Archive for October, 2008

US dollar rises against major currencies

Monday, October 13th, 2008

US dollar rose to a 1 year peak against major currencies, with investors hanging on to the currency in the midst of increasing fear of global slowdown.

Rush in risk aversion also assisted low yielding yen, as it’s pushed down new Zealand dollar, Australian dollar and euro to its lowest in two years. Times when risk appetite and global growth were increasing, yen was used to buy high yielding currencies in carry trade by investors.

According to analysts and experts, US investors were being driven to clear up or settle advantage in growing markets by vague global financial view. Senior currency strategist at Brown Brothers Harriman in New York, Win Thin, believes that the rise in US currency is a nothing new and is a continuation of the latest trend, with people trusting US market. He also added that with ability if US dollar to sustain global slowdown, someday, the trend will continue with money administrators getting back in United States.

USD index increased 80.375 DXY on ICE Futures Exchange that measures value of dollar against other six major currencies (the increase is the highest since last year). By the afternoon, trading was noted at a 0.2 percent of high with 80.175.

After trading at $1.3945, euro went down to $1.3882 . Comments from chairman of euro zone finance ministers added to the woes of euro, as Jean-Claude Juncker stated the currency being overrated.

US asset plan pushes dollar high against yen and euro

Monday, October 13th, 2008

On Friday, dollar went up against yen and euro following the boost from the reports about a consideration given by government of United States towards dealing with noxious bank assets. According to the news that boosted the greenback, government is thinking about a way to tackle bank assets sourcing the credit crisis.

In order to tackle the illiquid assets, Henry Paul (U.S. Treasury Secretary) and Ben Bernanke (Federal Reserve Chairman) plans to utilize the weekend for working on a comprehensive plan. These assets have been responsible for making Lehman Brothers file for economic failure, for destroying bank balance sheets and provoked the rescue of American International Group.

The plan possibly will involve fixing of a fund for purchasing distraught assets from the bank, similar to Resolution Trust Corporation. In late1980s, RTC was used for attacking bad debts from loan and saving crisis.

Head of foreign exchange strategy for Japan at Royal Bank of Scotland, Masafumi Yamamoto, said that investors purchased greenback believing that the new steps will deal with crisis in financial system. He also added that the news sparked the purchase of dollar and assisted in calming down jittered investors about the risk assets.

The currency of United States was 1.2 percent high with 79.049. The index follows performance of United State’s currency against other six key currencies. After a two week high at $1.4543 on Thursday, Euro went 1.3 percent down at $1.4160 .

From a low of 105.40 yen, dollar went 1.6 percent up with 107.10 yen after it took a jump of more than a yen. With Asian stocks rising up calming the investor risk aversion, yen went down. Shares of Tokyo’s Nikkei rushed forward to 3 percent, whereas stocks in Hong Kong moved 6.5 percent and in South Korea it soared to 4.3 percent.

The purchase of yen had been stirred up by the loosening of carry trades, in which low yielding Japanese currency was utilized by players for funding buying of assets with higher returns. The euro moved up to 151.70 yen with a rise of 0.3 percent. While, yen came down to 1.7 percent and 1.1 percent against Australian dollar and sterling , respectively.

In spite of the announcement from Federal Reserve regarding the pumping up of billions of cash in the financial system, in coordination with central banks, many in the market still consider the situation unstable and unsteady.

The reluctance seen in bank towards lending due to stress in financial zones is due to the rescue of distressed insurer AIG and fall of Lehman Brothers, which also added to the jitters in banking zone.

According to a senior manager of the Forex sales group for a European bank, the optimism that is bracing stocks is build on unstable ground due to market still being surrounded with doubt regarding the specification about the crisis plan of united states. He also added that probably the hope will not survive more than a weekend.

Stock gains pushed US dollar up against yen

Monday, October 13th, 2008

On Tuesday, dollar moved up session high as strengthened by recovery in stock bazaar of US with the rise in technology shares. A gain in US equities was observed buoyed by $700-billion rescue scheme of government of United States.

Investors are hoping that the bailout package will help in soothing down the lending as well as strengthen the capital spending.

After trading half percent up at 105.94 on Monday, dollar rose session high at 105.99 against the yen at EBS.

Director of foreign exchange trading at Scotia Capital in Toronto, Steven Butler, said that according to the scenario it looks like the trading sector is being forced to buy US currency. He also said that while the rise in stocks is easing the market, it still doesn’t t mean much as the market is unstable.

Rupee moves up touching mark of 46 a dollar

Monday, October 13th, 2008

On Friday, rupee went past the mark of 46 per dollar maintained by increase in domestic stock market. The rise came even when many banks were forced to borrow from central bank worth Rs 83,510 crore via repo operations, due to tight cash situations.

For past few weeks, many banks have been borrowing huge cash over Rs 50,000 crore following tensed cash conditions. Reaction for rupee got boosted with calming down of short term forward contracts and dollar selling by investors. The day marked its end with 45.80/82 per dollar intensifying from a previous day’s close of 46.42/43.

A senior dealer at a private bank said that the strong selling of dollar was observed and it wasn’t forced by central bank.

The rise in indices throughout the Asia guided the recovery of rupee, with BSE sensex commencing the day ended with 726 points. On account of possible loosening of forward contracts and inflows of foreign investments, many foreign banks were found selling greenbacks.

On Tuesday, the Indian currency had touched a two year low against dollar at 46.99mark, as foreign banks were found buying greenback in spot markets and selling in overseas Non-Deliverable Forwards or NDF.

With firm cash situations and concern regarding inflation moving sentiments of investor, at the end of the day bond yields went down with its previous day’s close. The 8.24% bond maturing ion 2018 was found commencing unaltered from its previous day’s close, at 8.39%. According to a dealer, yields after touching 8.43%,

Meanwhile, bond yields ended the day flat with their previous close since tight cash conditions and inflationary concerns took a toll on the investor sentiment. Yields on the 10-year benchmark bond, the 8.24% bond maturing ion 2018, ended the day at 8.39%, unchanged from its previous close.

Risk aversion pushes up dollar and yen

Friday, October 10th, 2008

As Lehman Brothers filed for bankruptcy protection, US currency moved up as rising risk aversion. Yen too moved up broadly.

Analysts and experts believe that another factor that has been pushing dollar, after a sudden drop, is the fall in prices of crude oil. The crude oil prices have touched its seven month low at $100 per barrel.

Senior currency strategist at Bank of New York Mellon in New York, Michael Woolfolk, said that dollar is performing price action same as what it did before liquid crisis of last year’s August. He also added that now more and more people are looking at dollar as a refuge. Michael said that in the midst of market disturbance, which is happening right in financial markets of United States, and increasing uncertainty, US currency is pulling cash.

The largest causality of credit crisis across the globe, fling of bankruptcy by Lehman Brothers came after it financed large chancy assets with little funds and financial backup.
In the mean time, market was hit by news about the purchase of Merrill Lynch by Bank of America and the acceptance of stocks for cash loans by Federal Reserve.

ICE Futures index was recorded 0.6 percent up with 78.800, in the morning trade New York. Index, that assesses performance of greenback in opposition to other major currencies, was also noted at a high of 79.360.

Also considered as a safer option, Swiss franc was up in opposition to the dollar as it went down to 1.1203 francs with a 0.8 percent of fall. From it previous gains of $1.4479, euro went 0.2 percent down as it touched $1.4197. Japanese yen had its own jump, as dollar went down to 105.83 yen due to the increasing risk aversion, whereas euro was pushed 1.9 percent below as it was noted at 150.40 yen.

Foreign exchange strategist at ABN Amro Bank in Chicago, Dustin Reid, said that the whole situation is regarding risk aversion. He also included yen’s performance in the current state of market, which is going through increasing or rising risk aversion.

European market faced a jumping European credit spreads as the stocks went down by over 4 percent. High-yielding currencies like New Zealand and Australian dollar went down against Japanese yen and US currency.

The previous trade showed a sharp fall in US stocks. A number of central banks across the globe came forward to help control down the market, struggling with the rising uncertainty. These major banks included names like Bank of Japan, European Central Bank and Bank of England.

Speculations have been surrounding the market that on its Tuesday’s policy meeting, Federal Reserve may announce a cut in interest rates. There are 64 percent of chances of a rate fall in fed funds futures. Possibility is of a fall from 2.0 percent to 1.75 percent.

Ringgit shifts high versus USD

Friday, October 10th, 2008

On Friday, Ringgit closed with a soaring level against US currency. According to dealers, with dollar diminish against the euro, local currency recovered well from its losses and hence closed higher.

Just as European finance ministers geared up for discussion about measures for fighting high inflation as well as low growth within Europe, euro reclaimed ground against the currency of United States. From 3.4700/4750, Ringgit was noted above US dollar at 3.4500/4550.

From 2.4014/4057, Ringgit was lowered down at 2.4062/4130 against Singapore dollar, whereas, the currency was noted above yen at 3.2093/2143 from its previous value of 3.2430/2492.Against euro the shift in Ringgit was noted from 4.8295/8375 to 4.8686/8771 and against the British pound, it showed a fall from 6.0711/0816 to 6.1110/1212.

Ringgit elevates against greenback

Friday, October 10th, 2008

With a selling pressure mounted by Lehman Brothers decision of filing for economic failure, Ringgit has an elevated opening against US currency. After closing down at 3.4525/4575, Ringgit was being traded against US dollar with 3.4475/4505, at 9 in the morning.

According to a dealer, the fall of US currency is caused by concern mounted by weakening of credit crisis across the globe, which includes struggle by American International Group and the purchase of Merrill Lynch by Bank of America.

Alan Greenspan, Former US Federal Reserve Chairman, said that it is likely that the crisis in financial market caused by fall of US subprime-mortgage market will lead to collapse of more such companies.

In morning, Ringgit was being traded at mix value with other major currencies. After a close of 2.4096/4153 on Monday, Ringgit fell against Singapore dollar as it touched 2.4103/4141. While in opposition to Japanese yen, it moved down from a previous value of 3.2988/3051 to 3.3038/3076

On the other hand, the currency witnessed an elevation against euro and pound sterling, as it went from 4.9260/9345 to 4.9020/9076 against euro and 6.2035/2135 to 6.1759/1830 against pound sterling.

Reserve Bank of Australia to expand their money market process

Friday, October 10th, 2008

It was said on Wednesday that as a part of their domestic operations the RBA (Reserve Bank of Australia) will be providing to take short-term deposits both from financial organizations and banks. Some of the analysts were of the view that this was intended at cleaning up of the extra overnight funds that the banks are having as they have stopped lending to each other and has deepened the hatred.

That has directed to a spike in term-money rates, particularly financial necessities for a time period of three months. Mr. Adam Carr who is a senior economist at ICAP gave a statement that Reserve Bank of Australia is making an effort to clear the extra cash to make sure that the overnight funds don’t fall short below the cash rate. Simultaneously there is an effort to make sure that the funding squeeze that is happening for about three months normalizes.

According to the announcement, American Federal Reserve will be opening all new foreign currency swap lines along with the central banks of Sweden, Norway, Australia, and Denmark. According to the Fed, the currency swap lines costing $30 billion each with the three banks were intended to normalize the money markets pressure. The Reserve Bank of Australia which maintained a distance from the coordinated approach by the international central banks to normalize the issue of short-term money markets was of the view that the new provisions for deposit taking will make an addition to already existing repurchase agreements.

It is evident that the first of these auctions for the deposit of fourteen days will take place on September 29th on Monday for making a settlement on September 30th Tuesday. The payable rate of interest on these deposits will be set as a margin to the cash rate of Reserve Bank of Australia and that margin probably might be negative one. Going according to Reserve Bank of Australia daily money market process acknowledge, bills of the banks, asset-backed commercial documents, government securities, certificate for the deposits etc.

As compared to the approximate cash shortage of A$611 million on Wednesday it managed to add A$814 million in repurchase agreements. All new insertion should help in making a balance with the commercial banks’ along with Reserve Bank of Australia approximately a record A$6.8 billion. In the previous week the central bank has been very kind with liquidity along with injecting big amount of money to normalize the universal credit issue. Off a seven week high of 7.48 percent on Tuesday, three month bank bill swaps rates were 7.44 percent but it still managed to stay over overnight cash rate of 7.0 percent.

Reserve Bank of Australia puts lesser funds with the relaxation of rates

Friday, October 10th, 2008

On Tuesday, the money market showed some relaxation after a short time credit disorder, The Reserve Bank of Australia put lesser amount of funds than actually required. Going according to the regular money market process The Reserve Bank of Australia successfully added around A$3.715 billion in repurchase agreement as compared to the approximately cash shortage of A$3.832 billion. Now, this will maintain the commercial banks’ balances with Reserve Bank of Australia around A$6.5 billion and will also assist in cutting down rates for money market in the near future.

In the past week the central bank has been real kind with the liquidity, injecting heavy amount of money in order to reduce the problem of global credit. In Australia with the banks refusing to lend to each other in the middle of financial market problem, Interbank rates shoot up with the international counterparts. The rates for Australian money market has relaxed showing a sign of relaxation of the rates of overnight American dollar Libor.

On Tuesday, the rates for three month bank bill swap ticked down from the seven week high of 7.48 percent to 7.44 percent. But it is still quite high of the overnight cash rate of 7.0 percent. The dip witnessed the spreads involving three month bill price and three month overnight index swap rates ease. At the end of the last week, the swap which rushed to a record 94 basis points, it relaxed to approximately 87 basis points but in the beginning of the month it was quite high with 32 basis points.

The banks bill and OIS spreads shows an enthusiasm from the bank’s side that they are prepared to lend to each other along with wider spread that proposes hard conditions for lending. The investors across the world are looking at Interbank lending market like an indicator for broader market recovery. It is evident that the more time the rates of Interbank stay high, the more they will be working hard to stretch up the costs for both the consumer lending and cost of the trade.

The central banks are making their best efforts to put large amount of money in the banking system to keep away the impact of the international credit crisis. It is in the last week that the Federal Reserve injected heavy amount of funds and on the other hand European Central Bank organized a dollar auction on Monday, assigning $40 billion in overnight money at 3.24 percent which was lower from Friday’s 3.49 percent and Thursday’s 3 percent. This was followed by a move by Bank of Japan on Wednesday, where the bank is offering their first ever funding of the dollar.

Prior to an industry report minute changes registered in British Pound against Dollar

Tuesday, October 7th, 2008

British pound didn’t registered any major changes against the dollar prior to an industrial report that will be presenting that the mortgage sanctions witnessed an increase or not in Britain for the month of August. Yesterday, according to a statement given by Rightmove Plc which is Britain’s foremost website of property, the prices of the house came down a fourth month low in September. From the month of August the average asking price for a house also came down one percent. According to the British Banker’s Association, it is evident that 22,447 loans were given for the purchase of house in the month of July, which is down 64 percent earlier in the year.

According to Mr. Lee Hardman who is a currency strategist in London at Bank of Tokyo-Mitsubishi Ltd, the numbers might be a verifying factor for the low mortgage financing in Britain. The economic basics for the pounds are still very negative. At around 8:10 p.m. in London, the pound did a trading from yesterdays $1.8543 against euro at $1.8509. The currency of Britain snapped a three day drop, rising to 79.47 pence, from 79.67 pence.

Mr. Spencer Dale who is Chief Economist at Bank of England last week said that, in the future months the market of property probably will get weaker that could lead to problems for many families. With the downfall of the home prices and the issue of financial market reduced the company’s value, HBOS Plc decided to takeover Lloyds TSB Group Plc.

Yesterday in a statement given by Deputy Governor of Bank of England, Mr. John Gieve said that the news of inflation anticipation in Britain has been encouraging and the makers of the policies should concentrate on the deflationary affect on the credit crunch. According to the remarks it gives a silent message that Mr. John might favor the low rate of interest. Mr. David Blanchflower was the one from nine of the policy makers who voted for the rate cut in the month of September.

On September 4th the policy makers of Bank of England kept the rate of interest at five percent as they have evaluated the risk of increasing price rises along with the risk that increasing losses in the banks will push Europe’s largest economy to its first recession since the year 1991.

The yield on the two year note also registered a downfall of two basis points to 4.45 percent. The Debt Management Office of Britain is planning to auction 450 million pounds of 1.24 percent bonds those are inflations protected, maturing in 2055 today.