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Tuesday, December 16, 2008
Thursday, December 4, 2008
CHALLENGES OF THE ISLAMIC UMMAH IN FACING GLOBAL FINANCIAL CRISIS
kudakepang: PEMIKIRAN MAHATHIR MENGENAI TAMBATAN MATAWANG DI ERA KEMELESETAN EKONOMI GLOBAL
CHALLENGES OF THE ISLAMIC UMMAH IN FACING GLOBAL FINANCIAL CRISIS
Ucapan Tun Dr Mahathir Bin Mohamad
di Institute For Policy And International Studies
Tehran, Iran, pada 10.00 pagi, 30 November 2008
The financial crisis is yet another threat facing the Islamic ummah. Whether we can avoid being dragged down by this crisis or we can minimize the effect will depend much on us. It will also depend on whether the ummah choose to act together or whether each Islamic nation will act individually.
In facing any challenge we need to know as much as possible the nature of the challenge and how it will affect us. But more importantly we need to know the causes of the financial crisis itself, and what made it possible.
The systems that we see collapsing i.e. the monetary and banking systems have been in place for centuries. Why is it that the collapse is happening now and not before, not when the systems were introduced or shortly after? And why has it happened to the richest and the most powerful countries of the world?
The problem with systems and ideas devised by Man is that they always undergo change over time. New ideas would be added to them. The new ideas may not be good for the original system or idea.
Thus money began with coins of metal of definite values. But this was replaced with paper money backed by gold. Then gold backing was dispensed with. The value of paper money is vaguely related to the strength of a country’s Government or its economy. Finally it was to be determined by the willingness of the market to accept the paper currency notes.
At this stage the currency became open to manipulation by market players. Currency traders find they could easily change the value of a currency in terms of exchange rates by massive selling and buying.
Besides making huge profits from currency trading, it was found that the countries whose currency has been devalued would experience political, economic and social turmoil. They and their people can become very poor.
The Western powers saw in this an opportunity to hegemonise and control the developing countries. The IMF and the World Bank were used for this purpose. By applying conditions to loans by the IMF/ World Bank, the countries in distress can be forced to surrender political and economic control to the Western powers. The impoverisation of these countries also enabled the Western banks and capitalists to buy up all the businesses of the debtor countries at very cheap prices as they all have been made bankrupt or nearly bankrupt by the devaluation of their currencies.
Currency trading is therefore a political weapon to bring all the countries of the world under the control of the Western powers. How far-reaching the control can be is being seen now. The foreign funds which had come in to buy shares and banks during the 1997 – 98 financial crisis in the East are now pulling out, taking their capital with them in order to escape the impending crises. They have done this, this time, in expectation of the world financial crisis affecting the economies of these countries adversely. The withdrawal of their capital will in fact cause the financial crisis to affect these countries sooner and more severely.
Currency trading is made possible because of fiat money i.e. money that is not linked to gold or other precious metals.
We all use paper money now. Our paper money is also not linked to gold. But we do not indulge in currency trading although we still have to buy foreign currency to pay for imports. To a certain extend the market determines the exchange rate of our money. This causes a certain degree of instability but not sufficient to impoverish us.
Still it is best if the exchange rates remained stable. That is why Malaysia decided that Government should fix the exchange rate of the Malaysian Ringgit. All the great experts predicted a collapse of the Malaysian economy because we did not abide by international rules or wisdom. But as you know we recovered faster than the other countries after fixing the exchange rate.
Islamic countries should study the possibility of fixing the exchange rates of their currencies as a measure to protect themselves during the current financial crisis.
However the fact remains that the monetary system of the world today is open to all kinds of manipulation. The world needs to have a new monetary system that would be less easily manipulated.
Perhaps the ummah might push for a return to the gold standard. Another solution could be the use of the gold dinar purely for trade payments. In any case the Islamic ummah can reduce the attacks against them by not using the American Dollars for trade payments, especially for oil.
The U.S. Dollar is not backed by reserves as are other currencies. Apart from that the Unites States is bankrupt as it has a debt of 14 trillion dollars and it can never repay this debt. This huge borrowing by the United States is because for many years it has trade and current account deficits which forces it to borrow 1 ½ billion dollars a day to sustain itself.
The only reason why the U.S. Dollar has any value at all is because it is used in trade payments. If the gold dinar or other currencies are used for trading then there would be no demand for U.S. Dollars. It would then become worthless and that would have consequences over the United States’ foreign policy.
This is something that the Muslim ummah can make use of in protecting themselves from the current financial crisis.
The other major cause of the present crisis is the banking system. For most people a bank is a convenient institution for depositing safely their money and withdrawing it when needed. We do not question how banks function. We assume that the money the banks lend us comes from the capital and the deposits with the banks.
The present banking system was created some 300 years ago by the Rothschild’s. In that system money is actually made out of thin air, out of nothing. No gold or other assets were necessary. Yet the money borrowed from them has accepted values. Each time money is lent it creates money for the banks.
In most countries central banks owned by Government produce coins and print money. The money in circulation is therefore under Government control. But money can also take the form of cheques and how much money issued as cheques is not controlled by the Government.
The United States Federal Reserve Bank is not owned by the Government. It is owned by twelve privately owned state reserve banks. Yet the Federal Reserve Bank can actually print and issue currency notes, without any backing. Certainly it can lend money to the Government in the form of cheques.
Other banks can borrow from the Federal Reserve Bank when short. But these banks can lend much more than the amount of capital and the deposits from its clients. In the American system the banks can lend 90% of the deposits by its clients. But such is the system in use that the banks can actually lend 10 times the amount that it holds in the form of deposits.
Whereas ordinary businesses can only sell what they have in stock, banks can apparently deal in ten times the money held by them.
The profits made by ordinary business is hardly ever more than 10% of the total value of the stock sold. But since banks earn a fix interest, and the interest comes from 10 times the money it actually holds, the earnings of the banks are far higher than from ordinary business.
Since banks can lend more than the money it has, the tendency is to increase the lending as much as possible.
The current crisis began with the sub-prime loans, i.e. loans at high interest to risky borrowers. The total amount of loans to such borrowers runs into hundreds of billions of dollars.
Housing loans usually require payment over 30 years. Banks calculate their earning from interest and principle over this period, without taking into account bad debts.
To avoid risks these loans were bundled up together with the good loans and insured with insurance companies such as AIG. The banks may also allow for a second mortgage to hedge against possible default.
Additionally the houses against which the loans were taken would belong to the bank until the total debt has been paid in 30 years time.
It seems that the banks would be making good profits even if the loans carry high risks. So would the insurance companies and the mortgage companies.
But when the risky loans defaulted by the millions resulting in debts of hundreds of billions which cannot be repaid, the banks were faced with huge numbers of non-performing loans. At the same time the collateralised houses cannot be sold as banks refused to lend money to buyers and the original banks could not recover any of the money lent through sales of the collaterals.
The insurance companies were also unable to pay the banks because the premium they received was far too small for the losses sustained by the banks.
The mortgage companies also faced the same problem as payments could not be paid by the borrowers.
The result is the spectacular collapse of the banks because most of the loans were not from deposit money but the ten times more than the deposits which banks were allowed to lend.
When banks lend much more than the money they have they were actually creating money out of nothing. If the loans are repaid then they would stand to gain far more than if they had limited themselves to their subscribed capital and deposits. However if the borrowers defaulted then their losses could exceed their capital and the deposits they had received. They would become bankrupt.
The sub-prime fiasco is due to the failure of the huge loans to high risk borrowers, to yield the interest and the principle expected. The banks concerned have lost far more than whatever capital assets or even deposits they had taken. Obviously they would not be able to return the deposits they had taken. They have by definition become bankrupt. When banks go bankrupt a whole lot of other businesses which depend on the banks for their operating capital will also go bankrupt. Hence, the bankruptcies of the three huge automotive companies of America.
The hedge funds are also affected as they depend on loans from the banks to leverage their investments.
Why did this crisis happen to the United States and not the other countries? Firstly, it is because the privately owned banks actually issue large amounts of money in America. It should be noted that the money issued need not be in the form of printed currency notes. Cheques can be made out in any amount and effectively the cheques are money. The lending and borrowing are no longer constrained by the amount of currency notes in circulation.
The second factor is the faith in the market regulating the value of money. Wall Street and the rich capitalists had persuaded the Government that it should not interfere with the market i.e. with banking and finance and the way money is used to make more money.
The market is about making money, making profits regardless of the consequence. When the banks created money out of thin air, when they lend this money to people quite incapable of repaying their loans, when the amounts exceed the capacities of the banks to recover in cash after the loans go bad, when the deals become so big as to be far bigger than money in circulation and total trade in goods and services, the Government did nothing. The Government did not even require accounts to be submitted for tax purposes. Though banks are required to submit accounts and pay taxes, this was easily avoided by having offshore subsidiaries in tax havens where they can borrow huge sums from legitimate banks and do anything they like with the money without having to show accounts to any Government agency.
The hedge funds took advantage of the lack of Government supervision to borrow as much as twenty times the amount invested in them. Using these loans the hedge funds made huge investments mainly in the money market, guaranteeing return to investors of 30% or more. This was believed to be possible because the returns would be from twenty times the amount invested in the hedge funds. So huge are the hedge funds that Central Banks cannot hope to protect national currencies by buying the currencies dumped into the market by hedge funds.
What can the Muslim ummah do to face the worldwide financial crisis? The first thing would be to continue with Government regulations of the banks and the financial institutions. The free market system should not be adopted, at least not in full. Instead, all financial transaction must be made transparent and subjected to proper regulation. The regulation should be judicious as over-regulation can stifle business, and affect economic growth.
The idea of a globalised, borderless world has been promoted by the rich countries especially the United States. Conceived by the rich, we can be sure that it was meant to benefit them.
Globalisation is something that cannot be avoided as the ease of communication and travel make isolation of countries impossible. Whether we like it or not whatever happens in other parts of the world will effect us. This involves not only finance and the economy but also political and social ideas.
There is more than one way to globalise. Muslims must study the manner and the effect of globalisation in order to devise a system of globalisation which will not destroy the Muslims and their religion.
In banking and finance, the principal causes of the current financial crises, there is no need to follow all practices coming out of the West.
The ummah can have their own banking and financial system. Already we have Islamic banking and Islamic insurance. They have not been abused the way the Western banking systems and insurance have been abused. It is necessary that the Muslim institutions such as these be scrutinied carefully in order to prevent them from causing the same problems.
Muslims must be active in proposing new systems, rules and regulations for banking and finance. We should even propose to go back to gold whether it is in the form of gold dinar or any coin or bullion.
To save our currency and economy from being affected by western banking practices and the U.S. Dollar, a new trading currency should be proposed to replace the U.S. Dollar. Such a trading currency should be tied to gold and used only in international trade.
This will help stabilise the value of national currencies as gold has intrinsic value in all countries. The local currencies can still be used but the value must be pegged to the international trading currency. There will be fluctuation as gold prices do fluctuate. But this would be minimal, much less than paper money.
Truly the Muslim ummah are in the best position to initiate and sustain the monetary and financial systems of the world. This is because they are in possession of more money than they can find use for. They are even in a position to insist that their oil be paid in the local currency or in any currency designated by them. Whatever currency they choose will become strong simply because there will be a demand for it just as today the U.S. Dollar has a value because there is a demand for it in the settlement of trade.
What is needed from the ummah is the will to insist on their wishes to be considered. I do not see all the Muslim counties in the world acting together. But it would be enough if a few would coordinate their efforts, would act together and agree to promote the interest of the ummah.
CHALLENGES OF THE ISLAMIC UMMAH IN FACING GLOBAL FINANCIAL CRISIS
Ucapan Tun Dr Mahathir Bin Mohamad
di Institute For Policy And International Studies
Tehran, Iran, pada 10.00 pagi, 30 November 2008
The financial crisis is yet another threat facing the Islamic ummah. Whether we can avoid being dragged down by this crisis or we can minimize the effect will depend much on us. It will also depend on whether the ummah choose to act together or whether each Islamic nation will act individually.
In facing any challenge we need to know as much as possible the nature of the challenge and how it will affect us. But more importantly we need to know the causes of the financial crisis itself, and what made it possible.
The systems that we see collapsing i.e. the monetary and banking systems have been in place for centuries. Why is it that the collapse is happening now and not before, not when the systems were introduced or shortly after? And why has it happened to the richest and the most powerful countries of the world?
The problem with systems and ideas devised by Man is that they always undergo change over time. New ideas would be added to them. The new ideas may not be good for the original system or idea.
Thus money began with coins of metal of definite values. But this was replaced with paper money backed by gold. Then gold backing was dispensed with. The value of paper money is vaguely related to the strength of a country’s Government or its economy. Finally it was to be determined by the willingness of the market to accept the paper currency notes.
At this stage the currency became open to manipulation by market players. Currency traders find they could easily change the value of a currency in terms of exchange rates by massive selling and buying.
Besides making huge profits from currency trading, it was found that the countries whose currency has been devalued would experience political, economic and social turmoil. They and their people can become very poor.
The Western powers saw in this an opportunity to hegemonise and control the developing countries. The IMF and the World Bank were used for this purpose. By applying conditions to loans by the IMF/ World Bank, the countries in distress can be forced to surrender political and economic control to the Western powers. The impoverisation of these countries also enabled the Western banks and capitalists to buy up all the businesses of the debtor countries at very cheap prices as they all have been made bankrupt or nearly bankrupt by the devaluation of their currencies.
Currency trading is therefore a political weapon to bring all the countries of the world under the control of the Western powers. How far-reaching the control can be is being seen now. The foreign funds which had come in to buy shares and banks during the 1997 – 98 financial crisis in the East are now pulling out, taking their capital with them in order to escape the impending crises. They have done this, this time, in expectation of the world financial crisis affecting the economies of these countries adversely. The withdrawal of their capital will in fact cause the financial crisis to affect these countries sooner and more severely.
Currency trading is made possible because of fiat money i.e. money that is not linked to gold or other precious metals.
We all use paper money now. Our paper money is also not linked to gold. But we do not indulge in currency trading although we still have to buy foreign currency to pay for imports. To a certain extend the market determines the exchange rate of our money. This causes a certain degree of instability but not sufficient to impoverish us.
Still it is best if the exchange rates remained stable. That is why Malaysia decided that Government should fix the exchange rate of the Malaysian Ringgit. All the great experts predicted a collapse of the Malaysian economy because we did not abide by international rules or wisdom. But as you know we recovered faster than the other countries after fixing the exchange rate.
Islamic countries should study the possibility of fixing the exchange rates of their currencies as a measure to protect themselves during the current financial crisis.
However the fact remains that the monetary system of the world today is open to all kinds of manipulation. The world needs to have a new monetary system that would be less easily manipulated.
Perhaps the ummah might push for a return to the gold standard. Another solution could be the use of the gold dinar purely for trade payments. In any case the Islamic ummah can reduce the attacks against them by not using the American Dollars for trade payments, especially for oil.
The U.S. Dollar is not backed by reserves as are other currencies. Apart from that the Unites States is bankrupt as it has a debt of 14 trillion dollars and it can never repay this debt. This huge borrowing by the United States is because for many years it has trade and current account deficits which forces it to borrow 1 ½ billion dollars a day to sustain itself.
The only reason why the U.S. Dollar has any value at all is because it is used in trade payments. If the gold dinar or other currencies are used for trading then there would be no demand for U.S. Dollars. It would then become worthless and that would have consequences over the United States’ foreign policy.
This is something that the Muslim ummah can make use of in protecting themselves from the current financial crisis.
The other major cause of the present crisis is the banking system. For most people a bank is a convenient institution for depositing safely their money and withdrawing it when needed. We do not question how banks function. We assume that the money the banks lend us comes from the capital and the deposits with the banks.
The present banking system was created some 300 years ago by the Rothschild’s. In that system money is actually made out of thin air, out of nothing. No gold or other assets were necessary. Yet the money borrowed from them has accepted values. Each time money is lent it creates money for the banks.
In most countries central banks owned by Government produce coins and print money. The money in circulation is therefore under Government control. But money can also take the form of cheques and how much money issued as cheques is not controlled by the Government.
The United States Federal Reserve Bank is not owned by the Government. It is owned by twelve privately owned state reserve banks. Yet the Federal Reserve Bank can actually print and issue currency notes, without any backing. Certainly it can lend money to the Government in the form of cheques.
Other banks can borrow from the Federal Reserve Bank when short. But these banks can lend much more than the amount of capital and the deposits from its clients. In the American system the banks can lend 90% of the deposits by its clients. But such is the system in use that the banks can actually lend 10 times the amount that it holds in the form of deposits.
Whereas ordinary businesses can only sell what they have in stock, banks can apparently deal in ten times the money held by them.
The profits made by ordinary business is hardly ever more than 10% of the total value of the stock sold. But since banks earn a fix interest, and the interest comes from 10 times the money it actually holds, the earnings of the banks are far higher than from ordinary business.
Since banks can lend more than the money it has, the tendency is to increase the lending as much as possible.
The current crisis began with the sub-prime loans, i.e. loans at high interest to risky borrowers. The total amount of loans to such borrowers runs into hundreds of billions of dollars.
Housing loans usually require payment over 30 years. Banks calculate their earning from interest and principle over this period, without taking into account bad debts.
To avoid risks these loans were bundled up together with the good loans and insured with insurance companies such as AIG. The banks may also allow for a second mortgage to hedge against possible default.
Additionally the houses against which the loans were taken would belong to the bank until the total debt has been paid in 30 years time.
It seems that the banks would be making good profits even if the loans carry high risks. So would the insurance companies and the mortgage companies.
But when the risky loans defaulted by the millions resulting in debts of hundreds of billions which cannot be repaid, the banks were faced with huge numbers of non-performing loans. At the same time the collateralised houses cannot be sold as banks refused to lend money to buyers and the original banks could not recover any of the money lent through sales of the collaterals.
The insurance companies were also unable to pay the banks because the premium they received was far too small for the losses sustained by the banks.
The mortgage companies also faced the same problem as payments could not be paid by the borrowers.
The result is the spectacular collapse of the banks because most of the loans were not from deposit money but the ten times more than the deposits which banks were allowed to lend.
When banks lend much more than the money they have they were actually creating money out of nothing. If the loans are repaid then they would stand to gain far more than if they had limited themselves to their subscribed capital and deposits. However if the borrowers defaulted then their losses could exceed their capital and the deposits they had received. They would become bankrupt.
The sub-prime fiasco is due to the failure of the huge loans to high risk borrowers, to yield the interest and the principle expected. The banks concerned have lost far more than whatever capital assets or even deposits they had taken. Obviously they would not be able to return the deposits they had taken. They have by definition become bankrupt. When banks go bankrupt a whole lot of other businesses which depend on the banks for their operating capital will also go bankrupt. Hence, the bankruptcies of the three huge automotive companies of America.
The hedge funds are also affected as they depend on loans from the banks to leverage their investments.
Why did this crisis happen to the United States and not the other countries? Firstly, it is because the privately owned banks actually issue large amounts of money in America. It should be noted that the money issued need not be in the form of printed currency notes. Cheques can be made out in any amount and effectively the cheques are money. The lending and borrowing are no longer constrained by the amount of currency notes in circulation.
The second factor is the faith in the market regulating the value of money. Wall Street and the rich capitalists had persuaded the Government that it should not interfere with the market i.e. with banking and finance and the way money is used to make more money.
The market is about making money, making profits regardless of the consequence. When the banks created money out of thin air, when they lend this money to people quite incapable of repaying their loans, when the amounts exceed the capacities of the banks to recover in cash after the loans go bad, when the deals become so big as to be far bigger than money in circulation and total trade in goods and services, the Government did nothing. The Government did not even require accounts to be submitted for tax purposes. Though banks are required to submit accounts and pay taxes, this was easily avoided by having offshore subsidiaries in tax havens where they can borrow huge sums from legitimate banks and do anything they like with the money without having to show accounts to any Government agency.
The hedge funds took advantage of the lack of Government supervision to borrow as much as twenty times the amount invested in them. Using these loans the hedge funds made huge investments mainly in the money market, guaranteeing return to investors of 30% or more. This was believed to be possible because the returns would be from twenty times the amount invested in the hedge funds. So huge are the hedge funds that Central Banks cannot hope to protect national currencies by buying the currencies dumped into the market by hedge funds.
What can the Muslim ummah do to face the worldwide financial crisis? The first thing would be to continue with Government regulations of the banks and the financial institutions. The free market system should not be adopted, at least not in full. Instead, all financial transaction must be made transparent and subjected to proper regulation. The regulation should be judicious as over-regulation can stifle business, and affect economic growth.
The idea of a globalised, borderless world has been promoted by the rich countries especially the United States. Conceived by the rich, we can be sure that it was meant to benefit them.
Globalisation is something that cannot be avoided as the ease of communication and travel make isolation of countries impossible. Whether we like it or not whatever happens in other parts of the world will effect us. This involves not only finance and the economy but also political and social ideas.
There is more than one way to globalise. Muslims must study the manner and the effect of globalisation in order to devise a system of globalisation which will not destroy the Muslims and their religion.
In banking and finance, the principal causes of the current financial crises, there is no need to follow all practices coming out of the West.
The ummah can have their own banking and financial system. Already we have Islamic banking and Islamic insurance. They have not been abused the way the Western banking systems and insurance have been abused. It is necessary that the Muslim institutions such as these be scrutinied carefully in order to prevent them from causing the same problems.
Muslims must be active in proposing new systems, rules and regulations for banking and finance. We should even propose to go back to gold whether it is in the form of gold dinar or any coin or bullion.
To save our currency and economy from being affected by western banking practices and the U.S. Dollar, a new trading currency should be proposed to replace the U.S. Dollar. Such a trading currency should be tied to gold and used only in international trade.
This will help stabilise the value of national currencies as gold has intrinsic value in all countries. The local currencies can still be used but the value must be pegged to the international trading currency. There will be fluctuation as gold prices do fluctuate. But this would be minimal, much less than paper money.
Truly the Muslim ummah are in the best position to initiate and sustain the monetary and financial systems of the world. This is because they are in possession of more money than they can find use for. They are even in a position to insist that their oil be paid in the local currency or in any currency designated by them. Whatever currency they choose will become strong simply because there will be a demand for it just as today the U.S. Dollar has a value because there is a demand for it in the settlement of trade.
What is needed from the ummah is the will to insist on their wishes to be considered. I do not see all the Muslim counties in the world acting together. But it would be enough if a few would coordinate their efforts, would act together and agree to promote the interest of the ummah.
Monday, November 10, 2008
Saturday, November 1, 2008
Bloomberg News: Yen, Dollar Head for Record Monthly Gains on Slumping Economyews:
Yen, Dollar Head for Record Monthly Gains on Slumping Economy
Oct. 31 (Bloomberg) -- The yen and the dollar rose against the euro and headed for record monthly gains as signs of a global recession led investors to seek safety.
Oct. 31 (Bloomberg) -- The yen and the dollar rose against the euro and headed for record monthly gains as signs of a global recession led investors to seek safety.
Thursday, October 30, 2008
Interest Rate
WASHINGTON (AP) -- The Federal Reserve has slashed a key interest rate by half a percentage point as it seeks to revive an economy hit by a long list of maladies stemming from the most severe financial crisis in decades.
The central bank on Wednesday reduced its target for the federal funds rate, the interest banks charge on overnight loans, to 1 percent, a low last seen in 2003-2004. The funds rate has not been lower since 1958, when Dwight Eisenhower was president.
The cut marked the second half-point reduction in the funds rate this month. The Fed slashed the rate by that amount in a coordinated move with foreign central banks on Oct. 8.
The central bank said that "downside risks to growth remain" holding out the promise of further rate cuts if needed. The rate-cut decision was unanimous.
Federal Reserve Chairman Ben Bernanke and his colleagues pledged that they would "monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability."
Many analysts said they believe the Fed will not stop at 1 percent if officials see the need to cut rates further. Some are forecasting another half-point move at the Fed's last meeting of the year on Dec. 16.
In its statement, the Fed indicated it had room to lower rates because the spreading economic weakness was lowering the risks that inflation would get out of control. Indeed, the weakness has caused dramatic declines in the price of oil and other commodities.
While many economists believe the country has already fallen into a recession, they think the aggressive efforts by the Fed to cut rates and take other actions to unfreeze credit markets will keep the country from plunging into a prolonged and deep downturn.
The Fed's action was expected to be quickly followed by a reduction by commercial banks in their prime lending rate, the benchmark for millions of consumer and business loans, by a similar half-point.
The central bank also announced that it was lowering its discount rate, the interest it charges to make direct loans to banks, by a half-point to 1.25 percent. This rate has become increasingly important as the central bank has dramatically increased direct loans to banks in an effort to break the grip of the credit crisis.
In addition to the rate cuts, the Fed has been moving to pump billions of dollars into the banking system to help unfreeze markets that seized up in dramatic fashion last month. The ensuing meltdown of financial markets caused the Bush administration to successfully lobby Congress to pass on Oct. 3 a $700 billion rescue package to make direct purchases of bank stock and buy up bad assets as a way of getting financial institutions to start lending again.
The central bank on Wednesday reduced its target for the federal funds rate, the interest banks charge on overnight loans, to 1 percent, a low last seen in 2003-2004. The funds rate has not been lower since 1958, when Dwight Eisenhower was president.
The cut marked the second half-point reduction in the funds rate this month. The Fed slashed the rate by that amount in a coordinated move with foreign central banks on Oct. 8.
The central bank said that "downside risks to growth remain" holding out the promise of further rate cuts if needed. The rate-cut decision was unanimous.
Federal Reserve Chairman Ben Bernanke and his colleagues pledged that they would "monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability."
Many analysts said they believe the Fed will not stop at 1 percent if officials see the need to cut rates further. Some are forecasting another half-point move at the Fed's last meeting of the year on Dec. 16.
In its statement, the Fed indicated it had room to lower rates because the spreading economic weakness was lowering the risks that inflation would get out of control. Indeed, the weakness has caused dramatic declines in the price of oil and other commodities.
While many economists believe the country has already fallen into a recession, they think the aggressive efforts by the Fed to cut rates and take other actions to unfreeze credit markets will keep the country from plunging into a prolonged and deep downturn.
The Fed's action was expected to be quickly followed by a reduction by commercial banks in their prime lending rate, the benchmark for millions of consumer and business loans, by a similar half-point.
The central bank also announced that it was lowering its discount rate, the interest it charges to make direct loans to banks, by a half-point to 1.25 percent. This rate has become increasingly important as the central bank has dramatically increased direct loans to banks in an effort to break the grip of the credit crisis.
In addition to the rate cuts, the Fed has been moving to pump billions of dollars into the banking system to help unfreeze markets that seized up in dramatic fashion last month. The ensuing meltdown of financial markets caused the Bush administration to successfully lobby Congress to pass on Oct. 3 a $700 billion rescue package to make direct purchases of bank stock and buy up bad assets as a way of getting financial institutions to start lending again.
Wednesday, October 29, 2008
News on GBP Mortgage Approvals
GBP MORTGAGE APPROVALS
Mortgage approvals in the U.K. inched higher to 33K from 32K in August, while lending surged to 2.2B in September as a result of lower borrowing costs. Despite the unexpected improvement, conditions may only get worse as Europe’s second largest economy slips into a recession, and may force the Bank of England to step in once again. Mounting growth fears has already led the BoE to lower the benchmark interest rate by 50bp for the first time since 2001, and the dovish outlook held by the MPC has raised speculation that the central bank will ease policy further, which would only stoke increased selling pressures for the British pound.
Mortgage approvals in the U.K. inched higher to 33K from 32K in August, while lending surged to 2.2B in September as a result of lower borrowing costs. Despite the unexpected improvement, conditions may only get worse as Europe’s second largest economy slips into a recession, and may force the Bank of England to step in once again. Mounting growth fears has already led the BoE to lower the benchmark interest rate by 50bp for the first time since 2001, and the dovish outlook held by the MPC has raised speculation that the central bank will ease policy further, which would only stoke increased selling pressures for the British pound.
Saturday, October 18, 2008
Forex News : US Fundamentals Deteriorates
US Fundamentals Deteriorates
by Korman Tam
10/17/2008 3:25:00 PM
Economic reports from the US continued to point toward further deterioration in fundamentals, thereby reinforcing sentiment of an imminent recession. The data also revealed a sharp collapse in consumer confidence in light of the recent market turmoil and financial system crisis. The University of Michigan consumer sentiment survey posted its steepest drop on record, collapsing far more than expected to 57.5 in October, versus calls for a decline to 68.0 from 70.3 in September. The current situation index declined sharply to 58.9 from 75.0 a month earlier while the expectations index slumped to 56.7 versus 67.2 previously. Housing data reflected continued weakness in the housing market, with housing starts falling by 6.3% in September to 817k units, its lowest reading in 17-years, versus calls for a smaller drop to 880k from 895k in the previous month.
by Korman Tam
10/17/2008 3:25:00 PM
Economic reports from the US continued to point toward further deterioration in fundamentals, thereby reinforcing sentiment of an imminent recession. The data also revealed a sharp collapse in consumer confidence in light of the recent market turmoil and financial system crisis. The University of Michigan consumer sentiment survey posted its steepest drop on record, collapsing far more than expected to 57.5 in October, versus calls for a decline to 68.0 from 70.3 in September. The current situation index declined sharply to 58.9 from 75.0 a month earlier while the expectations index slumped to 56.7 versus 67.2 previously. Housing data reflected continued weakness in the housing market, with housing starts falling by 6.3% in September to 817k units, its lowest reading in 17-years, versus calls for a smaller drop to 880k from 895k in the previous month.
Tuesday, October 14, 2008
Forex News : EUR Bail Out
Europe Steps up Bail-Out Efforts
by Korman Tam
10/13/2008 2:50:00 PM
The European bail-out plan comes on the heels of last week's British bank bail-out plan, which would effectively nationalize the UK's three largest banks. While it remains to be seen whether the unprecedented moves to pump liquidity into the financial system will be successful - it has stabilized the rapid deterioration in investor confidence and for the time being, halted the severe sell-off in global equities.
by Korman Tam
10/13/2008 2:50:00 PM
The European bail-out plan comes on the heels of last week's British bank bail-out plan, which would effectively nationalize the UK's three largest banks. While it remains to be seen whether the unprecedented moves to pump liquidity into the financial system will be successful - it has stabilized the rapid deterioration in investor confidence and for the time being, halted the severe sell-off in global equities.
Thursday, October 9, 2008
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Forex News Online : Interest Rate
Coordinated Intervention Fails to Quell Fears
by Korman Tam
In a coordinated effort to stem the global financial crisis, the Federal Reserve along with the ECB, BoE, BoC, SNB and several other central banks slashed their key interest rates by 50 basis points. The joint statement by the central banks said, "the recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability". Accordingly, the statement said that "some easing of global monetary conditions is therefore warranted". The unprecedented move underscores the dire predicament facing the global economy and the need for urgent coordinated action in order to stem further tightening in the credit markets and halt the rapid deterioration in confidence.
Heightened risk aversion continues to benefit the yen, propping the Japanese currency to its highest level in 3-years against the euro near the 135-level while surging to a near 7-year high versus the pound beneath the 171-handle. The greenback has also firmed against the euro and sterling, remaining buoyed near a one-year high versus the euro beneath the 1.36-level and its highest level since January 2006 against the pound under the 1.72-handle. Given the lingering uncertainty and burgeoning fears for a global economic recession, the yen will continue to be the safe haven currency of choice among traders.
by Korman Tam
In a coordinated effort to stem the global financial crisis, the Federal Reserve along with the ECB, BoE, BoC, SNB and several other central banks slashed their key interest rates by 50 basis points. The joint statement by the central banks said, "the recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability". Accordingly, the statement said that "some easing of global monetary conditions is therefore warranted". The unprecedented move underscores the dire predicament facing the global economy and the need for urgent coordinated action in order to stem further tightening in the credit markets and halt the rapid deterioration in confidence.
Heightened risk aversion continues to benefit the yen, propping the Japanese currency to its highest level in 3-years against the euro near the 135-level while surging to a near 7-year high versus the pound beneath the 171-handle. The greenback has also firmed against the euro and sterling, remaining buoyed near a one-year high versus the euro beneath the 1.36-level and its highest level since January 2006 against the pound under the 1.72-handle. Given the lingering uncertainty and burgeoning fears for a global economic recession, the yen will continue to be the safe haven currency of choice among traders.
Wednesday, October 8, 2008
Forex News : Interest Rate GBP
In Europe, which also has been hard hit by the financial crisis, the Bank of England cut its rate by half a point to 4.5 percent, while the European Central Bank sliced its rate to 3.75 percent.
Other central banks also taking part include the banks of Canada, Sweden, and Switzerland.
China also cut its key interest rates Wednesday for a second time in less than one month to stimulate slowing economic growth amid the global credit crisis.
Other central banks also taking part include the banks of Canada, Sweden, and Switzerland.
China also cut its key interest rates Wednesday for a second time in less than one month to stimulate slowing economic growth amid the global credit crisis.
Forex News : USD Interest Rate Cut
WASHINGTON - The Federal Reserve, acting in coordination with other global central banking authorities, cut a key U.S. interest rate by half a percentage point Wednesday to steady a teetering economy.
The Fed reduced its key rate from 2 percent to 1.5 percent.
The Fed reduced its key rate from 2 percent to 1.5 percent.
Interest Rate: US to Cut Interest Rate In October
The minutes of the FOMC's September 16th meeting revealed deliberations for a rate cut, with Board members expressing greater pessimism over growth in the coming year. The minutes showed some members calling for a "policy response" to the detrimental impact of the financial crisis on growth. With the next Fed policy meeting at the end of October, we look for a 50-basis point rate cut from the FOMC, lowering its benchmark lending rate to 1.50%.
Friday, October 3, 2008
Non Farm Payroll September 2008
U.S. employers slashed jobs for an eighth consecutive month in August and the nation's unemployment rate soared to a five-year high of 6.1%, up from 5.7% in July and 4.7% from one year ago. That's the highest it has been for 5 years.
In August, the economy suffered a net loss of 84,000 jobs, worse than the market forecast for a 75,000 decline. Additionally, job losses in June and July turned out to be much higher than originally reported. The economy lost an astounding 100,000 jobs in June and another 60,000 in July, according to revised figures. Previously, the Labor Department reported job losses at 51,000 in each of those months. So far this year, job losses have totaled 605,000.
In August, the economy suffered a net loss of 84,000 jobs, worse than the market forecast for a 75,000 decline. Additionally, job losses in June and July turned out to be much higher than originally reported. The economy lost an astounding 100,000 jobs in June and another 60,000 in July, according to revised figures. Previously, the Labor Department reported job losses at 51,000 in each of those months. So far this year, job losses have totaled 605,000.
Thursday, October 2, 2008
Non Farm Payroll
One of the most widely anticipated reports on the US economic calendar, the Employment Situation is a timely report that gives a picture of job creation, loss, wages and working hours in the United States. Data in the report relies on the Household Survey and the Establishment (or Payroll) Survey. While the Household Survey is based on the interviews to US households, the Establishment Survey queries business establishments, making it the preferred source of data. The Employment Situation's has many significant figures such as: Change in Non Farm Payrolls, Unemployment, Manufacturing Payrolls, and Average Hourly Earnings.
The headline figures for this report are reported monthly, as the total number of new jobs in thousands (say, 120K new jobs), and the unemployment rate.
The headline figures for this report are reported monthly, as the total number of new jobs in thousands (say, 120K new jobs), and the unemployment rate.
Trading News Caused Choppy Market
Trading will remain choppy in the coming days as markets eagerly anticipate the successful passage of the Administration's $700 billion rescue plan. The Senate is
scheduled to vote on a bailout plan this evening, with the House also
likely to vote by week's end.
scheduled to vote on a bailout plan this evening, with the House also
likely to vote by week's end.
Tuesday, September 30, 2008
Congress Rejects Rescue Plan
Congress Rejects Rescue Plan; Equities & USD Selloff
by Korman Tam
9/29/2008 5:40:00 PM
The dollar's fortunes reversed sharply, falling from near the 107-level against the yen to plunge to the 104-handle after it was announced that the House of Representatives voted against the $700 billion bailout plan by a vote of 228 to 205. The failure to pass the Administration's plan to purchase toxic assets off banks' balance sheets was incredibly disappointing to markets and heightens uncertainty over the outlook for the financial sector and raises the risk for the economy to plunge into a prolonged recession. US equity bourses succumbed to panic selling falling to multi-year lows, with the Dow Jones posting steep losses of 6.71% while both the Nasdaq and S&P500 plunged by over 9.14% and 8.49%, respectively. According to Congressional staffers, the earliest date for another vote to take place will be on Thursday.
US Treasury Secretary Paulson said there has been significant turmoil in the financial markets in recent days but remains committed to continue to work with regulators to protect both the financial system and economy. Paulson said the banking system was holding up very well considering the pressure, adding that he will continue to work with lawmakers as the effort to stabilize the banking system was too important to fail. He also expressed a sense of urgency, saying in spite of the "significant tools in the Treasury's tool kit", they are insufficient in bailing out the financial sector.
Global central banks continued to pump liquidity into the financial system with another bout of coordinated intervention. The Fed announced that it would be injecting another $630 billion in an effort to prevent the credit markets from locking up. In coordination with the ECB, BoE, BoJ and SNB, the Fed will bolster its swap lines to facilitate liquidity to flow more freely.
by Korman Tam
9/29/2008 5:40:00 PM
The dollar's fortunes reversed sharply, falling from near the 107-level against the yen to plunge to the 104-handle after it was announced that the House of Representatives voted against the $700 billion bailout plan by a vote of 228 to 205. The failure to pass the Administration's plan to purchase toxic assets off banks' balance sheets was incredibly disappointing to markets and heightens uncertainty over the outlook for the financial sector and raises the risk for the economy to plunge into a prolonged recession. US equity bourses succumbed to panic selling falling to multi-year lows, with the Dow Jones posting steep losses of 6.71% while both the Nasdaq and S&P500 plunged by over 9.14% and 8.49%, respectively. According to Congressional staffers, the earliest date for another vote to take place will be on Thursday.
US Treasury Secretary Paulson said there has been significant turmoil in the financial markets in recent days but remains committed to continue to work with regulators to protect both the financial system and economy. Paulson said the banking system was holding up very well considering the pressure, adding that he will continue to work with lawmakers as the effort to stabilize the banking system was too important to fail. He also expressed a sense of urgency, saying in spite of the "significant tools in the Treasury's tool kit", they are insufficient in bailing out the financial sector.
Global central banks continued to pump liquidity into the financial system with another bout of coordinated intervention. The Fed announced that it would be injecting another $630 billion in an effort to prevent the credit markets from locking up. In coordination with the ECB, BoE, BoJ and SNB, the Fed will bolster its swap lines to facilitate liquidity to flow more freely.
Friday, September 26, 2008
Breaking News : Bail Out Agreed
WASHINGTON - Key Republicans and Democrats reported agreement Thursday on an outline for a historic $700 billion bailout of the financial industry, but there was still resistance from rank-and-file House Republicans despite warnings of an impending panic.
"I now expect we will, indeed, have a plan that can pass the House, pass the Senate, be signed by the president and bring a sense of certainty to this crisis that is sill roiling in the market," Sen. Bob Bennett, R-Utah, said as members of both parties emerged from a two-hour negotiating session.
Negotiators planned to present the outline at a White House meeting later Thursday with President Bush and the rivals to replace him, Republican John McCain and Democrat Barrack Obama.
"We're very confident that we can act expeditiously," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman.
Not everyone in the closed-door talks was as optimistic. Rep. Spencer Bachus of Alabama, the only House Republican in the bargaining meeting, stopped short of saying he agreed with the other lawmakers on an imminent deal.
"There was progress today," said Bachus, the senior Republican on the House Financial Services panel.
Later, he issued a statement saying he was not empowered to strike any deals and there was "no agreement other than to continue discussions."
Both houses' Republican leaders, Rep. John Boehner and Sen. Mitch McConnell, also issued statements saying there was no agreement.
Still, the White House called the announcement "a good sign that progress is being made."
"We'll want to hear from (Treasury) Secretary (Henry) Paulson and take a look at the details. We look forward to a good discussion at the meeting this afternoon," said Tony Fratto, the deputy White House press secretary.
A Treasury spokeswoman said the proposal was being reviewed there.
On Wall Street, stock prices were up late in the trading day, but not by as much as earlier in the day.
The core of the plan proposed by the administration just a few days ago envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.
Obama and McCain called for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.
McCain on Wednesday asked Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead.
Congressional negotiators said Thursday there were few obstacles to a final agreement, although no details of an accord were immediately available.
"There really isn't much of a deadlock to break," said Rep. Barney Frank, D-Mass, chairman of the House Financial Services Committee.
But there were fresh signs of trouble in the House Republican Caucus. A group of GOP lawmakers circulated an alternative designed to attract private money back into the credit markets with less government intrusion.
Under that proposal, the government would provide insurance to companies that agree to hold frozen assets, rather than purchase them directly as envisioned under the administration's plan. The firms would have to pay insurance premiums to the Treasury Department for the coverage.
"The taxpayers haven't done anything wrong," said Rep Eric Cantor, R-Va., adding that rather than require them to bear the cost of the bailout, the alternative "pretty much puts the burden on Wall Street over time."
Boehner, R-Ohio, the minority leader, was huddling with McCain on the rescue. When asked whether the GOP presidential nominee could corral restive Republicans to support the plan, Boehner said, "Who knows?"
Bush told the nation in a televised address Wednesday night that passage of the package his administration has proposed was urgently needed to calm the markets and restore confidence in the reeling financial system.
House Speaker Nancy Pelosi, D-Calif., said Bush's agreement with Democrats on limiting pay for executives of bailed-out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.
It was not immediately clear how lawmakers had resolved differences over how to phase in the unprecedented cost — a step demanded by Democrats and some Republicans who want stronger congressional control over the bailout — without spooking markets. The idea of letting the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also has been a topic of intense negotiation.
Frank told The Associated Press Thursday both elements would be included in the legislation.
Bush acknowledged Wednesday night that the bailout would be a "tough vote" for lawmakers. But he said failing to approve it would risk dire consequences for the economy and most Americans.
"Our entire economy is in danger," he said.
"I now expect we will, indeed, have a plan that can pass the House, pass the Senate, be signed by the president and bring a sense of certainty to this crisis that is sill roiling in the market," Sen. Bob Bennett, R-Utah, said as members of both parties emerged from a two-hour negotiating session.
Negotiators planned to present the outline at a White House meeting later Thursday with President Bush and the rivals to replace him, Republican John McCain and Democrat Barrack Obama.
"We're very confident that we can act expeditiously," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman.
Not everyone in the closed-door talks was as optimistic. Rep. Spencer Bachus of Alabama, the only House Republican in the bargaining meeting, stopped short of saying he agreed with the other lawmakers on an imminent deal.
"There was progress today," said Bachus, the senior Republican on the House Financial Services panel.
Later, he issued a statement saying he was not empowered to strike any deals and there was "no agreement other than to continue discussions."
Both houses' Republican leaders, Rep. John Boehner and Sen. Mitch McConnell, also issued statements saying there was no agreement.
Still, the White House called the announcement "a good sign that progress is being made."
"We'll want to hear from (Treasury) Secretary (Henry) Paulson and take a look at the details. We look forward to a good discussion at the meeting this afternoon," said Tony Fratto, the deputy White House press secretary.
A Treasury spokeswoman said the proposal was being reviewed there.
On Wall Street, stock prices were up late in the trading day, but not by as much as earlier in the day.
The core of the plan proposed by the administration just a few days ago envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.
Obama and McCain called for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.
McCain on Wednesday asked Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead.
Congressional negotiators said Thursday there were few obstacles to a final agreement, although no details of an accord were immediately available.
"There really isn't much of a deadlock to break," said Rep. Barney Frank, D-Mass, chairman of the House Financial Services Committee.
But there were fresh signs of trouble in the House Republican Caucus. A group of GOP lawmakers circulated an alternative designed to attract private money back into the credit markets with less government intrusion.
Under that proposal, the government would provide insurance to companies that agree to hold frozen assets, rather than purchase them directly as envisioned under the administration's plan. The firms would have to pay insurance premiums to the Treasury Department for the coverage.
"The taxpayers haven't done anything wrong," said Rep Eric Cantor, R-Va., adding that rather than require them to bear the cost of the bailout, the alternative "pretty much puts the burden on Wall Street over time."
Boehner, R-Ohio, the minority leader, was huddling with McCain on the rescue. When asked whether the GOP presidential nominee could corral restive Republicans to support the plan, Boehner said, "Who knows?"
Bush told the nation in a televised address Wednesday night that passage of the package his administration has proposed was urgently needed to calm the markets and restore confidence in the reeling financial system.
House Speaker Nancy Pelosi, D-Calif., said Bush's agreement with Democrats on limiting pay for executives of bailed-out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.
It was not immediately clear how lawmakers had resolved differences over how to phase in the unprecedented cost — a step demanded by Democrats and some Republicans who want stronger congressional control over the bailout — without spooking markets. The idea of letting the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also has been a topic of intense negotiation.
Frank told The Associated Press Thursday both elements would be included in the legislation.
Bush acknowledged Wednesday night that the bailout would be a "tough vote" for lawmakers. But he said failing to approve it would risk dire consequences for the economy and most Americans.
"Our entire economy is in danger," he said.
Thursday, September 25, 2008
Bush , Congress and the Bail Out Plan
Speaking to the American public Wednesday night, President Bush indicated he's willing to work with members of Congress on a bailout plan, but he also put them in a tough spot.
In a televised address, Bush called on Congress to pass the administration's rescue plan for Wall Street, which would leave taxpayers on the hook for up to $700 billion--just before Election Day.
In a televised address, Bush called on Congress to pass the administration's rescue plan for Wall Street, which would leave taxpayers on the hook for up to $700 billion--just before Election Day.
Wednesday, September 24, 2008
High Impact Forex News : GBP CBI Realize Assets & USD Existing Home Sales
Look Out for the 2 High Impact News today:
1. CBI Realized Assets for GBP
2. Existing Home Sales for USD
Tuesday, September 23, 2008
Forex News : US Bail Out Plans
US was against Bail Out Plans by countries attacked by G.Soros. Will Congress Approve the massive $700 Billion Bail Out Plan.
Bloomberg : $700 Billion Troubled Assets
Dollar Falls to Three-Week Low Versus Euro on Deficit Concern
Sept. 22 (Bloomberg) -- The dollar dropped to a three-week low against the euro and fell versus the yen on concern a U.S. proposal to buy $700 billion of troubled assets from financial institutions will widen the country's budget deficit.
Sept. 22 (Bloomberg) -- The dollar dropped to a three-week low against the euro and fell versus the yen on concern a U.S. proposal to buy $700 billion of troubled assets from financial institutions will widen the country's budget deficit.
Friday, September 19, 2008
Forex News : The Dollar Rebounds on Govt Action
USD Rebounds on Govt Action
by Korman Tam
9/18/2008 11:00:00 PM
The dollar edged higher in early Friday trading, rising above the 106-figure versus the yen and pushing the euro lower toward the 1.42-region. A relief rally in US equity bourses reversed earlier losses, with the Dow Jones Industrial Average closing the Thursday session 3.86% higher and the Nasdaq up by 4.78%. The advance in the greenback and stocks was prompted by discussions for the creation of a government-sponsored entity that would remove "the illiquid assets on bank balance sheets that are the underlying source of the current stresses in financial institutions and financial markets". In doing so, the government aims to restore confidence in the recently battered financial industry following the string of failures and halt any additional fallout on the already slumping economy.
Global central banks announced coordinated efforts to pump massive amounts of liquidity into the financial system to alleviate "continued elevated pressures in the US dollar short-term funding markets". The BoC, BoE, ECB, SNB, BoJ and Federal Reserve increased their swap lines to provide improved liquidity in both term and overnight operations by more than $180 billion.
by Korman Tam
9/18/2008 11:00:00 PM
The dollar edged higher in early Friday trading, rising above the 106-figure versus the yen and pushing the euro lower toward the 1.42-region. A relief rally in US equity bourses reversed earlier losses, with the Dow Jones Industrial Average closing the Thursday session 3.86% higher and the Nasdaq up by 4.78%. The advance in the greenback and stocks was prompted by discussions for the creation of a government-sponsored entity that would remove "the illiquid assets on bank balance sheets that are the underlying source of the current stresses in financial institutions and financial markets". In doing so, the government aims to restore confidence in the recently battered financial industry following the string of failures and halt any additional fallout on the already slumping economy.
Global central banks announced coordinated efforts to pump massive amounts of liquidity into the financial system to alleviate "continued elevated pressures in the US dollar short-term funding markets". The BoC, BoE, ECB, SNB, BoJ and Federal Reserve increased their swap lines to provide improved liquidity in both term and overnight operations by more than $180 billion.
Wednesday, September 17, 2008
Tuesday, September 16, 2008
Forex News - Lehman Pushed The Yen Up
Yen Advances Most Against Dollar in Decade on Lehman Bankruptcy
Sept. 15 (Bloomberg) -- The yen strengthened the most in 10 years against the dollar after Lehman Brothers Holdings Inc. filed for bankruptcy, prompting traders to sell assets financed by loans in Japan.
Sept. 15 (Bloomberg) -- The yen strengthened the most in 10 years against the dollar after Lehman Brothers Holdings Inc. filed for bankruptcy, prompting traders to sell assets financed by loans in Japan.
Monday, September 15, 2008
The Dollar Fell
Sept. 12 (Bloomberg) -- The dollar fell from a one-year high versus the euro after reports showed U.S. retail sales unexpectedly declined in August and prices paid to producers dropped for the first time this year.
Friday, September 12, 2008
USDJPY
Global Growth Slowdown Spark USD, JPY
by Korman Tam
9/11/2008 3:19:00 PM
The key gainers in the currency market for the Wednesday session were the yen and dollar, both advancing sharply amid heightened risk aversion over mounting fears for a global recessionary environment. Crude oil also slumped, falling to its lowest level in 8-months at $100.32 per barrel as traders continue to anticipate a slowdown in demand in the near-term, prompted by deterioration in global economic fundamentals.
The economic reports earlier in the session saw a larger than anticipated US trade deficit, which burgeoned to its highest level since March 2007. Consensus estimates were expecting the July trade deficit to increase to $58.0 billion from $56.77 billion previously, instead the deficit swelled to $62.2 billion for July versus an upwardly revised $58.84 billion deficit in the month prior. The exports component hit a record, up 3.3% to $168.15 billion compared with $162.79 billion from June, while imports also expanded to record levels, increasing by 3.9% to $230.35 billion versus $221.65 billion. The July oil import price was up 6.4% to a record $124.66 per barrel. With oil retreating sharply from the record levels in July, we look for the deficit to pull back somewhat over the coming months. Also released were weekly jobless claims, which edged up marginally to 445k from 444k a week earlier.
The dollar surged to a near one-year high against the euro at 1.3881 and a fresh 2 ½-year high versus the pound at 1.7443. Lingering fears over the scope for a recession to hit the UK in the coming months continue to drag the sterling lower. The catalyst for the sell-off was comments from BoE Board Member Blanchflower, who expressed fears that job losses may triple amid a larger than expected decline in the UK economy. Meanwhile, traders shrugged off comments from BoE Governor King, suggesting interest rates may remain on hold in the interim. King, speaking before the Treasury Committee, said that while the growth outlook had deteriorated, inflation had also increased, potentially sparking further increases in wages.
by Korman Tam
9/11/2008 3:19:00 PM
The key gainers in the currency market for the Wednesday session were the yen and dollar, both advancing sharply amid heightened risk aversion over mounting fears for a global recessionary environment. Crude oil also slumped, falling to its lowest level in 8-months at $100.32 per barrel as traders continue to anticipate a slowdown in demand in the near-term, prompted by deterioration in global economic fundamentals.
The economic reports earlier in the session saw a larger than anticipated US trade deficit, which burgeoned to its highest level since March 2007. Consensus estimates were expecting the July trade deficit to increase to $58.0 billion from $56.77 billion previously, instead the deficit swelled to $62.2 billion for July versus an upwardly revised $58.84 billion deficit in the month prior. The exports component hit a record, up 3.3% to $168.15 billion compared with $162.79 billion from June, while imports also expanded to record levels, increasing by 3.9% to $230.35 billion versus $221.65 billion. The July oil import price was up 6.4% to a record $124.66 per barrel. With oil retreating sharply from the record levels in July, we look for the deficit to pull back somewhat over the coming months. Also released were weekly jobless claims, which edged up marginally to 445k from 444k a week earlier.
The dollar surged to a near one-year high against the euro at 1.3881 and a fresh 2 ½-year high versus the pound at 1.7443. Lingering fears over the scope for a recession to hit the UK in the coming months continue to drag the sterling lower. The catalyst for the sell-off was comments from BoE Board Member Blanchflower, who expressed fears that job losses may triple amid a larger than expected decline in the UK economy. Meanwhile, traders shrugged off comments from BoE Governor King, suggesting interest rates may remain on hold in the interim. King, speaking before the Treasury Committee, said that while the growth outlook had deteriorated, inflation had also increased, potentially sparking further increases in wages.
Thursday, September 11, 2008
The Yen Drops
Yen Falls as Advance in Stocks Boosts Demand for Higher Yields
Sept. 10 (Bloomberg) -- The yen fell the most in more than two weeks against the euro and the dollar as an increase in U.S. stocks encouraged investors to take out low-cost loans in Japan and buy higher-yielding assets elsewhere.
Japan's currency also decreased versus the Australian and New Zealand dollars on speculation .
Sept. 10 (Bloomberg) -- The yen fell the most in more than two weeks against the euro and the dollar as an increase in U.S. stocks encouraged investors to take out low-cost loans in Japan and buy higher-yielding assets elsewhere.
Japan's currency also decreased versus the Australian and New Zealand dollars on speculation .
Wednesday, September 10, 2008
EURUSD
EUR/USD (1.4162)
European & US sessions forecast levels: 1.4045/1.4260
Trend Sessions: European: Neutral
US: Neutral
European & US sessions forecast levels: 1.4045/1.4260
Trend Sessions: European: Neutral
US: Neutral
Tuesday, September 9, 2008
Forex News : Yen Falls Against Dollar
Sept. 8 (Bloomberg) -- The yen fell the most in two weeks against the dollar as the U.S. government's takeover of Fannie Mae and Freddie Mac encouraged investors to buy higher-yielding assets.
Saturday, September 6, 2008
Yen Rises US Jobs Down
Yen Rises to Highest Versus Dollar Since July as U.S. Jobs Fall
Sept. 5 (Bloomberg) -- The yen rose to the highest level against the dollar since July after the U.S. lost jobs for an eighth month and touched a one-year high versus the euro as investors sold higher-yielding assets funded in Japan.
Japan's yen rallied against most of the world's major currencies on concern credit-market losses will lead to a global recession. The Australian and New Zealand dollars dropped to a two-year low on speculation a slump in stocks and commodities encouraged investors to reverse carry trades.
The yen rose for a third day against the dollar, increasing 0.7 percent to 106.36 at 10:31 a.m. in New York, from 107.08 yesterday. It reached 105.55, the highest since July 17. Japan's currency climbed 1.1 percent to 151.66 versus the euro, from 153.40, and touched 150.60, the highest since Aug. 17, 2007. Against the euro, the dollar traded at $1.4261, compared with $1.4325. It touched $1.4196, the strongest since Oct. 24.
Sept. 5 (Bloomberg) -- The yen rose to the highest level against the dollar since July after the U.S. lost jobs for an eighth month and touched a one-year high versus the euro as investors sold higher-yielding assets funded in Japan.
Japan's yen rallied against most of the world's major currencies on concern credit-market losses will lead to a global recession. The Australian and New Zealand dollars dropped to a two-year low on speculation a slump in stocks and commodities encouraged investors to reverse carry trades.
The yen rose for a third day against the dollar, increasing 0.7 percent to 106.36 at 10:31 a.m. in New York, from 107.08 yesterday. It reached 105.55, the highest since July 17. Japan's currency climbed 1.1 percent to 151.66 versus the euro, from 153.40, and touched 150.60, the highest since Aug. 17, 2007. Against the euro, the dollar traded at $1.4261, compared with $1.4325. It touched $1.4196, the strongest since Oct. 24.
Friday, September 5, 2008
Non Farm Payroll - Aug 2008
Nonfarm payroll (NFP) employment continued its downtrend in July with U.S. employers shaving 51,000 jobs, marking the first time since May 2002 that the economy lost jobs for seven consecutive months. The Labor Department also reported last month that the U.S. unemployment rate rose to 5.7 percent—its highest level in more than four years—erasing all job gains made over the last year. Revisions to May and June's payrolls showed a total of 26,000 fewer jobs were lost than previously expected, bringing the number of jobs lost so far in 2008 to 463,000.
Thursday, September 4, 2008
SHORT GBPJPY
GBPJPY
SHORT position at 193.30
STOP LOSS above 193.80 (-50 pips).
THE TARGETS are 192.76 / 192.12
OP, SL & TP at your own risks.
SHORT position at 193.30
STOP LOSS above 193.80 (-50 pips).
THE TARGETS are 192.76 / 192.12
OP, SL & TP at your own risks.
Forex News : Euro Drops
Sept. 3 (Bloomberg) -- The euro fell to the lowest level against the dollar in more than seven months after European reports showed retail sales and business investment dropped and crude oil extended its decline.
Wednesday, September 3, 2008
Dollar Rises to Highest in Almost Seven Months on Oil, Fed Cuts
Sept. 2 (Bloomberg) -- The dollar rose to the highest level against the euro in almost seven months as oil fell and Federal Reserve rate cuts raised speculation that the U.S. economy will outperform Europe and Asia.
The pound fell to a two-year low versus the greenback on evidence a recession in the U.K. is looming. Australia's dollar fell to the weakest level in almost a year after the country's central bank cut interest rates for the first time since 2001 and said economic growth will slow.
The pound fell to a two-year low versus the greenback on evidence a recession in the U.K. is looming. Australia's dollar fell to the weakest level in almost a year after the country's central bank cut interest rates for the first time since 2001 and said economic growth will slow.
Tuesday, September 2, 2008
Forex News : USDJPY Higher
JPY, USD Climbs Higher in Thin Trading
by Korman Tam
9/1/2008 1:45:00 PM
The dollar is higher across the board, strengthening past the 1.80-level against the sterling and pushing the euro to 1.4583. Despite the holiday-shortened week, with the US market closed today in observance of the Labor Day holiday, foreign exchange traders will digest a barrage of economic events including several key central bank monetary policy announcements, including the Bank of Canada, the Reserve Bank of Australia, the European Central Bank and the Bank of England. Among the central banks, only the RBA is expected to shift policy - cutting its benchmark interest rate by 25-basis points to 7.0%. However, commentary from the BoC and ECB will be closely scrutinized for clues on whether policy changes from either central bank can be anticipated.
US economic reports due out this week consist of manufacturing ISM, durable goods orders, factory orders, weekly jobless claims, Q2 productivity, services ISM, and the August jobs report. Manufacturing ISM, due out on Tuesday at 10:00 AM, is seen slipping beneath the key 50-level to 49.9, which indicates contraction in the manufacturing sector for the month of August. Meanwhile, garnering the lion's share of market attention this week will be Friday's August jobs data. Although the unemployment rate is estimated to remain unchanged at 5.7%, the data is likely to indicate a loss of 73k jobs, greater than the 51k jobs lost from July.
by Korman Tam
9/1/2008 1:45:00 PM
The dollar is higher across the board, strengthening past the 1.80-level against the sterling and pushing the euro to 1.4583. Despite the holiday-shortened week, with the US market closed today in observance of the Labor Day holiday, foreign exchange traders will digest a barrage of economic events including several key central bank monetary policy announcements, including the Bank of Canada, the Reserve Bank of Australia, the European Central Bank and the Bank of England. Among the central banks, only the RBA is expected to shift policy - cutting its benchmark interest rate by 25-basis points to 7.0%. However, commentary from the BoC and ECB will be closely scrutinized for clues on whether policy changes from either central bank can be anticipated.
US economic reports due out this week consist of manufacturing ISM, durable goods orders, factory orders, weekly jobless claims, Q2 productivity, services ISM, and the August jobs report. Manufacturing ISM, due out on Tuesday at 10:00 AM, is seen slipping beneath the key 50-level to 49.9, which indicates contraction in the manufacturing sector for the month of August. Meanwhile, garnering the lion's share of market attention this week will be Friday's August jobs data. Although the unemployment rate is estimated to remain unchanged at 5.7%, the data is likely to indicate a loss of 73k jobs, greater than the 51k jobs lost from July.
GBPJPY @ 194.60
GBPJPY @ 22:30 GMT 1 Sept
SHORT position at 194.60
STOP LOSS above 195.10 (-50 pips).
THE TARGETS are 194.06 / 193.42
OP, SL & TP at your own risks.
SHORT position at 194.60
STOP LOSS above 195.10 (-50 pips).
THE TARGETS are 194.06 / 193.42
OP, SL & TP at your own risks.
Monday, September 1, 2008
Dollar Falls
Dollar Falls on Speculation Oil Gains to Weaken U.S. Economy
Sept. 1 (Bloomberg) -- The dollar fell to the lowest in more than a week against the yen on speculation a rise in oil prices will harm the economic outlook for the world's largest energy consumer.
The dollar declined against the euro as Hurricane Gustav approached the Gulf of Mexico,
Thursday, August 28, 2008
Euro Up
Euro Rises From Six-Month Low Against Dollar on Weber, Oil Gain
Aug. 27 (Bloomberg) -- The euro rose from a six-month low versus the dollar as European Central Bank council member Axel Weber said discussion about a reduction in interest rates is ``premature'' and crude oil prices increased for a third day.
Aug. 27 (Bloomberg) -- The euro rose from a six-month low versus the dollar as European Central Bank council member Axel Weber said discussion about a reduction in interest rates is ``premature'' and crude oil prices increased for a third day.
Wednesday, August 27, 2008
Bloomberg
Dollar Rises to Six-Month High on Bets Global Economy Slowing
Aug. 26 (Bloomberg) -- The dollar rose to a six-month high against the euro on evidence the greenback will be the main beneficiary from a global economic slowdown as German business confidence dropped in August more than forecast.
Aug. 26 (Bloomberg) -- The dollar rose to a six-month high against the euro on evidence the greenback will be the main beneficiary from a global economic slowdown as German business confidence dropped in August more than forecast.
Tuesday, August 26, 2008
Friday, August 22, 2008
Thursday, August 21, 2008
Bloomberg
Euro Declines as German Ministry Says Economy Is Deteriorating
Aug. 20 (Bloomberg) -- The euro fell against the dollar to near the lowest level in six months as Germany's Economy Ministry said the outlook for Europe's largest economy has deteriorated even beyond the second quarter.
The pound fell to near a two-year low versus the dollar as minutes of the Bank of England's August meeting indicated British inflation risks may have ``eased a little'' while the outlook for the economy got worse. The dollar has risen 8 percent versus the euro from the record low set in July.
``The market was waiting for a big correction after such a massive dollar rally, but they never got it,'' said Steve Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto. ``People are pessimistic about European growth. They are coming back to buy the dollar on a dip.''
The euro decreased 0.2 percent to $1.4748 at 10:38 a.m. in New York, from $1.4776 yesterday, when it touched $1.4631, the lowest since Feb. 20. It reached the record high of $1.6038 on July 15. The currency fell 0.1 percent to 161.92 yen, from 162.13 yesterday, when it touched 160.87, the weakest in three months. The dollar traded at 109.76 yen, compared with 109.72.
The pound dropped 0.3 percent to $1.8621 on the Bank of England's economic outlook, after touching $1.8512 on Aug. 15, the lowest level since July 2006.
BOE policy makers split three ways when they kept the target lending rate unchanged earlier this month, minutes of the Aug. 7 meeting showed today. Governor Mervyn King and six other members of the Monetary Policy Committee held the benchmark at 5 percent, while one official voted for a rate increase and another called for a cut to help sustain growth.
Freddie Mac
The dollar erased its gain versus the yen and pared its advance against the euro after the Wall Street Journal reported that Freddie Mac executives are scheduled to meet with U.S. Treasury Department officials today.
Crude oil increased 1.5 percent to $116.24 a barrel. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they move in lockstep.
Futures on the Chicago Board of Trade show a 21 percent chance the U.S. central bank will raise the 2 percent target rate for overnight lending between banks by at least a quarter- point by its Dec. 16 meeting, down from 35 percent odds a week earlier. Policy makers next meet Sept. 16.
The euro fell 0.2 percent to 14.9409 Mexican pesos as Germany's economic ministry said in its monthly report that growth will remain moderate.
The country's BDB banking association said it no longer expects Europe's biggest economy to expand between 2.25 percent and 2.50 percent this year, and will change its growth forecast on Sept. 18. The German economy shrank 0.5 percent in the second quarter, the first contraction in four years.
Aug. 20 (Bloomberg) -- The euro fell against the dollar to near the lowest level in six months as Germany's Economy Ministry said the outlook for Europe's largest economy has deteriorated even beyond the second quarter.
The pound fell to near a two-year low versus the dollar as minutes of the Bank of England's August meeting indicated British inflation risks may have ``eased a little'' while the outlook for the economy got worse. The dollar has risen 8 percent versus the euro from the record low set in July.
``The market was waiting for a big correction after such a massive dollar rally, but they never got it,'' said Steve Butler, director of foreign-exchange trading at Scotia Capital Inc. in Toronto. ``People are pessimistic about European growth. They are coming back to buy the dollar on a dip.''
The euro decreased 0.2 percent to $1.4748 at 10:38 a.m. in New York, from $1.4776 yesterday, when it touched $1.4631, the lowest since Feb. 20. It reached the record high of $1.6038 on July 15. The currency fell 0.1 percent to 161.92 yen, from 162.13 yesterday, when it touched 160.87, the weakest in three months. The dollar traded at 109.76 yen, compared with 109.72.
The pound dropped 0.3 percent to $1.8621 on the Bank of England's economic outlook, after touching $1.8512 on Aug. 15, the lowest level since July 2006.
BOE policy makers split three ways when they kept the target lending rate unchanged earlier this month, minutes of the Aug. 7 meeting showed today. Governor Mervyn King and six other members of the Monetary Policy Committee held the benchmark at 5 percent, while one official voted for a rate increase and another called for a cut to help sustain growth.
Freddie Mac
The dollar erased its gain versus the yen and pared its advance against the euro after the Wall Street Journal reported that Freddie Mac executives are scheduled to meet with U.S. Treasury Department officials today.
Crude oil increased 1.5 percent to $116.24 a barrel. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations. A reading of 1 would mean they move in lockstep.
Futures on the Chicago Board of Trade show a 21 percent chance the U.S. central bank will raise the 2 percent target rate for overnight lending between banks by at least a quarter- point by its Dec. 16 meeting, down from 35 percent odds a week earlier. Policy makers next meet Sept. 16.
The euro fell 0.2 percent to 14.9409 Mexican pesos as Germany's economic ministry said in its monthly report that growth will remain moderate.
The country's BDB banking association said it no longer expects Europe's biggest economy to expand between 2.25 percent and 2.50 percent this year, and will change its growth forecast on Sept. 18. The German economy shrank 0.5 percent in the second quarter, the first contraction in four years.
Wednesday, August 20, 2008
Yen
Yen Advances as Credit Losses Damp Demand for Higher Yields
Aug. 19 (Bloomberg) -- The yen increased to a three-month high against the euro on speculation financial firms will report more losses, reducing demand for higher-yielding assets funded by loans in Japan.
Aug. 19 (Bloomberg) -- The yen increased to a three-month high against the euro on speculation financial firms will report more losses, reducing demand for higher-yielding assets funded by loans in Japan.
Dollar Eases
USD Eases on Data, Oil
by Korman Tam
8/19/2008 3:17:00 PM
The dollar continued to relinquish its gains versus the majors in Tuesday trading, falling to 1.4791 against the euro and giving back the 110-handle versus the yen. Rebounding oil and commodity prices, combined with more evidence of deterioration in the US housing market prompted further profit taking in the greenback. Crude oil edged up to a session high of 116.12 but closed at 114.31 while spot gold recovered above the $800-level to $810/oz.
The economic reports released earlier in the session saw housing starts slump by 11% to 965k units for July, down from 1.066mln units a month prior. Building permits reversed the16.4% increase from June, sinking by 17.7% to its lowest level in 17-years at 937k units, down sharply from 1.138mln units previously. Meanwhile, producer prices firmed in July as core PPI increased to 0.7% up from 0.2% a month earlier and 3.5% compared with 3.0% from the previous month. Headline producer prices shot up to 9.8% versus 9.2% from a year earlier.
The next batch of US data are slated for release on Thursday, including weekly jobless claims, leading indicators, and the Philadelphia Fed manufacturing survey. Weekly jobless claims are seen easing slightly to 433k, down from 450k, while July leading indicators are estimated to worsen to -0.2% from -0.1%. The Philadelphia Fed manufacturing survey is expected to improve to -14.0, from -16.3 from July.
by Korman Tam
8/19/2008 3:17:00 PM
The dollar continued to relinquish its gains versus the majors in Tuesday trading, falling to 1.4791 against the euro and giving back the 110-handle versus the yen. Rebounding oil and commodity prices, combined with more evidence of deterioration in the US housing market prompted further profit taking in the greenback. Crude oil edged up to a session high of 116.12 but closed at 114.31 while spot gold recovered above the $800-level to $810/oz.
The economic reports released earlier in the session saw housing starts slump by 11% to 965k units for July, down from 1.066mln units a month prior. Building permits reversed the16.4% increase from June, sinking by 17.7% to its lowest level in 17-years at 937k units, down sharply from 1.138mln units previously. Meanwhile, producer prices firmed in July as core PPI increased to 0.7% up from 0.2% a month earlier and 3.5% compared with 3.0% from the previous month. Headline producer prices shot up to 9.8% versus 9.2% from a year earlier.
The next batch of US data are slated for release on Thursday, including weekly jobless claims, leading indicators, and the Philadelphia Fed manufacturing survey. Weekly jobless claims are seen easing slightly to 433k, down from 450k, while July leading indicators are estimated to worsen to -0.2% from -0.1%. The Philadelphia Fed manufacturing survey is expected to improve to -14.0, from -16.3 from July.
Tuesday, August 19, 2008
USA Housing Starts
Relevance: Tends to move markets on release
Release schedule : 8:30 AM (EST); monthly, two or three weeks after the reporting month
Source of report : U.S. Census Bureau
Web Address : www.census.gov
Address of release : www.census.gov/const/www/newresconstindex.html
Friday, August 15, 2008
Euro Down
Euro Trades Near 5 1/2-Month Low Versus Dollar as GDP Shrinks
Aug. 14 (Bloomberg) -- The euro traded near a 5 1/2-month low against the dollar after a report showed Europe's economy contracted for the first time since the 15-nation currency was introduced almost a decade ago.
Aug. 14 (Bloomberg) -- The euro traded near a 5 1/2-month low against the dollar after a report showed Europe's economy contracted for the first time since the 15-nation currency was introduced almost a decade ago.
Saturday, August 9, 2008
Euro Falls
Euro Falls the Most in 8 Years on Reduced Bets for Higher Rate
Aug. 8 (Bloomberg) -- The euro fell the most in almost eight years against the dollar as traders pared bets the European Central Bank will raise interest rates as the economy slows.
Aug. 8 (Bloomberg) -- The euro fell the most in almost eight years against the dollar as traders pared bets the European Central Bank will raise interest rates as the economy slows.
Wednesday, August 6, 2008
Forex News: FOMC @ 2.00%
FOMC Unchanged, USD Holds Gains
by Korman Tam
8/5/2008 3:35:00 PM
The FOMC, as expected, left interest rates unchanged at 2.0% when it announced its decision earlier in the session. The accompanying statement offered a neutral bias, reiterating high uncertainty over the inflation outlook, continued softening in the labor markets and considerable stress on the financial markets. The Fed expects tight credit conditions, the ongoing housing contraction, and elevated energy prices to weigh on economic growth over the coming quarters. Balancing its view on growth, the Fed acknowledged "upside risks to inflation are also of significant concern to the committee".
Although the greenback relinquished some of its overnight gains against the majors following the Fed policy announcement, it remained at 11-month highs against the Canadian dollar around 1.0450. The breaches of key levels recently, particularly 0.95 versus the Aussie, 1.0330 against the Canadian dollar and above 1.05 to the Swissie, mark a shift in sentiment with markets rewarding the greenback on a combination of sharp declines in oil and commodity prices and increasing uncertainty over the growth prospects of overseas economies. The euro's inability to hold above its 1-year ascending trendline and subsequent breach of the 1.55-level paves the way for an imminent test of the 1.5300-1.5350 region, which marks the neckline support for a triple top formation.
US data released this morning included a better than expected non-manufacturing ISM at 49.5 for July and improving from 48.2 a month earlier. This corresponds with softer figures from the Eurozone and UK, which printed at 48.3 and 47.4, respectively. With crude oil extending losses beneath the $120-handle, losing another $2.24 per barrel in the Tuesday session, and economic fundamentals across the Atlantic deteriorating more rapidly than expected, we look for the dollar to extend its gains further in the months ahead amid heightened anticipation for policy easing from the RBA, BoE, and ECB.
by Korman Tam
8/5/2008 3:35:00 PM
The FOMC, as expected, left interest rates unchanged at 2.0% when it announced its decision earlier in the session. The accompanying statement offered a neutral bias, reiterating high uncertainty over the inflation outlook, continued softening in the labor markets and considerable stress on the financial markets. The Fed expects tight credit conditions, the ongoing housing contraction, and elevated energy prices to weigh on economic growth over the coming quarters. Balancing its view on growth, the Fed acknowledged "upside risks to inflation are also of significant concern to the committee".
Although the greenback relinquished some of its overnight gains against the majors following the Fed policy announcement, it remained at 11-month highs against the Canadian dollar around 1.0450. The breaches of key levels recently, particularly 0.95 versus the Aussie, 1.0330 against the Canadian dollar and above 1.05 to the Swissie, mark a shift in sentiment with markets rewarding the greenback on a combination of sharp declines in oil and commodity prices and increasing uncertainty over the growth prospects of overseas economies. The euro's inability to hold above its 1-year ascending trendline and subsequent breach of the 1.55-level paves the way for an imminent test of the 1.5300-1.5350 region, which marks the neckline support for a triple top formation.
US data released this morning included a better than expected non-manufacturing ISM at 49.5 for July and improving from 48.2 a month earlier. This corresponds with softer figures from the Eurozone and UK, which printed at 48.3 and 47.4, respectively. With crude oil extending losses beneath the $120-handle, losing another $2.24 per barrel in the Tuesday session, and economic fundamentals across the Atlantic deteriorating more rapidly than expected, we look for the dollar to extend its gains further in the months ahead amid heightened anticipation for policy easing from the RBA, BoE, and ECB.
Saturday, August 2, 2008
The Dollar
USD Edges Higher Following Jobs
by Korman Tam
8/1/2008 2:19:00 PM
The US economic reports released in the Friday session offered a mixed bag of data, providing traders with conflicting signals and whipsawing the major currency pairs around. The dollar initially rallied sharply upon the release of the July non-farm payrolls reading, which bested consensus estimates for deterioration to -75k from -62k in June, instead revealing an improved jobs loss of 51k. The payrolls figure bolstered the greenback to its highest level since late June against the euro to test its one-year trendline support at 1.5518. However, the jobs report was not entirely rosy given the larger than expected reading in the July unemployment rate - which edged up to its highest level in 4-years at 5.7%, higher than calls for an increase to 5.6% from 5.5% in May. Meanwhile, manufacturing ISM in July beat estimates for a contraction, holding firm at the key 50-level and drifting marginally from the June reading of 50.2.
The greenback retreated sharply away from a year-long ascending support line against the euro near the 1.5520-region amid rebounds in crude oil and spot gold. Moreover, the dollar touched key levels against the Loonie and Swissie around the 1.03 and 1.05 handles, respectively, but failed to garner enough momentum to breach the aforementioned resistance levels. The current outlook continues to favor a stronger dollar stemming from the rapid deterioration in economic fundamentals across the Atlantic and tempered expectations for monetary policy tightening from both the ECB and BoE. However, failure to breach those key levels against the euro, Canadian dollar and Swiss franc will likely result in further consolidation in the major currencies, with movements largely dictated by price action in both crude oil and spot gold.
by Korman Tam
8/1/2008 2:19:00 PM
The US economic reports released in the Friday session offered a mixed bag of data, providing traders with conflicting signals and whipsawing the major currency pairs around. The dollar initially rallied sharply upon the release of the July non-farm payrolls reading, which bested consensus estimates for deterioration to -75k from -62k in June, instead revealing an improved jobs loss of 51k. The payrolls figure bolstered the greenback to its highest level since late June against the euro to test its one-year trendline support at 1.5518. However, the jobs report was not entirely rosy given the larger than expected reading in the July unemployment rate - which edged up to its highest level in 4-years at 5.7%, higher than calls for an increase to 5.6% from 5.5% in May. Meanwhile, manufacturing ISM in July beat estimates for a contraction, holding firm at the key 50-level and drifting marginally from the June reading of 50.2.
The greenback retreated sharply away from a year-long ascending support line against the euro near the 1.5520-region amid rebounds in crude oil and spot gold. Moreover, the dollar touched key levels against the Loonie and Swissie around the 1.03 and 1.05 handles, respectively, but failed to garner enough momentum to breach the aforementioned resistance levels. The current outlook continues to favor a stronger dollar stemming from the rapid deterioration in economic fundamentals across the Atlantic and tempered expectations for monetary policy tightening from both the ECB and BoE. However, failure to breach those key levels against the euro, Canadian dollar and Swiss franc will likely result in further consolidation in the major currencies, with movements largely dictated by price action in both crude oil and spot gold.
Friday, August 1, 2008
Dollar Falls
Dollar Falls as GDP Trails Forecast, Jobless Claims Increase
July 31 (Bloomberg) -- The dollar fell for the first time in three days against the euro as reports showed the U.S. economy grew less than forecast in the second quarter and initial jobless claims rose last week to a five-year high.
July 31 (Bloomberg) -- The dollar fell for the first time in three days against the euro as reports showed the U.S. economy grew less than forecast in the second quarter and initial jobless claims rose last week to a five-year high.
NON FARM PAYROLL
NON FARM PAYROLL
U.S. employers trimmed jobs from their payrolls in June for the sixth consecutive month, showing continued—albeit relatively mild—weakness in the labor market. Thus far, job losses are still at a rate soft enough to not pull the overall economy into recession. The Labor Department reported a net loss of 62,000 jobs in June, matching the job loss figure for May, which was revised higher from 49,000. The decline in June employment was slightly worse than the consensus forecast for a 60,000 decline, and brought the number of jobs lost by the U.S. economy so far this year to 438,000.
Several key factors are thought to have influenced the July NFP report. They include:
- An increase in the unemployment rate to 5.5%, matching the May level and consensus expectations.
- The decline of 49,000 (0.04%) in NFPs continues a trend of small declines in payrolls consistent with GDP growth near 1.5%.
- Hourly earnings bounced back to a 0.3% gain after a 0.1% increase in April.
- The four-week moving average for unemployment insurance initial claims neared the worrisome 400,000 benchmark, reaching 390,500—the highest level since the four weeks following 2005's Hurricane Katrina.
For week ending July 19, the Labor Department reported that the advance figure for seasonally adjusted initial claims was 406,000, an increase of 34,000 from the previous week's revised figure of 372,000. They also reported a four-week moving average of 382,500, an increase of 4,500 from the previous week's revised average of 378,000.
While the sequence of negative payroll numbers is certainly not good news for consumers, its relatively soft pace should be kept in perspective. Even incremental gains in economic productivity will keep overall growth slightly positive. While the economic picture isn't necessarily inspiring, neither is it cause for panic. Watch for slow growth ahead.
U.S. employers trimmed jobs from their payrolls in June for the sixth consecutive month, showing continued—albeit relatively mild—weakness in the labor market. Thus far, job losses are still at a rate soft enough to not pull the overall economy into recession. The Labor Department reported a net loss of 62,000 jobs in June, matching the job loss figure for May, which was revised higher from 49,000. The decline in June employment was slightly worse than the consensus forecast for a 60,000 decline, and brought the number of jobs lost by the U.S. economy so far this year to 438,000.
Several key factors are thought to have influenced the July NFP report. They include:
- An increase in the unemployment rate to 5.5%, matching the May level and consensus expectations.
- The decline of 49,000 (0.04%) in NFPs continues a trend of small declines in payrolls consistent with GDP growth near 1.5%.
- Hourly earnings bounced back to a 0.3% gain after a 0.1% increase in April.
- The four-week moving average for unemployment insurance initial claims neared the worrisome 400,000 benchmark, reaching 390,500—the highest level since the four weeks following 2005's Hurricane Katrina.
For week ending July 19, the Labor Department reported that the advance figure for seasonally adjusted initial claims was 406,000, an increase of 34,000 from the previous week's revised figure of 372,000. They also reported a four-week moving average of 382,500, an increase of 4,500 from the previous week's revised average of 378,000.
While the sequence of negative payroll numbers is certainly not good news for consumers, its relatively soft pace should be kept in perspective. Even incremental gains in economic productivity will keep overall growth slightly positive. While the economic picture isn't necessarily inspiring, neither is it cause for panic. Watch for slow growth ahead.
Thursday, July 31, 2008
The Greenback
Greenback Relinquishes Gains on Oil
by Korman Tam
7/30/2008 3:20:00 PM
The dollar backed away from its gains versus the majors by afternoon New York trading, relinquishing a five-week high against the euro at 1.5523 to fall back near the 1.56-handle. The greenback initially received a boost from the better-than-expected ADP private sector payrolls report but later succumbed to a combination of profit taking ahead of key US economic reports starting tomorrow and a $4.58 rebound in oil to $126.71 per barrel.
The ADP private sector payrolls defied consensus estimates for a loss of 60k jobs in July, following a 79k loss a month earlier, instead increasing by 9k jobs. Traders quickly rewarded the dollar following another bout of upbeat economic data, reacting in similar fashion to yesterday's better-than-forecast consumer confidence survey. However, the euphoria was short-lived as oil extended its rally and markets shift focus to several potentially dollar negative reports in the remainder of the week.
The US reports scheduled for release tomorrow include the advanced reading for Q2 GDP, weekly jobless claims, July NY NAPM manufacturing and the July Chicago PMI. The advanced reading for GDP in Q2 is seen improving to 2.0% from 1.0% in the previous quarter. The Chicago PMI reading is seen remaining beneath the key 50-level for the 6th consecutive month, expected to decline to 49.0 from 49.6 and highlighting continued weakness in the US manufacturing sector. Although the report has been steadily improving since hitting a 7-year low in February at 44.5, it has remain mired in contraction territory for six months and is seen slipping lower from the previous month.
by Korman Tam
7/30/2008 3:20:00 PM
The dollar backed away from its gains versus the majors by afternoon New York trading, relinquishing a five-week high against the euro at 1.5523 to fall back near the 1.56-handle. The greenback initially received a boost from the better-than-expected ADP private sector payrolls report but later succumbed to a combination of profit taking ahead of key US economic reports starting tomorrow and a $4.58 rebound in oil to $126.71 per barrel.
The ADP private sector payrolls defied consensus estimates for a loss of 60k jobs in July, following a 79k loss a month earlier, instead increasing by 9k jobs. Traders quickly rewarded the dollar following another bout of upbeat economic data, reacting in similar fashion to yesterday's better-than-forecast consumer confidence survey. However, the euphoria was short-lived as oil extended its rally and markets shift focus to several potentially dollar negative reports in the remainder of the week.
The US reports scheduled for release tomorrow include the advanced reading for Q2 GDP, weekly jobless claims, July NY NAPM manufacturing and the July Chicago PMI. The advanced reading for GDP in Q2 is seen improving to 2.0% from 1.0% in the previous quarter. The Chicago PMI reading is seen remaining beneath the key 50-level for the 6th consecutive month, expected to decline to 49.0 from 49.6 and highlighting continued weakness in the US manufacturing sector. Although the report has been steadily improving since hitting a 7-year low in February at 44.5, it has remain mired in contraction territory for six months and is seen slipping lower from the previous month.
Wednesday, July 30, 2008
Bloomberg Forex News
Dollar Rises to One-Month High as Confidence Rises, Oil Falls
July 29 (Bloomberg) -- The dollar advanced to a one-month high versus the euro and the yen as U.S. consumer confidence increased and crude oil prices dropped, reducing concern the economy may fall into a recession.
The currency rose against the yen and New Zealand's dollar as unemployment climbed in Japan last month and home building permits fell to the lowest in almost 22 years in New Zealand. The pound fell versus the dollar after an index of U.K. retail sales dropped in July to a 25-year low.
July 29 (Bloomberg) -- The dollar advanced to a one-month high versus the euro and the yen as U.S. consumer confidence increased and crude oil prices dropped, reducing concern the economy may fall into a recession.
The currency rose against the yen and New Zealand's dollar as unemployment climbed in Japan last month and home building permits fell to the lowest in almost 22 years in New Zealand. The pound fell versus the dollar after an index of U.K. retail sales dropped in July to a 25-year low.
Saturday, July 26, 2008
USD 25 July
Upbeat Data Props USD
by Korman Tam
The greenback was higher in the Friday session, rallying near the 108-level against the yen and 1.5650 versus the euro on the heels of better than expected US economic reports. The data released today consisted of June durable goods orders, new home sales and the July University of Michigan sentiment survey, all of which exceeded consensus estimates.
The headline durable goods orders report increased by 0.8%, beating calls for a 0.3% decline and up from a flat reading from May, while the excluding transportations figure shot up by 2.0%, reversing the 0.8% decline a month earlier. The University of Michigan sentiment survey improved by larger than expected jumping to 61.2 and sharply improving from its 28-year low in June at 56.4. Meanwhile, new home sales also jumped to 530k units in June, edging out consensus estimates of a decline to 500k units from 512k units from May.
A combination of weak data overseas and better than expected reports from the US helped prop the dollar to one-month highs against the yen and near two-week highs versus the euro. The economic calendar for next week will provide additional news for traders to digest to gauge the state of the US economy. The reports consist of July consumer confidence, Q2 GDP, employment cost index, PCE, weekly jobless claims, Chicago PMI, July non-farm payrolls, unemployment rate, and manufacturing ISM. The US economy is seen expanding by 1.9% in the second quarter, improving from 1.0% previously. The July manufacturing ISM is estimated to bode poorly for the economy, falling beneath the key 50-level which distinguishes between expansion and contraction to 49.8, versus 50.2 a month earlier. The key highlight will be Friday's July jobs report, with the unemployment rate expected to edge back higher to 5.6% from 5.5% a month earlier.
by Korman Tam
The greenback was higher in the Friday session, rallying near the 108-level against the yen and 1.5650 versus the euro on the heels of better than expected US economic reports. The data released today consisted of June durable goods orders, new home sales and the July University of Michigan sentiment survey, all of which exceeded consensus estimates.
The headline durable goods orders report increased by 0.8%, beating calls for a 0.3% decline and up from a flat reading from May, while the excluding transportations figure shot up by 2.0%, reversing the 0.8% decline a month earlier. The University of Michigan sentiment survey improved by larger than expected jumping to 61.2 and sharply improving from its 28-year low in June at 56.4. Meanwhile, new home sales also jumped to 530k units in June, edging out consensus estimates of a decline to 500k units from 512k units from May.
A combination of weak data overseas and better than expected reports from the US helped prop the dollar to one-month highs against the yen and near two-week highs versus the euro. The economic calendar for next week will provide additional news for traders to digest to gauge the state of the US economy. The reports consist of July consumer confidence, Q2 GDP, employment cost index, PCE, weekly jobless claims, Chicago PMI, July non-farm payrolls, unemployment rate, and manufacturing ISM. The US economy is seen expanding by 1.9% in the second quarter, improving from 1.0% previously. The July manufacturing ISM is estimated to bode poorly for the economy, falling beneath the key 50-level which distinguishes between expansion and contraction to 49.8, versus 50.2 a month earlier. The key highlight will be Friday's July jobs report, with the unemployment rate expected to edge back higher to 5.6% from 5.5% a month earlier.
Friday, July 25, 2008
Bloomberg Forex News
Euro Falls Against Yen as German Business Confidence Slumps
July 24 (Bloomberg) -- The euro fell the most against the yen in more than a week as a drop in business confidence in Germany reduced speculation that the European Central Bank will raise interest rates again this year.
July 24 (Bloomberg) -- The euro fell the most against the yen in more than a week as a drop in business confidence in Germany reduced speculation that the European Central Bank will raise interest rates again this year.
Pound Tumbles
Dollar Rallies
by Korman Tam
The dollar continued to advance across the board, pushing the sterling to 1.9820 and the euro to 1.5629 in the New York session. Dismal economic reports from the Eurozone and UK dragged their respective currencies lower. While the data released in the US fared just as poorly, with existing home sales plunging to its lowest level in 10-years, much of the weakness in the economy has already been priced into the dollar and the recent pullback in oil has propped the currency higher.
US economic reports released today saw higher than expected weekly jobless claims, which jumped above the 400k level to 406k, outpacing estimates for an increase to 376k, up from 366k a week earlier. Existing home sales plunged to its lowest level in 10-years to 4.86 million units in June, missing estimates for a slight decline to 4.93 million units from 4.99 million units and down 2.6%.
The calendar for Friday includes June durable goods orders, July University of Michigan consumer sentiment, June new home sales, and building permits. Consensus estimates call for durable goods orders in June to decline by 0.3% versus a flat reading previously, while the ex-transportations orders are seen improving to -0.2% from -0.8%. The final reading for the July University of Michigan consumer sentiment survey is forecasted to remain unchanged at 56.4. Meanwhile, new home sales are seen falling to 500k units in June from 512k units a month earlier.
by Korman Tam
The dollar continued to advance across the board, pushing the sterling to 1.9820 and the euro to 1.5629 in the New York session. Dismal economic reports from the Eurozone and UK dragged their respective currencies lower. While the data released in the US fared just as poorly, with existing home sales plunging to its lowest level in 10-years, much of the weakness in the economy has already been priced into the dollar and the recent pullback in oil has propped the currency higher.
US economic reports released today saw higher than expected weekly jobless claims, which jumped above the 400k level to 406k, outpacing estimates for an increase to 376k, up from 366k a week earlier. Existing home sales plunged to its lowest level in 10-years to 4.86 million units in June, missing estimates for a slight decline to 4.93 million units from 4.99 million units and down 2.6%.
The calendar for Friday includes June durable goods orders, July University of Michigan consumer sentiment, June new home sales, and building permits. Consensus estimates call for durable goods orders in June to decline by 0.3% versus a flat reading previously, while the ex-transportations orders are seen improving to -0.2% from -0.8%. The final reading for the July University of Michigan consumer sentiment survey is forecasted to remain unchanged at 56.4. Meanwhile, new home sales are seen falling to 500k units in June from 512k units a month earlier.
Thursday, July 24, 2008
JPY Falls
JPY Falls on Downgrade, USD Edges Higher
by Korman Tam
The greenback was higher against the euro and yen, rising to 1.5669 and 107.90, respectively. The dollar continues to benefit from further declines in oil, which fell to $123.63 per barrel, and renewed confidence stemming from government measures to support Fannie Mae and Freddie Mac.
Hawkish Fed commentary has also propped the currency higher. The Fed's Plosser reiterated his view that current interest rates at 2% are pretty low and ultimately, rates have to go up. He said it was important to protect the Fed's credibility by reinforcing its commitment to low inflation through action. Plosser added that it would be too late if the Fed waited for inflation expectations to become unanchored.
Markets will look ahead to Thursday's economic reports consisting of weekly jobless claims and existing home sales. Weekly jobless claims are estimated to increase to 375k, up from 366k a week earlier. Existing home sales are seen slipping to 4.93 million in June units versus 4.99 million units a month earlier.
by Korman Tam
The greenback was higher against the euro and yen, rising to 1.5669 and 107.90, respectively. The dollar continues to benefit from further declines in oil, which fell to $123.63 per barrel, and renewed confidence stemming from government measures to support Fannie Mae and Freddie Mac.
Hawkish Fed commentary has also propped the currency higher. The Fed's Plosser reiterated his view that current interest rates at 2% are pretty low and ultimately, rates have to go up. He said it was important to protect the Fed's credibility by reinforcing its commitment to low inflation through action. Plosser added that it would be too late if the Fed waited for inflation expectations to become unanchored.
Markets will look ahead to Thursday's economic reports consisting of weekly jobless claims and existing home sales. Weekly jobless claims are estimated to increase to 375k, up from 366k a week earlier. Existing home sales are seen slipping to 4.93 million in June units versus 4.99 million units a month earlier.
Dollar Raises
Dollar Rises to Four-Week High as Fannie, Freddie Plan Advances
July 23 (Bloomberg) -- The dollar rose to a four-week high against the yen and advanced versus the euro as a U.S. government rescue of Fannie Mae and Freddie Mac moved closer to congressional passage and oil prices fell.
July 23 (Bloomberg) -- The dollar rose to a four-week high against the yen and advanced versus the euro as a U.S. government rescue of Fannie Mae and Freddie Mac moved closer to congressional passage and oil prices fell.
Wednesday, July 23, 2008
Friday, July 18, 2008
Yen Drops
Yen Declines as JPMorgan Earnings Fuel Demand for Higher Yields
July 17 (Bloomberg) -- The yen dropped against the dollar and the euro as better-than-expected earnings at JPMorgan Chase & Co. fueled investors' appetite for higher-yielding assets funded in Japan.
The yen fell 0.4 percent to 105.50 per dollar at 10:09 a.m. in New York, from 105.13 yesterday, when it weakened to 103.77, the lowest since May 27. It dropped 0.7 percent to 167.51 per euro, from 166.39 yesterday. The dollar decreased 0.4 percent to $1.5884 versus the euro, from $1.5827. It touched an all-time low of $1.6038 two days ago.
The Dollar Index on the ICE market, which tracks the greenback against the currencies of six U.S. trading partners, fell 0.3 percent to 71.875, from 72.064 yesterday, when it touched 71.508, the lowest level since April 23.
Housing Starts
Housing starts increased to a 1,066,000 annual pace last month, compared with a revised 977,000 in May, the Commerce Department reported today. The median forecast of 76 economists surveyed by Bloomberg News was for a drop to a 960,000 rate.
Federal Reserve Chairman Ben S. Bernanke told the House Financial Services Committee yesterday that growth and inflation risks are increasing and the housing market is the ``central element'' of the crisis.
The yen dropped 1.1 percent to 13.9677 against the South African rand while the Swiss franc dropped 0.5 percent to 5.8753 Swedish kronar as traders sold the currencies to buy higher- yielding assets such as stocks where returns are higher.
The Bank of Japan held its target lending rate at 0.5 percent this week, the lowest among major economies, while borrowing costs in Switzerland are 2.75 percent. In comparison, the benchmark rates are 12 percent in South Africa and 4.5 percent in Sweden.
July 17 (Bloomberg) -- The yen dropped against the dollar and the euro as better-than-expected earnings at JPMorgan Chase & Co. fueled investors' appetite for higher-yielding assets funded in Japan.
The yen fell 0.4 percent to 105.50 per dollar at 10:09 a.m. in New York, from 105.13 yesterday, when it weakened to 103.77, the lowest since May 27. It dropped 0.7 percent to 167.51 per euro, from 166.39 yesterday. The dollar decreased 0.4 percent to $1.5884 versus the euro, from $1.5827. It touched an all-time low of $1.6038 two days ago.
The Dollar Index on the ICE market, which tracks the greenback against the currencies of six U.S. trading partners, fell 0.3 percent to 71.875, from 72.064 yesterday, when it touched 71.508, the lowest level since April 23.
Housing Starts
Housing starts increased to a 1,066,000 annual pace last month, compared with a revised 977,000 in May, the Commerce Department reported today. The median forecast of 76 economists surveyed by Bloomberg News was for a drop to a 960,000 rate.
Federal Reserve Chairman Ben S. Bernanke told the House Financial Services Committee yesterday that growth and inflation risks are increasing and the housing market is the ``central element'' of the crisis.
The yen dropped 1.1 percent to 13.9677 against the South African rand while the Swiss franc dropped 0.5 percent to 5.8753 Swedish kronar as traders sold the currencies to buy higher- yielding assets such as stocks where returns are higher.
The Bank of Japan held its target lending rate at 0.5 percent this week, the lowest among major economies, while borrowing costs in Switzerland are 2.75 percent. In comparison, the benchmark rates are 12 percent in South Africa and 4.5 percent in Sweden.
Friday, July 11, 2008
Dollar Falls
Dollar Falls Versus Euro on Concern Financial Losses to Deepen
July 10 (Bloomberg) -- The dollar fell against the euro on concern losses at financial firms will deepen, prolonging the U.S. economic slowdown.
July 10 (Bloomberg) -- The dollar fell against the euro on concern losses at financial firms will deepen, prolonging the U.S. economic slowdown.
Dollar Weakens
Greenback Weakens amid Lingering Fears
by Korman Tam
The dollar was softer on Thursday, drifting lower to 1.5800 against the euro and 106.69 versus the yen. Fears of ¡°ongoing financial turmoil¡±, as described by Fed Chairman Bernanke in his Congressional testimony, continue to plague the currency. Nonetheless, Treasury Secretary Paulson tried to alleviate fears over the solvency of Fannie Mae and Freddie Mac, reaffirming that both are ¡°adequately capitalized¡±.
The US calendar was light yesterday, with just the release of weekly jobless claims, which unexpectedly improved to 346k, down from 404k a week earlier. Traders will look ahead to tomorrow¡¯s May trade deficit and the July University of Michigan consumer sentiment survey, which remains mired near multi-decade lows. The July preliminary survey is seen declining to 55.5 from 56.4, while the expectations component is estimated to fall to 48.0 from 49.2.
by Korman Tam
The dollar was softer on Thursday, drifting lower to 1.5800 against the euro and 106.69 versus the yen. Fears of ¡°ongoing financial turmoil¡±, as described by Fed Chairman Bernanke in his Congressional testimony, continue to plague the currency. Nonetheless, Treasury Secretary Paulson tried to alleviate fears over the solvency of Fannie Mae and Freddie Mac, reaffirming that both are ¡°adequately capitalized¡±.
The US calendar was light yesterday, with just the release of weekly jobless claims, which unexpectedly improved to 346k, down from 404k a week earlier. Traders will look ahead to tomorrow¡¯s May trade deficit and the July University of Michigan consumer sentiment survey, which remains mired near multi-decade lows. The July preliminary survey is seen declining to 55.5 from 56.4, while the expectations component is estimated to fall to 48.0 from 49.2.
Thursday, July 10, 2008
Wednesday, July 9, 2008
Dollar Rises
Dollar Rises as Bernanke Says Fed May Extend Lending Into 2009
July 8 (Bloomberg) -- The dollar rose against the euro for the first time in three days as Federal Reserve Chairman Ben S. Bernanke said the bank may extend securities dealers' access to direct loans into 2009.
July 8 (Bloomberg) -- The dollar rose against the euro for the first time in three days as Federal Reserve Chairman Ben S. Bernanke said the bank may extend securities dealers' access to direct loans into 2009.
Tuesday, July 8, 2008
Dollar Eases
Dollar Eases, Awaits Fed Speeches
by Korman Tam
The greenback relinquished some of its gains versus the euro and yen, falling to 1.5752 and 106.64 by the New York afternoon. Last week's payrolls report, while disappointing, was largely in line with expectations and tempered fears that the non-farm payrolls figure would reflect a similar amount of job losses as seen in the ADP private sector report. The US economic calendar this week is light, consisting of May pending home sales, weekly jobless claims, trade balance, and the July University of Michigan consumer confidence survey.
Fed speakers will dominate the headlines this week, with Chairman Bernanke and Richmond Fed Governor Lacker slated to speak today. Despite Lacker issuing hawkish commentary in recent months, the sole dissenter voting for a rate hike at the FOMC's June meeting was Dallas Fed President Fisher. Traders will closely on the comments from both Bernanke and Lacker for hints on whether the Fed will tighten policy as early as August. Given the persistent weakness in both the labor and housing market, we do not anticipate a Fed shift toward a tightening policy until Q4, at which point we look for only a 25-basis point hike.
by Korman Tam
The greenback relinquished some of its gains versus the euro and yen, falling to 1.5752 and 106.64 by the New York afternoon. Last week's payrolls report, while disappointing, was largely in line with expectations and tempered fears that the non-farm payrolls figure would reflect a similar amount of job losses as seen in the ADP private sector report. The US economic calendar this week is light, consisting of May pending home sales, weekly jobless claims, trade balance, and the July University of Michigan consumer confidence survey.
Fed speakers will dominate the headlines this week, with Chairman Bernanke and Richmond Fed Governor Lacker slated to speak today. Despite Lacker issuing hawkish commentary in recent months, the sole dissenter voting for a rate hike at the FOMC's June meeting was Dallas Fed President Fisher. Traders will closely on the comments from both Bernanke and Lacker for hints on whether the Fed will tighten policy as early as August. Given the persistent weakness in both the labor and housing market, we do not anticipate a Fed shift toward a tightening policy until Q4, at which point we look for only a 25-basis point hike.
Monday, July 7, 2008
Friday, July 4, 2008
Dollar Rallied on Trichet Comments
Euro Plunges on Trichet
by Korman Tam
The dollar rallied sharply against the euro in New York trading, rebounding from 1.5908 to beneath the 1.57-level at 1.5683. Ahead of a long weekend holiday in the US, traders digested a barrage of economic events earlier in the session prompting a sharp reversal in the euro from its 2 ½-month highs, falling by over 2 big figures.
The closely watched US labor report was largely inline with expectations, with the June non-farm payrolls slightly above forecast at -62k, from -49k. Meanwhile, the unemployment rate in June was higher than expected at 5.5% and unchanged from the previous month. Despite further losses in non-farm payrolls, the dollar found some respite since markets were preparing for an even greater loss of jobs following yesterday's unexpectedly disappointing ADP private-sector payrolls report, which declined by 79k. The June non-manufacturing ISM report missed consensus estimates, dipping beneath the key 50-level which distinguishes between contraction and expansion, to 48.2 versus calls for a smaller decline to 51.0 from 51.7.
by Korman Tam
The dollar rallied sharply against the euro in New York trading, rebounding from 1.5908 to beneath the 1.57-level at 1.5683. Ahead of a long weekend holiday in the US, traders digested a barrage of economic events earlier in the session prompting a sharp reversal in the euro from its 2 ½-month highs, falling by over 2 big figures.
The closely watched US labor report was largely inline with expectations, with the June non-farm payrolls slightly above forecast at -62k, from -49k. Meanwhile, the unemployment rate in June was higher than expected at 5.5% and unchanged from the previous month. Despite further losses in non-farm payrolls, the dollar found some respite since markets were preparing for an even greater loss of jobs following yesterday's unexpectedly disappointing ADP private-sector payrolls report, which declined by 79k. The June non-manufacturing ISM report missed consensus estimates, dipping beneath the key 50-level which distinguishes between contraction and expansion, to 48.2 versus calls for a smaller decline to 51.0 from 51.7.
Thursday, July 3, 2008
Dollar Falls to Two-Month Low Against Euro on ADP Jobs Report
Dollar Falls to Two-Month Low Against Euro on ADP Jobs Report
July 2 (Bloomberg) -- The dollar fell to a two-month low against the euro as a report showed U.S. companies shed more jobs last month than economists forecast, reducing bets that the Federal Reserve will increase borrowing costs next month.
The U.S. currency also weakened as economists predicted that the European Central Bank will raise its main refinancing rate by a quarter-percentage point tomorrow while the U.S. Labor Department will say employers eliminated jobs in June for a sixth straight month. The Australian dollar approached a 25-year high as retail sales grew at the fastest pace in six months.
July 2 (Bloomberg) -- The dollar fell to a two-month low against the euro as a report showed U.S. companies shed more jobs last month than economists forecast, reducing bets that the Federal Reserve will increase borrowing costs next month.
The U.S. currency also weakened as economists predicted that the European Central Bank will raise its main refinancing rate by a quarter-percentage point tomorrow while the U.S. Labor Department will say employers eliminated jobs in June for a sixth straight month. The Australian dollar approached a 25-year high as retail sales grew at the fastest pace in six months.
Wednesday, July 2, 2008
Non Farm Payroll - May 2008
Non Farm Payroll
Quote
“The unemployment rate in May jumped more than it has in over two decades, reaching its highest level since October 2004 and emphasizing the recessionary risk the U.S. economy is currently facing. The civilian unemployment rate spiked to 5.5 percent from 5.0 percent in April, coming in much worse than the expectation of 5.1 percent. The last time the unemployment rate jumped half a percentage point was February 1985. With nearly 49,000 jobs cut from payrolls following decreases of 28,000 in April and 88,000 in March, May marked the fifth consecutive month of job losses. Overall, the economy has shed 324,000 jobs this year.”
Unquote
Quote
“The unemployment rate in May jumped more than it has in over two decades, reaching its highest level since October 2004 and emphasizing the recessionary risk the U.S. economy is currently facing. The civilian unemployment rate spiked to 5.5 percent from 5.0 percent in April, coming in much worse than the expectation of 5.1 percent. The last time the unemployment rate jumped half a percentage point was February 1985. With nearly 49,000 jobs cut from payrolls following decreases of 28,000 in April and 88,000 in March, May marked the fifth consecutive month of job losses. Overall, the economy has shed 324,000 jobs this year.”
Unquote
Yen, Swiss Franc Rise as Stock Slump
Yen, Swiss Franc Rise as Stock Slump Pares High-Yield Demand
July 1 (Bloomberg) -- The yen and the Swiss franc rose against all of the other major currencies as stock market losses and concern global economic growth is slowing eroded demand for higher-yielding assets funded in Japan and Switzerland.
Japan's currency climbed to the highest level in almost four weeks versus the Australian dollar after the Reserve Bank of Australia said growth will weaken. The dollar pared its loss against the euro as an industry report showed U.S. manufacturing unexpectedly expanded in June for the first time in five months.
July 1 (Bloomberg) -- The yen and the Swiss franc rose against all of the other major currencies as stock market losses and concern global economic growth is slowing eroded demand for higher-yielding assets funded in Japan and Switzerland.
Japan's currency climbed to the highest level in almost four weeks versus the Australian dollar after the Reserve Bank of Australia said growth will weaken. The dollar pared its loss against the euro as an industry report showed U.S. manufacturing unexpectedly expanded in June for the first time in five months.
Forex News : ISM Dollar Firms
USD Firms on ISM
by Korman Tam
7/1/2008 2:36:00 PM
The greenback recovered against the majors in the Tuesday session following sharply better than expected US manufacturing data, pushing the currency toward the 106-level against the yen and 1.5734 against the euro. The June manufacturing ISM report defied consensus estimates for a deterioration to 48.6 from 49.6 in May, instead climbing above the key 50-level to 50.2 - which distinguishes between expansion and contraction.
Traders will turn to the Wednesday session, with the calendar to include the June ADP payrolls figure, May durable goods, new goods orders and factory orders. The June ADP payrolls figure, often viewed as a proxy for the more closely watched non-farm payrolls, is estimated to decline by 20k, versus a 40k increase in the previous month. Meanwhile, the revised May durable goods orders figure is seen unchanged with a flat reading and factory orders are seen declining to 0.4% for May versus 1.1% previously.
by Korman Tam
7/1/2008 2:36:00 PM
The greenback recovered against the majors in the Tuesday session following sharply better than expected US manufacturing data, pushing the currency toward the 106-level against the yen and 1.5734 against the euro. The June manufacturing ISM report defied consensus estimates for a deterioration to 48.6 from 49.6 in May, instead climbing above the key 50-level to 50.2 - which distinguishes between expansion and contraction.
Traders will turn to the Wednesday session, with the calendar to include the June ADP payrolls figure, May durable goods, new goods orders and factory orders. The June ADP payrolls figure, often viewed as a proxy for the more closely watched non-farm payrolls, is estimated to decline by 20k, versus a 40k increase in the previous month. Meanwhile, the revised May durable goods orders figure is seen unchanged with a flat reading and factory orders are seen declining to 0.4% for May versus 1.1% previously.
Tuesday, July 1, 2008
Forex News : GBPUSD
At 6.00 GMT
It's on the top right hand corner.
Manufacturing PMI
Nationwide Housing Prices
Disorderly Decline in U.S. Dollar
Disorderly Decline in U.S. Dollar Can't Be Ruled Out, BIS Says
June 30 (Bloomberg) -- A disorderly decline in the dollar remains a possibility as losses on U.S. assets pile up and the current-account deficit triggers ``a sudden rush for the exits,'' the Bank for International Settlements said.
The U.S. current-account deficit, the broadest measure of trade in goods, services and investment income, widened in the first quarter to $176.4 billion, the Commerce Department said on June 17. The U.S. needs to attract $1.9 billion a day from overseas to fund the gap. Foreign buying of U.S. assets rose in April to an 11-month high as total holdings of equities, notes and bonds increased by a net $115.1 billion, the Treasury Department said June 16.
The Dollar Index, which measures the currency against six major counterparts, declined 6 percent this year. The U.S. currency fell to an all-time low against the euro on April 22, when it reached $1.6019. Against the yen, it dropped to a 12- year low of 95.76 on March 17.
The Japanese currency is forecast to rise to 100 per dollar and 148 against the euro within a year, according to the median of analysts' estimates compiled by Bloomberg. The world's second-largest economy shrank at an annual 0.4 percent pace in the second quarter, a separate Bloomberg survey of 17 economists showed.
June 30 (Bloomberg) -- A disorderly decline in the dollar remains a possibility as losses on U.S. assets pile up and the current-account deficit triggers ``a sudden rush for the exits,'' the Bank for International Settlements said.
The U.S. current-account deficit, the broadest measure of trade in goods, services and investment income, widened in the first quarter to $176.4 billion, the Commerce Department said on June 17. The U.S. needs to attract $1.9 billion a day from overseas to fund the gap. Foreign buying of U.S. assets rose in April to an 11-month high as total holdings of equities, notes and bonds increased by a net $115.1 billion, the Treasury Department said June 16.
The Dollar Index, which measures the currency against six major counterparts, declined 6 percent this year. The U.S. currency fell to an all-time low against the euro on April 22, when it reached $1.6019. Against the yen, it dropped to a 12- year low of 95.76 on March 17.
The Japanese currency is forecast to rise to 100 per dollar and 148 against the euro within a year, according to the median of analysts' estimates compiled by Bloomberg. The world's second-largest economy shrank at an annual 0.4 percent pace in the second quarter, a separate Bloomberg survey of 17 economists showed.
Forex News
Traders will digest a barrage of economic events and data this week with the greenback trading on softer footing early in the Monday session, dipping to 105 against the yen and 1.5835 versus the euro. The US reports released today saw a better than forecast Chicago PMI, which improved to 49.6 from 49.1 and beating out estimates for a decline to 48.0.
Despite the holiday-shortened week in the US, markets will scrutinize several key reports including June manufacturing ISM, May durable goods orders, factory orders, non-manufacturing ISM and the June labor report. Manufacturing ISM in June is seen remaining mired beneath the key 50-level to 49.0 from 49.6 in May. Meanwhile, Thursday's labor report is seen mixed with the unemployment rate improving to 5.4% in June, down from 5.5% in May and non-farm payrolls posting another decline at -43.0k, compared with a loss of 49k jobs a month earlier.
Despite the holiday-shortened week in the US, markets will scrutinize several key reports including June manufacturing ISM, May durable goods orders, factory orders, non-manufacturing ISM and the June labor report. Manufacturing ISM in June is seen remaining mired beneath the key 50-level to 49.0 from 49.6 in May. Meanwhile, Thursday's labor report is seen mixed with the unemployment rate improving to 5.4% in June, down from 5.5% in May and non-farm payrolls posting another decline at -43.0k, compared with a loss of 49k jobs a month earlier.
Sunday, June 29, 2008
News and The Month of Jun 2008
The month of June could be one of the worst nightmares of Fundamental Traders. The market either moved in a different direction to the news release or in some cases short / beyond the normal forecasts. There are cases, the move is not within the expected timeframe.
If you did not perform well for last month be assured that you are still on the right track. There’s nothing wrong with your indicators, judgment or signal provider.
It was reported in WSJ that Soros admitted that he “realized his mistake”.
If you did not perform well for last month be assured that you are still on the right track. There’s nothing wrong with your indicators, judgment or signal provider.
It was reported in WSJ that Soros admitted that he “realized his mistake”.
Saturday, June 28, 2008
Bloomberg Forex News : The Yen vs Euro & Dollar
June 27 (Bloomberg) -- The yen strengthened from a record low against the euro and rose versus the dollar as a decline in stock markets around the world reduced demand for higher- yielding assets funded by loans in Japan.
Friday, June 27, 2008
Weak Dollar
Dollar Falls to Two-Week Low on Reduced Bets Fed to Raise Rates
June 26 (Bloomberg) -- The dollar declined to the weakest level against the euro in more than two weeks as investors reduced speculation that the Federal Reserve will increase borrowing costs in August.
June 26 (Bloomberg) -- The dollar declined to the weakest level against the euro in more than two weeks as investors reduced speculation that the Federal Reserve will increase borrowing costs in August.
Thursday, June 26, 2008
Forex News
FOMC Unchanged, Increased Risks to Inflation
by Korman Tam
6/25/2008 2:30:00 PM
The Federal Reserve, as expected, held monetary policy unchanged at 2% when it announced its decision shortly after 2:00pm. However, the vote to leave rates unchanged was not by unanimous decision with Dallas Fed President Fisher voting in favor of a rate hike. Although the dollar initially jumped higher following the announcement, it quickly relinquished those gains as traders digested the accompanying statement.
Dollar Little Changed Versus Euro Before Fed Decision on Rates
June 25 (Bloomberg) -- The dollar was little changed against the euro before the Federal Reserve ends a two-day meeting at which policy makers are forecast to keep the target lending rate at the lowest level in more than three years.
The dollar pared its decline as crude oil prices fell on an unexpected increase in inventories, reducing the need to sell the U.S. currency as a hedge against inflation. Fed Chairman Ben S. Bernanke said on June 9 the central bank would ``strongly resist'' a leap in inflation expectations.
by Korman Tam
6/25/2008 2:30:00 PM
The Federal Reserve, as expected, held monetary policy unchanged at 2% when it announced its decision shortly after 2:00pm. However, the vote to leave rates unchanged was not by unanimous decision with Dallas Fed President Fisher voting in favor of a rate hike. Although the dollar initially jumped higher following the announcement, it quickly relinquished those gains as traders digested the accompanying statement.
Dollar Little Changed Versus Euro Before Fed Decision on Rates
June 25 (Bloomberg) -- The dollar was little changed against the euro before the Federal Reserve ends a two-day meeting at which policy makers are forecast to keep the target lending rate at the lowest level in more than three years.
The dollar pared its decline as crude oil prices fell on an unexpected increase in inventories, reducing the need to sell the U.S. currency as a hedge against inflation. Fed Chairman Ben S. Bernanke said on June 9 the central bank would ``strongly resist'' a leap in inflation expectations.
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