was unveiled last month.
According to testimony obtained by Reuters, Volcker will urge Congress to curb the risks taken by large banks to help prevent them from being treated as "too big to fail"

US President Barack Obama unveils 2011 budget plans

2010-02-02T04:42:00.000+05:00

President Obama: "It is a budget that reflects the serious challenges"

US President Barack Obama has announced a $3.8tn (£2.4tn) budget plan for 2011, which includes increased spending for job creation, but cuts in other areas.

He also forecast the US deficit would rise to a record $1.56tn this year.
He scrapped plans to send astronauts back to the Moon and will seek to save $250bn by capping a range of domestic spending programmes for three years.
Congress must approve the budget for the financial year starting on 1 October for it to take effect.
Mr Obama blamed the huge deficit on the decisions of President George W Bush, previous Congresses and his administration's moves to prevent an economic collapse.

ANALYSIS

Kevin Connolly, BBC News, Washington

Barack Obama, buffeted by recent election defeats for his Democratic Party, has a keen political sense of the image he wants to portray on the economy - that of a president forced by circumstance into enlarging America's already huge budget deficit in the short-term while promising in the medium-term to reduce it.
So his $3.8tn budget includes more money for education and scientific research and more for defence programmes. But it also looks forward to eliminating waste and freezing many other domestic programmes.
His critics will accuse him of old-fashioned taxing and spending. His electoral future may well depend on his ability to bring the deficit under control.

He said that in normal circumstances he would have worked to cut the deficit immediately, but expensive steps were need to help the economy.
Mr Obama urged lawmakers to follow his lead on reducing "waste in programmes I care about" and avoid "grandstanding".
He added: "We cannot continue to spend as if deficits do not matter."
The budget includes about $100bn of tax incentives designed to lower double-digit unemployment, including inducements for companies to hire workers.
This will be partially offset by higher taxes on wealthy Americans earning more than $250,000 a year.
The budget also includes more money for education, scientific research and defence programmes.
'Quagmire' of debt
But Mr Obama also plans an overall three-year freeze on the portion of government spending that excludes commitments on welfare benefits, healthcare for the elderly, defence and homeland security.

The president's proposed Nasa budget begins the death march for the future of US human space flight

Republican Senator Richard Shelby

Obama kills Moon landing plan

And he cancelled the Constellation programme launched by his predecessor that envisaged putting astronauts on the Moon's surface by 2020.
In his federal budget request, Mr Obama described the project as "over budget, behind schedule, and lacking in innovation", adding that it was draining resources from other Nasa activities.
Under Mr Obama's budget plans, Nasa would get funding to encourage private companies to build, launch and operate their own spacecraft, which could be used to carry astronauts to the International Space Station.

Republican Senator Richard Shelby condemned the move. "The president's proposed Nasa budget begins the death march for the future of US human space flight," he said.
Republicans also attacked Mr Obama's proposed tax increases and said the large projected deficits showed he had failed to get government spending under control.
Senator Judd Gregg, the top Republican on the Senate Budget Committee, said the US was sinking into a "quagmire" of debt and that Mr Obama's stimulus plan had failed to create jobs.
"These circumstances call for a bold, game-changing budget that will turn things around, put in place a plan to restrain spending, reduce the debt and tackle the big entitlement programmes that are growing out of control," he said.
"Instead, the president has sent us more of the same."