Currencies

[Muthukali]

Euro Bailout Bid Gets Vote of No-Confidence as Markets Drop

European policy makers received another vote of no-confidence in their efforts to stem economic turmoil as the euro fell to its lowest in more than two years following final approval for a bailout of Spanish banks.

The decision by euro finance chiefs failed to offset trouble elsewhere. Spanish Prime Minister Mariano Rajoy forecast a second year of recession and Valencia became the first state to say it would seek a rescue from the central government. Italian Prime Minister Mario Monti blamed unrest in Spain for surging borrowing costs, and an ally of German Chancellor Angela Merkel endorsed the prospect of Greece exiting the euro.

“We’re looking at a situation when people are realizing we’re at a point of debt restructuring and repudiation,” Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, said in an interview yesterday. “It’s cold-hearted reality. The great blag and bluff of the euro zone has always managed to kick the can down the road, but it is no longer a viable strategy. We’re getting to a crunch point.”

The market declines came exactly a year after European leaders pledged a second bailout for Greece and empowered their rescue fund to aid banks and extend credit lines to safeguard Spain and Italy. Those efforts have fallen short, and Greece is now fighting for more help after the biggest debt restructuring in history. Spain is meanwhile paying record costs to borrow.

Markets Slide
The euro fell 1 percent to $1.216 at 7:59 p.m. in Brussels yesterday. The Euro Stoxx 50 Index slid 2.8 percent, led by Italian banks. The risk premium to lend to Spain instead of Germany rose to the highest on record. In Italy, that spread climbed to the most since January. Investors who pay to lend to Germany for two years drove those securities higher.

“It looks like a lack of willingness of traders to hold positions over weekends,” said Tom Russo, a partner at Lancaster, Pennsylvania-based Gardner Russo & Gardner, which oversees $5 billion including U.S.-traded shares of Nestle SA (NESN) and Heineken NV. (HEIA) “Because you just never know. You have two days’ worth of risk and you can’t trade. Why not just de-risk your portfolio for the weekend?”

Even with euro-area finance ministers signing off on providing aid of as much as 100 billion euros ($122 billion) to Spanish banks, the officials continue to squabble over whether the burden of the emergency loans will be assumed by the Spanish government or the banks.

Greek Redemption
Next, attention turns to the concerns looming over Greece. The country owes a 3.1 billion-euro bond payment, mostly to the European Central Bank, in August and the so-called troika of international creditors is due to arrive in Athens next week to begin quantifying how far off bailout targets Greece is.

While European officials have said the bond redemption won’t be an issue for cash-strapped Greece, they have declined to specify how they’ll ensure the payment gets made.

“Over the summer, we’re not going to see much progress and markets remain nervous,” said John Stopford, head of fixed income at Investec Asset Management in London, which oversees $98 billion. “The crisis is happening. The euro is disintegrating from the inside with a lack of cross-border lending.”

Monti, speaking in Rome, said the surge in his country’s borrowing costs resulted from anti-austerity demonstrations in Spain that are adding to investor concerns about European debt.

The difference between the yield on 10-year Italian debt and similar maturity German bunds rose 22 basis points to 500 basis points yesterday. Italian spreads haven’t ended a trading day above that level since Jan. 11.

Contagion Concerns
“It’s difficult to say to what extent the contagion comes or came from Greece, or from Portugal, or from Ireland, or from the situation of the Spanish banks, or of the one apparently emerging from the streets and the squares of Madrid,” Monti told reporters. “Obviously, without the problems in those countries, Italy’s interest rates would be lower.”

The ongoing crisis will force the ECB to cut its benchmark 0.75 percent interest rate in October and also reduce the rate it pays on overnight bank deposits to below zero, Greg Fuzesi, an economist at JPMorgan Chase & Co., said in a report.

The aim would be to reduce funding costs for banks in the periphery reliant on ECB support, pulling down market borrowing costs and forcing investors to buy riskier-assets, he said.

In Spain, Rajoy is fending off international investors, domestic protesters and his own states as the slump in the fourth-biggest euro economy deepens. The Ibex stock index tumbled 5.8 percent, the biggest daily drop since May 2010. Ten- year yields rose to 7.28 percent, driving the gap with German bonds to a euro-era record of 610 basis points.

Economy Shrinks
Gross domestic product will fall 0.5 percent in 2013 instead of rising 0.2 percent as the government predicted April 27, Budget Minister Cristobal Montoro said after the Cabinet met in Madrid. The government will spend 9.1 billion euros more paying interest than in 2012, he said.

Meantime, Valencia, Spain’s second-most indebted state, said it would tap an 18 billion-euro emergency fund Rajoy set up last week for bailing out regions.

“This is a region which we’ve known for some time, which has been widely known for some time, has been facing difficulties,” European Union spokesman Simon O’Connor said in a Bloomberg Television interview. “The financial assistance comes with very strict conditionality which in many ways mirrors the system that we’ve put in place for the euro zone.”

 

[Muthukali]

Kiwi Gains as RBNZ Holds Rate, Amid ESM Bank-License Bets

By Mariko Ishikawa - Jul 26, 2012 12:12 PM GMT+0800

The New Zealand dollar rose against all except one of its 16 major counterparts after Reserve Bank Governor Alan Bollard left benchmark interest rates on hold and said the economy should grow “modestly.”

The Australian and New Zealand dollars held gains against the greenback ahead of U.S. data forecast to show growth slowed in the world’s largest economy. Demand for the South Pacific nations’ currencies was supported after Ewald Nowotny, a European Central Bank council member, said there were arguments in favor of giving the region’s rescue fund a banking license.

“The RBNZ did say they were quite confident about the outlook for New Zealand’s economy,” said Peter Dragicevich, a Sydney-based foreign-exchange economist at Commonwealth Bank of Australia. (CBA) “We still expect the next move by the RBNZ to be a hike. We’ve seen the New Zealand dollar supported by that.”

New Zealand’s dollar, nicknamed the kiwi, rose 0.3 percent to 79.10 U.S. cents as of 1:51 p.m. in Sydney from yesterday, when it gained 0.6 percent. It added 0.2 percent to 61.79 yen from yesterday, when it gained 0.6 percent.

Australia’s dollar fetched $1.0313 from $1.0307 yesterday, when it appreciated as much as 1.1 percent to $1.0337, the largest intraday gain since June 29. The so-called Aussie was unchanged at 80.57 yen from yesterday, when it advanced 0.8 percent.

New Zealand’s central bank left the official cash rate unchanged at 2.5 percent for an 11th-straight time at a meeting today. The decision was predicted by all 16 economists surveyed by Bloomberg News.

‘Grow Modestly’
The nation’s economy should “grow modestly over the next few years,” Bollard said, with the rebuilding of earthquake-hit Christchurch expected to boost the construction industry. Fiscal consolidation and a strong exchange rate were offsetting that by constraining demand, he said.

The country’s two-year swap rate, a fixed payment made to receive floating rates, added four basis points, or 0.04 percentage point, to 2.6 percent.

Investor demand for riskier assets was buoyed after ECB council member Nowotny said there were arguments in favor of giving the European Stability Mechanism a banking license, easing concern its 500 billion-euro ($607 billion) cash reserves won’t be enough if Italy or Spain require assistance as the region’s debt crisis deepens.

‘Unlimited Firepower’
A banking license would “theoretically give the ESM unlimited firepower to fight the crisis, so we saw risk markets benefit from that,” said CBA’s Dragicevich. “We have seen the Aussie drift higher and it should stay above $1.03 today.”

Australian government bonds declined as Asian stocks rose. The MSCI Asia Pacific Index (MXAP) of stocks advanced 0.4 percent, capping four days of decline. The yield on Australia’s 10-year security rose two basis points to 2.82 percent.

In the U.S., orders for durable goods probably rose 0.3 percent in June after a 1.3 percent gain in May, according to economist estimates in a Bloomberg survey taken before the Commerce Department releases the figures today.

Data tomorrow is forecast to show gross U.S. domestic product expanded at an annualized 1.4 percent in the second quarter, the slowest pace in a year, leading to speculation the Federal Reserve will act to boost growth.

“Expectations for further unorthodoxy from the Fed have increased,” Citigroup Inc.’s Group of 10 currency strategy team led by Steven Englander, wrote in a note to clients today. “GDP on Friday may further stoke expectation.”

The Fed released its Beige Book business survey last week, saying the U.S. economy expanded at a “modest to moderate” pace. It gives central bankers anecdotal evidence on the economy before a two-day policy meeting starts on July 31.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

Dollar Up Versus Yen as Growth Slows Less Than Forecast

The euro strengthened against the dollar for the first week this month as German Chancellor Angela Merkel and French President Francois Hollande said they’ll do “everything” necessary to protect the single currency.

The greenback gained today versus the yen after U.S. economic growth slowed less in the second quarter than forecast, damping bets the Federal Reserve will take more stimulus action next week. European Central Bank President Mario Draghi will hold talks with Bundesbank President Jens Weidmann on ECB bond purchases, two central-bank officials said. The euro pared gains as investors speculated the cost of preserving it may weigh it down. The Mexican peso and New Zealand dollar climbed today.

“Anything that appears to provide some form of a near-term solution to the market’s fears around Europe should boost the euro,” Shahab Jalinoos, a Stamford, Connecticut-based senior currency strategist at UBS AG, said in a telephone interview.

The euro strengthened 1.4 percent this week, the most since February, to $1.2322. It rose as much as 0.9 percent today to $1.2390, the highest level since July 6, before trimming its gain to 0.3 percent at 5 p.m. New York time. The euro was poised for a loss of 2.7 percent for July.

The dollar was little changed against the yen on the week at 78.46. It rose 0.3 percent today. Europe’s shared currency climbed 1.3 percent against the yen on the week and appreciated 0.6 percent on the day to 96.67.

Biggest Winner

The Mexican peso was the biggest winner among major currencies, rising on optimism for exports to the U.S., its biggest trade partner, after GDP growth exceeded the forecast. The currency strengthened 1.3 percent to 13.2393 per dollar.

New Zealand’s dollar advanced as risk appetite improved and U.S. stocks and commodities rose on speculation the ECB will take steps to ease Europe’s debt crisis. The Standard & Poor’s 500 Index (SPX) rallied 1.9 percent, and the S&P GSCI Index of raw materials increased 1 percent.

The kiwi, as New Zealand’s currency is nicknamed, gained 1.1 percent to 81.06 U.S. cents, the highest level since May 3, before trading at 80.97 cents, up 1 percent.

The euro pared gains today against the dollar amid speculation that the cost of further moves to protect the currency will weaken it.
‘Severe Implications’

“The realization became for the market that if we are going this route of another round of massive bond buying, that is going to have some pretty severe implications for the ECB’s balance sheet,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank (TD)’s TD Securities unit, said in a telephone interview. “The initial movement perhaps reflected a more risk- on and dollar-negative bias, but ultimately we may get back to this weighing on the euro from a longer-term point of view.”

The 17-nation currency initially climbed after Merkel and Hollande said their countries are “bound by the deepest duty” to keep the euro area intact.

Draghi and Weidmann will meet in coming days in an effort to overcome the biggest stumbling block to a new raft of measures to stem the region’s debt crisis, including bond purchases, two central-bank officials said. They requested anonymity because the talks are private.

The ECB chief’s proposal involves Europe’s rescue funds buying government bonds on the primary market, flanked by ECB purchases on the secondary market to ensure transmission of its record low interest rates, the officials said. Further central- bank rate cuts and long-term loans to banks are also up for discussion, one of the officials said. Draghi said yesterday policy makers will do whatever is needed to preserve the euro.

People Wondering

“This is a lot to promise in a short amount of time, and people are wondering if Draghi is overreaching,” said Carl Forcheski, a director on the corporate currency sales desk at Societe Generale SA in New York. “The market had come up a lot with short covering, and when people started to think about the news reports the air was let out of the balloon.” Short covering is buying a security to square earlier bets that it would fall.

The ECB is scheduled to meet next week. The euro has slid this year versus 14 of its 16 most-traded counterparts on concern the region’s debt crisis was worsening.

U.S. gross domestic product, the value of all goods and services produced, rose at a 1.5 percent annual rate after a revised 2 percent gain in the prior quarter, Commerce Department figures showed in Washington. The median forecast in a Bloomberg News survey was an increase of 1.4 percent.

Treasury Yields

Japan’s currency weakened versus the dollar as U.S. Treasuries fell after the GDP data, pushing two-year note yields up as much as three basis points, or 0.03 percentage point, to 0.26 percent. The extra yield investors get for investing in U.S. two-year debt versus comparable Japanese government bonds increased to the most in two weeks, enhancing dollar-denominated assets’ appeal. The yield gap was 14 basis points. It was 10 basis points on July 20, the least since February.

“It’s a yield-spread story,” Dan Dorrow, head of research in Stamford, Connecticut, at Faros Trading LLC, said in a phone interview. “Dollar-yen is one of the most sensitive currencies to yield differentials. That’s what pushing up the dollar.”

Credit Suisse AG cut forecasts for the euro, citing deterioration in the Spanish sovereign market and weak economic data. It said in a note the currency will trade at $1.17 in three months and $1.19 in 12 months, versus a prior estimate of $1.19 and $1.21. The euro will trade at 76 U.K. pence in three months, versus an earlier projection of 79 pence, the firm said.

Spanish Yields

Spanish government bond yields rose to 7.75 percent on July 25, a euro-era record, before dropping to 6.74 percent today. A composite index of euro-area purchasing managers in services and manufacturing was unchanged at 46.4 in July, London-based Markit Economics reported on July 24. A reading below 50 indicates contraction.

The Fed opens a two-day meeting on July 31. While policy makers refrained from introducing a third round of asset purchases at their session last month, Fed Chairman Ben S. Bernanke indicated that it’s an option.

The U.S. central bank purchased $2.3 trillion in securities in two rounds of a strategy called quantitative easing from 2008 to 2011 to spur the economic recovery.

To contact the reporter on this story: Joseph Ciolli in New York at [email protected]

To contact the editor responsible for this story: Robert Burgess at [email protected]

 

[Muthukali]

Aussie Touches 4-Month High After Building Data

Australia’s dollar touched its highest level in four months after a report today showed declines in the nation’s building approvals were less than economists expected.

The so-called Aussie gained versus most of its major counterparts on prospects the Reserve Bank of Australia will refrain from lowering borrowing costs at a meeting next week. The Australian and New Zealand currencies are set to close out a second monthly gain against the greenback as the Federal Reserve begins its two-day policy meeting today amid speculation it will consider expanding monetary stimulus.

“The Australian dollar is being supported because of the less-than-expected fall in building approvals,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “The RBA is still quite cautious about what’s happening in the euro zone, but on the other hand, they’re still saying the domestic economy is still pretty resilient.”

The Australian dollar climbed 0.2 percent to $1.0520 as of 12:03 p.m. in Sydney after earlier touching $1.0524, the strongest since March 27. The Aussie rose 0.1 percent to 82.22 yen. New Zealand’s currency added 0.2 percent to 81.05 U.S. cents after reaching 81.13 cents yesterday, the highest since May 2. The so-called kiwi added 0.2 percent to 63.34g yen.

Australia’s 10-year government bond yield dropped three basis points, or 0.03 percentage point, to 3.096 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.77 percent.

To contact the reporter on this story: Kristine Aquino in Singapore at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

Euro Weakens Versus Yen, Dollar as Draghi Disappoints on Policy

The euro weakened against the yen and the dollar as investors judged European Central Bank President Mario Draghi failed to announce sufficient new measures to contain the region’s debt crisis.

The 17-nation currency earlier rose to a four-week high against the greenback after the ECB kept its benchmark interest rate at 0.75 percent at a policy meeting today, in line with the forecast of 51 of 55 analysts surveyed by Bloomberg News. Four predicted a cut to 0.5 percent. The pound rose against the euro as the Bank of England kept its bond-buying program and benchmark rate on hold.

“There was a lot of talk but no actions, there was nothing of substance, no silver bullet,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “The market was looking for more. This is a straight euro sell in my mind.”

The euro dropped 0.7 percent to 95.27 yen at 2:01 p.m. in London after rising as much as 1.1 percent. The single currency declined 0.2 percent to $1.2197. It earlier climbed to $1.2405 the highest level since July 5. The dollar dropped 0.3 percent to 78.18 yen.

Draghi pledged last week to “do whatever it takes” to preserve the common currency, stoking speculation that policy makers will intervene in bond markets to support ailing euro- area economies.

The pound rose against the euro as the Bank of England announced its decision. The Monetary Policy Committee maintained its bond-buying program at 375 billion pounds and left interest rates at a record-low 0.5 percent, in line with the median forecasts in Bloomberg surveys.

Sterling gained 0.3 percent to 78.45 pence per euro. The U.K. currency was little changed at $1.5536.

The euro has depreciated 4.7 percent in the past six months, the worst performance of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen gained 0.7 percent and the dollar strengthened 3.6 percent.

To contact the reporters on this story: David Goodman in London at [email protected]

To contact the editor responsible for this story: Daniel Tilles at [email protected]

 

[Muthukali]

Pound May Fall to Two-Year Low Versus Dollar: Technical Analysis

The pound may weaken more than 3 percent to a two-year low against the dollar after it failed to strengthen above a key level of so-called resistance, Commerzbank AG said, citing trading patterns.

Sterling’s inability to break through its 200-day moving average means it is poised to decline over the next one to three months,Karen Jones, head of fixed-income, commodity and currency technical analysis, wrote today in a note to clients. The U.K. currency may fall as low as $1.50, she said.

Repeated failure at the 200-day moving average “finally took its toll and the market has sold off,” London-based Jones wrote. So-called Fibonacci analysis also signaled the pound was poised to decline, she said.

The U.K. currency was little changed at $1.5551 as of 11:18 a.m. in London. The last time the pound declined below $1.50 was in July 2010.

Sterling may find so-called support at $1.5458, which represents a short-term uptrend drawn from its June 1 low of $1.5269, Jones wrote. The currency may also find support at its July low of $1.5393, she said.

Support refers to an area on a price graph where analysts anticipate orders to buy a security. The stronger the support, the more selling is needed to drop below that level. Resistance is where they may be sell orders.

Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, currency or index.

To contact the reporter on this story: Neal Armstrong in London at [email protected]

To contact the editor responsible for this story: Daniel Tilles at [email protected]

 

[Muthukali]

Dollar Index May Extend Gains After Breakout: Technical Analysis

The Dollar Index may post further gains after a “bullish breakout” above a resistance level this week, Royal Bank of Canada said, citing trading patterns.

The index, which IntercontinentalExchange Inc. (ICE) uses to track the greenback against the currencies of six U.S. trading partners, surpassed “congestive” resistance at 83.01 on Aug. 1, according to George Davis, chief technical analyst for fixed- income and currency strategy in Toronto at the bank’s RBC Dominion Securities unit. The gauge climbed to a one-week high yesterday, data compiled by Bloomberg show.

The advance is “underpinning topside momentum for the Dollar Index,” Davis wrote in a report yesterday. “We note that 83.63 serves as the next resistance target to watch for this development.” Resistance is an area on a chart where orders to sell may be clustered.

The gauge was little changed from yesterday at 83.33 as of 9:55 a.m. in Tokyo. It yesterday touched 83.51, the strongest since July 26. The Dollar Index is set for a 0.8 percent advance this week, the most since the period ended July 6.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: Kristine Aquino in Singapore at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

Dollar Gains Versus Yen as U.S. Payrolls Increase Beats Forecast

The dollar rose against the yen after U.S. employers added more jobs in July than forecast, damping expectations the Federal Reserve would restart a third round of debt purchases under quantitative easing.

The greenback’s gains were limited as the unemployment rate rose and job gains in the previous month were revised lower. Members of German Chancellor Angela Merkel’s coalition parties signaled they won’t stand in the way of European Central Bank President Mario Draghi’s plan to buy government bonds. A report today is forecast to show U.S. service industries grew at the slowest pace since 2010.

“The reaction speaks to diminished QE3 odds,” Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, said in a telephone interview. “Printing north of 150,000 ever so slightly reduces the odds of another round of QE.”

The dollar appreciated 0.6 percent to 78.68 yen at 8:59 a.m. New York time. The U.S. currency fell 0.6 percent to $1.2256 per euro.

Payrolls increased 163,000 following a revised 64,000 rise in June that was less than initially reported, Labor Department figures showed today in Washington. The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Unemployment rose to 8.3 percent, from 8.2 percent.

Dollar Index
The Dollar Index, which International Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners, fell 0.5 percent. It gained 0.7 percent on July 6, when the last payrolls report showed the number of new jobs in June fell short of the 100,000 forecast in a Bloomberg survey. The gauge rose 0.1 percent on Oct. 7, when the Labor Department said employers added 103,000 positions in September, versus a Bloomberg forecast of 60,000.

The euro gained earlier versus the greenback after retail sales in the currency region unexpectedly increased in June. New Zealand’s dollar rose after Standard & Poor’s affirmed the nation’s credit rating and said the outlook was stable.

The U.S. currency has advanced versus the euro this year as investors sought safety amid speculation Europe’s financial turmoil was worsening and U.S. growth was slowing. The greenback rose 3 percent in July against the common currency.

The Fed said Aug. 1 after a policy meeting it “will provide additional accommodation as needed” to spur growth and employment, while it refrained from expanding monetary easing this month. It said it will “closely monitor incoming information on economic and financial developments.”

Quantitative Easing
The central bank bought $2.3 trillion of assets in two rounds of a stimulus strategy called quantitative easing between December 2008 and June 2011. It has kept its benchmark interest rate at zero to 0.25 percent since December 2008 and is swapping $667 billion in short-term debt in its holdings for longer-term securities through year-end to cap borrowing costs. Traders call the program Operation Twist after a similar effort in the 1960s.

ECB officials are working on a plan to buy bonds and details will be released in coming weeks, Draghi told reporters yesterday after a policy meeting. The bank kept its key interest rate at a record low 0.75 percent.

The Institute for Supply Management’s non-manufacturing index, a gauge of U.S. service industries, slipped to 52 in July, economists in a Bloomberg survey forecast before the Tempe, Arizona-based group reports the data at 10 a.m. It would be the lowest level since January 2010’s 50.5, after falling to 52.1 in June. Fifty is the dividing line between expansion and contraction.

To contact the reporter on this story: Joseph Ciolli in New York at [email protected]

To contact the editor responsible for this story:

 

[Muthukali]

Yen Stays Stronger Before BOJ Meeting; Aussie Near 4-Month

The yen remained stronger versus the dollar as a rally in equities worldwide spurred speculation the Bank of Japan (8301) will refrain from additional monetary easing at a policy meeting that starts tomorrow.

Demand for the euro was supported after German Chancellor Angela Merkel’s government backed the European Central Bank’s bond-buying plan as Italian Prime Minister Mario Monti called for more urgency in efforts to lower borrowing costs. The Australian dollar rose to the highest in more than four months after the Reserve Bank kept interest rates unchanged at 3.5 percent at a policy meeting today.

“The Bank of Japan looks set to keep policy unchanged,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “Without any impediment from the Bank of Japan, we’ll see more of the same, that gradual grind lower in the next few sessions and coming months for dollar-yen.”

The yen was little changed at 78.26 per dollar at 1:57 p.m. in Tokyo from yesterday, when it rose 0.3 percent. The Japanese currency was at 96.99 per euro from 97.03. The 17-nation euro bought $1.2391 from $1.2401 yesterday, when it touched $1.2444, the most since July 5. Australia’s dollar reached $1.0603, the highest since March 20, before trading at $1.0577, 0.1 percent above yesterday’s close.

The MSCI Asia Pacific Index (MXAP) of shares added 0.4 percent, and Japan’s Nikkei 225 Stock Average gained 0.6 percent. That followed a 0.7 percent advance in MSCI’s World Index yesterday.

BOJ Policy
The BOJ probably won’t change its view that Japan’s economy is picking up moderately, the Nikkei newspaper reported, without saying where it got the information. All 17 economists in a Bloomberg survey forecast the central bank will keep its benchmark overnight target rate at 0.1 percent at this week’s two-day meeting.

This will be the first central bank meeting with new board members Takahide Kiuchi and Takehiro Sato, who have both signaled willingness to consider fresh forms of easing.

The two “are known to be sympathetic to more unconventional easing, but like the RBA, a ‘wait and see’ stance by the BOJ is more likely now,” according to a note dated yesterday by Brown Brothers Harriman & Co. analysts, including New York-based Marc Chandler, global head of currency strategy.

Finance Minister Jun Azumi told reporters in Tokyo today that Japan will extend a facility to counter yen gains through fiscal year 2012. The International Monetary Fund said last week the currency is “moderately overvalued.”

Intervention Risks
Government data in February showed that Japan last year carried out so-called stealth intervention, where officials refrain from confirming yen sales on the day they were executed. The nation sold 1.02 trillion yen ($13 billion) against the dollar on the first four days of November in addition to 8.07 trillion yen on Oct. 31, the data showed.

“There are some risks of currency intervention if the yen strengthens beyond 78 per dollar, and that’s keeping the currency on the back foot,” said Daisaku Ueno, a senior currency and debt strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “The government and the BOJ carried out stealth intervention last year around that level, and global opposition against currency intervention has eased somewhat.”

The yen has appreciated 3.7 percent in the past three months among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has fallen 4.3 percent over the same period, while the dollar has gained 1.3 percent.

German Backing
Demand for the euro was supported after Merkel’s government backed ECB President Mario Draghi’s proposals on bond buying to help bring down borrowing costs in Spain and Italy. Germany is “not worried” by Draghi’s announcement of Aug. 2, deputy Merkel spokesman Georg Streiter told reporters at a regular press briefing in Berlin yesterday, when asked whether the government is concerned that ECB independence might be compromised.

Draghi outlined a plan last week under which the ECB may buy debt of struggling euro-bloc countries in tandem with the euro area’s bailout fund, while saying the details still need to be worked out over the coming weeks.

“The fact that the German spokesperson made an official statement for the first time about the country’s backing of ECB’s bond purchases is supporting the euro,” said Ken Takahashi, assistant vice president of global markets at Sumitomo Mitsui Trust Bank Ltd. in New York. “The market is reassessing the ECB’s decision from last week and taking a more positive view on it.”

Italy’s Monti said that disagreements within the euro area are detracting from the policy response to the debt crisis, according to an interview with Germany’s Der Spiegel magazine published Aug. 5. He said he backed the ECB’s willingness to address “severe malfunctioning” in the government bond market.

RBA Decision
The Australian dollar remained higher against most major peers after the Reserve Bank of Australia left interest rates unchanged, in line with estimates of 26 out of 27 economists in a Bloomberg survey.

“In Australia, most indicators suggest growth close to trend overall,” RBA Governor Glenn Stevens said in a statement today. Inflation “is expected to be consistent with the target over the next one to two years.”

-- With reporting by Kazumi Miura in Tokyo, Mika Otsuka in New York. Editors: Naoto Hosoda, Garfield Reynolds

To contact the reporters on this story: Mariko Ishikawa in Tokyo at [email protected]; Masaki Kondo in Singapore at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

Aussie Near 4-Month High On Domestic Economy Optimism

Australia’s dollar was 0.5 percent from its highest level in more than four months after data showed home-loan approvals rose in June by the most this year, adding to signs of improvement in the economy.

New Zealand’s so-called kiwi dollar declined against most of its major peers for a second day after Prime Minister John Key said there may be scope for the central bank to lower borrowing costs. Demand for both South Pacific nations’ currencies was tempered ahead of data that may show weakness in German industrial production and Chinese retail sales, adding to concern the global economy is slowing.

“The domestic story is positive” in Australia, said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “There are certainly reasons to be concerned about the global situation. But in general right now, it doesn’t seem to be a very clever time to be trying to short the Aussie dollar.” A short position is a bet an asset may decline.

The Australian dollar was at $1.0552 as of 12:04 p.m. in Sydney from $1.0554 yesterday, when it reached $1.0604, the strongest since March 20. It bought 82.89 yen from 82.96 in New York, when it touched 83.23, the highest level since May 2. The kiwi lost 0.1 percent to 81.52 U.S. cents after sliding 0.5 percent yesterday to 81.60, the biggest one-day drop since July 23. It declined 0.2 percent to 64.02 yen.

Australian Economy
The number of loans granted to build or buy houses and apartments in Australia climbed 1.3 percent in June after a revised 0.9 percent drop in the the previous month, the Bureau of Statistics said today. That’s the biggest gain since December and compares with economist forecasts for a 2 percent advance.

Figures tomorrow may show the number of people employed increased by 10,000 last month after dropping 27,000 in June, according to forecasts in a separate poll. The jobless rate probably climbed to 5.3 percent from 5.2 percent.

The Aussie has advanced 5.6 percent in the past three months, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi was the second-biggest gainer, rising 4.8 percent in the same period.

The MSCI Asia Pacific Index (MXAP) of stocks rose 0.9 percent.

The New Zealand dollar weakened after Prime Minister Key signaled yesterday that the onus is on the nation’s central bank and private investors to aid economic growth as he seeks to eliminate a budget deficit.

“The government’s preferred position is not to be stimulatory,” he said in an interview in Christchurch. “We want to get back to surplus.”

German industrial production may have fallen 0.8 percent in June after rising 1.6 percent in the previous month, according to another survey before figures due today. A report tomorrow may show retail sales growth in China decelerated to 13.5 percent in July from a year earlier from 13.7 percent in June. That would be the slowest pace since February last year.

To contact the reporters on this story: Kristine Aquino in Singapore at [email protected]; Sharon Chen in Singapore at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

Yen Drops on BOJ Stimulus Signs, Asian Stock Gains

The yen weakened versus all 16 major counterparts as Asian shares rallied and minutes of the Bank of Japan (8301)’s July meeting signaled policy members are considering ways to expand stimulus.

Japan’s currency slid for a second day against the euro as equities gains curbed demand for haven assets. Demand for Europe’s shared currency was damped before data forecast to show the euro-area economy contracted in the second quarter as French gross domestic product shrank and Germany’s expansion slowed. New Zealand’s dollar rose after a government report showed retail sales increased more than economists forecast.

“There’s going to be no change to the BOJ’s stance so long as they’re short of their inflation goal,” Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotiabank, a unit of Bank of Nova Scotia (BNS), said in reference to the central bank’s 1 percent price target. Sentiment today “is looking a little bit better, so I think that’s pretty much consistent with a little bit of softening in the yen.”

The yen lost 0.1 percent to 78.43 per dollar as of 11:34 a.m. in Tokyo. It fell 0.2 percent to 96.80 per euro. The 17- nation currency was at $1.2343 after rising 0.4 percent to $1.2332 yesterday, the biggest one-day advance since Aug. 3. The New Zealand dollar gained 0.1 percent to 80.97 U.S. cents.

The MSCI Asia Pacific Index (MXAP) of shares climbed 0.2 percent.

BOJ Options
The BOJ avoided adding stimulus at its July meeting, expanding its asset-purchase program to 45 trillion yen ($574 trillion) from 40 trillion, while cutting its loan facility to 25 trillion yen from 30 trillion yen.

A few board members said the BOJ shouldn’t rule out any options in advance, while one said price gains without economic improvement are not good, minutes of the gathering showed today. The BOJ established its inflation goal in February.

Figures released yesterday showed Japan’s economy grew at an annualized 1.4 percent in the three months through June 30, missing economist estimates for a 2.3 percent pace.

The yen has declined 2.4 percent in 2012, the third-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro dropped 5.5 percent in the same period, the biggest slide among the gauge’s members. The dollar fell 0.2 percent.

Data due today that may add to signs Europe’s debt crisis is weighing on the broader economy. The region’s fiscal woes have prompted five of the trading bloc’s 17 states to seek international bailouts.

“Today we’re going to be worried about euro-zone data.” said Robert Rennie, chief currency strategist at Westpac Banking Corp. (WBC) in Sydney. “The euro will continue to struggle to mount a sustainable rally.”

France, Germany
The euro area economy probably shrank 0.2 percent in the second quarter from the previous period, economists surveyed by Bloomberg News predicted before gross domestic product data is released today. France’s GDP probably contracted by 0.1 percent from the first quarter, while German growth slowed to 0.2 percent, separate surveys showed.

In New Zealand, sales adjusted for inflation gained 1.3 percent in the three months through June from the first quarter, when they fell 0.6 percent. The median estimate in a Bloomberg poll of nine economists was for a 0.7 percent increase.

To contact the reporters on this story: Sharon Chen in Singapore at [email protected]; Kristine Aquino in Singapore at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

New Zealand Dollar Poised To Fall, BofA Says: Technical Analysis

New Zealand’s dollar may fall against its U.S. counterpart after descending from the top of its year-long contracting range, according to Bank of America Corp., citing technical analysis.

The currency, nicknamed the kiwi, had an “impulsive break” to 80.67 cents to the greenback that confirmed a top a turn lower, MacNeil Curry, head of foreign-exchange and interest-rates technical strategy in New York at Bank of
America Merrill Lynch, wrote today in a research report. The kiwi will likely fall to 78.41 cents and may decline as low as 74.89 cents against the U.S. dollar.

New Zealand’s dollar “looks like it’s looking to carve out a top,” Curry said in a telephone interview. “Aussie and kiwi have been in this year-long contracting range,” he said, referring to the Australian dollar.

The kiwi depreciated 0.4 percent to 80.56 cents today in New York.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

To contact the reporter on this story: John Detrixhe in New York at [email protected]

To contact the editor responsible for this story: Dave Liedtka at [email protected]

 

[Muthukali]

Euro Near 6-Week High; Merkel Shows Support for ECB Plan

The euro traded 0.2 percent from a six-week high versus the yen as Germany signaled its support for a European Central Bank approach to resolve the debt crisis.

The shared currency is set to complete five-day gains against all 16 of its major counterparts before meetings of German Chancellor Angela Merkel, French President Francois Hollande and Greek Prime Minister Antonis Samaras from Aug. 23-24. The yen was poised for its biggest weekly loss in almost two months versus the dollar as the extra yield investors receive from U.S. securities over Japanese debt climbed.

“We’re starting to see the early signs of some real progress being made in the euro area,” said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “We do see the euro rebounding modestly over the next few months.”

The euro traded at 97.98 yen as of 10:26 a.m. in Tokyo from 98.04 yesterday, when it touched 98.18, the most since July 6. It was little changed at $1.2355 after rising 0.5 percent to $1.2356 in New York. Japan’s currency was at 79.30 per dollar from 79.35. The euro is set to gain 0.6 percent against the dollar this week, the most since the period ended July 27. The yen headed for a 1.3 percent loss versus the dollar, its biggest drop since the five days ended June 22.

Merkel is due to host Hollande Aug. 23, Paris-based Agence France-Presse reported, one day before Samaras visits Berlin for talks. Italian media reported that Prime Minister Mario Monti is due in the German capital on Aug. 29, while Spanish Prime Minister Mariano Rajoy has said that Merkel will visit Madrid on Sept. 6.

‘Right Track’
“Obviously time is pressing” on stamping out the debt crisis, though “on many of these issues we feel we’re on the right track,” Merkel told reporters in Ottawa yesterday at a joint press conference with Canadian Prime Minister Stephen Harper. Euro-area policy makers “feel committed to do everything we can to maintain the common currency.”

The euro and Swiss franc slid 4.6 percent over the past three months, the worst performances among the 10 developed- market currencies tracked by Bloomberg Correlation-Weighted Indexes. The yen and dollar fell 1.7 percent.

The difference between yields on two-year U.S. Treasuries and similar maturity Japanese government bonds was 19 basis points yesterday, the most since July 4. Five-year U.S. government debt offered a premium of 56 basis points today over comparable JGBs, up from this year’s low of 36 basis points.

“The interest-rate differential is a key driver of the dollar-yen exchange rate,” ANZ’s Salter said. “As it appears that pockets of the U.S. economy are doing better, in particular the housing sector, the bias is for Treasuries to weaken. That should put pressure on the yen.”

Sales of existing U.S. homes probably rose to a 4.5 million annual rate in July from a 4.37 million pace in June, according to the median estimate of economists surveyed by Bloomberg News before a report by the National Association of Realtors due Aug. 22. Housing starts fell 1.1 percent to a 746,000 annual rate last month from June’s 754,000 pace, Commerce Department figures showed yesterday.

To contact the reporters on this story: Sharon Chen in Singapore at [email protected]; Kristine Aquino in Singapore at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

Asia Currencies Drop as Slowing Europe, China Sap Export Outlook

Asian currencies weakened amid concern Europe’s debt crisis and the slowing Chinese economy is worsening the outlook for the region’s overseas sales.

Taiwan will report today export orders, an indication of shipments in the next one to three months, fell for a fifth month in July, while Thailand may say overseas sales dropped last month, according to Bloomberg surveys of economists. Euro- area finance ministers are expected to meet in Athens this week to discuss Greek Prime Minister Antonis Samaras’ request for a two-year extension of the country’s fiscal adjustment program.

South Korea’s won fell 0.1 percent to 1,135.50 per dollar as of 11:30 a.m. in Seoul, according to data compiled by Bloomberg. Thailand’s baht weakened 0.1 percent to 31.56 and China’s yuan dropped 0.03 percent to 6.3605. The Bloomberg JPMorgan Asia Dollar Index declined for a second day. Onshore financial markets in Indonesia, the Philippines, Singapore, Malaysia and India are closed today for public holidays.

“Export outlooks for many Asian countries are quite dull with Europe’s crisis and China’s slowdown,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Trading may not be so active today with many markets closed.”

Thai gross domestic product increased 4.2 percent in the second quarter from a year earlier, official data showed today, more than the 3.1 percent median forecast in a Bloomberg survey.

“Second-quarter growth should be quite solid due to the recovery process from last year’s floods,” Nishihama said before the report was released. “The uncertain export outlook weighs on the baht.”

Investors Cautious
The won touched the weakest level since Aug. 3 after data this month showed Korean exports fell 8.8 percent in July from a year earlier, the biggest drop in almost three years, while the central bank kept interest rates unchanged at 3 percent.

“Investors are cautious and waiting to see if the politicians in Europe will be able to do something to turn things around,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “South Korea’s exports aren’t performing well. Although the central bank didn’t cut rates this month, we’re still expecting one reduction this year.”

The People Bank of China weakened the yuan’s daily fixing by 0.05 percent to 6.3478 after a commentary in the central bank-controlled Financial News on Aug. 18 suggested the PBOC has no intention of cutting lenders’ reserves requirements in the short term to support the economy.

“Investors aren’t so active as they are waiting for more clarity on Chinese government policy,” said Banny Lam, chief economist at CCB International Securities in Hong Kong. “The yuan is likely to stay steady on thin trading.”

Elsewhere, Taiwan’s dollar rose 0.1 percent to NT$29.999 against the greenback, while Vietnam’s dong was unchanged at 20,845.

To contact the reporter on this story: Yumi Teso in Bangkok at [email protected]

To contact the editor responsible for this story: James Regan at [email protected]

 

[Muthukali]

Euro Holds Gain Before Luxembourg’s Juncker Visits Greece

The euro remained higher before Luxembourg Prime Minister Jean-Claude Juncker visits Greece tomorrow to discuss the country’s request for an extension to its fiscal adjustment program.

The 17-nation currency headed for an advance versus most of its 16 major counterparts this month after Spain’s benchmark yields slid to a seven-week low, supporting the outlook for a bill auction today. Demand for the euro was tempered after Germany’s Bundesbank criticized European Central Bank bond buying. Australia’s dollar climbed after minutes of the Reserve Bank’s last meeting showed that policy makers see domestic growth overshadowing a “fragile” global outlook.

“The hurdles are still high, but European leaders do seem to be working towards more positive results,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. “This is a period of calm before a resumption of the bear trend for the euro.” The bank predicts the euro will be at $1.18 by Sept. 30, Henderson said.

The euro rose 0.1 percent to $1.2356 at 12:15 p.m. in Tokyo after gaining 0.1 percent yesterday. It was little changed at 98.04 yen. The dollar traded at 79.35 yen from 79.43.

Juncker, who also heads the group of euro-area finance ministers, will discuss a request by Greece’s Prime Minister Antonis Samaras for a two-year extension to the indebted nation’s fiscal adjustment program when he visits Athens. Samaras travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and German Chancellor Angela Merkel meet in the German capital on Aug. 23.

Greek Cuts
Greek Finance Minister Yannis Stournaras said his government is still considering 11.5 billion euros ($14.2 billion) of spending cuts for the next two years. The package will be ready by the time the so-called troika of the European Commission, ECB and International Monetary Fund returns to Athens early next month, Stournaras said on state-run NET TV yesterday after a meeting with Samaras.

Spain’s 10-year yields declined to as low as 6.16 percent yesterday, the least since July 2. That compares with a euro-era record high of 7.75 percent reached on July 25. The nation is scheduled to offer 546-day and 364-day bills today.

Europe’s shared currency failed to rally from a decline against the yen yesterday when comments by the Bundesbank sparked concern policy makers will struggle to agree on measures to address the debt crisis.

‘Stability Risks’
“The Bundesbank holds to the opinion that government bond purchases by the Eurosystem are to be seen critically and entail significant stability risks,” the Frankfurt-based central bank said in its monthly report yesterday.

ECB President Mario Draghi said on Aug. 2 that the bank is working on a plan to intervene in the secondary market to lower yields in countries that ask Europe’s bailout fund to buy its bonds in the primary market, ensuring conditionality.

The euro has declined 9 percent in the past year, the worst performance after the Swiss franc among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar advanced 7.4 percent, while the yen climbed 1.5 percent over the same period.

The greenback may be poised for more gains versus Japan’s currency should it breach the top of its weekly cloud at 80.55 to 80.60, according to MacNeil Curry, New York-based head of foreign-exchange and interest-rates technical strategy at Bank of America Corp.

‘Bullish’ Trend
“A weekly close through here would reinstate the cyclical turn in trend view from dollar-yen bearish to dollar-yen bullish,” Curry wrote in a report yesterday.

On a five-day basis, the 80.55 level was last seen in the period ended June 29, when the dollar advanced to as high as 80.62 yen, according to data compiled by Bloomberg. The cloud refers to the area between the first and second leading span lines on the chart and is used to show an area where buy orders may be clustered.

Tomorrow, the Federal Reserve is due to publish minutes of its two-day meeting that ended on Aug. 1. The central bank, which has pledged to keep its benchmark rate near zero through 2014, refrained from adding to the $2.3 trillion in asset purchases it has already made to support the economy. Its next gathering is on Sept. 12-13.

Australia’s dollar gained versus all of its peers after the RBA released today records of its Aug. 7 gathering, when it kept the overnight cash rate target at 3.5 percent for a second- straight meeting. The nation’s borrowing costs are the highest in the developed world.

“With inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the board judged the stance of monetary policy remained appropriate,” according to the meeting minutes. The central bank’s next gathering is on Sept. 4.

Australia’s currency rose 0.4 percent to $1.0483 and 0.3 percent to 83.17 yen.

To contact the reporter on this story: Kristine Aquino in Singapore at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

Dollar Rises Before U.S. Housing Data, Fed Minutes

The dollar gained versus most major peers before data that may show an improving U.S. housing market, damping prospects the Federal Reserve will start a third round of asset purchases, or quantitative easing.

Demand for the greenback was supported before the U.S. central bank releases today minutes of its most recent meeting. The yen rose against the Australian and New Zealand dollars as Asian stocks declined. The euro traded 0.2 percent from a six- week high ahead of meetings among European leaders this week, beginning with Luxembourg Prime Minister Jean-Claude Juncker’s visit to Greece today to discuss the nation’s request for a two- year extension to its fiscal adjustment program.

“Our central case is the Fed won’t do QE3,” said Richard Grace, Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia (CBA), the nation’s largest lender. “We don’t think the case is quite there for the Fed to move down that road. We’re expecting the U.S. dollar to bounce back a little bit over coming weeks.”

The greenback bought 79.25 yen at 10:46 a.m. in Tokyo from 79.29 yesterday in New York. It was at $1.2466 per euro after sliding to $1.2488 yesterday, the weakest since July 5. The yen added 0.1 percent to 98.78 per euro. The Japanese currency rose 0.5 percent to 82.78 per Australian dollar and advanced 0.4 percent to 64.04 versus its New Zealand counterpart.

The MSCI Asia Pacific Index (MXAP) of shares lost 0.7 percent.

Home Sales
Sales of existing homes in the U.S. probably climbed to a 4.51 million annual rate last month from a 4.37 million pace in June, according to the median estimate of economists in a Bloomberg News survey before today’s report from the National Association of Realtors.

The Fed will release records of its two-day meeting concluded on Aug. 1, when officials refrained from adding new stimulus measures that may debase the currency.

The U.S. central bank bought $2.3 trillion of mortgage and Treasury debt between 2008 and 2011 in two rounds of quantitative easing to cap borrowing costs. Policy makers have held the Fed’s key rate in a range of zero to 0.25 percent since 2008 and plan to keep it there at least through late 2014.

The greenback has advanced 7.1 percent in the past year, the best performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro posted the second-biggest decline, dropping 8.1 percent. The yen gained 1.7 percent.

Greek Concessions
A senior lawmaker with German Chancellor Angela Merkel’s party, Norbert Barthle, said concessions are possible for Greece so long as Greek Prime Minister Antonis Samaras shows a willingness to meet the main targets set out in his country’s bailout program.

The Greek leader travels to Berlin and Paris on Aug. 24 and 25 after French President Francois Hollande and Merkel meet in the German capital on Aug. 23.

“There are some quite short positions in the euro which will be squeezed out of the market” before the meetings in Europe, said Derek Mumford, a director in Sydney at Rochford Capital, a currency risk-management company. “We get this relief rally and then pressure will build again for another look lower.” A short position is a bet an asset will decline.

The yen was supported even after figures today showed the nation’s exports declined 8.1 percent in July, exceeding a forecast 2.9 percent drop. The country had a trade deficit of 517.4 billion yen ($6.5 billion) after a revised surplus of 60.3 billion yen in June.

To contact the reporter on this story: Kristine Aquino in Singapore at [email protected]

 

[Muthukali]

Dollar Declines Versus Peers Before Fed’s Evans Speaks

The dollar slid versus most of its major peers for a fourth day before Federal Reserve Bank of Chicago President Charles Evans speaks today amid prospects U.S. policy makers will add to stimulus measures.

The greenback touched its lowest level in seven weeks against the euro after minutes of the Federal Open Market Committee’s most recent meeting showed many U.S. policy makers favor additional growth measures, which could debase the greenback. Demand for Europe’s shared currency was tempered before the release of manufacturing and services purchasing managers’ indexes for the 17-nation region.

“The FOMC’s minutes and the probability of quantitative easing saw the U.S. dollar slip,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney, referring to the Fed’s asset-purchase program. “There may be more surprise out of the FOMC than out of the European PMIs, so that tells me that the euro shouldn’t suffer too badly should the PMIs be softer.”

The dollar fetched $1.2544 per euro at 11:17 a.m. in Tokyo after earlier touching $1.2553, the weakest since July 4. It was little changed at 78.56 yen from 78.58 yesterday, when it slid to as low as 78.28, the weakest since Aug. 13. The euro bought 98.55 yen after dropping 0.4 percent to 98.45 yesterday, the biggest decline since Aug. 10.

Chicago Fed President Evans is scheduled to hold a media briefing in Beijing at 11:30 a.m. local time today.

Records released yesterday of the two-day meeting of the FOMC that concluded on Aug. 1 said “many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” Policy makers next meet on Sept. 12-13.

To contact the reporter on this story: Kristine Aquino in Singapore at [email protected]

To contact the editor responsible for this story: Rocky Swift at [email protected]

 

[Muthukali]

Yen Set for Gain as Stock Declines Boost Safety Demand

The yen gained versus most of its 16 major peers this week as declines in Asian stocks and weakening global economic data boosted demand for haven assets.

Japan’s currency headed for its biggest five-day advance against the dollar in 12 weeks after reports yesterday showed U.S. jobless claims increased while manufacturing gauges in Europe and China signaled a contraction. The Australian dollar touched a one-month low versus its New Zealand counterpart after Reserve Bank Governor Glenn Stevens said the bigger nation’s currency would probably fall if a mining boom ends.

“There are still concerns about the global economy,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. Investors are “selling currencies against the yen.”

The yen fetched 78.55 per dollar at 10:52 a.m. in Tokyo from 78.49 yesterday. It was little changed at 98.69 per euro. Europe’s shared currency bought $1.2564, unchanged from the close in New York.

The Australian dollar was at NZ$1.2826 after earlier touching NZ$1.2820, the weakest since July 12.

The yen has strengthened 1.3 percent since Aug. 17 versus its U.S. peer, the biggest advance since the period ended June 1. The euro has gained 1.9 percent, the most since the five days through Feb. 24.

The MSCI Asia Pacific Index (MXAP) of shares lost as much as 1.1 percent today.

To contact the reporter on this story: Kristine Aquino in Singapore at [email protected]

To contact the editor responsible for this story: Garfield Reynolds at [email protected]

 

[Muthukali]

Chinese more willing to keep foreign currencies

BEIJING -- Chinese people were more willing to keep foreign currencies and sell their yuan-denominated assets in July, data from the State Administration of Foreign Exchange has indicated.

Individuals and institutions exchanged $127.5 billion in foreign currencies for Renminbi through Chinese banks, while buying $127 billion of foreign currencies from financial institutions during the month. This resulted in a foreign exchange surplus in banks of $500 million, according to SAFE.

Although Chinese banks swung back to a foreign exchange surplus in July from a $3.6-billion deficit in June, surplus data has narrowed sharply from $5.1 billion in May, $7.8 billion in March, $4.4 billion in February and $19.4 billion in January.

The banks reported a foreign exchange deficit of $3.7 billion in April.

Compared with these spot market figures, forward contracts, which reflect investors' outlook towards the relative value of the Renminbi, showed they chose to buy in foreign currency assets as the yuan weakens.

In July, companies and individuals signed forward contracts with Chinese banks to buy $15.2 billion in foreign currencies at a future date agreed by both sides. At the same time, investors agreed with banks in their forward contracts to exchange $11.8 billion.

After the yuan's central parity hit a record high of 6.267 against the greenback on May 2 this year, the Chinese currency weakened by about 646 basis points, as of Friday.

In the first seven months, the banks posted a cumulative deficit of $8.8 billion in foreign exchange in forward contracts. This has raised concerns that an outflow of funds might be under way in the world's second-largest economy.

In the January-July period, overseas business-related proceeds of domestic institutional and individual clients via banks totaled $1.44 trillion, with $1.35 trillion paid to overseas businesses, SAFE data showed.

Surpluses, which make up part of China's foreign exchange reserve along with current account surpluses and foreign direct investment inflow, do not include banks' own foreign exchange transactions or interbank transactions, according to SAFE.

 

[Muthukali]

Aussie, N.Z. Dollars Drop as Resources Outlook Weakens
By Mariko Ishikawa and Sharon Chen - Aug 28, 2012 12:30 PM GMT+0800

Australia’s dollar touched the lowest level in a month after commodities slid amid concern global economic growth will weaken.

The so-called Aussie declined for a fifth day against the yen after a private report showed the South Pacific nation’s new home sales dropped for the first time in four months. Data this week may show Chinese manufacturing stagnated and German consumer confidence fell. New Zealand’s dollar weakened after Asian stocks retreated and dairy exporter Fonterra Cooperative Group Ltd. cut its payout forecast.

Australia’s new home sales report “doesn’t help the Aussie as it adds to the negative short-term sentiment,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. The downward trend on the currency “will continue until China does something or risk appetite’s changed.”

The Australian dollar touched $1.0345, the weakest since July 26, before trading at $1.0355 at 2:18 p.m. in Sydney, 0.1 percent below yesterday’s close. It slid 0.4 percent to 81.33 yen. New Zealand’s dollar, known as the kiwi, declined 0.2 percent to 80.75 U.S. cents and 0.4 percent to 63.42 yen.

The MSCI Asia Pacific Index (MXAP) of stocks lost 0.6 percent. The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials fell 0.1 percent yesterday.

Global Economy
Australian sales of newly built homes decreased 5.6 percent to 5,682 last month from June, when they gained 2.8 percent, the Canberra-based Housing Industry Association said today, citing a survey of the nation’s largest builders.

The nation’s government bonds rose, pushing 10-year yields down by as much as three basis points, or 0.03 percentage points to 3.17 percent, the lowest since Aug. 3.

A report yesterday showed profits for industrial companies in China fell 5.4 percent in July from a year earlier. China is Australia’s biggest trading partner and New Zealand’s second- largest export market.

A Purchasing Managers’ Index of Chinese manufacturing probably fell to 50 in August from 50.1 the previous month, according to the median estimate of economists surveyed by Bloomberg before the data on Sept. 1. Fifty marks the dividing line between expansion and contraction.

“The recent softness in the Aussie is generated by the softer resources outlook that we’re hearing and the negative news that we’ve had already from China,” said Emma Lawson, a Sydney-based currency strategist at National Australia Bank Ltd. (NAB) “Now the market is waiting for a follow-up stimulus response from various governments.”

In Germany, GfK SE (GFK)’s gauge of consumer sentiment for September is forecast to drop to 5.8 in September from 5.9 in August, according to a poll of economists before the organization releases its report today.

Fonterra
New Zealand’s dollar fell against most of its 16 major counterparts after Fonterra, the world’s largest dairy exporter, cut its forecast payout to farmer suppliers for the current production season. The company will pay its 11,000 farmer shareholders NZ$5.25 ($4.24) a kilogram of milk solids in the year ending May 31, 2013, the Auckland-based company said in a statement today.

Losses in the Australian and New Zealand dollars were limited before the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, this week. European Central Bank President Mario Draghi and Fed Chairman Ben S. Bernanke will speak at the event.

“The case for further monetary relaxation in the U.S. is pretty strong,” Russell Jones, the Sydney-based global head of fixed-income strategy at Westpac Banking Corp. (WBC), said in a Bloomberg Television interview. “We might get an element of disappointment this weekend, but I still think ultimately you’ll see the Fed move on monetary policy.”

To contact the reporters on this story: Mariko Ishikawa in Tokyo at [email protected]; Sharon Chen in Singapore at [email protected];

To contact the editor responsible for this story: Garfield Reynolds at [email protected]