Archive for August, 2007

Rupee strengthens against US Dollar by 11 paise

Friday, August 31st, 2007

Mumbai – In late morning deals on Friday, rupee was strengthened by 11 paise against US dollar, sustained by an industry movement in equity market and flaws in dollar abroad.

The local currency resumed industry at 41.09/11 from sudden close at 41.09/11 and afterwards flowed to 41.0450/0550 per dollar in late morning deals in the active trade at the interbank foreign exchange market.

The benchmark Sensex flowed further by about 67.40 points during morning trade to touch 15,189.41, increasing more than 1,000 points from past August 24.

The weak dollar abroad market also assists the rupee opinion.

Due to decrease in the demand of dollar rupee gained. Oil refiners were steady buyers in the greenback in the last few days to meet their month-end expenses.

The main factors operating in favour of rupee according to Forex dealers are equity markets and weak dollar abroad.

Dollar’s weakness in international markets was recognized to indications of a possible interest rate cut.

Euro Jumps to Three-Week High; Trading Above $1.37

Friday, August 31st, 2007

New York – Last week on Friday, euro switched to a three week high against the US dollar. It had passed through a technical level approximately $1.3680 that generated more buying and it was pushed above $1.3700.

Paul Bednarczky who is a currency strategist at 4cast consultancy in London said, “Now it’s the month end and U.S. has a long weekend ahead so it basically looks like some bank in New York came in early and they had bought some euros”.

Some traders are away because of the holiday this week which is making the market more susceptible to many areas he added.

The single currency has reached as high as $1.3719 early Friday, its highest level since Aug. 9 when it touched $1.3817.

Euros had been experiencing changing odds during late night sessions for quite long following the reports that on Friday president George W. Bush might announce a relief package for the U.S housing sector.

As reported by EBS, Friday witnessed an increase in Euros from $1.3624 to $1.3718 while dollar was at Y116.23 from Y115.79. Late Thursday saw Euro at $1.3718 from $1.3624 while U.K pound went from $2.0121 to $2.0227. Also, the dollar was estimated at CHF1.1994 from CHF1.2039.

Global Stock meeting results in progress of Asian Currencies – Rupiah and Peso

Friday, August 24th, 2007

Bloomberg, August 22, 2007 – The currencies that offer highest yields amongst the other currencies in Asia are the Indonesian Rupiah and Philippine Peso. These currencies rose as gains in global stocks encouraging investors to buy market resources that are rising.

The day before, the Jakarta Composite Index bought more shares than they sold after the overseas funds surged 3 percent because of this the value of Rupiah raised. The central bank will meet to decide on interest rates tomorrow, before which, the value of peso has already risen by 1 percent mostly in Asia. Comparing the costs of U.S. dollars with Philippines and Indonesia, US cost is 5.25 percent and Philippines borrowing cost is 6 percent and Indonesia’s is 8.25 percent.

An economist at forecast Singapore, Vishnu Varathan said “People are trying to go back to higher yielding currencies, but in a precise way”.

According to the information collected, Rupiah gained 0.5 percent to 9395 against the dollar at 3:44 pm in Jakarta. This currency is not a good performer this year as it lost 4.3 percent. The peso rose to 46.455 per dollar.

Marcelo Ayes, senior treasury vice president at Rizal Commercial Banking Corp. in Manila said that the peso rose on thought that the central bank is selling dollars to stop the currency from reaching the 47 level.

“The central bank is trying to smoothen the currency movement, given the recent instability in the market,” said Ayes.

When related to losses in sub prime mortgages, spread nine of ten Asia’s most trades currencies have fallen this month. South Korea’s won fell 0.1 percent to 944.10.

Instability in the market

Japan and South Korea’s finance ministers said today that financial market disorders needs to be closely watched to make sure that risks to the global economic expansion do not become too much.

According to the statement the ministers said “accepted the need for constant observing of the instability in international financial markets”.

U.S. Treasury Secretary Henry Paulson said in an interview the day before, that instability in credit markets will “take time” to fall down.

The Thai baht fell 0.2 percent onshore to 34.46. Prime Minister Surayud Chulanont said Dec. 23 is the “most appropriate” date for a general election, and that will be discussed with the Election Commission. His comments came after the majority of eligible voters approved the junta’s draft for a constitution on Aug. 19.

As Instability Raises, Australian and New Zealand Dollars fades

Friday, August 24th, 2007

Bloomberg, Aug 22, 2007 — The Australian and New Zealand dollars fall as increasing instability prevented traders from unsafe investments like buying assets in countries with advanced give ups financed by borrowing in Japan.

The decrease today widens the two currencies loss in the past month to at least 15 percent as compared to yen. This is the biggest decrease amongst the 16 liveliest currencies. The extending outcome of losses linked to the U.S. housing market almost doubled the currency instability, revealing carry-trade bets to greater risk.

Peter Pontikis, treasury strategist at Suncorp – Metway Ltd. in Brisbane, Australia said, “Instability has made people gun-shy of the carry trade”. Referring the currencies by their nicknames he said, “With the supporting matters, neighboring banks and the lack of liquidity, people will be hesitant to help the Aussie and kiwi”.

The value of Australian dollar was 80.33 late in Asia the last day, where it fell down to 79.98 in Sydney today. The currency dropped to 91.41 yen from 91.97.

New Zealand’s dollar bought 69.12 U.S. cents from 69.81 cents yesterday. It fell to 79.01 yen from 79.91 in Asia the last day.

New Zealand’s equivalent measure was at 21 percent, from the average 10.3 percent for the last 12 months. Higher instability implies an increase in exchange-rate fluctuation risk.

The New Zealand Dollar still remains the top performer. Even after a 19 percent fall in the last month New Zealand dollar gained 6.7 percent and is still the top performer when compared to yen in the past 12 months. Australian currency has lost 15 percent in a month, dipping one-year gains to 3.1 percent.

Japan’s 0.5 percent overnight lending rate is the lowest of any major economy. New Zealand’s central bank raised borrowing costs four times. It has increased to 8.25 percent this year and the Reserve Bank of Australia increased rates on august 8 to 6.5 percent, making their currencies more likable to carry trades. 

Jens Nordvig, senior currency strategist at Goldman Sachs & Co. in New York said, “we have seen a great point in instability and that’s made it very hard to re-enter carry trades”.

Both the currencies fell down the day before after U.S. Treasury Secretary Henry Paulson said instability will “take time” to fall down. After then they had a meeting with Federal Reserve Chairman Ben S. Bernanke and Senate Banking Committee Chairman Christopher Dodd.

Raising of Bonds

The newspaper reported, the lack of liquidity in the bank-bill market may prompt the Reserve Bank to step in. The central bank was an onlooker at a meeting this week of association members who were called to discuss the issue, the Post said.

The day before, the government’s Debt Management Office increased the size of this week’s bond auction and presenting a bond of two more years, because of market demand for government securities.

Australian government bonds increased, with the yield on the level 10-year note declining 1 basis point to 5.85 percent. According to data collected by Bloomberg, New Zealand’s government debt fell, with the yield on the 10-year bond gaining 4 basis points to 6.23 percent.

US Dollar falls due to rate cut in Federal Funds

Friday, August 24th, 2007

Singapore – Against major competitors, US dollar had changed on Wednesday when the dealers considered the probability of Federal Reserve cutting its funds rate in the coming term in a continued effort to reinstate calm in credit markets.

According to Senator Chris Dodd, chairman of the senate banking committee, Fed chairman Ben Bernanke had said on Tuesday that to address the credit crisis in the US financial system he was completely ready to use all the tools at his removal. After a closed-door meeting with Bernanke and Treasury Secretary Henry Paulson, Dodd stated Bernanke’s comments to the press.

The senator, who is looking for the Democratic Party’s selection for the 2008 presidential promotion, criticized the Fed for acting too gradually in tightening system for lenders, but commended the central bank’s decision on Friday to insert more liquidity into the market by lowering the discount rate by 50 basis points.

The remarks primarily fueled hope that the fed will follow its discount rate cut by minimizing quickly fed funds rate at its next meeting. But the hopes faded after Jeffrey Lacker, head of Richmond Federal Reserve, said that financial market instability was not the sufficient reason by itself for the Fed to cut rates.

Jeffrey Lacker said in his speech, that “Interest rate policy needs to be directed by the viewpoint for real expenditure and increase. Federal funds rate adjustments in response to changes in the outlook for inflation and growth should continue to endeavor to stabilize inflation expectations”.

Thomas Lam, Treasury economist at United Overseas Bank was not essentially trying to shut the door to the idea of a rate cut.

If the current disorder in the credit markets begins to blow the outlook for growth or rise, the Fed would have to move, said Lam, but “they don’t want to give the impression that they are bonding anyone out — that would support even more risk-taking.”
Lam is expecting the Fed to convey at least 25 basis points to cut either at its September meeting or even in an inter-meeting move.

“The risks haven’t really worsened and there is still a chance they could embark on an emergency cut,” he said. If not, “they might cut by at least 50 basis points at the next meeting.”

Dollars last trading was at 114.59 yen compared with 114.36 yen in the early trade.

According to the Thursday’s interest rate decision by the Bank of Japan yen is expected to remain in a tight range ahead.

“No one expects it to be anything but a ‘no change’ statement,” said Ian Copsey, senior financial analyst at Global Forex Trading. “However, this is the first rate decision following the turmoil and what the market is now focusing on how the central banks are going to react.”

The euro was last trading at 1.3490 US dollars, up from 1.3457 early in the session. The European currency came under pressure after a key indicator of business confidence in Germany came in well short of market expectations on Tuesday. Adding to the downdraft, the head of one of Germany’s largest state-owned banks warned that foreign lenders were cutting off credit lines to banks in Germany, Europe’s biggest economy.
The UK Times reported on Wednesday that the credit crisis was inching closer to the “heart of the British financial system”.

Market stability return falls heavy on Yen

Friday, August 24th, 2007

22August2007

With the air of stability back in the financial markets yen experienced a slight fall in global trade scenario. The return of market stability is a result of the assurance given yesterday by Ben Bernanke, Chairman Us Federal Reserve.

The words of chairman Bernanke also targeted the assurance process for nervous investors. His comments calmed both the investors and market condition with Asian market closing stable and US equities closing up.

It is reported that a private meeting session was held among higher officials, chairman Bernanke, treasury secretary Henry Paulson and Senator Chris Dodd, to talk on the current market situation.

Chairman of senate banking committee, Senator Chris Dodd, informed press about the meeting, also he said that Chairman bernanake is confident as he plans to use all the necessary tools and means to tackle credit emergency in US market.

Comments of chairman Bernanke has burdened yen to fall which also saw investors trading off

Though, doubts and questions are being raised on the duration of this sudden relief from instability of financial market. Trade analysts blame the looming cut rates in Fed Funds darted by Richmond Federal Reserve head, Jeffery Lacker.

Lacker said the instability in market itself is not an enough reason for rate cuts by Fed.

Currency economist at bank of Tokyo-Mitsubishi, Derek Halpenny, quoted “it is doubtful to say how adequate a further response to ongoing crisis would be”. He also said “current situation predicts more chaos in market”

Yen is now focused on the press conference of Bank of Japan to be held later in the day. While, it is anticipated that bank of Japan is going to respond by putting rates on hold for sometime, experts are hoping to get some words on the slow down of carry trade.

The logic behind recent build up of yen is said to be the strategy of investors of avoiding risk by purchasing low yielding currencies to trade with high yielding ones.

An analysts, BNP Paribas, said “Japanese household balance sheets and consumer budget is likely to be affected unenthusiastically, by the build up of yen currency”

In the meantime, to the fore of June industrial order statistics for the 13-nation single currency zone, Euro has been found to be steady as compared to the dollar. As compared to the last month1.7 percent the statistics are likely to rise to 2.1 percent in coming months.

Day before, pound suffered a drop following the scare of credit crisis shifting towards UK, as bank of England reported purchase of 314mln stg by a lender Barclays (named by daily mail).

Following the amalgamation of British industry, Pound found stability ahead of monthly industrial trends survey.

Euro strengthens as ECB suggests increase in September rates

Friday, August 24th, 2007

August 22, 2007

Euro strengthens as European central bank suggested its plan to increase the borrowing costs in September rates. The raise is announced in spite of the current instability in financial market.

ECB proved its intention by stating that its monetary policy position has not changed since the beginning of this month. Earlier this month, Jean Claude Trichet, chief of Europen Central Bank, reinforced prospects of a further increase to 4.25 percent.

The beginning of the rate increase is seen to be result of his quoted words ‘strong vigilance’. The uncertainty towards the further increase in the rates is also due to the fall in global financial markets.

Capital economic analyst, Jennifer Mckeown, quoted “The strong words of Mr. Claude has been observed in many rate increase phase, thus we believe September is going to see good rate increase by ECB”. She also said that another increase in December (up to 4.50 percent) is expected, if the future sees the increase rebounding”

The determination of European central bank to increase the rates is accompanied by the rate cut in US Federal reserve.

Chairman of senate banking committee, Chris Dodd, said that a private meeting was held between the higher financial officers. He then added that federal chairman Ben Bernanke is determined to utilize every possible means to handle the credit crisis in the US market.

The session held to discuss the US market situation included federal bank chairman, Ben Bernanke, Chairman of State Senate Chris Dodd and treasury secretary, Henry Paulson.

Pound was found floating strongly. UK manufacturing sector’s survey was not expecting such stronger drift by pound.

Previous news of fall in annual CPI increase from 2.4 percent to 1.9 percent in June has cleared any expectation of any further rate increase by bank of England.

Balance of +9 percent as revealed by Alliance of British industry informed that august saw the highest level of books order in 12 years, which was more than normal.

Analyst at bank of America, Matthew sharratt, expects an increase up to 6.00 percent by bank of England by the end of the year.

Matthew Sharratt also said “Coming months can see a stable market accompanied by stepping up of increase in CPI in Q4”. According to Matthew the reason behind the stability and acceleration in CPI inflation can be the huge fall in oil prices last year.

 

Nervous market weakens dollar at noon

Friday, August 24th, 2007

August 22, 2007

Following the nervousness in the currency market, dollar was weak at noon and it sustained the fall amid the jumpy status of currency market.

At noon, Australian dollar observed a down fall at $US0.7979/82, which is less than last close of $US0.8018/23. The morning trade opening was noted amid a high of $US0.8022 and a low of 0.7972, hardly altering from where it closed yesterday.

Joshua Williamson, senior currency strategist of TD securities, blamed the Australian dollar for lacking direction which kept market partakers waiting for situation of global credit markets, as he quoted “There seems to be nervousness in currency market”.

He also, quoted “There is no particular reason for lagging of Australian dollar below $US0.8000”.

Mr. Williams added that there was definitely a lack of direction in the market today, thus chances of Australian dollar trade in afternoon is firmed to stay between $US0.7980 and 0.8020.

Reports are that last night there was a meeting between Chris Dodd, chairman of US Senate Banking Committee, Ben Bernanke, chairman US Federal Reserve and Henry Paulson, treasury secretary. The meeting resulted in the discussion of current nervousness and turbulence of currency in financial market, amid repercussion on US economy.

The meeting among the higher officials held last night had not much of an effect on the afternoon fall of currency.

Senator Dodd quoted “My stand was on the use of effective ideas and devices available, as I requested Mr. Chairman to imply necessary means to support the flow in the market. And Mr. Chairman has been positive in his assurance”

Even the sudden rise in the prices of US treasury following the increasing prospects of US rate cut, could not stop the falling of Australian dollar market in the afternoon from $0.8020 to $US0.7980.

Experts believe that the abrupt nervousness and lack of direction in the market liquidity is connected to talks going on the rate cut by Federal Reserve (Fed).

Following the current scenario of currency market and the dip in dollar this afternoon, more meetings are likely to commence between the higher officials.

Afternoon also witnessed rise in Commonwealth Government February 2017 bond from 5.855 percent to 5.835 percent, where it was closed yesterday. Also no change was observed in the August bond yield as it was found to be stable at 6.110 percent.

While September 10-year bond futures contract suffered a downfall from yesterday’s closing, as it was noted 94.135 less than 94.160 where it closed yesterday. And the September 3 year contract was found to follow the dip from 93.915 to 93.890.

Reserve bank of Australia noted index (TWI) with a fall this afternoon. The index (TWI) closed yesterday at 65.0 and sustained a downfall to 64.6, at 12pm.

EUR/USD Technical View

Wednesday, August 22nd, 2007

Euro is now trading very close to a crowded area, full of support and resistance lines; a continuation of the south move will get the pair very close to the next support area around 1.3600/15..