Forex Capital Market - News

Dollar slips but poised near highs

2005-10-04T23:41:00.000-07:00

By Eric Burroughs

TOKYO, Oct 5 (Reuters) - The dollar slipped on Wednesday but held near a three-month high against the euro and a 16-month peak versus against the yen as more Federal Reserve officials made clear U.S. interest rates are heading even higher.

Philadelphia Fed President Anthony Santomero was the last of three policymakers to signal on Tuesday the central bank's plans to tighten monetary policy further, saying the Fed was somewhat more worried about inflation compared with a year ago.

Dallas Fed President Richard Fisher said core consumer price inflation was running at the upper end of the Fed's tolerance zone and "shows little inclination to go in the other direction".

The array of Fed remarks signaling that its 15-month credit tightening campaign is not yet close to finishing has revived the U.S. currency's rally this year by heightening the allure of dollar deposits and yields.

Profit-taking pushed the dollar slightly lower after the U.S. currency had trouble extending big gains from earlier in the week, stymied against the euro at $1.19 and versus the Japanese currency near 114.50 yen.

Analysts said the Fed's vocal campaign of declaring its intention to stamp out any building inflationary pressures was boosting investors' faith in the dollar.

"What matters for currencies are expectations of inflation," said currency strategists at JPMorgan Chase in a note to clients.

"So far this week, hawkish comments by the Fed have managed to control these worries, suggesting that investors have become more confident that the Fed will hike rates enough to slow down the economy and control future inflation," they said.

The euro bought $1.1935, after it fell to a fresh three-month low of $1.1900 on Tuesday on electronic trading platform EBS.

So far the single currency has withstood attempts to take out suspected stop-loss orders at $1.19, which to some analysts suggests that speculators may be poised to reverse their bets for a deeper euro slide.

One trader at a European investment bank said the dollar was poised for a correction and that equity portfolio managers were good euro buyers on any drop. The FTSEurofirst 300 share index has scaled 3-1/2-year highs this week.

Against the yen, the dollar was down 0.3 percent to 113.85 yen after having climbed to around 114.40 yen, the highest level since late-May 2004.

Repeated dollar selling from Japanese exporters repatriating overseas profits has blocked the currency's advance, traders said.

THE LOWLY YEN

The yen has suffered from hungry investor demand in Japan for mutual funds offering higher-yielding foreign bonds, helping drive it to eight-year lows against the New Zealand dollar and near seven-year troughs versus the Australian dollar.

Investors widely expect the Fed to raise its funds rate to 4 percent or 4.25 percent by the end of this year from the current 3.75 percent, and expectations have mounted for more such tightening next year.

The Fed has repeated that the current accommodative policy needs to be removed at a "measured" pace and aims to take rates to a neutral level that neither hinders nor spurs growth.

Steady rate increases from the Fed have contrasted with the euro zone and Japan, where overnight rates have been stuck at 2 percent and virtually zero percent. Rising U.S. rates have also eroded the appeal of higher-yielding currencies, such as the Australian and New Zealand dollars and the British pound.

Fed policy tightening has been the main driver behind the dollar's gains so far this year, pushing the greenback up about 14 percent against the euro and Swiss franc and 11 percent versus the yen.

source: reuters

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Strike hits early trade in forex market

2005-09-29T04:37:00.000-07:00

Thursday, 29 September , 2005, 11:43

Mumbai: Early trade was adversely affected at the Interbank Foreign Exchange market here today due to the nation-wide one day industrial strike after the bulk of bank employees joined a slew of unions to protest the Centre’s privatisation policy.

Airport employees scale down strike duration from 24 to 12 hours Most air services to be normal

Strike: Air force personnel man airports

In thin dealing at the Forex spot market, the rupee was quoted at Rs 44.0250/0350 per dollar in late morning deals, higher from Wednesday’s close of Rs 44.0350/0450 per dollar following a strong opening slot of Rs 44.0150/0250.

In subdued business, mainly confined to a few foreign and private banks, the rupee rallied mildly on the back of steady FII inflows and receding dollar demand, a forex dealer said.

However, a fresh rise in crude oil prices could weigh on rupee value, he added.

World crude oil prices rose to $ 66.44 a barrel in early Asian trade today due to signs that US supplies would plunge.

Having absorbed most of the month-end dollar demand in the last three session, the rupee today rallied on sustained FII inflows into the equity market, another dealer said. Today in Sify Finance

Sabarimala pilgrims rejoice!
The Kerala Govt along with IL&FS has finally embarked on a Rs 1000 cr facelift for

Left-wing trade union have called a nation-wide strike today against the government’s privatisation policy wherein major bank unions have supported the strike, adversely affecting transactions in the Forex spot market.

In Cross Currency Trade, the Euro was quoted at Rs 53.12/15, Pound Sterling at Rs 77.89/91 and the Japanese Yen (100) at Rs 38.96/99.

source: reuters

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Dollar hits 2-month high on Rita relief

2005-09-25T23:53:00.000-07:00

By Hideyuki Sano

TOKYO, Sept 26 (Reuters) -The dollar hit a two-month high against the euro on Monday after Hurricane Rita caused less damage than feared, driving oil prices lower and reinforcing expectations the Federal Reserve will keep raising interest rates.

Rita spared Texas oil refineries, pushing oil prices lower and alleviating worries that lofty energy costs could eat into U.S. consumer spending.

"With the outlook for rising U.S. rates unchanged, the bullish sentiment for the dollar is intact," said Mitsuru Sahara, a senior forex trader at UFJ Bank.

Just last week the Fed raised overnight rates to 3.75 percent and said Hurricane Katrina's more damaging hit to the economy would not pose a "persistent threat", repeating that more monetary tightening was needed.

The Fed's tightening campaign began in June 2004 and has helped to lift the dollar about 11 percent against a basket of currencies this year.

The market was also mindful of the outcome of a meeting of Finance ministers and central bankers from the Group of Seven economic powers at the start of the weekend.

The G7's post-meeting statement omitted 18-month-old language urging more currency flexibility in regions where it was lacking and commended China for the 2.1 percent revaluation of the yuan in July.

"In the long run, this change could be seen as meaningful," said Kikuko Takeda, a currency analyst at Bank of Tokyo-Mitsubishi.

"The G7 had been calling for a change in China's forex regime, and that's why the market had been interested in the issue. In that sense, interest in the yuan will retreat."

The yen had often been bought as a proxy for the yuan whenever G7 pressure on China to revalue had strengthened, but most traders saw little immediate effect of the G7 communique on the Japanese currency.

TESTING PEAKS

The euro bought $1.2035 after falling to around $1.2010 -- its lowest level since July 27 and off the $1.2040 fetched in late U.S. trade on Friday.

Traders were keen to see whether the euro can protect $1.20, where they suspect some central banks are ready to buy the euro to put in their official reserves.

The British pound also hit a two-month low around $1.7700 before climbing back up to $1.7750 -- little changed on the day.

The dollar was down slightly at 112.35 yen on sales by Japanese exporters. That compares with around 112.50 yen in late U.S. trade, but still in sight of a two-month high above 112.63 yen.

Some traders said the U.S. currency could test the 14-month high of 113.73 yen hit on July 20.

"I think the dollar could rise to the upper half of 113-114 this week," said Kotaro Kunimochi, director of forex trading at Barclays Capital, citing the tendency of Japanese investors to buy more foreign bonds ahead of half-year book closing at the end of September.

Although data showed on Monday that Japanese investors broke a 10-week steak of heavy foreign bond buying in the week that ended on Sept. 17, traders said they expected hefty buying this week.

The yen could gain support from a government survey released on Monday that showed big Japanese manufacturers were more confident about business conditions in the three months to September.

The poll augured well for the Bank of Japan's closely watched tankan survey of corporate sentiment due next Monday and could fuel fund inflows to Tokyo shares.

(Additional reporting by Shiho Tanaka and Rika Otsuka)

source: reuters

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Dollar rallies, Rita a little less fearsome

2005-09-23T03:45:00.000-07:00

SYDNEY, Sept 23 (Reuters) - The dollar held broadly firmer
in Asia on Friday after Hurricane Rita weakened in ferocity,
leading investors to price in less risk of massive disruption
to oil and refining capacity in the Gulf of Mexico.
Rita was donwgraded one notch to a Category 4 hurricane on
Thursday, still very powerful but not quite as frightening as a
Category 5.
As a result crude oil pulled back beneath $67 a
barrel, dampening talk that ever-rising energy costs would
finally tell on the U.S. economy and perhaps halt the Federal
Reserve's tightening campaign.
Traders, fearing the worst outcome in the Gulf, had sold
the dollar in favour of safer havens, but were now buying it
back.
"Markets always price for the worse, then row back when it
doesn't happen," said Robert Rennie, chief currency strategist
at Westpac. "In this case, as soon as Rita was donwgraded the
dollar jumped in a relief rally, it's as simple as that."
The bounce was aided by a wave of stop-loss buying when a big
technical level at $1.2180 per euro gave way, so that in early
Asian trade one euro bought $1.2150, a full cent below
Thursday's $1.2269 peak.
Still, the euro remains well above Monday's two-month
trough of $1.2098 hit when worries about the political
stalemate in Germany were considered more important than the
weather in the Gulf.
The dollar likewise firmed on the Swiss franc,
reaching 1.2793 francs from a 1.2656 low on Thursday.
The story was much the same in dollar/yen, though Japan has
as much to lose from high energy costs as the U.S. given it
imports all its oil.
The dollar was hovering at 111.64 yen in Asia,
having been as low as 110.99 overnight. It still faces tough
resistance at the week's 111.96 high and then a whole band of
former tops in the 112.60 to 113.00 area.
Analysts doubted the dollar would break higher in local
time given Japan was on holiday.
"It's pretty quiet out there and the ranges are likely to
hold," noted Westpac's Rennie. "In fact, all the majors have
been pretty much range-bound, barring the Canadian of course.
That's been on a tear."
The Canadian currency has been benefiting from the
country's enviable position as a net energy exporter and
touched a 13-year high on Thursday around C$1.1619 per U.S.
dollar.
Sterling steadied at $1.7911 having fallen more
than 1 percent on Thursday amid talk U.K. oil firm BP would bid
for Spanish company Repsol. The potential flow out of sterling
into euros could weigh on the pound, at least in the long
term.

source: reuters

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Dollar bounces up but market wary of Rita

2005-09-21T23:27:00.000-07:00

By Brent Kininmont

TOKYO, Sept 22 (Reuters) - The dollar climbed against the yen and the euro in choppy trade on Thursday, although it was capped by nervousness about the potential damage to the U.S. economy from another monster hurricane churning towards the Gulf Coast.

Demonstrating how keen investors were to buy and sell on Hurricane Rita, the dollar got a lift on market whispers that Rita had weakened, despite weather monitors showing it is the third most intense Atlantic hurricane on record.

Before the rumours, "everybody sold dollars because Rita grew to Category 5," said Ryuichi Atsuta, head of forex trading at Bank of America in Tokyo.

Recognising the risk that Rita poses, oil companies shut down refineries in Texas ahead of landfall, now expected late on Friday or early on Saturday -- all but guaranteeing a rise in the price of gasoline.

In the wake of Hurricane Katrina in late August, the dollar hit three-month lows against the euro, due in part to surging oil prices and the potential for a crimping of consumer spending.

"What's on people's minds is the possibility of a slowdown of the U.S. economy given the accumulation of interest rate hikes in the past year and a half and on higher oil prices," said Kikuko Takeda, a currency analyst at Bank of Tokyo-Mitsubishi.

After extending the previous day's losses in early Asian trade, the dollar was also bought back as Tokyo dealers who held short positions in the currency covered those bets ahead of a Japanese national holiday on Friday.

The euro fetched $1.2205, down slightly from the level in late U.S. trade on Wednesday, when it rose 0.8 percent. Against its Japanese counterpart, the euro was up about 0.2 percent at 136.40 yen.

The single currency rose as high as $1.2270, propelled higher after stop-loss levels were taken out at $1.2250, traders said.

The dollar was up 0.4 percent at 111.70 yen after falling 0.6 percent on Wednesday.

FED SUPPORT

The dollar also found continued comfort from Tuesday's statement by the Federal Reserve that suggested the central bank would keep raising interest rates, and that damage wrought by Katrina did not pose a persistent threat to the economy.

Still, some market players said Rita could tilt the Fed towards pausing its run of rate hikes if the damage ripples through to the larger U.S. economy.

Others said Rita's effect on the dollar should be short-term, and the currency was unlikely to break out of the 109-112 yen range of recent weeks.

"I don't think weather issues like hurricanes can breach the trading range," said Takeda at Bank of Tokyo-Mitsubishi.

The Fed raised its benchmark fed funds rate for the 11th straight meeting on Tuesday, taking it to 3.75 percent.

After three lean years, the dollar has risen this year on its widening rate advantage over the euro and the yen.

source: reuters

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Dollar a touch softer as Fed decision looms

2005-09-20T06:42:00.000-07:00

By Katie Hunt

LONDON, Sept 20 (Reuters) - The dollar inched lower against the euro on Tuesday but remained near the previous session's seven-week high with the Federal Reserve widely expected to raise U.S. rates for an 11th straight time later in the day.

The single currency won some respite after Monday's slide in the wake of Germany's indecisive election result that has cast doubt over the pace of reforms in Europe's largest economy.

The market's main focus was the Fed decision and its accompanying statement due around 1815 GMT.

Players are looking to see if the central bank will alter its pledge to raise rates at a "measured" pace to remove accommodative policy in the wake of Hurricane Katrina, which devastated New Orleans less than a month ago.

"We would expect the Fed to say something about Katrina and what it means for the immediate and long-term impact on activity and I think there's a lot of uncertainty about what they may say," said Adam Cole, senior currency strategist at Royal Bank of Canada.

"Also once again there seems to be some debate as to whether the accommodative and measured statements stay in or come out. There is a fair mix of opinion going into it so there is scope for some surprise," he added.

Most top Wall Street economists expect the Fed to raise U.S. interest rates by a quarter of a percentage point when its policymakers meet on Tuesday, a Reuters poll has found. [ID:nNAT001796].

Rising U.S. interest rates have spurred a rally in the dollar this year.

By 1145 GMT, the euro was at $1.2162, up nearly a quarter percent on the day but still within sight of the seven-week low around $1.2100 hit on Monday after the German vote failed to produce a clear winner.

Against the yen, the euro was unchanged at 135.35 yen.

The dollar dipped 0.2 percent to 111.31 yen from around 111.55 yen in late New York trade. The yen was supported as Tokyo shares hit a four-year high.

RITA RISK

Currencies hugged narrow ranges as investors were reluctant to take fresh positions on concerns that Tropical Storm Rita could turn into a major hurricane and pummel the already battered oil facilities in the Gulf of Mexico.

All 80,000 residents were ordered out of the Florida Keys on Monday.

"There's concern about this Tropical Storm Rita. People are watching that a little bit more closely, given Katrina and its impact on the market. There's some unwillingness right now to take aggressive positions," said Paul Mackel, FX strategist at ABN AMRO.

The Canadian dollar hovered near a 13-year high hit against the U.S. dollar and a seven-year high against the yen after oil prices jumped on Monday.

U.S. crude oil futures slipped below $67 a barrel on Tuesday after climbing as high as $67.60 on Monday.

ELECTION

The euro was still smarting after the stalemate election in Germany raised prospects for further delays in implementing labour market and other reforms.

Chancellor Gerhard Schroeder and Christian Democrat leader Angela Merkel were scrambling to find coalition partners in the aftermath of the most inconclusive German election result since World War Two.

The euro's tentative comeback was dampened by news that German investor confidence fell by more than expected in September in part due to uncertainty about the country's future economic policies.

An expectations indicator compiled by Germany's ZEW think tank, based on a poll of 309 analysts and institutional investors, fell to 38.6 in September from 50.0 in August and was far short of a forecast of 45.0.

The think tank began collecting responses for the survey on Sept. 5 and closed it on Monday at 1500 GMT - capturing some reaction to Sunday's inconclusive poll.

source: reuters

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Dollar eases, eyes U.S. consumer confidence data

2005-09-16T06:50:00.000-07:00

By Veronica Brown

LONDON, Sept 16 (Reuters) - The dollar eased from the previous session's two-week highs versus the euro on Friday before data expected to show a slump in U.S. consumer confidence in the aftermath of devastation wreaked by Hurricane Katrina.

The euro also advanced as market players squared positions in the single currency before this weekend's closely contested election in Germany that could determine the pace of economic reforms in Europe's largest economy.

The University of Michigan index of consumer confidence due at 1345 GMT is expected to show a fall to 85.0 in September from 89.1 in August and comes after a surprisingly weak survey of manufacturing from the Philadelphia Federal Reserve on Thursday.

Data on the U.S. current account deficit in the second quarter and capital inflows into the United States in July are also due later in the session.

"The market, looking for a move down to 85 in the Michigan data, is maybe not pricing in the full risk of a significant slow-down...I think the dollar is vulnerable to a weaker number," Bear Stearns currency strategist Steve Barrow said.

The euro climbed as high as $1.2309 before pulling back to $1.2250 by 1132 GMT. It was still up a quarter percent on the day but within the $1.22-$1.25 range seen over the past two weeks. The dollar hit a two-week high against an index of currencies on Thursday.

The euro traded around 135.78 yen, up 0.4 percent from late U.S. trade. Little euro reaction was seen from final euro zone August inflation data which came in slightly above expectations.

The dollar was up a quarter percent against the yen at 110.82 yen.

Many in the Tokyo market shied away from placing big bets on the dollar ahead of a three-day weekend in Japan.

GERMAN ELECTION UNCERTAINTY

Opinion polls show that conservative leader Angela Merkel may not win an outright victory over Chancellor Gerhard Schroeder, raising the possibility of a "grand coalition" government that could make compromises on market-friendly reforms.

"The market is building in a risk premium because of the uncertainty surrounding the election -- once we get that out of the way, all other things being equal, the euro will probably bounce," RBC Capital Markets senior currency strategist Adam Cole said.

The centre-right coalition sought by Merkel is running marginally ahead of other main parties, a poll on Friday showed.

However, an estimated 15 percent of voters have yet to make up their minds.

Bear Stearns' Barrow said any impact from the German poll may not be felt until the middle of next week after the U.S. Federal Reserve makes its decision on interest rates.

Earlier in the month, devastation caused by Hurricane Katrina led some in the market to conclude the Fed could put U.S. interest rates on hold after raising them at each of its meetings since June 2004.

But comments from Fed officials have suggested the key rate will rise on inflation concerns despite the damage caused by Katrina, tilting market expectations in favour of a 0.25 percentage point hike to 3.75 percent on Tuesday.

The market will scrutinise the Fed's post-meeting statement for any indications the central bank may slow its pace of monetary tightening.

source: reuters

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Dollar slips as market sorts out Katrina impact

2005-09-13T23:21:00.000-07:00

By Eric Burroughs

TOKYO, Sept 14 (Reuters) - The dollar slipped on Wednesday from two-week highs against the euro and the yen but investors mostly stuck to the sidelines and awaited this week's slew of U.S. economic data for clues on the Federal Reserve's next move.

A report on Tuesday showing the U.S. trade gap shrank unexpectedly in July helped the dollar as investors see the Fed pushing ahead with its 14-month stretch of interest rate rises on Sept. 20, despite Hurricane Katrina's damage.

A few Fed officials have said in the past two weeks that they were still judging the scope of Katrina's hit to the economy but were worried about steep energy prices quickening core inflation.

Analysts and investors are still trying to assess whether any slowdown in consumer spending may prompt the Fed to take a break from the credit tightening, or whether the threat of higher inflation is a bigger worry for central bankers.

A consumer confidence index from Investor's Business Daily and TechnoMetrica Market Intelligence fell in September to its lowest since the survey began in early 2001.

This week's array of U.S. data mostly reflects the economy's health before Katrina, though regional factory surveys for September will offer some insight on how the hurricane's impact rippled to other parts of the country.

"The mixed data that is likely to come out of the U.S. this week adds to the uncertainty," said Sharada Selvanathan, a currency strategist at BNP Paribas in Singapore.

"Sentiment data for September is likely to show clear weakening, and a downside surprise will see the dollar react negatively," she said.

Wednesday's economic releases include U.S. retail sales for August at 1230 GMT, which are forecast to show a 1.2 percent drop from a month earlier. Sales jumped 1.8 percent in July on a boom in auto buying.

Currencies have largely been confined to familiar ranges so far this month despite a raft of events that investors had thought might shake things up, including elections in Japan and Germany.

By 0315 GMT, the dollar was down 0.2 percent at 110.45 yen. It has been mostly stuck between 109 yen and 111 yen over the past month.

The yen gained a tad after Bank of Japan Deputy Governor Kazumasa Iwata said the central bank was "now very close to the exit" of its super-loose policy that floods the banking system with cash and pins short-term rates virtually at zero percent.

But the Japanese currency has failed to reap a lasting benefit from an election victory for Prime Minister Junichiro Koizumi's ruling party last weekend on a mandate for reform.

SHAKY EURO

The euro has taken a hit this week as the parties competing in Germany's election on Sunday were in a dead heat, raising the possibility of a grand coalition between conservatives and socialists that could stymie reforms.

The single currency rose 0.3 percent to $1.2300 but has gravitated between a three-month high of $1.2590 hit in early September and a mid-August low near $1.2125. Against the Japanese currency, the euro edged up to 135.85 yen.

The dollar has posted broad gains this year against major currencies on the Fed's gradual ratcheting up of overnight rates to 3.5 percent from 1 percent in June 2004, helping offset the nagging anxiety about the giant U.S. trade and budget deficits.

Tuesday's data showed the U.S. trade gap for July at $57.94 billion, better than forecasts and down from an upwardly revised $59.49 billion in June, which was the second largest ever.

A flat reading in the core Producer Price Index for August showed the energy threat to inflation was fairly contained.

($1=110.75 yen)

source: reuters

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Yen hits 2-week high vs euro after Koizumi victory

2005-09-11T23:25:00.000-07:00

By Chikako Mogi

TOKYO, Sept 12 (Reuters) - The yen climbed to a two-week high against the euro on Monday after Prime Minister Junichiro Koizumi's party won a landslide victory in Japanese elections, spurring hopes for more foreign buying of Tokyo shares.

The euro tumbled against the yen as Koizumi's resounding win contrasted with investor uncertainty over the outcome of Germany's own upcoming election.

The single currency's slide helped to lift the dollar across the board, especially against European currencies, and brought it back versus the yen to levels little changed from late U.S. trade on Friday.

Koizumi's Liberal Democratic Party netted 296 seats in the 480-seat lower house of parliament in Sunday's general election, the first time it has won a majority in the chamber in 15 years.

Analysts had expected Koizumi to win, but the surprisingly big margin prompted traders to snap up the yen on hopes his victory would clear the way for reforms such as privatising the vast postal system.

"The unexpectedly strong result is likely to prompt yen buying particularly from foreign investors who take it as a sign that Japan's structural reforms will make progress," said Tatsuro Karitani, senior trader at Mizuho Corporate Bank.

Traders said the yen's further advance depended on how high Tokyo share prices rise on the election result, how eager Japanese importers and investors were to buy the dollar, and how overseas markets respond to moves in the Tokyo market.

The yen firmed to 135.20 per euro after rising as high as around 135.00 -- a two-week high. It fetched 136.11 yen in late U.S. trade.

The Japanese currency was little changed on the day at 109.65 per dollar. It had peaked at 108.96 yen, its highest level since it struck 108.75 yen last week -- its highest in two and a half months.

Traders said that opinion polls showing Chancellor Gerhard Schroeder catching up to opponent Angela Merkel had created doubts about the outcome of elections in Germany, weakening the euro and boosting the dollar.

Traders said that buying by Japanese importers and investors on the dollar's dips had also contributed to the yen giving up all of its early gains against the U.S. currency.

"Foreigners seem to feel comfortable about buying the yen. But for the currency to advance further, the market needs more than the election and the rise in shares," said a dealer at a Japanese bank.

The dollar's upside was seen capped around 109.70 yen, where stop-loss orders were lined up, traders said.

The euro was at $1.2330, down 0.6 percent from late Friday levels.

The Nikkei average ended the morning session up around 1 percent, after rising to a fresh four-year intraday high.

STOCKS EYED

The yen has received a boost ever since Koizumi called the snap election a month ago as foreigners have picked up the pace of their stock buying spree.

While foreign investors were likely to keep buying Japanese shares over the longer term on brightening growth prospects, they could take profits in the near term and contain the yen's rise, some traders said.

Foreign investors have already bought more than 3 trillion yen ($27.5 billion) of stocks in the past two months. Of that, a net 2.1 trillion yen was bought in August alone, the largest since March 2004 when foreign investors bought 2.8 trillion yen.

"It is highly likely that the 2 trillion yen buying in August reflected the market's expectations that Koizumi's victory will support the stock market, and that foreign buying could take a respite this month," said Osamu Takashima, chief forex analyst at Bank of Tokyo-Mitsubishi.

The yen had received a slight boost from upwardly revised growth data for Japan in the April-June quarter, which showed gross domestic product expanded 0.8 percent from the preceding quarter.

That was up from an initial reading for a 0.3 percent increase and economists' forecast of a 0.4 percent rise.

($1=109.25 yen)

source: reuters

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Dollar dips but supported as U.S. rates seen rising

2005-09-08T23:49:00.000-07:00

By Brent Kininmont

TOKYO, Sept 9 (Reuters) - The dollar edged down against the euro on Friday but found broad support from growing expectations the Federal Reserve will keep raising interest rates despite devastation wrought by Hurricane Katrina.

Despite the day's dip, the dollar has recovered about 1.7 cents against the euro since it hit a three-month low last Friday, and has regained around 1.7 yen since marking its lowest level versus the yen in two and a half months on Monday.

Those lows were struck amid concerns about the economic impact of Katrina on the U.S. economy and worries that the Fed, after lifting rates at 10 straight meetings, might pause at its next meeting on Sept. 20.

Such concerns have eased amid a chorus of comments by top Fed officials that the best way to help the U.S. economy recover from Katrina is to keep inflation in check.

Traders said the market remained mindful of soaring oil prices and an expected deterioration in the budget deficit due to massive reconstruction required after the hurricane.

"There's two camps fighting over whether we think the dollar's going to benefit or lose ground," said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo.

"This sort of second guessing will continue until we actually see what the real impact of the situation is going to be on the U.S."

The euro bought around $1.2420, up from $1.2397 in late U.S. trade on Thursday, when it fell 0.2 percent.

Traders said stop-loss orders triggered above $1.2410 had propelled the euro higher, dragging the single European currency up versus the yen. The euro was at 137.20 yen, up from 137.00.

The dollar was little changed at 110.45 yen (JPY=>, after it rose 0.4 percent on Thursday.

Helping to support the yen were expectations the currency could gain next week following a general election in Japan at the weekend that is predicted to be a victory for Prime Minister Junichiro Koizumi and his reform agenda.

But some traders said the dollar could get a lift if investors who had been betting on Koizumi's victory and buying the yen started to unwind their yen holdings.

"The market is a bit cautious that a win for Koizumi has already been digested," said the chief trader at a foreign brokerage in Tokyo.

RATES ON RADAR

The latest Fed official to weigh in on Katrina was San Francisco Fed President Janet Yellen, who said late on Thursday that the best thing the Fed could do was to ensure the stability of the national economy.

She also said monetary policy "has little scope to cushion the immediate economic fallout from such a severe and sudden blow to a region" in the near term, suggesting to some the Fed would keep raising rates.

The thinking of traders and analysts has quickly evolved into "pre-Katrina" and "post-Katrina" concepts of the currency market.

Some market players who had predicted before the hurricane that U.S. rates would climb as high as 4.25 percent by the end of the year are scaling back their forecasts.

The Fed's key rate is currently at 3.5 percent, up from 1 percent in June 2004, and the dollar's rate advantage over the euro and the yen was a key factor in its rise in the first half of this year.

The market's obsession with rate differentials was highlighted on Friday by the Canadian dollar rising to a fresh nine-month high of C$1.1782 against the U.S. dollar.

The Canadian dollar has been supported this week by the Bank of Canada's decision on Wednesday to raise its benchmark rate 25 basis points to 2.75 percent, the first rise in almost a year.

source: reuters

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Dollar rises but market wary of Katrina effect

2005-09-06T23:25:00.000-07:00

By Chikako Mogi

TOKYO, Sept 7 (Reuters) - The dollar edged up on Wednesday but investors stayed wary of what implication Hurricane Katrina might have on U.S. economic growth and whether it will deter the Federal Reserve from raising interest rates further.

The dollar has bounced off recent multi-month lows as worries about the economic impact from Katrina were seen overdone.

Some market participants said the dollar could retreat leading up to the Federal Reserve's meeting on Sept. 20 given uncertainty about whether the central bank will pause its year-long campaign of raising rates.

"The trend for the dollar remains unclear, but risks are for dollar weakness at the moment," said Junya Tanase, forex strategist at JPMorgan Chase Bank. But others said the rise in oil prices to record highs above $70 last week has fuelled worries about mounting inflationary pressures, which could prompt the Fed to stick to its "measured" pace of credit tightening to ensure stable economic growth.

"The dollar had been oversold on worries that damage inflicted by Katrina would be extensive and very serious," said Mitsuru Sahara, senior trader at UFJ Bank.

He said such worries were fading as oil production in the Gulf of Mexico and refinery operations along the Gulf Coast recover after the hurricane and help push oil prices to two-week lows.

The dollar was also supported after U.S. Treasury Secretary John Snow said that economic stimulus from rebuilding efforts in the wake of Katrina would likely boost gross domestic product in 2006 after weighing on growth for the rest of 2005.

The dollar bought 109.95 yen, up from 109.66 yen in late U.S. trade. The euro was little changed at $1.2465.

The dollar eased against the yen earlier in the session on selling by a big Japanese bank and various domestic investors on a bearish outlook for the U.S. currency, a trader at a Japanese bank said.

But it was seen recouping those losses on buying from importers, mutual funds and other institutional investors.

ELECTION WILD CARD

For clues about the effect of Katrina on monetary policy and the economy, the market will take a close look at the Fed's beige book, which outlines business conditions across the nation, and tune in to a speech by Fed Bank of Chicago President Michael Moskow.

Both events are slated for later in the session.

The Fed has hiked rates at 10 straight meetings since June 2004, raising its funds rate to 3.5 percent from 1 percent and helping to push the dollar broadly higher in the first half of the year.

Fed economist Robert Eisenbeis said on Tuesday that damage by Katrina to economic growth would likely be short-lived and would not change the underlying dynamics for which the Fed has set monetary policy.

Some traders said that Sunday's election in Japan could be a wild card for the market's near-term direction.

Players who have bought the yen on a bet that Prime Minister Junichiro Koizumi will be victorious, could take profits on the currency if he wins. But if Tokyo share prices keep rising, it could open the way for full-fledged buying of the yen.

Elsewhere, the Reserve Bank of Australia kept rates at 5.5 percent on Wednesday, as widely expected.

Later in the session, the Bank of Canada will announce its rate decision, with traders widely expecting an increase of 25 basis points to 2.75 percent.

The Bank of Japan and the Bank of England are both expected to keep rates unchanged when they make announcements on Thursday.

source: reuters

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SBI forex department staff plan stir

2005-09-05T23:59:00.000-07:00

The State Bank of India (SBI) Staff Association (Bengal Circle) and the State Bank of India's officer' Association (West Bengal) warned that they might go in for joint agitation action against any violation of the tripartite agreement on integration of treasury operation that was signed between All India State Bank of India Staff Federation, All India State Bank of India's officer' Federation and the SBI management in January 2000.

In July 2005, SBI decided to implement 'Mercury Fx', the internet based forex reporting system in three branches in Mumbai and overseas branch in New Delhi.

By using this technology, any branch official will be able to connect dealers from Treasury on-line, provide details of transaction, negotiate rate and provide report.

Such a system would eventually make Calcutta FD redundant in the forex rate negotiation and report finalising activities.

In protest, the the two staff association bodies have asked the chief general manager of SBI at Kolkata to stop this, but their request had been ignored, said an association official.

"As the management is maintaining a stoic silence on our repeated request for arranging a meeting on the issue, we have no option but go in for other course of action," the bodies said a memorandum to the CGM, Kolkata.

According to the agreement, it was decided that the forex business of the bank within the country would be handled equally between the dealing room at the foreign department (FD), Calcutta and Treasury department, Mumbai.

source: business-standard.com

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Dollar falls on U.S. rate uncertainty after Katrina

2005-09-04T23:19:00.000-07:00

By Rika Otsuka

TOKYO, Sept 5 (Reuters) - The dollar crept back towards a three-month low against the euro on Monday due to uncertainty about how high U.S. interest rates would climb and how much Hurricane Katrina would curb economic growth.

A series of weaker-than-expected economic data last week has prompted some investors to conclude that the Federal Reserve could pause its rate tightening campaign at its Sept. 20 meeting to assess the fallout from Katrina.

Traders said the market would keep an eye on upcoming weekly snapshots of retail sales, jobless claims and consumer confidence for clues about what impact the hurricane has on policy.

U.S. Treasury Secretary John Snow said on Friday that Katrina, which ripped up the Gulf Coast and sent flood waters pouring into New Orleans, could slow U.S. economic growth for a quarter or so, though it would not have a lasting impact.

Soaring oil prices, which hit a record-high $70.85 last week as Katrina ruptured the U.S. oil industry, were also seen undermining U.S. economic growth.

"While few see a long-term effect from the hurricane on the overall U.S. economy, the dollar is being sold on surprise that damage caused by the hurricane was more serious than previously thought," said Kikuko Takeda, a market economist at Bank of Tokyo-Mitsubishi.

"The market may continue to focus on the impact of Katrina for now."

By 0340 GMT, the euro was buying $1.2575, up from $1.2530 in late trade on Friday when it hit a three-month high of $1.2590.

The dollar fetched 109.20 yen, down from around 109.80 yen and near a two-month low below 109 yen.

The dollar gave up 0.4 percent versus the Swiss franc to hover around 1.2255 francs.

Traders said that currency moves were exaggerated by thin volume as U.S. markets are closed on Monday for Labor Day.

FED ON RADAR

The Fed has raised its funds rate 10 straight times since June 2004 to 3.50 percent, with the rate advantage helping to propel the dollar 8 percent higher against the euro and 7 percent versus the yen this year.

Previously, many traders and analysts had expected two or three more rate hikes by year's end. But more and more market players have revised their forecasts, seeing one or two more rate rises and the end of the current tightening cycle soon.

Some players have even started to think the Fed might skip a rate increase at its monetary policy meeting this month because of Katrina.

The market is eager to hear from Fed board members, and both Chicago Fed President Michael Moskow and San Francisco Fed President Janet Yellen are slated to speak this week.

The yen, meanwhile, was underpinned by a range of factors, including media polls showing firm support for Japanese Prime Minister Junichiro Koizumi's party ahead of the Sept. 11 general election.

The Nikkei stock average hit a fresh 4-year intraday high on Monday, while a Finance Ministry survey showed that Japanese firms boosted capital spending in the April-June quarter from a year ago despite surging oil prices.

source: reuters

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Dollar limps up from lows before U.S. jobs report

2005-09-02T00:41:00.000-07:00

TOKYO, Sept 2 (Reuters) - The dollar edged up on Friday after hitting a three-month low against the euro a day earlier on yet more weak U.S. economic data that fanned speculation the Federal Reserve could soon halt its series of interest rate increases.

This week's U.S. data has all come in worse than expected, compounding investor jitters about the economy's outlook from record oil prices and the severe destruction caused by Hurricane Katrina.

The Institute for Supply Management's (ISM) index of national manufacturing activity fell more sharply than expected to 53.6 in August from 56.6, data showed on Thursday, a day after news of the first contraction in Midwest business activity in more than two years.

Traders are now eyeing the U.S. payrolls report for August at 1230 GMT for more signs of weakness. Economists' consensus forecast is for employers to add 190,000 jobs after hiring 207,000 in July.

"The dollar's outlook doesn't look very good," said a trader at a Japanese bank. "The impact of Hurricane Katrina also seems bigger than previously thought."

By 0120 GMT, the euro had eased a tad to $1.2490 from around $1.2500 in late Thursday New York trade. The single currency climbed as high as $1.2525 on Thursday and is up about 3 percent from lows near $1.2170 on Tuesday.

The dollar kept most of its losses against the Swiss franc at 1.2350 francs, also near a three-month low. The Swiss franc has strengthened on investor risk aversion as oil prices have surged and cast doubts on the global growth outlook.

Against the yen, the dollar drifted up to around 109.90 yen from a low of 109.60 yen on Thursday. Traders said dollar buying by Japanese importers provided some support.

News that Fed Chairman Alan Greenspan had lunch with President George W. Bush on Thursday helped stir expectations that the Fed could stand pat at its Sept. 20 policy meeting to assess the economic fallout from Katrina.

The Fed's repeated rate rises over the past year powered the dollar higher during the first half of the year.

But after peaking in early July, the dollar has retreated on mounting worries about the threat to U.S. growth from soaring energy prices and chances of an end to the country's housing boom.

Oil prices stood at $69.30 on Friday, not far from an all-time high of $70.85 hit on Tuesday in the wake of Katrina's devastation to important U.S. oil and gasoline operations in the Gulf of Mexico.

The fed funds rate stands at 3.5 percent, and most analysts had expected it to rise to 4 percent or 4.25 percent by the year-end. But that was before the run of poor data and Katrina's impact.

source: reuters

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Dollar slides on soft Chicago PMI report

2005-08-31T23:41:00.000-07:00

NEW YORK, Aug 31 (Reuters) - The dollar slid on Wednesday after a report showed business activity in the U.S. Midwest contracted unexpectedly, for the first time in more than two years.

The Chicago purchasing management index for August came in at 49.2, sharply below market forecasts for a reading of 61.5 and under 50, which denotes a contraction. August's reading was the lowest since April 2003.

The euro last changed hands up 1 percent against the dollar at $1.2343 in midafternoon trade. Before the data, the euro zone single currency had traded around $1.2210. August was the best month for euro/dollar since December.

The dollar fell 0.6 percent against the yen to 110.60 yen. Earlier, the U.S. currency hit a three-week high at 111.78 yen as the Japanese currency struggled with the anticipated impact high oil prices will have on Japan, which imports all the crude oil it uses.

"On balance, (the PMI) is a dollar-negative number because it compounds concerns about the dampening affects of high oil prices on growth and supports the view U.S. interest rates may top out at a lower level than previously anticipated," said Alex Beuzelin, senior market analyst at Ruesch International in Washington.

The dollar has rebounded for most of 2005 on expectations the Federal Reserve will continue its rate hiking campaign, boosting the allure of some short-term dollar denominated assets. Analysts are certainly re-examining their bullish view on the U.S. currency and extent of future rate increases.

On Wednesday, interest rate futures and bond yields tumbled. The implied year-end fed funds rate fell below 4 percent, from around 4.15 percent as recently as Monday. The fed funds rate currently stands at 3.5 percent.

Anthony Santomero, president of the Philadelphia Federal Reserve Bank said on Wednesday that low rates partly reflect low inflation expectations.

The dollar earlier came under slight pressure after data showed the U.S. economy grew slightly less in the second quarter than initially reported.

U.S. gross domestic product, a measure of all goods and services produced within the country, expanded at a revised 3.3 percent annual rate in the second quarter after a 3.8 percent first-quarter rise, according to the Commerce Department.

The Chicago PMI extended the dollar's losses.

The dollar was down 1.3 percent against the Swiss franc to 1.2530 francs, posting its biggest one-day percentage decline since February. That helped the greenback post its worst month against the franc since November.

The Swiss currency firmed after the KOF leading indicator rose to 0.71 in August from a revised July figure of 0.64, brightening the outlook for the Swiss economy.

Sterling gained 1 percent to $1.8037, which helped the pound show its best monthly performance against the dollar since November.

"With the energy market so close to the surface in the markets here, the (Chicago PMI) number just amplified the current thinking that the recent hurricane and the effects on the energy market may have a broader impact than people were thinking," said Ronald Simpson, managing director of global currency analysis with Action Economics in New York.

Oil was once again one of the main drivers of the currency market even as oil futures eased from record highs. Energy experts said the two-year bull run that took oil to $70.85 on Tuesday may not have run its course.

This placed downward pressure on currencies in oil-reliant Asia, which were already reeling from fears of an economic crisis in Indonesia after its currency plunged to a 4-year low against the dollar this week.

Analysts were also assessing the potential damage caused by Hurricane Katrina.

"The hurricane itself will put a drag on overall growth in the economy, even though there will be sectors that will ultimately benefit from what is going to be a massive clean-up and rebuilding effort," HSBC said in a research note.

Estimates have put the cost of the storm at $25 billion. The bank noted that given the extent of the storm's damage to New Orleans and a swath of the U.S. Gulf coast, some of the large European insurance companies could buy dollars and sell either the Swiss franc or euro to cover the cost of those claims. That should underpin the dollar in the near term.

source: reuters

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Dollar meanders as traders mull oil price impact

2005-08-30T23:40:00.000-07:00

TOKYO, Aug 31 (Reuters) - The dollar was trapped in narrow ranges against major currencies on Wednesday as investors struggled to sort out what record-high crude oil prices mean for currencies and the global economy.

Dealers said worries that crude oil prices of over $70 a barrel would slow consumer spending in the United States were keeping investors cautious, even in the face of U.S. data on Tuesday that showed the American consumer was holding up well.

The surge in oil prices has raised doubts about whether the Federal Reserve will keep raising interest rates into 2006, continuing the tightening campaign that has helped the dollar rebound this year from a three-year slump.

Minutes on Tuesday from the Federal Reserve's August meeting showed most policy-makers were worried inflation risks had "ticked up" recently. But they also suggested the Fed was concerned rising energy costs might force a slowdown in consumer spending.

The oil price spike has also led some traders to bet that the economies of export-dependent Asian economies such as Japan will slow, hurting their currencies.

"It's really tough trying to guess the impact of higher oil prices, but people's first instinct seems to be to sell the yen, then the dollar," said Noriyuki Kubo, forex planning manager at Resona Bank in Tokyo.

Morgan Stanley currency strategist Stephen Jen said in a research note that higher oil prices were "unambiguously bad" for Asian countries including Japan, most of which are almost entirely dependent on imported oil for their energy needs.

The dollar edged up against the yen in early trade, but was beaten back down as Japanese exporters took the chance to sell dollars at close to a three-week high.

The dollar was at Y111.25 yen as of 0330 GMT, barely changed on the day but still not far off a peak around 111.60 yen hit on Tuesday.

The yen has now retreated more than two yen from a three-week high of 109.05 to the dollar hit on Aug. 16.

Foreign investors were heavy buyers of Japanese stocks earlier in the month, spurred by signs of an improving economy and polls suggesting that reformist Prime Minister Junichiro Koizumi would fare well in an election in September.

HURRICANE KATRINA

The euro was trading at around $1.2225, also barely budged from late U.S. trade.

Dealers said the dollar was gaining support against the euro from talk European insurers were buying dollars to cover insurance claims resulting from the massive damage caused by Hurricane Katrina. The claims are estimated at up to $25 billion.

The dollar was boosted in part on Tuesday as the Indonesian rupiah tumbled by almost 9 percent to a four-year low against the U.S. currency, which put pressure on Asian currencies including the yen.

The rupiah weakened again on Wednesday, with Indonesia later in the day expected to unveil a series of fresh steps to rescue the rupiah currency and restore financial market confidence.

Trading activity was muted as the market also readied for a series of big U.S. economic reports later in the week that include the Institute for Supply Management's manufacturing survey on Thursday and a nonfarm payrolls report on Friday.

Traders are keeping an eye on oil prices after Hurricane Katrina sent crude prices to a record high of $70.85 on Tuesday.

So far oil prices, which have risen more than 60 percent this year to date, inflating the cost of gasoline, appear to have done little to deter the ever-resilient U.S. consumer.

The Conference Board's U.S. consumer confidence index rose to 105.6 in August, far above economists' median forecasts.

Most analysts still expect the Fed to raise its funds rate to at least 4.00 percent by the end of the year, extending a string of 10 straight rate rises from the central bank.

source: reuters

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Dollar climbs before data, Indonesia in spotlight

2005-08-29T23:54:00.000-07:00

By Eric Burroughs

TOKYO, Aug 30 (Reuters) - The dollar climbed against the euro and touched a three-week high against the yen on Tuesday, gaining strength ahead of a U.S. consumer confidence report that kicks off a busy week of economic data.

The dollar gained in part as the Indonesian rupiah tumbled more than 5 percent to a four-year low against the U.S. currency, putting pressure on currencies around Asia including the yen.

Record oil prices have strained Indonesia's finances by boosting the cost of fuel subsidies, spooking investors who have driven the rupiah sharply lower. As a result, worries about inflation have mounted and compounded the currency's slide.

But Indonesia's central bank has yet to raise interest rates to help support the battered rupiah. Indonesia's currency woes have rekindled memories of the Asian financial crisis of 1997/98.

In just two days the rupiah has shed more than 8 percent against the dollar, and analysts said the size of the move was enough to push down other regional currencies. The Taiwan dollar hit its lowest in almost 10 months.

"We have seen this aggressive rally in dollar/rupiah and it has given the dollar a bid tone across the board," said Richard Yetsenga, currency strategist at HSBC in Hong Kong.

The dollar rose as high as 111.02 yen, its strongest since Aug. 10, before easing to near 110.85 yen. The euro also rose a tad to 135.40 yen.

Disappointing data out of Japan did little to shake expectations for a sustained recovery. Spending by wage earner households fell in July and the unemployment rate rose. But the ratio of jobs to applicants improved to its best since 1992.

Against the dollar, the single currency inched lower to $1.2210 and was down more than a cent from its peak near $1.2350 in Asia on Monday.

Traders said talk of U.S. companies repatriating overseas profits as part of the Homeland Investment Act kept the euro under pressure.

END TO THE RANGES?

With summer holidays coming to an end this week, traders are hoping a series of U.S. data will give the market a new direction after major currencies have been trapped in ranges the past few weeks.

The data, including the Institute for Supply Management August factory index on Thursday and the payrolls report for the same month on Friday, are expected to show the economy is weathering the run-up in oil prices.

Before then, the Conference Board's consumer confidence survey at 1400 GMT will be watched for how much steep gasoline prices are hurting households. The main confidence index is forecast to fall to 101.5 in August from 103.2.

The dollar index -- its performance against a trade-weighted basket of six major currencies -- is down about 1 percent in August at 88.35 and nearly 3 percent from a 14-month high of 90.77 hit on July 8.

In the past few weeks the dollar index has shuffled between 86.76 and 88.90.

Traders are keeping an eye on oil prices after the strength of Hurricane Katrina sent crude prices soaring to a record high of $70.80. Crude prices rose back above $68 on Tuesday from a low of $66.30 the previous session.

The Federal Reserve's steady lifting of overnight rates to 3.5 percent had fuelled the U.S. currency's rally earlier in the year by widening the U.S. rate advantage over the euro and yen. The minutes of the Fed's Aug. 9 meeting are due at 1800 GMT.

But even as the central bank is poised to raise rates to 4 percent or 4.25 percent by the end of the year, the dollar has failed to capitalise as investors doubt the U.S. economy's prospects.

A variety of other events could shape the direction of currencies this month, including a visit by Chinese President Hu Jintao to Washington next Wednesday and elections in Japan and Germany on Sept. 11 and Sept. 18 respectively.

source: reuters

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Dollar falls on oil price spike, yuan eyed

2005-08-28T23:50:00.000-07:00

TOKYO, Aug 29 (Reuters) - The dollar fell half a percent against the Canadian dollar and Swiss franc on Monday as investors fretted that a surge in crude oil prices above $70 a barrel could crimp U.S. economic growth.

U.S. crude futures soared to a new record of $70.80 as Hurricane Katrina strengthened into one of the fiercest storms ever seen in the United States, threatening oil production facilities in the northern Gulf of Mexico.

The Canadian dollar hit nine-month highs against the dollar last week and has benefited from Canada being a major producer of oil. Meanwhile, the Swiss franc has gained on worries that the spike in energy costs will slow the U.S. and global economies.

Traders said a fall Tokyo share prices and a poll showing less support for Prime Minister Junichiro Koizumi's ruling Liberal Democratic Party (LDP) dampened yen sentiment.

The stock market's Nikkei average was down almost 1 percent as the spike in oil prices hurt optimism on the economy's outlook, moving away from a four-year high above 12,500 hit last week.

"Yen buying seems to be stalling after an initial round of optimism about the Sept. 11 election receded," said Tomoko Fujii, a senior currency strategist at Bank of America.

An opinion poll by the daily Asahi Shimbun published on Sunday showed a narrowing of the gap between Japan's main opposition party and the LDP.

Koizumi called the snap election as a referendum on his reform plans, especially privatising the postal system. Polls showing strong public support for Koizumi have encouraged overseas investors to buy Japanese stocks, helping the yen.

By 0350 GMT the dollar was near $1.1925 Canadian dollar, down 0.6 percent from late Friday New York levels and not far from a nine-month low of C$1.1862 struck last Thursday.

The U.S. currency slid close to 1.2535 Swiss francs from 1.2590 francs.

The dollar's broader weakness helped the euro rise 0.3 percent to $1.2320, but it was a tad firmer against the yen around 110.25 yen. The euro gained nearly 0.5 percent to 135.85 yen.

Sounding a cautionary note on the U.S. economy, Federal Reserve Chairman Alan Greenspan said on Saturday that home prices could fall as the housing surge "inevitably" slows. The booming housing market has underpinned U.S. growth in the past few years.

REVALUATION SPECULATION LINGERS

Traders were keeping an eye on the yuan after the dollar briefly fell against the yen on Friday on speculation China would revalue its currency again, following its July 21 move.

Chinese authorities denied another revaluation was coming but said market forces would determine the currency's value.

Talk that China could revalue the yuan again has built up ahead of President Hu Jintao's visit to Washington on Sept. 7.

Chinese central bank governor Zhou Xiaochuan told the Financial Times that recent reforms to the yuan regime do not represent a one-off adjustment. Zhou said a managed floating exchange rate was in place that would allow a move to a market-driven system.

The yuan hit another post-revaluation high of 8.0955 to the dollar on Monday.

Oil may stay as the main focus on Monday with banks in London closed for a holiday and no major economic indicators scheduled to be released except for German data on consumer confidence and July retail sales.

Some traders said speculators may keep to the sidelines ahead of a series of potentially market-moving events in September, starting with the U.S. Institute for Supply Management survey on manufacturing on Thursday.

The busy schedule includes the monthly U.S. employment report on Sept. 2, President Hu's visit and elections in Japan on Sept. 11 and and Germany Sept. 18. (Additional reporting by Satomi Noguchi)

source: reuters

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Dollar creeps up vs yen, sticks to tight range

2005-08-25T23:29:00.000-07:00

TOKYO, Aug 26 (Reuters) - The dollar edged higher against the yen on Friday but was confined to tight ranges as many market players refrained from making big bets ahead of a series of potentially market-moving events in September.

The busy schedule includes a U.S. jobs report on Sept. 2, elections in Japan and Germany, and a visit by Chinese President Hu Jintao to Washington on Sept. 7, which comes less than two months after China's revaluation of the yuan.

Traders said speculators were sitting on the sidelines ahead of these events and the market was being driven by flows from longer-term investors.

Encouraged by signs of a stronger economy in Japan, foreigners have been heavy buyers of Japanese stocks, helping buoy the Nikkei share average to four-year highs.

But the yen has struggled to gain, as the foreign buying is being offset to a large extent by Japanese investors' appetite for high-yielding foreign currency denominated bonds, some said.

"As a result we're stuck at a bit of an impasse," said Mitsuru Sahara, vice president of forex dealing at UFJ Bank.

The dollar has risen around 8.4 percent against a basket of six major currencies this year as a steady campaign of interest rate rises by the Federal Reserve has increased the dollar's rate advantage over other currencies.

But the dollar index is now roughly unchanged from three weeks ago, after a period of listless trade with market activity thinned by the absence of many market players due to summer holidays in the Northern Hemisphere.

The dollar had edged up around 0.2 percent against the yen at 110.30 yen as of 0250 GMT. It was well above a seven-week low near 109.05 yen hit in mid-August and in the middle of the range of 109-111 in which it has drifted for the past two weeks.

Some traders said the yen had come under mild pressure after a report in the Financial Times daily cited a French anti-terrorism expert saying that Al Qaeda could be planning attacks on Asian financial centres including Tokyo.

The euro was barely changed against the dollar at $1.2300 but fared better against the Japanese currency, rising 0.2 percent to 135.60 yen.

OIL WORRIES

The euro was holding steady despite data on Thursday that showed Germany's Ifo business sentiment index unexpectedly dipped to 94.6 in August from 95.0 in July.

That followed a more upbeat survey from the ZEW economic research institute earlier in the week, which showed investor confidence in the euro zone's largest economy at a 17-month high.

Federal Reserve Chairman Alan Greenspan will appear on Friday at an economic symposium in Wyoming, where he is due to reflect on his 18-year stint at the helm of the U.S. central bank but is not expected to touch on the outlook for monetary policy.

Some traders, however, said they would be watching for any comments from the Fed chairman on the recent rise in oil prices to record highs, which they worry could hurt the U.S. economy and give the Fed cause to pause its rate-rising campaign.

"People want to buy dollars on the rising interest rate story, but the big rise in oil prices is starting to make them cautious," said Kosuke Hanao, head of forex sales at Royal Bank of Scotland in Tokyo.

For now the Federal Reserve appears more worried about the impact of rising oil prices on inflation than growth.

Chicago Fed President Michael Moskow said late on Wednesday that higher U.S. interest rates were needed to keep inflation contained as the labour market tightens and energy prices climb.

The market may get a better handle on the Fed's thinking next Tuesday when the central bank releases minutes of its policy meeting on Aug. 9.

The Fed raised rates by a quarter percentage point to 3.5 percent at that meeting in its 10th straight rate hike. Most analysts expect the Fed to raise rates to at least 4 percent by the end of the year, and some see rates heading as high as 5 percent in 2006. (Additional reporting by Satomi Noguchi) ($1=110.07 Yen)

source: reuters

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Dollar slips as U.S. durables data disappoints

2005-08-25T00:12:00.000-07:00

By Hideyuki Sano

TOKYO, Aug 25 (Reuters) - The dollar skidded lower on Thursday after surprise weakness in U.S. durable goods orders data the previous day cast a shadow over market optimism on the U.S. economy.

Orders for U.S. durable goods tumbled 4.9 percent in July, the biggest drop in more than a year and a half and worse than economists' forecast of a 1.2 percent drop.

"I think the durable goods data was weak enough to make some people think it could set off a declining trend in the dollar," said Kotaro Kunimochi, director of forex trading at Barclays Capital.

While most market players think this data alone is unlikely to change the overall picture of a solid U.S. economy, it contrasts with unexpected upswings in euro zone economic sentiment of late, helping the euro to hit a one-week high.

The euro rose to around $1.2300 -- its highest level since Aug. 17 -- from around $1.2275 in late Wednesday U.S. trade. It also rose as high as around 135.60 yen, the highest since Aug. 25, from around 135.25 yen.

The euro has been gaining momentum since Tuesday's news that Germany's ZEW investor confidence indicator had shot up to a 17-month high.

That augured well for Germany's Ifo business sentiment survey due at 0800 GMT. Economists expect it to have risen to 95.2 in August from a five-month high of 95.0 in July, but the ZEW data may have boosted market expectations further.

The dollar fell to 110.00 yen from around 110.20 yen in late U.S. trade, reversing earlier slim gains built on the back of a fall in Japanese share prices.

The market made no response to data showing Japan's trade surplus narrowed 22.6 percent in July from a year earlier to 873.6 billion yen, a smaller decline than economists forecast.

ANOTHER SHOCK WAVE?

Some traders said the dollar was hurt after U.S. rating firm Moody's downgraded its ratings on Ford (F.N: Quote, Profile, Research) and General Motors (GM.N: Quote, Profile, Research) to junk status late on Wednesday.

Ford and GM are among the biggest issuers of corporate debt in the United States, with well over $400 billion of combined debt as of June, or more than five percent of the entire U.S. corporate debt market.

The downgrades could sap foreign investors' appetite for U.S. corporate bonds.

That would be detrimental for the dollar, particularly after foreign investors' record $52 billion net buying of U.S. corporate bonds in June, accounting for a big chunk of the $71.2 billion of net capital inflows to the United States that month.

But many said the impact would be limited and the cuts were no surprise as two other rating firms, Standard & Poor's and Fitch, had already downgraded the automakers' debt.

"It's unlikely to cause a huge shock like the one we saw earlier this year. The U.S. macroeconomic environment remains sound," said Masayuki Kichikawa, a senior economist at Mizuho Securities. But he added: "We need to see the reaction of the U.S. corporate debt market in the next few days."

Comments by Chicago Federal Reserve Bank President Michael Moskow did not cause any market reaction.

In a speech on Wednesday in Chicago, Moskow said the United States needs higher interest rates to keep inflation down as the job market tightens and energy prices stay high.

Moskow, a voting member at Fed policy meetings this year, also said core inflation is at the upper end of a level consistent with price stability.

He also said the jobless rate, at 5.0 percent in June and July, is about as low as it can be on a sustained basis, and that the current capacity utilisation rate showed "some slack remaining in manufacturing, but not much". ($1=110.22 Yen)

source: reuters

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Dollar drifts higher, market looks for direction

2005-08-23T23:10:00.000-07:00

TOKYO, Aug 24 (Reuters) - The dollar climbed against the euro and the yen in light trade on Wednesday as investors looked to U.S. durable goods data and a speech from a Federal Reserve policymaker for clues on the U.S. interest rate outlook.

Major currencies have been trapped in tight ranges this week given little significant economic news and few events to guide traders and investors, with many on holiday.

The yen has given back some of the big gains that took it to a seven-week high against the dollar and a six-week peak versus the euro as foreign investors took a breather from their heavy buying of Japanese shares in the past two weeks.

The Nikkei share average was almost flat after rallying to four-year highs on hopes for a sustained economic recovery and expectations that Prime Minister Junichiro Koizumi will win a mandate for reform in the Sept. 11 election.

"This is just a correction and I don't think the rally in the Nikkei is over yet," said Sharada Selvanathan, a currency strategist at BNP Paribas in Singapore.

"Political and economic factors are bright and in this sense, foreign investor interest in Japanese equities should persist."

In early Asian trade, the dollar climbed to 110.35 yen from near 109.90 yen in late New York but has stayed within a range roughly between 109 yen and 111 yen in the past two weeks.

"People are just buying the dollar below 110 yen and selling above 110 yen," said one trader at a European bank.

The euro also recovered a tad to around 134.65 yen, pulling away from a six-week low of 133.53 yen struck on Monday.

Against the dollar, the euro slipped close to $1.2200. It has shifted between $1.21 and $1.2250 this week after falling from a two-and-a-half month high of $1.2487 hit on Aug. 12, according to data from electronic trading platform EBS.

DATA GETS A SHRUG

The market mostly shrugged off the previous session's data showing U.S. existing home sales slipped a bit more than expected in July from the record pace in June, while inventories hit their highest levels since 1988. That raised concerns about a slowdown in the red-hot U.S. housing market that could cool overall growth, sparking a rally in U.S. Treasuries that drove benchmark 10-year yields to one-month lows.

Still, Richmond Fed President Jeffrey Lacker said last week he has become more worried about inflationary pressures in the last two months.

Investors will see whether Chicago Fed President Michael Moskow shares those concerns in a speech on the U.S. economy at 2200 GMT and gives any hint on how high the fed funds rate could head.

Before then, figures for U.S. durable goods orders in July at 1230 GMT are forecast to show a drop of 1.2 percent after climbing 2.8 percent in June.

At 1400 GMT another housing report is expected to show new home sales eased to a 1.333 million annual pace in July after a record 1.374 million a month earlier.

The Fed has lifted overnight rates 10 straight times to 3.5 percent, though economists are divided about whether the central bank will push rates beyond the 4 percent to 4.25 percent level most expect by the end of this year.

So far this year the Fed's repeated rate rises have powered a broad rally in the dollar that has driven it up 11 percent against the euro and almost 8 percent versus the Japanese currency.

But the outlook for both the Japanese and the euro zone economies is looking up. Germany's ZEW index of investor confidence for August jumped to a 17-month high of 50.0, easily beating forecasts.

(Additional reporting by Hideyuki Sano)

source: reuters

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Yen keeps gains as foreigners snap up Japan stocks

2005-08-23T00:08:00.000-07:00

TOKYO, Aug 23 (Reuters) - The yen clung to solid gains on Tuesday as foreign investors continued their love affair with Japanese stocks, helping to push the Nikkei share average to a fresh four-year high.

The Japanese currency has stolen the limelight in a week devoid of major economic data in the United States and with many market players away on summer vacation -- resulting in thinner trading volumes.

"It's all about the yen right now," said Hideaki Furuyama, manager of forex trading at Trust & Custody Services Bank. "As long as foreigners keep buying Japanese stocks we should see the yen drift higher."

Yen bulls have also been emboldened by newspaper polls showing growing public support for Prime Minister Junichiro Koizumi and his economic reform plans heading into the Sept. 11 snap election.

Investors are also more upbeat on the Japanese economy. The Reuters Tankan, a monthly survey of business sentiment, showed on Tuesday that business confidence was flat in August but companies saw improvement in the months ahead.

As of 0300 GMT, the dollar fetched 109.85 yen, up only slightly after it slipped around 0.7 percent on Monday. The dollar touched a seven-week low of just above 109 yen last week.

The Nikkei share average bolted above 12,500 on Tuesday to its highest level since July 2001, garnering more support from foreign investors who have already gobbled up some 6 trillion yen ($54.71 billion) of Japanese equities this year.

The euro fetched around 134.15 yen, down from 134.26 yen in late U.S. trade. The single currency hit a seven-week trough of 133.53 yen on Monday, breaking below a low of 133.58 yen hit soon after China revalued the yuan on July 21.

The single currency bought $1.2210, down from $1.2230 in late U.S. trade but well above a three-week low of around $1.2125 hit on Friday.

GERMAN CONFIDENCE

The ZEW Centre for European Economic Research will release its indicator of German economic sentiment at 0900 GMT. The data is expected to underscore a modest improvement in consumer sentiment in the euro zone's biggest economy.

A strong reading in that, or Thursday's closely watched Ifo survey of German business sentiment, will likely be taken by some investors as an excuse to buy euros, Morgan Stanley strategists said in a research note.

The single currency has rebounded 3 percent from a 14-month low around $1.1870 hit on July 5, not long after voters in France and the Netherlands rejected the European Union Constitution.

The dollar has faltered this week after bouncing back against the euro and the yen last week following a series of strong data that cemented the likelihood of more dollar-supportive interest rate rises from the Federal Reserve in coming months.

Chicago Fed President Michael Moskow may provide some guidance for investors on Wednesday with a speech on the U.S. economic outlook.

Alan Greenspan will appear on Friday at an economic symposium in Wyoming, where the Fed chairman is due to reflect on his 18-year stint at the helm of the central bank but is not expected to touch on the outlook for monetary policy.

The Fed's series of 10-straight rate hikes since June 2004 has helped the dollar arrest a three-year, 30 percent slide against major currencies to the end of 2004, driven by worries about large and growing budget and trade deficits.

The dollar index -- a gauge of its performance against six major currencies -- is up 9 percent this calendar year.

($1=109.66 yen)

source: reuters

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Dollar down vs yen as foreigners grab Tokyo shares

2005-08-21T23:25:00.000-07:00

TOKYO, Aug 22 (Reuters) - The dollar slipped from near a three-week high against the euro on Monday and edged down versus the yen as foreign investors kept up their buying of Tokyo shares, sending the Nikkei average to a new four-year peak.

The U.S. currency had bounced back against the euro and the yen last week after a series of strong data cemented the likelihood of more dollar-supportive interest rate rises from the Federal Reserve in coming months.

But exchange rate swings may be dictated more by key chart levels, oil prices and investment flows, with few major events to give guidance this week and several market players on holiday.

The only eye-catching data due from big economies on Monday is the euro zone current account balance for June. Reports later in the week include U.S. housing and durable goods figures, as well as Germany's ZEW and Ifo confidence surveys.

More foreign cash poured into Japan stocks on optimism about the economy. The Nikkei climbed 0.8 percent on Monday to hit a new four-year intraday high, and foreign buying has played a big role in the rally.

The yen also was helped by growing public support in newspaper polls for Prime Minister Junichiro Koizumi and his reform plans heading into the Sept. 11 snap election.

Tomoko Fujii, senior currency strategist at Bank of America in Tokyo, said investment flows would buttress the yen as Japanese investors hold back on foreign purchases before the first half of the fiscal year ends in September.

"Global investors remain interested in Japanese assets. In general, the yen is likely to remain firm over the next several weeks," Fujii said.

In midday Asian trade, the dollar was down around 0.3 percent on the day at 110.15 yen after having clawed back from a seven-week low of 109.01 yen plumbed last week. The euro was mired near a one-month low at 134.20 yen.

Against the dollar, the single currency rose 0.3 percent to $1.2185 but was in sight of a three-week low of $1.2125 hit on Friday, according to data from electronic trading platform EBS.

The dollar index -- a gauge of its performance against six major currencies -- slipped to 88.45 from the 88.58 hit on Friday but was up from the two-and-half-month low of 86.76 hit on Aug. 12.

Some technical analysts said the dollar index needs to clear resistance at the Fibonacci retracement levels of 88.70 and 89.20 to resume its rise.

In a note to clients, strategists at Lehman Brothers said the dollar's recent bout of weakness was more technical in nature than a renewed focus on the currency's perennial negatives -- the trade and current account deficits.

DOLLAR RECOVERY

The dollar's recovery began once speculators slowed the shedding of some of their hefty long positions in the currency as market activity began to wind down this month.

Speculators in the International Monetary Market slashed their dollar longs in the week ending Aug. 16 to be net short for the first time in four months, coinciding with the dollar index's slide to its lows.

Part of that big swing was a slash in their bets against the yen as net shorts fell by almost half to 26,385.

The Fed's non-stop rate increases have boosted the dollar 11 percent against the euro and almost 8 percent versus the yen this year, snapping a three-year slide to the end of 2004 on the deficit worries.

Most analysts see the U.S. central bank raising its funds rate to at least 4 percent or 4.25 percent this year from the current 3.5 percent. A growing number expect the Fed to raise rates to as high as 5 percent in 2006.

Richmond Fed President Jeffrey Lacker told Market News International in an interview last week that he was less comfortable with the inflation outlook than he was two months ago.

source: reuters

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Dollar clings to gains after five-day rise

2005-08-19T00:15:00.000-07:00

TOKYO, Aug 19 (Reuters) - The dollar held gains on Friday after a five-day winning streak against a basket of major currencies, as a robust U.S. factory survey backed views the Federal Reserve would keep raising interest rates.

The Philadelphia Fed said on Thursday its business activity index jumped in August to the highest reading in four months.

The data beat forecasts and added to a raft of recent figures suggesting the U.S. manufacturing sector is in good shape and inflation is running near the top end of the Fed's perceived comfort zone, giving it reason to push rates higher.

But traders said that in thin summer trade, economic data was taking a back seat to other factors driving fund flows.

One such factor was U.S. multinational companies buying dollars to take advantage of a recent change in tax laws that allows them to bring their overseas profits home at a lower tax rate, some traders said.

"The U.S. data is good, and you can't ignore that," said Nobuaki Kubo, forex planning manager at Resona Bank.

"But it's still not clear what the Fed will do after another two or three more rate hikes this year," he said, adding that trading would likely be driven by technical factors in the coming week due to a vacuum of major events.

Few major U.S. economic figures are due next week, and Japan won't see anything significant until trade data is releaed on Thursday.

By 0113 GMT, the dollar bought around 110.45 yen, slightly down from the level in late U.S. trade on Thursday but still well above a seven-week low at 109.05 yen hit on Tuesday.

Traders said the yen would likely keep gaining support from foreign investors, who have bought 6 trillion yen ($54.32 billion) of Japanese equities this calendar year to date, helping push the Nikkei average to four-year highs.

The dollar has gained almost 2 percent against a basket of six major currencies over the past five sessions.

Over the same period, the U.S. currency has gained around 2.3 percent against the euro and 3 percent versus the Australian dollar, while its rise against the yen has been less than 1 percent.

The euro traded near $1.2180, a tad higher than the level in late U.S. trade when it hit a two-week low around $1.2160. It's fall gained momentum on Thursday after breaking through the key technical level of $1.2250.

Most analysts expect the Fed to raise its funds rate to either 4.00 or 4.25 percent by the end of the year, after it lifted it to 3.5 percent this month -- the 10th straight increase since June 2004.

According to a Reuters poll earlier in August, most forecasters see the Fed raising rates well into 2006, but the survey of 20 primary dealers showed predictions for the peak rate ranging from as low as 3.75 percent to as high as 5.25 percent.

In the three years to the end of 2004, the U.S. currency dropped roughly 30 percent against the basket of six currencies, but it has recovered this year as overnight U.S. rates rise further above those in the euro zone and Japan. ($1=110.46 yen)

source: reuters

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Dollar gains against yen for a third day

2005-08-18T01:12:00.000-07:00

TOKYO, Aug 18 (Reuters) - The dollar climbed against the yen for a third straight day on Thursday after the latest batch of U.S. inflation figures gave investors another signal the Federal Reserve will likely push ahead with more interest rate rises.

Data on Wednesday showed the U.S. core producer price index rose 0.4 percent in July -- quadruple forecasts -- and up 2.8 percent from a year earlier, the fastest pace since November 1995.

Economists said the pace of core wholesale price inflation was exaggerated by a surprising jump in car and truck prices, but the report suggested the pressure from surging energy prices would keep the U.S. central bank all the more vigilant.

"This will probably stoke expectations for higher rates even more," said Tohru Sasaki, chief forex strategist at JPMorgan Chase in Tokyo.

Sasaki was quick to add, however, that the possibility of higher inflation was not necessarily a supporting factor for the dollar since it erodes the higher return from rising rates.

"We need to watch inflation numbers for August carefully. But the best scenario for the dollar would be tamed inflation while the Fed's rate-raising policy is held intact," he said.

Other gauges of U.S. consumer prices have showed inflation running close to a 2 percent year-on-year rate, near the upper end of the Fed's perceived comfort zone.

Some analysts expect overnight U.S. rates to go as high as 5 percent next year after the Fed raised rates to 3.5 percent this month, its 10th straight increase since June 2004.

In the three years to the end of 2004, the U.S. currency dropped roughly 30 percent against a basket of currencies on persistent worries about the swelling U.S. trade and budget deficits.

But the dollar has recovered this year as overnight U.S. rates rise further above those in the euro zone and Japan, and come closer to the higher rates in the United Kingdom and Australia.

By 0207 GMT, the euro traded near $1.2270, little changed from the level in late U.S. trade on Wednesday when it hit a two-week low of $1.2261. The dollar has gained about 10 percent against the euro since the start of the year.

The U.S. currency climbed about 0.3 percent to 110.20 yen, bouncing back from a seven-week low at 109.05 yen hit on Tuesday.

The yen had gained on growing confidence that Japan's economy is staging a sustained recovery and that Prime Minister Junichiro Koizumi would gain public support for his reform plans in the coming Sept. 11 snap election.

Foreign investors have poured funds into Tokyo stocks and helped drive major indices to four-year highs.

The benchmark Nikkei stock average ended morning trade up 0.5 percent, just below the four-year intraday high it struck a day earlier.

Data from the Ministry of Finance showed foreign investors snapped up a net 721.9 billion yen ($6.58 billion) of Japanese stocks last week, the biggest weekly purchase since March 2004 and the ninth straight week of buying.

So far in the calendar year, foreign investors have grabbed a net 5.99 trillion yen ($54.57 billion) of Japanese shares. ($1=109.76 yen)

source: reuters

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Dollar extends losses after US retail sales

2005-08-11T23:29:00.000-07:00

NEW YORK, Aug 11 (Reuters) - The dollar extended its losses on Thursday after a softer than expected U.S. retail sales report, which left intact the market's expectations for measured Federal Reserve interest rate hikes, traders said.

The euro pushed up against the dollar to its highestin more than 2 months, while the dollar fell below 110 yen to 6-week lows, with the Japanese currency boosted by strong domestic stocks and repatriation flows.

July U.S. retail sales rose 1.8 percent, below economists forecasts for a rise of 2.2 percent. Excluding autos, retail sales rose 0.3 percent, below the forecast 0.6 percent rise.

"Retail sales came in softer than expected and the dollar remains vulnerable to the downside," said Alex Beuzelin, foreign exchange market analyst at Ruesch International in Washington DC.

"The number does not change the market's assessment that the U.S. economy is on a robust growth track and the Federal Reserve will continue to hike rates at a measured pace. However that scenario is fully priced into the dollar," he added.

Higher U.S. interest rates are broadly dollar supportive because they make dollar-denominated deposits more appealing to foreign investors, but dollar sentiment is shaky heading into Friday's report on the U.S. June trade data. The large U.S. trade deficit is proving a persistent weight on the currency.

Late morning in New York, the euro traded around $1.2438 according to Reuters data, up from around $1.2405 shortly before the U.S. data and up about 0.4 percent from levels late on Wednesday in New York. The euro extended its recent rally to hit $1.2445, its highest level since the end of May.

Meanwhile, the yen firmed on strong gains in Tokyo stocks, easing political worries and repatriation flows.

The dollar fell to a 6-week low against the yen around 109.77 yen, sinking below a trough hit last month when China announced a change to its currency regime.

The Japanese currency was bolstered by Tokyo stocks, which hit four-year highs on optimism about Japan's economy amid buying by foreign investors.

It reversed losses made following Prime Minister Junichiro Koizumi's call for an election after losing a parliamentary vote on privatizing the postal system. Public opinion polls showed on Wednesday Koizumi's support rating had risen since he called the election for Sept. 11 to seek a new mandate for his reforms.

Talk that Japanese investors were preparing to repatriate coupon payments on U.S. Treasuries also helped the yen, traders said.

"We are just continuing yesterday's theme of bullishness towards Japan," partly driven by Japanese equities' push higher, said Patrick Brodie, chief dealer at Sumitomo Mitsui Banking Corp. in New York.

"Flows data overnight have confirmed the sizeable foreign purchases of Japanese equities," Brodie said, adding that the yen was being further fired by large U.S. coupon payments, some of which may be repatriated into Japanese currency.

source: reuters

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Dollar inches up vs euro post-Fed, yen buoyed

2005-08-09T23:12:00.000-07:00

TOKYO, Aug 10 (Reuters) - The dollar edged up against the euro on Wednesday, recovering from an initial drop after the Federal Reserve raised interest rates for a 10th straight time and indicated even more are on the way.

The yen was buoyed broadly by foreign investors chasing Tokyo shares higher as the Nikkei rose 1.5 percent to 15-month peaks and as more data showed a brightening outlook for Japan's economy.

The dollar had dipped after the Fed failed to deliver a stiffer warning about combatting inflation pressures in its post-meeting statement, as some traders had braced for.

Still, the U.S. central bank lifted its funds rate to 3.5 percent, as expected, and said more "measured" increases were likely. The central bank gave no signal it would soon wrap up the credit tightening campaign that began in June last year.

Mounting evidence of strong U.S. growth has prompted more economists to lift their forecasts for the fed funds rate to peak at 5 percent in 2006. Just a few months ago most had expected the Fed to pause around 4 percent.

"There's more room for markets to be surprised and re-price for higher rates," said Ray Farris, director of Asian forex strategy at Credit Suisse First Boston in Singapore. "As that happens, it should be a positive for the dollar, especially against the euro."

CSFB has forecast a 5 percent fed funds rate. Deutsche Bank and Goldman Sachs upped their forecasts to 5 percent this week.

While the prospect of even higher overnight U.S. rates has done nothing to help reinvigorate the dollar's rally this year, some analysts said the lure of fatter returns on dollar deposits should soon prod investors to start buying the U.S. currency.

Morgan Stanley's currency strategists said in a note to clients that the Fed is far from finished. "We continue to look for additional dollar appreciation into year end and believe the recent softness is temporary in nature," they said.

The dollar's widening interest rate advantage has driven it up about 10 percent against the euro and 9 percent against the yen so far this year, overshadowing the fears about the U.S. deficits. U.S. trade data will be released later in the week.

By midday in Tokyo, the euro was down a tad against the U.S. currency to near $1.2360 after falling close to $1.2340, about where it was before the Fed decision. The single currency had hit a two-month high of $1.2418 on Tuesday.

The dollar fell half a percent against the yen to around 111.40 yen per dollar but remained in a broad range over the past few weeks between 112.90 yen and 110.70 yen.

Traders again cited Japanese investors repatriating coupon payments on U.S. Treasuries as helping the yen. Those coupon payments are likely being used to brush up portfolios before the fiscal half-year ends in September.

The euro also dropped half a percent against the Japanese currency to 137.65 yen, down from a three-and-a-half month high of 138.84 struck on Monday as worries ease about the political fallout in Japan from a Sept. 11 snap election.

Japanese data on Wednesday showed wholesale prices rising 1.5 percent year-over-year in July, above forecasts and providing more hope that the economy could shake off its seven-year bout of deflation late this year or early next year.

Meanwhile, China announced new measures in yuan trading, including allowing more participation in spot trading and launching markets for yuan forwards and interbank swaps with other currencies.

China also detailed the main currencies in the yuan's new basket -- the dollar, yen, euro and South Korea won -- but not their respective weightings.

Since announcing the revaluation on July 21, China's central bank has kept the yuan's value on a tight leash near the initial 8.11 per dollar level.

source: reuters

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Yen recovers despite early election call

2005-08-08T22:59:00.000-07:00

NEW YORK, Aug 8 (Reuters) - The yen recovered from a 3-1/2-month low against the euro and firmed against the dollar on Monday, weathering jitters over the impact of a snap election in Japan.

Traders were also focused on Tuesday's Federal Reserve policy-setting meeting, which is expected to result in another rate hike.

Prime Minister Junichiro Koizumi dissolved parliament's powerful lower house for a Sept. 11 election after losing a key vote on postal industry reform.

A political shake-up in Japan could unnerve foreign investors, who have bought nearly $100 billion worth of Japanese stocks and bonds this year, and undermine the yen. But Koizumi is betting that elections could purge his party of anti-reformers and allow him to go ahead with reforms.

The dollar traded at 111.68 yen, down about 0.2 percent from late Friday. After earlier climbing to around 138.89 yen, the euro was off 0.1 percent at 138.15 yen.

Some analysts said the yen recovered on Monday after already being pressured on Friday, partly because currency investors were anticipating the possibility of a snap election being called.

"It was a clear 'buy the rumor, sell the fact' reaction," said Paresh Upadhyaya, portfolio manager with Putnam Investments in Boston.

Worries about an election briefly pushed the Nikkei stock average down more than 2 percent from 15-month peaks hit last week and overshadowed an increasingly upbeat outlook for Japan's economy. But shares later reversed losses to end higher.

Politicians and analysts say that Japan's bitterly divided ruling Liberal Democratic Party is in danger of losing to the main opposition Democratic Party in the election.

"If we see the public abandoning Koizumi ... that would be negative for the yen," said Ian Gunner, head of foreign exchange research at Mellon Bank in London.

However, "there is a belief in the market, not major but sizable, that the new elections might result positively for the reform minded sectors of the (LDP) party," Putnam's Upadhyaya said.

"The thinking is that reform will help stimulate the Japanese economy and help take the country out of this deflationary vortex," he added.

The dollar weakened versus the euro as investors waited to see whether the Federal Reserve will hint at future rate hikes after Tuesday's interest rate decision.

The euro was at $1.237, up 0.1 percent.

Sterling scored a one-month high versus the dollar after data showed British raw material costs increased at the fastest annual rate in over 20 years in July.

The data raised speculation that the Bank of England would stay in a wait-and-see mode after ordering its first cut in interest rates for two years last week.

The pound traded at $1.7870 per dollar, up about 0.5 percent. It hit $1.7903 earlier in the session, its highest level since July 1.

On Tuesday, the market's attention will be on U.S. monetary policy, with the Federal Reserve expected to deliver its 10th straight 25-basis-point increase in its fed funds rate, taking it to 3.5 percent.

A Reuters poll found fewer U.S. primary dealers expect the Fed to pause its credit tightening campaign this year, meaning rates could rise to 4.25 percent by year end.

source: reuters

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Dollar directionless ahead of payrolls, yen down

2005-08-05T06:40:00.000-07:00

LONDON, Aug 5 (Reuters) - The dollar drifted in tight ranges against the euro on Friday with investors reluctant to make big bets ahead of key U.S. jobs data, while the yen lost ground on worries about political stability in Japan.

The greenback retraced some of its losses after having hit two-month lows against the euro on Thursday but lacked energy to extend gains much.

Markets were waiting to see if it could rally on the back of any surprise uptick in the July non-farm payrolls report.

The jobs data due at 1230 GMT could set the pace of U.S. rate hikes and impact yield differentials between the U.S. and Europe. Economists are forecasting 183,000 jobs created in July.

"Ahead of the labour data, moves are largely irrelevant and all we have is some position adjustment," said Hans-Guenter Redeker, chief currency strategist at BNP Paribas in London.

"If we get a strong number, the euro will dip. But this may create a buying opportunity because central banks might be there again like they were earlier this week."

The euro found support a few days ago amid talk that some of the world's largest central banks were buying the single European currency to diversify their mostly dollar-denominated foreign currency reserves.

By 1135 GMT, the dollar traded steady on the day against the euro at $1.2382, after having slid to session lows of $1.2395 on Friday and $1.2402 on Thursday.

Many analysts said the dollar's recent problems may not end even if the payrolls number is strong.

"With the dollar's decline this week having come despite strong data, elevated Fed tightening expectations, and higher U.S. yields, it seems unlikely that even a stronger jobs number will generate a meaningful recovery for the currency," UBS analysts said in a research note.

Meanwhile, Europe's single currency showed little reaction to German data after industrial output beat expectations and rose by 1.4 percent on the month in June.

The dollar bought around 111.55 yen, up 0.3 percent from 111.20 yen in late U.S. trade.

YEN POSTS LOSSES

The yen hit a three-month low against the euro at 138.24 as uncertainty grew about the fate of Japan's postal reform bills and their sponsor, Prime Minister Junichiro Koizumi.

Koizumi's plan to privatise Japan Post -- the centrepiece of his reform agenda -- has met growing opposition from within his own Liberal Democratic Party even as he has tacitly threatened to call an election if parliament rejects the bills.

A few upper house members of the LDP who had been seen among swing voters suggested on Friday that they would oppose the bills when the upper house vote is held on Monday, slightly tilting odds against the bills being passed.

The news made many investors nervous as most have expected the legislation to get through. Rejection of the bills and an ensuing general election could lead to the fall of Koizumi's governnment, analysts said.

source: reuters

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Dollar recovers losses made on yuan comments

2005-07-28T04:47:00.000-07:00

TOKYO, July 28 (Reuters) - The dollar steadied on Thursday, recovering from a dip on a report that China would allow market forces to decide the yuan's value, as investors awaited U.S. data for clues about how high U.S. interest rates would rise.

The U.S. currency hit a session low against the yen in early Tokyo trade after the official Shanghai Securities News said China's central bank would allow market forces to decide yuan exchange rates following a 2.1 percent revaluation last week.

In an interview with the newspaper, Wu Xiaoling, vice governor of the People's Bank of China, was also quoted as saying Beijing was preparing to launch foreign exchange derivatives, including options and futures, but did not offer a timeframe.

"The market overreacted to the report," said Tomoko Fujii, senior currency strategist at Bank of America. "It was only two days ago that the PBOC strongly denied the possibility of an additional yuan revaluation in the near term.

"The market then quickly shifted its focus back to Japanese politics in terms of the yen," she added.

Traders said the yen could come under pressure from uncertainty over whether a postal reform bill will be approved by the upper house and from a widening interest rate gap with the United States.

Japanese Prime Minister Junichiro Koizumi has threatened to call an election if the bill, aimed at privatising Japan Post and a centrepiece of his reforms, is not passed.

More immediately, investors were focused on U.S. gross domestic product figures due on Friday, with economists in a Reuters poll forecasting a rise of 3.4 percent in the second quarter.

A strong reading could reinforce expectations the Federal Reserve will raise rates to 4 percent by year-end and perhaps even further in 2006, analysts said, boosting the dollar.

MORE BALANCED

As of 0600 GMT, the dollar bought around 112.45 yen, little changed from the level in late U.S. trade but off Thursday's intraday low of 112.13 yen marked following the reported comments by Wu of China's central bank.

"Market players are now generally more inclined to analyse the comments first rather than reacting impulsively," said Kaoru Kondo, chief forex analyst at financial services provider Fisco.

He added that currency positions held by investors were more balanced now than when the yuan peg was changed last week. The yen is often bought as a proxy bet for a yuan revaluation and a rise in other Asian currencies.

The yuan was at 8.1100 per dollar, up from 8.1128 at Wednesday's close.

Solid data on Wednesday for U.S. durable goods orders supported the dollar, as did the Federal Reserve's "Beige Book" snapshot of the U.S. economy, which showed business activity continuing to grow in June and July.

"I thought the dollar would fall a bit more but it held steady after brief selling and it seems to indicate the floor may be quite solid," said a trader at a Japanese bank.

The euro was almost flat at $1.2065, and it fetched 135.65 yen versus around 135.70 yen.

Traders said that dollar sell orders were lined up just below 112 yen. Against the euro, sell orders were set above $1.2100.

The market will also pay close attention to Japanese consumer prices data, due on Friday, for clues on the timing of when the Bank of Japan might start preparing for an end to its ultra-easy monetary policy.

source: reuters

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Dollar steady vs yen in early afternoon Tokyo trade

2005-07-25T23:33:00.000-07:00

AFX News Limited

TOKYO (AFX) - The US dollar was virtually unchanged against the yen in early afternoon trade here, with market participants reluctant to make aggressive bets due to a dearth of fresh leads, dealers said.

After a sharp reaction to China's decision to end the yuan's peg to the dollar and revalue its currency, analysts say Beijing's policy change has now been factored in and the market is turning its focus again on interest-rate differentials between the US and other economies.

With the US widely expected to continue hiking interest rates, analysts see the value of the greenback rising in the near future.

'Market participants are generally expecting upcoming US data this week to come in upbeat, so a likely scenario is that the greenback would edge up,' Harry Ida, senior analyst at Thomson Financial's IFR Forex Watch, said.

Major US indicators include the Conference Board's consumer confidence survey on Tuesday, durable goods data on Wednesday followed by second quarter preliminary gross domestic data (GDP) and the University of Michigan consumer sentiment survey which are both due out Friday.

At 1.00 pm (0400 GMT), the dollar was quoted at 111.76 yen, after trading between 111.43 and 111.83 yen. Earlier in Sydney, it was at 111.78 yen and was quoted at 111.63 yen in late New York trade yesterday.

The euro stood at 1.2035 usd, compared to 1.2047 usd in Sydney and 1.2052 usd in New York. It moved in a range of 1.2022-66 here.

Dealers said expectations for Beijing to take additional steps to make its currency more flexible have faded for now.

'Traders are becoming wary of China taking any further measures to raise the yuan's value more decisively in the immediate future, although some speculators overseas may again try to push the yen up on talk of a further yuan appreciation ahead of Chinese President Hu Jintao's visit to the US in September,' Ida said.

China though has downplayed any quick move to make the yuan more flexible with Chinese central bank monetary committee member Li Deshui citing concerns about the possibility of hedge funds trying to attack the Chinese currency.

'There's more than 800 bln to one trillion dollars of hedge funds in the world and the Chinese financial system is relatively weak,' Deshui said. 'Our banks are not good enough and the monetary system is not quite up to international standards,' he added.

Ida noted that currency trading volumes are likely to thin out in coming weeks as many players overseas go on vacation. He expects the dollar to trade in a range of 109-113 yen over the next two months.

source: forbes

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US dollar firms in Singapore afternoon trade as focus shifts from yuan

2005-07-25T04:28:00.000-07:00

AFX News Limited
SINGAPORE (AFX) - The US dollar was firmer against the yen and euro in afternoon trading here, as players started to look past last week's unexpected but small revaluation of China's yuan and resume their focus on the dollar's prospects.

At 3.00 pm (0700 GMT) here, the dollar was at 111.78 yen, up from 111.56 yen nearly three hours earlier in Tokyo. The euro was at 1.2047 usd, down from 1.2048 usd in Tokyo.

On Thursday, China announced it would revalue the yuan by 2.1 pct and abandon its peg to the US dollar in favor of an undisclosed basket of currencies. As expected, the dollar initially fell sharply, but since late Friday has begun a slow recovery, which continued as the week started this morning in Asia.

Players said the unexpectedly small adjustment to the yuan exchange rate -- to around 8.11 from 8.28 against the dollar -- and the fact that China's central bank provided few details, particularly about the components of the basket, gave little impetus for a prolonged dollar sell-off.

In addition, most players believe that although pressure will again mount on China to deliver a more decisive revaluation, it appears unlikely that the Chinese government will concede anytime soon.

'The mechanism instituted by China does give them room to slowly and steadily appreciate their currency, even as it rules out further one-off changes of significance in the value of the yuan,' UBS foreign exchange strategist Bhanu Baweja wrote in a note.

'As the market took the view that another move higher in the yuan may not come in a hurry, the trading focus shifted to covering the large near-term US dollar shorts that had been instated as soon as China moved,' he added.

Still, the dollar's gains in Asia were modest at best, with many investors still eager to sell the greenback on rallies on the view that the yuan revaluation has set the stage for a bullish trend for Asian currencies, at least in the near-term.

'Some analysts and market players are apparently still holding out for further renminbi [yuan] appreciation, and this may provide some near-term support for the yen,' said Bank of Tokyo-Mitsubishi's Singapore economist Wong Keng Siong.

'Yen bulls believe in further yen appreciation because they see China's de-peg as the start of a revaluation process,' Singapore's DBS Bank said in a strategy note.

'Yen bears, on the other hand, are focused on the domestic political troubles and the widening US-Japan rate differential, not to mention the threat of intervention by the Ministry of Finance,' DBS said.

'Hence dollar-yen is likely to be range-bound between 110 yen and 113 for now from the two conflicting views, though medium term, the odds appear to favor the yen bears,' it said.

source: forbes

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Dollar drops vs yen as China abandons currency peg

2005-07-22T05:35:00.000-07:00

By Nick Olivari

NEW YORK, July 21 (Reuters) - The dollar plunged against the yen in heavy trading on Thursday after China abandoned its dollar peg in favor of a basket of currencies to manage the yuan.

The yen's rise accelerated and other Asian currencies firmed after Malaysia said it has changed the ringgit peg to a managed float, fueling further gains in the Japanese currency.

Traders had expected the Hong Kong Monetary Authority and Monetary Authority of Singapore to revise their currency regime as well. However, both said on Thursday that they are maintaining their current foreign exchange policy.

In midafternoon trade, the dollar was down 2.4 percent against the yen to 110.16 yen, after falling as low as 109.96 yen according to Reuters data. Intraday it was the biggest one-day percentage decline for the pair since March 2002. Before China's announcement, it was trading at around 112.40.

Analysts said a stronger yuan against the dollar would make Japanese monetary authorities more comfortable with a higher yen, as the countries are competitors in global trade.

Both countries have kept their currencies weak to gain export advantage in global markets.

China's long-awaited revaluation, which was 2.1 percent to 8.11 per dollar from the previous 8.28 was smaller than many economists had expected.

"It opens the doors and are on the road to what most people expect eventually," said John Beerling, chief dealer at Wells Fargo Bank in Minneapolis. "It's leading to some sort of crawling peg and heading to quite a bit stronger Chinese yuan."

Analysts and traders are also debating whether a sharp appreciation of the yuan will be allowed by China given that the yuan can move 0.3 percent on daily basis against the dollar. Reading the new rules literally, if Thursday's close became Friday's opening rate and so forth with no cap, the yuan could rise quickly, analysts said.

"We don't have enough details of how they will operate this," said Beerling.

Sterling, meanwhile, was up 1.2 percent at $1.7586, with investors almost ignoring news British transport officials closed London Underground lines after a series of explosions were reported on Thursday. The pound earlier rose as high as $1.7615 on the China news.

The dollar fell 0.4 percent against the Swiss franc, trading at 1.2804 francs.

The euro fell 2 percent against the yen to 134.43 yen, from around 136.60 before China's announcement. At its low, the pair endured its biggest one-day intraday percentage drop since May 2001.

The single euro zone currency did manage gains against the dollar, on the greenback's overall weakness, climbing 0.5 percent to $1.2198, The euro rose to the day's high of $1.2255 on the China news from around $1.2140 previously.

U.S. Treasury Secretary John Snow welcomed China's move to let its currency trade more freely, and said he expects more currency moves from Beijing. But analysts said that expectations of a further yuan revaluation would add volatility to the currency market.

"The speculators smell blood in the water," said TJ Marta, senior currency strategist at RBC Capital Markets in New York

"China gave us 2 percent, speculators are thinking they would give us more. The other school of thought is that speculators have already built in a 5-7 percent revaluation and it's going to be a classic 'buy the rumor, sell the fact' kind of thing," Marta added.

Before the yuan move, the dollar had been weakening against major currencies after Federal Reserve chairman Alan Greenspan said in his testimony to Congress on Wednesday that the U.S. economic outlook was healthy, but sounded less optimistic than some investors had expected.

Greenspan appeared before the Senate on Thursday and made no changes to his speech of the previous day.

The Philadelphia Federal Reserve business activity index was reported at 9.6, almost in line with the consensus forecast of 9, and had little impact on currency markets, analysts said.

source: reuters.co.uk

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US dollar mixed in Sydney morning, maintaing upside on rate outlook

2005-07-18T02:48:00.000-07:00

AFX News Limited
SYDNEY (AFX) - The US dollar was trading mixed against major currencies but maintaining upside bias because of the outlook for US interest rates, dealers said.

They said the dollar gave up some of the gains against the euro seen of Friday after a barrage of positive US economic data but was continuing to make headway against the yen.

Dealer said trading volumes are light with Japan closed for a public holiday.

At 11.20 am Sydney (0120 GMT) the dollar was at 112.29 yen from 112.17 in late New York trade while the euro was at 1.2044 usd from 1.2042.

Dealers said downside pressure on the euro has eased to some degree following a marked reduction on speculative short positions but the single currency is unlikely to stage a significant recovery because of the likelihood that the interest rate differential between the US and the euro zone will continue to widen.

An expected upbeat address to Congress on Wednesday by Federal Reserve Board chairman Alan Greenspan is likely to support the case for higher US interest rates, dealers said.

National Australia Bank currency strategists said in a market note that the continuing flow of positive economic data from the US all but ensures the Fed will keep raising interest rates over the rest of the year.

'As such, we expect that Fed chairman Greenspan's semi-annual testimony to Congress will be upbeat on US growth, consistent with at least another couple of rate hikes,' the NAB strategists said.

They said the US dollar is likely to maintain a firmer bias ahead of Greenspan's address while the euro looks likely to continue to struggle to break above key resistance at 1.2250/1.2300 usd.

The NAB strategists noted speculative short euro positions were slashed by two thirds to just 7,800 contracts in the week to July 12, the lowest in over two months.

'Speculative positioning is not at an extreme in the euro right now, providing it with less protection from either bad news in the euro-zone or good news in the US,' they said.

The NAB strategists said tonight's focus will be the US Treasury report on net foreign security purchases for May, with a rebound expected to 60 bln usd from a low of 47.4 bln in April.

Macquarie Bank currency strategists said with Japan on holiday, the market is drifting, adding that lack of direction will become more obvious in markets as the northern hemisphere holiday season moves into full swing.

They said markets are looking forward to Greenspan's mid week address but it is unlikely the Federal Reserve chairman will deviate from his recent rhetoric at Wednesday's and Thursday's monetary policy testimonies which will be his last as Fed chairman.

source: forbes.com

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Dollar edges higher in choppy trade after US data

2005-07-15T00:47:00.000-07:00

By Gertrude Chavez

NEW YORK, July 14 (Reuters) - The dollar drifted higher on Thursday in choppy trading as mixed U.S. data gave dealers little motivation to push the currency firmly in any one direction.

In midday trade, the euro traded at $1.2081, down slightly from late Wednesday but well above 14-month lows near $1.1870 set earlier in July.

The dollar initially rose after the data as traders focused on a robust retail sales report, which suggested that strong spending continued to drive the economy. But it trimmed its gains quickly as markets digested a benign reading on consumer prices, which eases pressure on the Federal Reserve to accelerate its campaign of interest rate rises.

"The data is mixed for the dollar. Lower inflation means the Fed can be less aggressive if it chooses, and that's negative for the dollar. But retail sales show the economy is on a sound footing and that's positive for the dollar," said Greg Anderson, senior currency strategist at ABN Amro in Chicago.

U.S. retail sales rose an unexpectedly large 1.7 percent in June, led by spending on cars, gasoline and clothes. Excluding cars and parts, sales grew 0.7 percent last month. Analysts had expected a 1.0 percent rise in the headline number and a 0.6 percent increase on sales excluding autos.

Strong retail sales outweighed a tepid CPI number, which held steady in June as falling energy prices offset gains in the cost of food and other items. Core CPI edged up 0.1 percent for a second straight month.

A higher CPI number would have fueled expectations of accelerated interest rate rises by the Fed, enhancing the appeal of some dollar-denominated assets.

Sterling fell 0.3 percent to $1.7575 after downbeat data on the UK service sector. But the currency stayed well above 19-month lows near $1.7310 hit in the immediate aftermath of last week's London bombings.

The dollar was up 0.2 percent against the yen at 112.10 and firmed against the Swiss franc to 1.2909 francs.

Jason Daw, senior currency strategist at Merrill Lynch in New York, predicted that by the end of trading in New York, the euro could close higher against the dollar, with inflation the market's primary focus.

"Throughout the balance of the day, the currency and bond markets are likely going to focus on the CPI number. It was such a big miss. It looks like we're getting this process where price pressures are kind of rolling over and pipeline pressures are starting to diminish," he noted.

With two key U.S. economic reports out of the way, Tim Mazanec, senior currency strategist at Investors Bank and Trust Co. in Boston, said traders are looking ahead to Fed Chairman Alan Greenspan's semi-annual testimony on the U.S. economy next week.

"Tomorrow's data are not perceived to be major market movers. At this point, we're looking for something to move and shake the market," he said.

U.S. producer prices data are due on Friday, with economists forecasting a 0.4 percent increase. The University of Michigan consumer sentiment index is also scheduled for release and analysts are forecasting a preliminary reading 95.0 for July.

source: reuters.com

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US dollar slightly firmer in late Asian trade ahead of US trade data

2005-07-13T05:07:00.000-07:00

AFX News Limited

SINGAPORE (AFX) - The US dollar edged up against the yen and euro in afternoon trade here though with most investors adopting a generally cautious stance ahead of the release of US May trade data due out tonight, dealers said.

'Although some have indicated that concerns over the expected widening of the US trade deficit in May have played a role in the recent weak performance of the US dollar, we are more inclined to believe that the negative real impact is quite marginal,' currency strategists at Singapore's United Overseas Bank wrote.

Indeed, forecasts for the May trade balance are only for a modest widening of the deficit from the previous month, and as such do not really justify the dollar's large correction prior to this afternoon's mild uptick, dealers said.

The US trade gap is expected to widen to 57.5 bln usd in May from April's 57 bln, according to a Market News International survey of economists.

'The psychological impact of the perceived widening of the trade deficit in May, however, has probably imparted some negative sentiment toward the greenback,' they said.

Aiding the dollar here was the release of Japanese May current account data earlier today, which showed a sharp fall in the current account surplus down 19.5 pct year-on-year to 1.38 trln yen, althogh the decline was slightly below what the market had expected.

'While there isn't a specific variable that stands out as the catalyst that has triggered this (recent) round of US dollar downside, it is fair to say that the market's long position on this currency had been getting stretched from a short-term perspective,' UBS currency strategist Bhanu Baweja wrote in a morning note.

The dollar-yen pair opened above 111.00 yen this morning after recovering from a New York low of 110.75 following the Japan current account numbers. The pair held within a tight 111.10 to 111.20 range through the morning while sporadic dollar selling kept the pair under pressure, with offers reportedly at 111.20 up to 111.50.

In the afternoon, the Bank of Japan announced its policy decision at the end of a two-day meeting, in which it decided to keep its monetary policy on hold, which had been expected. Dollar-yen showed little inclination to move on that and stayed near 111.10 yen before subsequently inching higher to mark a 111.18 session high.

'We think the overnight lows around 110.70-80 remain a good buying zone for a target of 111.70-80,' UBS currency dealers said.

UOB's tech analysts also said the pair has yet to see its near-term low despite some oversold signals but even then, the downtrend seemed to lack momentum, 'and any further down-move will probably be slow and grinding.'

Concerns about a resurgence in oil prices fueled the yen's early pullback, dealers said, after crude futures closed above 60 usd a barrel last night. Late afternoon in Asia, future prices for August delivery continued to push higher, touching 60.90 a barrel at 2:30 p.m. in Singapore.

Euro-dollar started around 1.2220 usd in Asia after marking a 1.2255 high in New York yesterday but it then found itself wallowing in a 1.2205 to 1.2220 usd range. Euro selling reportedly by North Asian sovereign names sent the pair to 1.2210 and subsequently reached a low of 1.2203.

'We would look to buy on dips towards 1.2180-90 usd with a stop at 1.2150 and take profit near 1.2280-90,' UBS dealers said.

While the trade data release will be the main event of the day, there is a slew of other US data due for release this week, including June CPI and retail sales on Thursday. This will be followed by June PPI, industrial production, capacity utilization and preliminary July University of Michigan consumer sentiment on Friday, suggesting that market attention for the rest of the week will remain focused on the US macroeconomic picture.

source: forbes.com

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Euro hits 3-week high as dollar selling mounts

2005-07-12T07:11:00.000-07:00

By Natsuko Waki

LONDON, July 12 (Reuters) - The euro hit a three-week high against the dollar on Tuesday as investors scrambled to cover positions following its sharp fall this month and before potentially dollar-negative U.S. data this week.

In relatively thin trading with no key data, investors looked to Wednesday's release of May U.S. trade numbers. The trade deficit was a key factor that pushed the dollar into a three-year 30 percent decline through the end of 2004, but rising U.S. interest rates have fuelled a dollar rally in 2005.

Chinese data on Monday showing a five-fold surge in its trade surplus signalled the U.S. trade deficit could widen by a bigger margin than expected.

"The Chinese trade surplus was larger than expected so people are saying that the U.S. trade deficit could be wider than expected," said Niels Christensen, senior currency strategist at Societe Generale in Paris.

"The market is closing off long dollar positions. It is, more than anything, a short (euro) squeeze that started yesterday and continued during the Asian session."

The U.S. trade deficit is forecast to widen in May to $57 billion, in sight of the record $60.1 billion marked in February, according to a Reuters poll.

The euro had risen one percent on the day to the 3-week high of $1.2203, with buying gathering pace on the break of a technical level at $1.2125. It trimmed gains to $1.2170 by 1125 GMT.

The dollar fell almost one percent to 1.2760 Swiss francs before recovering to 1.2790 and was down 0.6 percent to 111.10 yen.

"Good news in the U.S. and bad news in the euro zone are priced in so prices can't go any further," said Michael Metcalfe, senior strategist at State Street.

RATE DIVERGENCE

The euro also drew support after European Central Bank Governing Council member Nicholas Garganas said surging oil prices may force the bank to raise its inflation forecast, dampening some market expectations for an interest rate cut in the euro zone.

In an interview with Bloomberg he said he expected recent oil price increases would raise inflation above 2 percent in coming months.

ECB Governing Council member John Hurley said euro zone economic growth is expected to slow this year but interest rates remain at an appropriate level.

With central banks in the euro zone and Britain expected to leave rates on hold or even to lower borrowing costs this year, the Federal Reserve is the only major central bank, except the Bank of Canada, likely to raise rates this year.

The BOC meets later on Tuesday. Although the central bank is expected to leave interest rates at 2.5 percent, many in the market expect it to raise rates in September or October.

The Canadian dollar rose to a three-month high against the dollar and hit its highest levels in almost 7 years versus the yen ahead of the rate-setting meeting.

"The market is still upbeat on Canadian dollar because there will be further tightening ahead and fundamentals are strong," said Paul Mackel, currency strategist at ABN AMRO.

"If you want to express a bearish U.S. dollar view, it is still quite easy to do so against Canadian dollar because of positioning."

Dealers were also awaiting U.S. retail sales and consumer price figures later this week to see if the Fed still has a case for steadily raising rates.

source: reuters.com

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Forex - US dollar flat in Sydney morning after Friday's US jobs data

2005-07-11T00:42:00.000-07:00

AFX News Limited

SYDNEY (AFX) - The US dollar was flat against the euro and yen following Friday's weaker than expected jobs data in the US, dealers said.

They said the rise in US non-farm payrolls for June of 146,000 was less than the 198,000 consensus, and markets took little notice to the upward revisions totalling 44,000 to April and May.

Dealers said sterling rebounded from a 19-month low of 1.7311 usd to above 1.7400 usd following the US payrolls numbers, only to fall back down later.

They said the euro initially traded below 1.1900 usd following the data, but profit taking emerged on long US dollar positions, pushing the euro higher.

At 11:00 am Sydney (0100 GMT) the euro was flat at 1.1967 usd from late New York trading on Friday and the dollar was flat against the yen at 112.21 yen.

Dealers said the weaker than expected US non-farm payrolls data gave the currency markets an opportune time for profit-taking on long US dollar positions.

They said a fall of 0.1 pct in the unemployment rate to 5.0 pct did show the labor market in the US remained strong.

NAB currency strategists said, in a market note, the US jobs data 'reinforced expectations that the Federal Reserve will continue to raise interest-rates over the rest of the year'.

Dealers said interest rate differentials are likely to underpin the US dollar in the near term with speculation the Bank of England and European Central Bank are on a loose and neutral tightening basis respectively.

Morgan Stanley currency analysts Francesca Fornasari and Sophia Drossos said in a market note: 'The question we are now facing is whether we will see some US dollar consolidation or whether more strength can be expected ... we believe the dollar can extend its recent rally.'

Looking ahead to the week, dealers said the markets will watch the release of data in the US to determine portfolio holdings of US dollars.

US May international trade and June fiscal figures (key 'twin deficit' indicators) are due on Wednesday, while on Thursday June CPI will be reported along with retail trade data. Friday sees the release of industrial production, producer prices, and Michigan consumer sentiment index.

While the US dollar was flat against the yen it is expected to strengthen in the short term, dealers said.

NAB strategists said 'the reality is that confidence on Japanese economic growth is not yet evident in the numbers'.

They expect the US dollar to strengthen to 114.80-115.00 yen before the market begins to see value in the Japanese currency.

source: forbes.com

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US dollar firmer Sydney morning following London bombings

2005-07-08T00:17:00.000-07:00

AFX News Limited

SYDNEY (AFX) - The US dollar was trading firmer against the major currencies, particularly the sterling, following the London bombings, dealers said.

Dealers said the markets sold the US dollar immediately after the bombings fearing a similar attack on the US, but the markets retraced except for the sterling.

They said sterling fell from 1.7534 usd to 1.7400 usd, ending at 1.7427 usd late in New York.

Dealers said the euro briefly climb by over 100 points to 1.2042 usd but reversed as fears of a terrorist attacks in the US faded.

At 11:00 am Sydney (0100 GMT) the euro was weaker at 1.1940 usd from 1.1948 usd in late New York trade while the dollar was higher against the yen at 112.33 yen from 112.02.

Dealers said the main focus overnight was the London bombings and the negative impact for the sterling and UK economy.

The Bank of England did leave its overnight cash rate unchanged at 4.75 pct.

But dealers suggest the continuing evidence of cooling house prices and retail spending keep the bias for interest rate cuts in the UK.

National Australia Bank currency strategists said, in a market note: 'investors expect the terrorist attack on London added to the likelihood of BOE interest rate cuts, although its difficult to assess the extent of the economic impact at this stage.'

NAB strategists are targeting a sterling level of 1.7000 usd by the end of the year.

The European Central Bank also left its cash rates unchanged at 2.00 pct with the central bank's statement perceived as broadly neutral, dealers said

Dealers said the ECB saw near-term growth risks as tilted slightly to the downside.

Action Economics analyst Ronald Simpson forecast the euro testing 1.1850 usd level if tonight's US non-farm payrolls data is strong.

Market consensus for an increase of 198,000 in non-farm payrolls was backed by the overnight release of US initial job claims, increasing to 319,000 from 312,000.

Dealers noted the job claims remained relatively low and suggestive of strong employment gains.

'The market is prepared for a strong payrolls report and so the US dollar is more likely to be underpinned, rather than significantly boosted by such a result,' NAB strategists said.

Oil prices reacted to the London bombings by falling by almost 5.00 usd a barrel with investors fearing that global tourism demand may be affected, dealers said.

Dealers said prices recovered to 60.73 usd a barrel when investors concluded the impact would be limited.

The yen also retraced following the bombings, strengthening against the US dollar to 111.48 yen from 112.27 before easing slightly in morning trade here.

source: forbes.com

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Forex - US dollar up but top heavy vs yen in Tokyo trade ahead of US job data

2005-07-06T23:51:00.000-07:00

AFX News Limited

TOKYO (AFX) - The US dollar was firmer but top-heavy against the yen, morning trade with investors hesitant about taking aggressive long positions in the greenback ahead of the release Friday of the closely-watched US non-farm payroll data, dealers said.

Overnight in the US, the greenback had rallied to above the 112 yen level for the first time in 11 months on the back of strong June data from non-manufacturers, they said.

The US Institute for Supply Management reported that its non-manufacturing index rose to 62.2 pct in June from 58.5 in May, beating the consensus forecast that the index would slip to 58.4 pct.

'The dollar will remain top-heavy against the yen until the release of the US June non-farm payroll data, and whether the dollar advances further will depend on its outcome,' Chuo Mitsui Trust and Banking foreign exchange manager Yasuhisa Ishida said.

'But since recent strong US economic data has reinforced appetite for the dollar on expectations for widening interest rate differentials, if the job data is good enough, the dollar could test the key level of 112.50 yen,' Ishida said.

Economists are expecting a net rise of about 195,000 jobs in the June non-farm payroll.

At 12:30 pm Tokyo (0330 GMT) the euro was at 1.1919 usd compared to 1.1927 usd in early Sydney and 1.1935 usd in late New York trade yesterday while the dollar was at 112.30 yen here, compared to 112.23 yen in Sydney and 112.22 in New York.

The euro eased on caution ahead of today's European Central Bank committee meeting and the Bank of England's monetary policy committee meeting, dealers said.

The European unit had gained some support earlier in the week from reports citing an unnamed European Central Bank (ECB) source as saying that the recent depreciation of the euro has taken pressure off the bank to cut interest rates.

But Ishida warned that the downward pressure on the euro may be set to continue going forward.

'Although expectations for imminent rate cuts in Europe have receded for now, speculation about possible rate cuts there will continue due to the region's weak economic fundamentals,' Ishida said.

source: forbes.com

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FOREX-Dollar near 13-mth highs vs euro as rates support

2005-07-05T02:03:00.000-07:00

By Naomi Tajitsu

TOKYO, July 5 (Reuters) - The dollar drifted within striking distance of a 13-month high against the euro on Tuesday as the market stayed focused on the U.S. currency's widening interest rate advantage over its rivals.

The dollar was still basking in the glow of upbeat data last week that helped cement the case for more Federal Reserve interest rate rises, just days after the Fed lifted rates to 3.25 percent and suggested more tightening was in store.

"The interest rate differential story isn't going to go away in a hurry," said Hideaki Furumaya, forex manager at Trust & Custody Services Bank in Tokyo.

"The dollar will stay well supported until the Fed gives reason to believe it will stop hiking rates," he said.

Although the European Central Bank is expected to keep interest rates at 2 percent on Thursday, market speculation of a possible cut in the near- to mid-term has heated up, putting even more pressure on the euro.

"There's been a lot of talk in the market about a rate cut by the ECB, and if this does happen, the euro will be pushed lower," said Kikuko Takeda, currency analyst at Bank of Tokyo-Mitsubishi.

Despite such talk, ECB President Jean-Claude Trichet on Monday rejected suggestions that the central bank should risk a little more inflation by cutting rates to recharge growth in the euro zone.

Market players shrugged off Japan's Prime Minister Junichiro Koizumi winning a key parliamentary vote on postal privatisation, the centrepiece of his reform agenda. A rejection would have raised the possibility of a snap election.

At 0610 GMT, the dollar bought 111.80 yen, up slightly on the session and near an 11-month high.

The euro inched down to $1.1900 after falling as far as $1.1889 in London trade, its lowest level since late May 2004.

U.S. markets were closed on Monday for the Independence Day holiday.

The single currency, already battered by concerns about slowing economic growth and political instability, fell in London trade after ECB Governing Council member Christian Noyer said it was possible for a euro country to abandon the single currency.

Sterling traded around $1.7580 after skidding to a 14-month low of $1.7569 on Monday. Market participants have shunned the pound on expectations the Bank of England will also lower interest rates in the near future.

While the BoE is expected to keep rates at 4.75 percent on Thursday, a Reuters poll of 45 economists showed that a majority of respondents see the central bank moving into rate-cutting mode between August and November.

The market was also awaiting a summit meeting of leaders of the Group of Eight industrialised nations, which kicks off on Wednesday in Scotland and is expected to address the yuan's revaluation.

Any hints that China could soon move to loosen the yuan's tight peg to the dollar could support the yen, which many traders tend to buy as a proxy for any eventual appreciation in the Chinese currency

source: reuters.com

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Forex - Dollar firmer after FOMC confirms US rate hikes to continue

2005-07-01T05:36:00.000-07:00

AFX News Limited
07.01.2005, 05:43 AM

LONDON (AFX) - The dollar was firmer against major currencies after last night's Federal Reserve Open Market Committee raised US interest rates to 3.25 pct and confirmed that monetary tightening will continue to rise at a measured pace.

The rate hike was fully expected, but the dollar rallied on the back of the accompanying statement which removed fears that the Fed could soon take a pause in raising rates.

'The 25 basis point rate hike at the FOMC meeting yesterday was no surprise nor was the repeat of the 'measured' pace comment, but some had looked for signs that the Fed is close to ending its rate hike cycle,' said CALYON analyst Mitul Kotecha.

He said the dollar is likely to find further support from the Fed statement, sufficient to push the euro below 1.20 usd in the coming days, due to favourable US interest rate spreads -- given that the next moves in the euro zone and the UK are set to be down.

'The Fed revealed no signs of being close to putting the brakes on further rate hikes in the months ahead,' he said.

The dollar rose across the board, with the yen unable to benefit from an upbeat Tankan report which showed widespread improvement in Japanese business sentiment.

The euro also failed to capitalise on a survey showing an improvement in manufacturing sector activity in June. The purchasing managers' index for the 12-nation single currency zone rose to 49.9 in June from 48.7 in May, still showing a contraction but well above analysts' expectations for a more modest rise to 49.0.

Meanwhile, the pound remained weak after a string of very disappointing data over the past few days intensified speculation that the Bank of England will cut interest rates as soon as August.

'Sterling has remained under pressure as the weakness in UK data persists,' said HBOS currency analyst Steve Pearson.

Short sterling contracts indicate that the market has fully discounted two rate cuts this year, with a third now partially priced-in, whilst the spread between UK and euro zone short-term interest rates continues to narrow, he added.

Yesterday saw a sharp and unexpected downgrade in UK first quarter GDP and a weak consumer sentiment survey add to the negative sentiment prompted after Wednesday's dismal retail sales survey from the Confederation of British Industry.

Today will see the release of the latest purchasing managers index on UK manufacturing activity.

Given that the latest German IFO and Japanese Tankan surveys have begun to show some signs of improvement, however, there is a good chance the UK report could beat expectations and prompt a slight rebound for sterling, Pearson said.

source: forbes.com

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Pound comes under pressure after dismal retail sales survey

2005-06-30T01:55:00.000-07:00

AFX News Limited

06.29.2005, 09:34 AM

LONDON (AFX) - The pound came under pressure after a dismal survey of the UK retail sector undermined sentiment and shortened the odds of an interest rate reduction later in the year.

In its latest monthly Distributive Trades Survey, the CBI reported that UK high street spending in June nose-dived to its worst ever year-on-year level in the 22-year history of the poll and that no respite is expected in July.

The Bank of England has been closely monitoring the outlook for the consumer sector and may well be able to justify a rate reduction if the weakness in the survey becomes entrenched.

The pound, which has been struggling ever since it was revealed that two rate setters voted for a cut earlier this month, fell under the key 1.81 usd to a two-week low.

'The break below 1.8100 usd bodes poorly and suggests scope for a re-test of the 1.8000 usd area,' said Mark Austin at HSBC.

The weak survey also overshadowed data released earlier in the day showing that UK mortgage lending and consumer credit had risen more than expected.

Data released by the Bank of England showed that mortgage lending rose by 8.0 bln stg in May, the highest rise since August 2004 and well above expectations of a more modest 7.5 bln.

Additionally, there was a pick-up in mortgage approvals -- an indicator of future demand in the property sector.

The pound gained slightly after the news but its increases soon faded away.

Elsewhere, the recent spike in oil prices put a damper on the yen, helping the dollar to break above the 110 yen level in convincing fashion.

Austin at HSBC noted that the outlook for the yen does not look particularly bright with even the expected improvement in the key quarterly Tankan survey, due Friday in Tokyo, doing little to lift sentiment.

The dollar was also well bid against the euro which had to contend with a crucial downgrade to German economic estimates.

The Deutsche Institut fuer Wirtschaftsforschung, one of the six leading institutes for economic research in Germany, dramatically slashed its forecast for GDP growth in 2005 to 0.9 pct from 1.8 pct.

It also lowered its GDP growth forecast for 2006, to 1.5 pct from 2.0 pct.

Later today, attention will fall on revised US first-quarter GDP numbers where a upward adjustment to an annualised 3.7 pt rate from 3.5 pct previously is expected.

It will take a bigger upward revision to push the dollar higher, analysts said.

That aside, the highlight of the week comes tomorrow when US rate setters deliver their interest rate verdict. A quarter-point hike is widely expected but focus will be more on the accompanying statement for signs that US rate setters are taking their foot off the pedal.

Some sections of the market believe the Fed may hint that it will soon take a pause from the hiking cycle which has taken the benchmark Fed fund rate from 1 pct to 3 pct over the span of just one year.

Accordingly, the dollar's progress since Monday has been slow and even a forecast-beating rise in US consumer confidence yesterday failed to spark a buying frenzy.

'Markets have already moved some considerable distance towards pricing a pause in the tightening cycle and will be looking for some form of dovish concession from the Fed tomorrow night,' said Steve Pearson, chief currency strategist at HBOS.

'We do not expect the Fed to blink just yet, potentially sparking further widespread dollar gains,' he added.

source: forbes.com

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Forex - Euro rises on pick-up in German Ifo survey

2005-06-27T04:35:00.000-07:00

AFX News Limited

06.27.2005, 05:44 AM

LONDON (AFX) - The euro was higher against the dollar after the key German Ifo business climate survey showed a slight rebound in May, though trade remains rangebound ahead of Thursday's US interest rate decision.

The Ifo index rose to 93.3 in June from 92.9 in May, in line with expectations and partly reflecting a slight improvement in the business outlook due to the recent fall in the euro's rate against the dollar.

Any recovery for the euro is likely to be short-lived, however, ahead of a busy week for economic news which is only likely to highlight the contrasting interest rate outlooks in the euro zone and the US, analysts said.

The focus of the week will be the announcement by the Federal Reserve Open Market Committee on Thursday, which is fully expected to result in a further 25 basis point hike in the Fed Funds rate to 3.25 pct.

The FOMC's accompanying statement is set to confirm that US borrowing costs will continue to rise at a measured pace and overall the report is expected to provide a further boost to the dollar, analysts said.

'The statement is unlikely to divert from the usual Fed message that interest rates will continue to rise at a 'measured' pace, which ought to maintain the favourable interest rate spread for the dollar,' said CALYON analyst Mitul Kotecha.

Following a week of intense speculation of a possible interest rate cut by the European Central Bank, the prospects for the euro look no better this week, particularly with the market's interest rate spread between the euro zone and the dollar close to record levels, he said.

Despite the pick-up in the Ifo business sentiment survey, it remains at a weak level, and the euro zone consumer sentiment survey due later this week is likely to have fallen further in June, Kotecha said.

WestLB analysts also noted that comments made by European commissioner Joaquin Almunia in an Italian newspaper over the weekend that the recent rise in oil prices poses a big risk for the euro zone economic recovery will 'keep speculation about an ECB rate cut alive' despite the rebound in the Ifo index.

source: forbes.com

Forex - US dollar slightly higher vs euro in Tokyo early afternoon trading

2005-06-26T23:39:00.000-07:00

AFX News Limited
06.27.2005, 01:43 AM

TOKYO (AFX) - The dollar was slightly firmer against the euro but steady against the yen in early afternoon trade here, with market participants in Asia reluctant to make aggressive bets ahead of key events and data this week, dealers said.

Investors will focus on the two-day US Federal Open Market Committee (FOMC) meeting due to start Wednesday, along with the Bank of Japan's quarterly Tankan survey of business sentiment, due to be released Friday, analysts said.

While the Fed is widely expected to raise its key federal funds rate by 25 basis points to 3.25 pct, its ninth straight hike in a year, dealers said its accompanying statement, an indicator of future monetary policy, will be a crucial influence on the dollar.

'The real issue here is how soon the Fed is going to end its current credit tightening cycle,' said Masahiro Yamashita, senior analyst at Japanese currency analysis provider Fisco.

Dealers said that if the Fed statement offers any sign of a switch toward lower US rates, the dollar could be negatively affected, which could put an end to the fast selling of the euro seen over the past few weeks.

At 1.00 pm (0400 GMT) here, the euro stood at 1.2124 usd, after trading in a range of 1.2096-1.2137 usd during Asian trading hours. Three hours earlier in Sydney, it was at 1.2128 usd.

The dollar was quoted at 109.28 yen, compared to 109.29 yen earlier in Sydney. It had moved between 109.15 yen and 109.39 yen here.

Many dealers still believe that the market bias remains towards a firmer dollar against the euro, with growing speculation that the European Central Bank (ECB) will be moving closer to a rate cut to prop up the euro zone economy.

'The euro could tumble again, possibly toward the 1.18 usd mark, with growing hopes for an ECB rate cut next week,' Fisco's Yamashita said.

He also said the dollar will likely remain on a firm footing against the yen on rising prices of oil futures.

The average import price of crude oil stood at 37 usd a barrel last year in Japan, Yamashita said, adding that spikes above the 60 usd a barrel should cost Japan some 3 trln yen additionally.

'This would also reduce Japan's trade surplus, which dropped last month. This could be the beginning of the downtrend [in the trade surplus] if oil prices keep rising. This could be a drag to Japan's economy and its currency,' he said.

source: forbes.com

Forex - Euro continues rebound after weak US data

2005-06-24T14:36:00.000-07:00

AFX News Limited
06.24.2005, 12:50 PM

LONDON (AFX) - The euro continued its rebound against the dollar after slumping to a 10-month low in Asia -- with the latest boost coming from disappointing US data.

While the headline figure showed that US durable goods orders rose a forecast beating 5.5 pct in May, the details of the release indicated that excluding transportation, total orders actually fell 0.2 pct. Additionally, the headline number for April was revised down to 1.4 pct from 1.9 pct.

'The data certainly boosted the euro and sterling against the dollar,' said Marios Maratheftis at Standard Chartered.

But the latest numbers are unlikely to prevent the US Fed from putting up the cost of borrowing again in the coming months.

The dollar, which was in the doldrums for much of the last couple of years, due to concerns over the US twin deficits, has surged against the euro in the wake of the current political crisis engulfing the EU as well as a greater emphasis on developments related to yield differentials.

While the ECB is being urged to cut rates from 2.0 pct to help boost anaemic economic growth, the Fed is poised to continue raising the cost of borrowing from the current 3.0 pct in a measured manner, possibly to 4.0 pct by the year's end.

The euro's rebound in the European session comes after it dipped below the 1.20 usd mark for the first time since last August.

Separately, European Central Bank president Jean-Claude Trichet failed to inspire markets at a speech today. He did not comment on the possibility of rate cuts in the euro zone.

The yen however, was unable to rise against the dollar given the impact of high oil prices. As a net importer of oil, Japanese economic growth is vulnerable to high oil prices.

FOREX-Euro breaks below $1.20, dogged by yield worries

2005-06-24T01:02:00.000-07:00

Friday, June 24, 2005 6:21:00 AM
http://www.reuters.com

By Eric Burroughs

TOKYO, June 24 (Reuters) - The euro fell below $1.20 for the first time in 10 months on Friday as traders bet that euro zone interest rates will eventually be cut and make the dollar an even more attractive destination for investors. A combination of Sweden's central bank slashing interest rates this week and the Bank of England moving closer to lowering rates has thrown the spotlight on the European Central Bank. ECB officials have held firm that current rates at 2 percent are appropriate, but political pressure has mounted on the euro zone's central bank to do something about the region's struggling economy.

Speculation about a rate cut has heated up in the wake of the French and Dutch "no" votes on the European Union constitution and the failure of EU leaders to settle on a long-term budget.

The euro spiked as low as $1.1981, according to data from electronic trading platform EBS. A large-lot sale of euros by a U.S. brokerage triggered stop-loss selling lined up around $1.20, dealers said.

The common currency bounced back to late New York levels around $1.2035 by 0547 GMT, though most analysts expect a relapse to below $1.20.

"I'd thought it was just a matter of time before the euro broke below $1.20," said Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp. "I think the euro will spend more time below $1.20 than above that level next week."

With the Federal Reserve poised to keep raising U.S. rates, investors have flocked to the dollar for its yield appeal.

The next week will provide a key test of whether the euro will continue its 11 percent slide against the dollar in the past three months.

A heavy slate of U.S. data along with a Fed meeting will shed light on the economy's strength and outlook for more Fed credit tightening.

"We anticipate euro weakness may continue through the coming days," currency strategists at Morgan Stanley said in a note to clients.

The Fed is widely seen pushing up rates by a quarter percentage point after a two-day meeting ends on Thursday, taking it to 3.25 percent from 1 percent a year ago. Another such rate increase is expected at the Fed's August meeting.

ECB chief Jean-Claude Trichet will have a chance to clarify the central bank's monetary policy stance in a speech at 1300 GMT.

YET MORE YUAN TALK

Revived speculation that China will soon loosen the yuan's tight peg to the dollar also hammered the euro to a one-year low against the yen on Thursday.

Traders often snap up the yen as a proxy for any revaluation that would let the yuan appreciate.

The single currency straddled the 131 yen line for much of Tokyo trading hours. It dropped to the day's low around 130.80 yen on the euro's sharp fall versus the dollar, just above the one-year low near 130.60 yen.

Still, the yen has languished against the dollar around 109 yen, in sight of eight-month lows but trapped between the dollar's allure and euro's decline.

The Japanese currency fetched 108.95 per dollar , stuck between 108 yen and 109.50 yen for the past two weeks.

China's yuan policy is set to be an ongoing topic for currency markets ahead.

Japan's finance minister, Sadakazu Tanigaki, said on Friday that the yuan would likely be a topic when he meets his Chinese counterpart over the weekend, the first bilateral meeting of the two countries' finance ministers in four years.

China's state-run Xinhua news agency reported on Thursday that the country's foreign exchange regime would likely be discussed when President Hu Jintao participates in the Group of Eight summit in Scotland on July 6-8. (Additional reporting by Hideyuki Sano)

© Reuters 2005. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

Forex - US dollar mixed in Tokyo early afternoon trade

2005-06-23T04:36:00.000-07:00

AFX News Limited
06.23.2005, 01:49 AM

TOKYO (AFX) - The US dollar was mixed against other major currencies in early afternoon trade here, with investors waiting for fresh trading leads from today's testimony on the yuan by US officials, dealers said.

US Federal Reserve chairman Alan Greenspan and Treasury Secretary John Snow will testify before a US Senate panel tomorrow about the impact of China's fixed exchange rate on the US economy.

The head of the Chinese Finance Ministry's international department, Zhu Guangyao, said: 'Under external pressure and external speculation, no country can make an adjustment. External noise will only delay the process'.

At 1.00 pm (0400 GMT) here, the euro was trading at 1.2124 usd, compared to 1.2138 usd three hours earlier in Sydney and 1.2126 usd in late New York trade, while the dollar was quoted at 108.62 yen, compared to 108.68 yen earlier in Sydney and 108.88 in New York.

The dollar was firmer against the euro, as speculation about an interest rate cut by the European Central Bank (ECB) gained momentum after the overnight release of the minutes from this month's Bank of England monetary policy committee meeting showed that two members voted for a 0.25 pct interest rate cut.

'The market is now increasingly wary about monetary policy management by the ECB,' said Makoto Kojima, executive director of UBS Tokyo.

Yet, the dollar was nowhere near the recent high of 1.2069 usd against the euro, which it touched Tuesday, because of the emerging prospect of the US Fed nearing the end of its rate-hiking cycle, dealers said.

'The speculation that the US Fed has entered the final stages of its rate-hiking cycle, or that it may even start cutting rates, is curtailing the gains of the US dollar,' Kojima said.

'In addition, the market is still skeptical about the actual interest rate reduction by the ECB,' he said.

The dollar was slightly easier against the yen, hit by the release here of a government survey which showed a bottoming-out of the deterioration in business sentiment, dealers said.

'But as any upturn in the Japanese macro-economy is not likely to prompt an immediate shift in the monetary policy, the yen cannot become a sustained target for buying,' Kojima said.

Toshiro Muto, the deputy governor of the Bank of Japan, said the central bank may see a chance to end its present monetary policy in the year to March 2007, if things go smoothly.

Forex - Euro near 9-month dollar lows on ECB rate cut talk

2005-06-21T05:32:00.000-07:00

06.21.2005, 08:35 AM

LONDON (AFX) - The euro remained near nine-month lows against the dollar on renewed expectations the European Central Bank may be considering cutting interest rates to boost economic growth in the 12-nation currency zone.

The latest bout of speculation was sparked by comments last night from European Central Bank council member Jaime Caruana, who said risks to growth in the euro zone are 'on the downside', and by a bigger than expected rate cut from Sweden's Riksbank.

The risks to growth were highlighted further this morning by very disappointing French consumption data. Official figures showed French household consumption of manufactured goods fell 0.9 pct in May compared with a revised 1.1 pct rise in April and expectations of a more modest 0.2 pct decline.

The later ZEW survey of German business confidence did little to alter sentiment towards the single currency and the pressure on the ECB.

The ZEW said its German economic expectations index for June climbed 5.6 points to +19.5 from +13.9 in May and expectations of a rise to +7.3.

'While political concerns seem to be losing their ability to damage the euro significantly, as demonstrated by relatively muted reaction to last week's EU summit results, the European currency remains acutely sensitive to indications the ECB might cut rates,' said Daniel Katzive, an analyst at UBS.

The dollar, which was in the doldrums for much of the last couple of years, due to concerns over the US twin deficits, has been buoyed this week by the political cloud hanging over the EU as well as a greater emphasis on developments related to yield differentials.

'Focus is shifting from the European political backdrop to interest rate fundamentals, but the net effect is still the same; i.e. euro selling,' said Mark Austin, global head of currency strategy at HSBC.

While the ECB is being urged to cut rates from 2.0 pct to help boost anaemic economic growth, the Fed is poised to continue raising the cost of borrowing from the current 3.0 pct in a measured manner, possibly to 4.0 pct by the year's end.

The political pressure on the ECB is likely to have increased further from the decision by Sweden's Riksbank to cut its key interest rate by 50 basis points to an historic low level of 1.50 pct in a bid to spur economic growth following recent weak macroeconomic data.

The Riksbank also revised downwards its growth forecast for 2005 and 2006, from 3.2 pct for both years to 1.9 pct this year and 2.7 pct next year.

The rate cut, which will be effective from Wednesday, was bigger than expected by most financial market analysts, who had mostly been looking for the Riksbank to shave just 0.25 points off the rate.

'This ups the pressure on the ECB to do something,' said Steve Barrow, currency strategist at Bear Stearns.

Forex - Euro slips on EU concerns

2005-06-20T06:52:00.000-07:00

06.20.2005, 09:15 AM
(www.afxnews.com)

LONDON (AFX) - The euro remained soft against the dollar as sentiment in the single currency continued to be dented by the breakdown of last Friday's summit of European leaders and moves in Italy to call a referendum on bringing back the lira.

The EU summit descended into acrimony on Friday night when British Prime Minister Tony Blair held firm against French-led demands for a reduction in the 3 bln stg 'cheque britannique', meaning an agreement on the EU budget for the years 2007-13 could not be reached.

The euro plunged to near nine-month highs in recent days as investors fret about the political future of the EU following the rejection of the EU constitution by both France and the Netherlands and the debate about the budget.

There are also concerns that Italy's Northern League party may gather the necessary 500,000 signatures required to force a referendum on re-introducing the lira.

Though the campaign is not supported by Italian premier Silvio Berlusconi, it reportedly has the backing of two Northern League Cabinet members, Roberto Calderoli, Minister of Reform, and Roberto Maroni, Minister of Welfare.

Despite these ongoing concerns about the future of the EU and EMU, a number of analysts think the political woes may take a backseat for now.

'Political and structural euro negatives look set to take a back seat this week as generalised pressure on the dollar re-emerges,' said Steve Pearson, currency strategist at HBOS, noting the surge in oil and commodity prices.

Investors will be interested to see what impact record oil prices will have on currency markets. Traditionally, high oil prices have impacted on the yen as Japan is a net importer of oil and dented confidence in the dollar by diminishing expectations of further US interest rate hikes.

Oil prices surged to a record high overnight in Asian trading, with the benchmark New York contract climbing past 59 usd a barrel.

In addition, analysts warned that this week's data flow may work against the dollar.

Mark Austin, global head of currency strategy at HSBC, thinks the US currency is 'vulnerable' to disappointing news especially as the recent indicators out of the US have been uneven at best.

He will be particularly interested to see if this afternoon's leading indicators for May show their fifth consecutive negative reading.

'Three consecutive monthly readings below zero are generally thought to signal an economic slowdown 6-9 months in the future,' he said.

'Hence, near-expected data (-0.2) today should give pause to perceptions of a positive cyclical backdrop for the dollar,' he added.

The dollar, which was in the doldrums for much of the last couple of years, due to concerns over the US twin deficits, has been buoyed this year as investors placed greater importance on developments related to yield differentials.

While the European Central Bank is being urged to cut rates from 2.0 pct to help boost anaemic economic growth, the US Federal Reserve is poised to continue raising the cost of borrowing from the current 3.0 pct in a measured manner, possibly to 4.0 pct by the year's end.

Forex - US dollar down slightly vs euro as market awaits outcome of EU summit

2005-06-17T02:15:00.000-07:00

06.17.2005, 04:55 AM

SINGAPORE (AFX) - The US dollar ended the Asian session down slightly against the euro, but retained a firm tone after trading in narrow ranges ahead of the end of the EU summit today.

At 3.13 pm (0713 GMT) here, the euro was at 1.2128 usd, up from 1.2103 usd just over three hours earlier in Tokyo. The dollar was at 108.83 yen, down from 108.89 yen in Tokyo earlier.

The EU summit in Brussels is hoping to resolve two main issues: whether to proceed with future referendums on the EU constitution in other countries, after voters in France and the Netherlands rejected it; and the debate about the 2008-2013 EU budget.

Concerns about disagreement over the budget and the future of the constitution continued to weigh on the euro throughout the Asian session, dealers said.

The dollar was stuck in a narrow range against the yen as players focused on the euro and with some uncertainty over the dollar's direction after a slew of weak US economic data, they said.

This week has seen a series of US data mostly coming in below expectations, most notably Wednesday's Treasury International Capital flows data, which brought back fears of an unsustainable deficit.

Still, the dollar's resilience in the face of that has left many players somewhat confused as to whether its strength is truly justified or whether it is a precursor to a sharper future withdrawal, dealers said.

US current account data for the first quarter are due later today, followed by preliminary University of Michigan consumer sentiment data for June.

'With sentiment stacked so heavily against the euro, a positive outcome from the US economic releases is expected to be welcome news for the dollar, whereas negative data is likely to be shrugged off yet again,' said Bank of Tokyo-Mitsubishi economist here, Wong Keng Siong.

Forex Training: The psychological aspect of a DEMO ACCOUNT

2005-06-16T05:40:00.000-07:00

by:Paul Strumberg

The Forex industry of today, now rapidly growing and outreaching anywhere worldwide, includes a large amount of FOREX dealers (organizations) who face strong and growing competition in this thriving marketplace.
In general, we are talking about FOREX platforms (internet sites) which operate as "market-makers", offering their clients various levels and features of service.
One of the "features" offered is the DEMO ACCOUNT. Many among this industry's players, but not all, offer the DEMO tool to their newly registered customers. It is a marketing mean, aimed to acquire customers, on one hand, and to serve them with training experience under "near" real-life terms, on the other.
For example: "Register with us, and get a free $1,000 DEMO account".
In fact, from the Forex dealers' point of view, it is a very important tool, since the Forex industry has completely changed during our new era of internet. Traditional Forex traders must comply today with the modern facilities, and customers' psychological barriers should be removed in that respect.
This industry in its new form is less than 10 years old, and thanks to the global network, every person today can trade Forex, any time, from anywhere. The Forex market daily turnover is more than 100 times greater than the Nasdaq, amounting over 200 trillion dollars per day.
More and more people hear about the prospects in trading Forex, but they are not confident enough to do the easy and the obvious: connect, register, start trading immediately.
Hence, in order to train the industry players (potential, novice and pros alike), many Forex companies offer now the DEMO account.

From the FOREX providers' view it is a great marketing tool.
However, from the trader's (the customer's) point of view: is it that good?
The answer is quite simple, divided as follows:
[1] Training-wise, for merely exercising the technique: it is a good instrument.
[2] Psychology-wise: not-so-good, even BAD. The tactics and strategies an average Forex player performs are totally different (even opposite) between DEMO, when traders are trading with the dealer's virtual money, and REAL-LIFE, where they risk their own funds. In fact, the danger is that the trader would be too anxious in his REAL-LIFE trading, after achieving great results on the virtual playground.

My tip: Enjoy the advantage offered in a DEMO ACCOUNT, only if you know how to differentiate between the two above mentioned aspect…

Courtesy of: Paul Strumberg, an independent Forex trader since 2001.

Forex mart has a new animal -dollar STRIPS

2005-06-15T23:31:00.000-07:00

Anindita Dey / Mumbai June 16, 2005

STRIPS may not have made an entry into the domestic debt market but the foreign exchange market is witnessing the advent of a new product from the same lineage — dollar STRIPS.

STRIPS stands for separately traded registered interest and principal of a security. For instance, a 5-year bond can have 10 semi-annual coupons and one payment of the principal. Stripping this bond will create 11 instruments —10 coupons and one principal. Each of them can be traded separately. It is aimed at catering to the needs of investors with varying maturity profiles.

Corporates having export receivables and harbouring the view that the rupee will appreciate in the medium to long term against the dollar are signing up dollar-rupee currency options for 6 to 12 months.

Under the new structure, the deal spanning over 12 months will be broken down into 12 contracts with individual expiry dates, explained a bank dealer.

Assuming that a corporate had a receivable of $12 million, it can enter into 12 contracts of $1 million each maturing at the end of the each month.

Under the currency option, the corporate can buy a put option for half of the amount ($500,000), which gives it the right to sell dollars at the decided price (strike price) in the event that the spot rupee dollar exchange rate appreciates beyond the strike price at the end of the one-month period.

However, if the rupee dollar rate depreciates in value and the dollar fetches more number of rupees against the strike price, the bank could insist on the exporter to exercise the option to sell dollars.

This will be facilitated by the corporate selling a call option to the banks for the full $1 million amount at the time of striking the deal. The entire package would form part of monthly deal. In the process, 12 such deals are contracted by the bank with the exporter, said a dealer.

The bank thus ensures that the flow of dollars is unidirectional (from the client to the bank) and dependent only on who exercises the option.

The major advantage of the new STRIPS product is that corporates do not have to book the entire amount in the forward market and can take a delivery of receivable or roll over the contract for the full amount depending on the dollar-rupee movement.

The product gives flexibility to the corporate to exercise his judgment on the exchange rate with reduced level of risk. This is because the entire amount does not get affected should his view on the rupee dollar movement be reverse to that of the exporters, explained a senior bank official.

Forex - Dollar steady ahead of US data

2005-06-14T05:52:00.000-07:00

06.14.2005, 08:41 AM

LONDON (AFX) - The dollar remained steady below its recent nine-month highs against the euro as investors exercise some caution ahead of this afternoon's US economic data.

Analysts said US retail sales and producer price data may come in on the soft side.

They expect the core PPI rate in May to drop to 0.2 pct from 0.3 pct in April, and retail sales to slip 0.2 pct from the 1.4 pct improvement the previous month.

'I think the dollar's losing a little bit of momentum and investors are just taking a bit of a breather, especially ahead of today's data,' said Audrey Childe-Freeman, an analyst at CIBC World Markets.

A combination of dollar supporting factors pushed the euro down to 1.2036 usd yesterday, its lowest level since Sept 8. As recently as the end of April, it was trading as high as 1.30 usd.

The dollar's surge to near nine-month highs came as investors fretted about the political future of the EU following the rejection of the EU constitution by both France and the Netherlands, and the current acrimony surrounding the future of the British rebate.

The US currency has also been buoyed by better-than-expected news on the US twin deficit front and expectations that the interest rate differentials between the US and the 12-nation euro zone will widen further in the coming months.

While the European Central Bank is being urged to cut rates from 2.0 pct to help boost anaemic economic growth, the US Federal Reserve is poised to continue raising the cost of borrowing from the current 3.0 pct in a measured manner despite some expected weakness in today's economic data.

Analysts said it remains unclear what direction the dollar will take over the coming days, especially as many of the supportive factors have been priced in.

'The dollar appears to have lost momentum because a lot of news now appears to be priced in,' said Mansoor Mohi-uddin, currency strategist at UBS.

'The markets are expecting a negative result when the EU heads of government meet later this week, the markets have also shifted towards pricing in ECB rate cuts and investors continue to be concerned about the weakness of the euro zone against the US economy,' he added.

Elsewhere, the pound has been buoyed by a relatively hawkish message from the Bank of England's governor Mervyn King last night, which has dampened expectations of an imminent rate cut, despite a weaker than expected house price survey from the Royal Institution of Chartered Surveyors.

Today's higher than expected CPI inflation data for May acted with the market's prevailing interpretation of King's speech.

While acknowledging the risks of a sharper than expected consumption slowdown, King warned of the upside risks to inflation, stemming from a variety of factors, including accelerating money supply growth, rising import prices and a tight labour market.

'The pound has managed to regain its losses as May CPI came out higher than expected and King was seen as being more hawkish on rates,' said UBS's Mohi-uddin.

FOREX-Dollar hits multi-month highs vs euro and yen

2005-06-13T04:53:00.000-07:00

Monday, June 13, 2005 10:22:31 AM
http://www.reuters.com

(Updates price, adds quotes, changes dateline, byline)

By Justyna Pawlak

LONDON, June 13 (Reuters) - The dollar hit a nine-month high against the euro and eight-month peak versus the yen on Monday, extending gains after U.S. data and comments from Fed chief Alan Greenspan raised prospects for more interest rate hikes.

Following last week's better-than-expected U.S. trade data and Greenspan's comments that the economy was on a "firm footing", the market is looking to see if this week's figures would reinforce expectations of higher U.S. rates.

"Friday's trade data allowed the market to focus on the cyclical performance of the U.S. economy," said Lena Komileva, G7 market economist at Tullett Liberty in London.

"It doesn't appear that the yield difference will shift in favour of the euro any time soon."

The euro had fallen to $1.2036 , its lowest level since early September 2004, before pushing back to $1.2050 by 1000 GMT to stand at 0.6 percent down on the day.

The dollar also rose about two thirds of a percent to hit its highest level in eight months at 109.34 , after rallying 1.2 percent on Friday in its biggest daily gain in more than four months.

"People are just looking for excuses to buy the dollar. It comes down to near-term positive view about interest rates. It is an extremely positive and profitable trade," said Neil Mellor, currency strategist, Bank of New York.

The week will also see European Union leaders debating the future of the bloc's political and monetary integration after France and the Netherlands voted "no" to a new EU constitution.

"There is concern about a lack of conviction on the political process and a lack of coordination of monetary and political policies. But the euro's loss is driven by weak data and the summit won't be able to change this," said Benedikt Germanier, currency strategist at UBS in Zurich.

"People have bought a lot of dollars but long-term investors are still long euro dollars. There may be more pain to come."

Finance ministers from the world's rich nations (G8) during their weekend meeting in London kept up pressure on China to move towards more flexible exchange rates, but produced no clues as to the timing.

WIDENING DIFFERENTIAL

The Fed is widely expected to raise rates by a quarter percentage point at its next policy meeting on June 29-30, which would be its ninth straight rate rise and take its funds rate to 3.25 percent.

The outlook for higher U.S. interest rates has attracted foreign capital into the country, offsetting concerns about the huge U.S. current account deficit.

U.S. April capital flows data, due on Wednesday, could add to evidence the United States is comfortably financing its trade deficit.

U.S. producer and consumer price indices, due on Tuesday and Wednesday separately, are expected to give clues for any signs of an uptick in prices, which could lead the Fed to raise rates at an even faster pace to ward off inflation.

In contrast, the euro zone's sluggish economy is raising expectations the European Central Bank's next move may be an interest rate cut.

ECB Chief Economist Otmar Issing has said he could not rule out a rate cut. The central bank has kept rates at 2 percent since June 2003.

"After the trade data on Friday the dollar is continuing its rise. The market is afraid of the possibility of the Fed interest rates going higher and at the same time the ECB is about to cut rates," Germanier said.

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FOREX-Dollar braces for U.S. trade data, G8

2005-06-10T07:29:00.000-07:00

Friday, June 10, 2005 12:13:40 PM
http://www.reuters.com

By Carolyn Cohn

LONDON, June 10 (Reuters) - The dollar steadied against the euro on Friday as investors hung onto positions ahead of U.S. trade data and a meeting of finance ministers from the Group of Eight countries.

Investors are expecting a widening U.S. trade gap in data due at 1230 GMT, to $58 billion in April from $55 billion in March, although analysts say the dollar is less susceptible to concern about the U.S. trade deficit than a few months ago.

Markets will also be on alert for comments from a meeting of G8 finance ministers on Friday and Saturday in London, with China's economy and its yuan policy expected to be on the agenda.

"Trade data is obviously going to be key," said Derek Halpenny, currency economist at Bank of Tokyo-Mitsubishi.

"It's going to be a bad figure -- I wouldn't be surprised if it comes back up to $60 billion."

At 1155 GMT, the euro fetched $1.2226 , little changed from the U.S. close and from the week's opening levels.

The euro hit its lowest levels since September of $1.2157 last week.

The dollar was also steady against the yen at 107.40 yen .

EURO CRACKS

The dollar remains supported by increasing optimism over the U.S. economy and worries about cracks in the euro, after France and the Netherlands voted against an EU constitution in referendums last week.

European budgetary issues are also in focus. France and Germany stepped up demands on Friday for Britain to make a "gesture" over its European Union rebate to help the EU agree to a long-term budget, following joint talks in Paris.

"The real issue for the euro is still the fall-out from the euro referendum," said Halpenny.

"The euro is still being weighed down by political divisions. These divisions that have opened up need to be eliminated."

EU Monetary Affairs Commissioner Joaquin Almunia speaks in London at 1230 GMT on "Confronting European Economic Challenges".

U.S. RATES

Markets took comments to Congress from Federal Reserve Chairman Alan Greenspan on Thursday as the go-ahead for further increases in interest rates, after recent comments by other Fed officials suggested the U.S. central bank might be nearing the end of its rate-raising cycle.

Greenspan told a congressional committee that the U.S. economy was on a reasonably firm footing and underlying inflation remained contained, enabling the Fed to reaffirm its "measured" pace of monetary tightening at its May meeting.

The Fed has raised short-term borrowing costs eight times since last June to 3 percent in a bid to head off inflation.

That contrasts with the euro zone, where rates have been stuck at 2 percent since June 2003, and many think the next move by the European Central Bank could be a rate cut.

The widening interest rate advantage the dollar enjoys over its major rivals has been key to the currency's rise of around 10 percent against the euro and nearly 5 percent versus the yen this year.

It has helped divert attention from concerns about whether the United States can keep financing its trade and budget deficits. Such concerns helped to push the dollar index <=USD> down 30 percent over the three years to the end of 2004.

"The dollar is now more resilient to trade deficit and other structural issues. Unless there is a significant widening in the trade deficit, the dollar should remain resilient," said Mitul Kotecha, head of currency research at Calyon in London.

CHINA DATES

Also in focus was the London meeting of finance ministers from the Group of Seven industrialised nations plus Russia that starts on Friday.

International Monetary Fund Managing Director Rodrigo Rato added his voice on Friday to the large chorus of policymakers calling for yuan reform, saying China has a "window of opportunity" to adopt a flexible exchange rate, and Beijing only needs the political will to act.

But dealers said the market has become jaded after long and intense speculation about when Beijing will loosen the yuan peg to the dollar, saying the meeting would likely pass without any impact on currencies.

"Obviously, the Chinese yuan is going to be the centre of attention (at G8). They will continue to keep up the pressure but the Chinese are unlikely to yield to pressure at this point of time," said Kotecha.

U.S. Treasury Secretary John Snow will meet Chinese finance minister Jin Renqing at 1500 GMT, a G8 official told Reuters on Friday. China is also due to attend a G8 breakfast on Saturday.

Jin will give a speech at 1800 GMT at an award ceremony, said The Banker magazine, which will be presenting Jin with an award.

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FOREX-Dollar eyes 9-month high vs euro, awaits Greenspan

2005-06-09T07:36:00.000-07:00

Thursday, June 9, 2005 12:30:52 PM
http://www.reuters.com

(Updates comments and prices, changes byline)

By Karin Strohecker

LONDON, June 9 (Reuters) - The dollar approached its highest level against the euro in nine months on Thursday as traders looked for a signal from Federal Reserve chief Alan Greenspan that U.S. interest rates would continue to rise.

In his congressional testimony on the economy at 1400 GMT, Greenspan is expected to detail his expectations for growth and interest rates after a run of weak U.S. data prompted forecasts of a near-term pause in the Fed's credit tightening.

Earlier this week when Greenspan spoke on low global bond yields, dealers noted he did little to counter comments by Dallas Fed President Richard Fisher last week that the Fed may soon come to the end of its tightening cycle.

Nevertheless, dealers expect Greenspan to be upbeat about the economy and this helped the U.S. currency maintain its strength.

"We expect him to be positive about the economy. The underlying fundamentals are sound and so is consumer spending," said Holger Schmieding, senior economist at Bank of America in London.

At 1210 GMT the euro traded at $1.2234 , less than a cent above nine-month lows set last week and steady from the U.S. close.

The single currency was trading at 131.23 yen , steady on the day.

The dollar was 0.1 percent higher at 107.30 yen .

STERLING JUMPS ON DATA

In Britain, the Bank of England kept interest rates unchanged at 4.75 percent for the tenth month running.

Sterling did not move on the widely expected outcome but briefly jumped versus the dollar and the euro earlier in the session after British manufacturing output unexpectedly saw its biggest monthly gain in a year in April.

The Office for National Statistics said manufacturing output rose 0.9 percent in April, more than the 0.4 percent expected. That followed a sharp 1.6 percent decline in March which was the biggest fall in nearly three years.

But analyst remained sceptical.

"The economy is weakening (in the UK)," said Schmieding. "We do not expect a sudden u-turn in policy but a gradual change."

Markets have started increasingly to price in a rate cut later in the year following a batch of weak manufacturing data the previous week and the mid-range forecast gave a 70 percent chance that the next move in interest rates will be a cut.

"This was never really a contentious decision today," said George Buckley, UK economist at Deutsche Bank.

"We view August as the most likely date for the start of the easing cycle, as long as the data remain weak over the coming weeks," he said.

YIELDING DEPOSITS

The allure of rising U.S. interest rates has helped drive the dollar up roughly 10 percent against the euro this year and nearly 5 percent versus the yen.

The Fed has raised rates at eight consecutive policy meetings since last June to 3 percent, drawing investors to dollar deposits. Rates in the euro zone and Japan remain stuck at 2 percent and virtually zero, respectively.

The New Zealand dollar was steady near recent one-month highs after the central bank left interest rates unchanged at 6.75 percent, as expected.

Also in focus was a meeting of finance ministers from the Group of Eight industrialised nations that starts in London on Friday and is expected to discuss the global economic outlook and China's rigid exchange rate policy.

SQUASHED EURO

The euro has taken a beating in past weeks due to sluggish economic growth in the euro zone and worries about the bloc's political future.

Britain postponed a referendum on a new European Union constitution earlier this week after the treaty was flatly rejected in France and the Netherlands, helping spark the latest bout of euro selling that some analysts say has not yet run its course.

Investors are on the look-out for any hints that the European Central Bank may cut rates.

German inflation was less strong in May than initially reported, data showed on Thursday.

Germany's harmonised index of consumer prices rose 0.2 percent month-on-month and 1.4 percent year-on-year.

Investors were also awaiting April U.S. trade figures on Friday, which are expected to show a widening of the deficit to $58 billion from $55 billion in March.

Concerns about expanding trade and budget deficits have been the main driver of a 30 percent slide in the dollar index <=USD> over the three years to the end of 2004.

Data showing a widening in Japan's current account surplus in April was brushed off by the market. Japan posted a surplus of 1.6269 trillion yen, up 5.2 percent from a year earlier.

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FOREX-Dollar dawdles as market braces for Greenspan

2005-06-09T03:45:00.000-07:00

Thursday, June 9, 2005 5:56:31 AM
http://www.reuters.com

By Naomi Tajitsu

TOKYO, June 9 (Reuters) - The dollar held near a nine-month high against the euro as traders look for Federal Reserve chief Alan Greenspan to express confidence in the U.S. economy's strength and signal that interest rates are heading even higher.

In congressional testimony on the economy later in the day, Greenspan is expected to detail his views on the outlook for growth and interest rates after a run of weak U.S. data stirred expectations of a near-term pause in the Fed's credit tightening.

Earlier this week when Greenspan spoke on low bond yields globally, dealers noted he did little to counter comments by Dallas Fed President Richard Fisher last week that the central bank may soon be done tightening.

But the prospect of Greenspan being upbeat about the economy helped the U.S. currency to maintain its strength before he started speaking at 1400 GMT.

"The U.S. economy in general is quite strong, and if he acknowledges this, we're going to see some dollar buying," said Toshiaki Kimura, forex manager at Mitsubishi Trust and Banking.

The allure of rising U.S. interest rates has helped drive the dollar up more than 10 percent against the euro this year and nearly 5 percent versus the yen. The Fed has raised rates at eight straight policy meetings since last June to 3 percent, drawing investors to dollar deposits. Rates in the euro zone and Japan remain stuck at 2 percent and virtually zero, respectively.

At 0545 GMT, the euro fetched $1.2235 . That was little changed from late New York trade but well off highs at $1.2355 hit in Wednesday's volatile session.

The dollar was less than a cent from 1.2158 per euro, last week's peak and the highest level since last September.

The single currency fetched 131.15 yen , about one yen away from an 11-month low hit last week.

MORE EURO SALES?

The euro has taken a beating in past weeks due to sluggish economic growth in the euro zone and worries about the bloc's political outlook.

Britain earlier this week postponed a referendum on the new European Union constitution after the treaty was flatly rejected by France and the Netherlands, helping spark the latest bout of euro selling that some analysts say has not yet run its course.

"It wouldn't be a surprise to see the euro below $1.20 sometime next week," said Yoshi Yanagisawa, treasury manager at State Street Bank.

The dollar bought 107.20 yen , compared with 107.28 yen in late U.S. trade.

Traders said that dollar/yen trading would likely be bookended by 106.50 yen and 107.50 yen for the time being, due in part to the recent tendency for exporters to step in with sell orders around 108 yen.

Investors were also awaiting April U.S. trade figures on Friday, which are expected to show a widening of the deficit to $58 billion from $55 billion in March.

Concerns about expanding trade and budget deficits have been the main driver of a 30 percent slide in the dollar index <=USD> over the three years to the end of 2004.

Despite weak forecasts for the trade data, some analysts said that sentiment for the euro was so low that a soft reading would likely have limited impact on the U.S. currency.

Also in focus was a meeting of finance ministers from the Group of Eight industrialised nations that starts on Friday and is expected to discuss China's economy and its yuan policy.

Data showing a widening in Japan's current account surplus in April was brushed off by the market. Japan posted a surplus of 1.6269 trillion yen, up 5.2 percent from a year earlier.

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FOREX-Technical factors propel dollar higher

2005-06-08T22:42:00.000-07:00

Wednesday, June 8, 2005 8:44:30 PM
http://www.reuters.com

NEW YORK, June 8 (Reuters) - The dollar rallied broadly on Wednesday, reversing losses against the euro in choppy and technically-driven trade that spurred investors to make fresh bets on the U.S. currency.

By late afternoon, the euro dropped to $1.2224, down 0.5 percent compared with late Tuesday, a few hours after hitting an intraday high of $1.2354.

Traders said there had been heavy two-way interest in the euro around midday, but a series of automatic sell orders was triggered, taking it down to an intraday low after it failed to sustain a move above $1.2350.

"Purely technical pressure on the euro" caused the sharp move downward, said Brian Taylor, chief dealer of foreign exchange trading at Manufacturers and Traders Bank, Buffalo, New York.

The euro had found a footing earlier this week after a 5-1/2 percent drop over the past month to an eight-month low of $1.2157 last Wednesday, driven by European political instability and widening interest rate and economic growth differentials.

But the sudden drop by more then a cent in a few hours in both the euro and sterling caught some market participants off-guard.

"People who were buying (euros) for the past three days just got caught above $1.2350. It was a false break," said a trader on the U.S. West Coast. "Long-term guys are scrambling to get out."

The euro dipped slightly to new session lows around $1.2207 shortly after the White House raised its forecast for inflation, saying it expected the consumer price index to increase 2.9 percent, fourth quarter over fourth quarter, versus its December outlook for 2 percent. It blamed the higher forecast on volatile energy prices.

If rising inflation spurred the Federal Reserve to hike interest rates more steeply than previously expected, that could increase the attraction of dollar-denominated deposits to global investors.

The White House also trimmed its U.S. 2005 real gross domestic product growth forecast to 3.4 percent from a previous 3.5 percent. But economic activity in the euro zone remains lackluster by comparison.

Over the past three weeks, the market "has been selling euros into any kind of strength," said David Gilmore, partner with FX Analytics, a consulting firm in Essex, Connecticut. "People are starting to get back into the trade ... and are looking for new lows," Gilmore said.

GREENSPAN, TRADE AND VOLATILITY

The euro had been supported against the dollar after Federal Reserve Chairman Alan Greenspan, in a speech on Monday, failed to dispel a concern among some traders that the Fed may be close to pausing in its current policy tightening.

Greenspan's testimony to Congress on the U.S. economy at 10 a.m. EDT (1400 GMT) on Thursday may provide more clues on how much further the Fed intends to raise interest rates. Since June 2004, the central bank has raised rates eight times, to a current 3 percent.

Dealers will also look closely at April U.S. trade data on Friday that are expected to show a widening of the deficit to $58 billion from $55 billion in March. Worries about large and growing trade and budget deficits were the main drivers of a 30 percent slide in the dollar index over the three years to the end of 2004.

Sterling touched three-week highs against the dollar at $1.8403 before falling to $1.8234 .

Against the yen, the dollar rose 0.7 percent to 107.39 yen .

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FOREX-Euro rallies as investors look beyond EU crisis

2005-06-08T22:39:00.000-07:00

Posted on Wednesday, June 08 @ W. Europe Daylight Time
The euro recovered from recent multi-month lows against the dollar and the yen on Wednesday, as panic over the future of the single currency faded and markets looked ...

The euro recovered from recent multi-month lows against the dollar and the yen on Wednesday, as panic over the future of the single currency faded and markets looked to Fed policy and a meeting of G8 finance ministers. Recent comments from top euro zone policymakers calmed worries that the euro might not get enough political support after two founding members of the European Union rejected a draft EU constitution last week. Markets are instead focusing on comments from U.S. Federal Reserve officials for clues on the future path of U.S. interest rates, while revaluation of China's currency is expected to come under the spotlight at a meeting of the world's leading industrialised nations in London this weekend.

FOREX-Euro rallies as investors look beyond EU crisis

2005-06-08T06:53:00.000-07:00

Wednesday, June 8, 2005 12:07:57 PM
http://www.reuters.com

(Recasts, adds fresh quotes, FX polls, Trichet comments)

By Carolyn Cohn

LONDON, June 8 (Reuters) - The euro recovered from recent multi-month lows against the dollar and the yen on Wednesday, as panic over the future of the single currency faded and markets looked to Fed policy and a meeting of G8 finance ministers.

Recent comments from top euro zone policymakers calmed worries that the euro might not get enough political support after two founding members of the European Union rejected a draft EU constitution last week.

Markets are instead focusing on comments from U.S. Federal Reserve officials for clues on the future path of U.S. interest rates, while revaluation of China's currency is expected to come under the spotlight at a meeting of the world's leading industrialised nations in London this weekend.

The euro also found support against the dollar after U.S. Federal Reserve Chairman Alan Greenspan on Tuesday failed to dispel concern the U.S. may be near the end of its tightening cycle.

"There has been profit-taking of dollar long positions ahead of Greenspan's testimony tomorrow, an expected widening of the U.S. trade deficit on Friday and the G8 meeting," said Armin Mekelburg, currency strategist at HypoVereinsbank in Munich.

"Markets are historically very cautious of dollar long positions ahead of G7 meetings."

At 1140 GMT the euro traded a third of a percent up on the day at $1.2328 , almost two cents above eight-month lows set last week.

High-yielding currencies were back in vogue, with the Australian and New Zealand dollars hitting one-month highs against the U.S. dollar, and sterling reaching three-week highs .

The euro gained more than half a percent versus the yen to trade at 131.65 yen , one yen above 11-month lows set in the previous session.

The dollar was also up a quarter percent against the yen at 106.85 yen .

Analysts said receding expectations of a near-term revaluation of the yuan were putting pressure on other Asian currencies, such as the yen.

Traders in Tokyo also said the yen was sold after a report in the Financial Times suggested several foreign companies might pull out of Japan if proposed changes to the country's commercial code, which would increase their costs, go through.

Investors search for forex bets on Euro break-up risk

2005-06-08T04:04:00.000-07:00

LONDON (Reuters) - Could the European Monetary Union fall apart? Most currency analysts say probably not.

But concerns are growing that persistent economic trouble in the euro zone could encourage more calls to drop the single currency, similar to recent demands for a referendum on the euro from a junior government coalition partner in Italy.

The Northern League's demand to bring back the lira rattled the euro over the last week, helping to bring it to its lowest level in 10 months on a trade-weighted basis on Tuesday.

The single currency was battered after France and Netherlands rejected the vote on European constitution, raising fears that the monetary union could be at risk without strong political footing.

The euro fell most deeply against the yen, which was also helped by positive news about the Japanese economy, hitting its lowest level in almost a year at 130.65 yen.

Analysts said in the future, there may be other ways for investors to hedge or even profit from any potential damage to the six-year-old euro from fears over cracks in Europe's currency union.

Buying the Swiss franc was one, they said.

"Say things were going to spin out of control, people would pile into the Swiss franc at the expense of the euro," said Paul Mackel, currency strategist at ABN AMRO in London.

"It's a traditional 'safe haven' and old European money would move into Switzerland. The relative cost of this trade, in the options market, is low which makes it attractive."

On Tuesday, the euro traded near its lowest level against the Swiss franc in almost six months, around 1.5308 francs. One-month volatility on the pair traded around 3 percent, compared to nine percent in euro/dollar volatility, eight percent in euro/yen and five percent in euro/sterling.

"Euro/Swiss is one of our natural EMU trades, because implied volatility is so low compared to other euro crosses," said Mackel.

FRAYING ON THE EDGES?

The referendums plunged the bloc into crisis and sparked concerns about future policy-making and the lack of political unity which many analysts view as essential for a successful currency union.

Many senior euro zone policymakers, including European Central Bank President Jean-Claude Trichet, have called talk of the EMU falling apart "absurd".

But Italy's Prime Minister Silvio Berlusconi and his Economy Minister Domenico Siniscalco have yet to criticise the Northern League's proposal.

"The risk of a break-up of the EMU...has always been non-negligible," Stephen Jen, chief currency economist at Morgan Stanley in London, wrote in a research note. He added such risk was there even before the failed referendums on the EU charter.

But he said Germany, if any country, could be the "most relevant country to break away from the EMU."

Investors who wanted to bet that problems within the euro would stem from economic woes that could hit all of Europe, would probably sell the euro against the dollar and the yen, rather than investing in any other European currency, some analysts said.

"The strongest candidate is probably euro/dollar. The clear rationale would be to avoid the euro and Europe completely," said Steven Saywell, chief currency strategist at Citibank in London, adding he did not expect the EMU to actually fall apart.

Other analysts also said the yen could be the currency of choice for investors wanting to bet on problems within the EMU.

"If you think there is a possibility of disaster within the EMU but you are still positive on Europe, euro/Swiss would be ok. But euro/yen is more attractive (to sell). There are some good indications coming from Japan," said Marios Maratheftis, currency strategist at Standard Chartered in London.

© Reuters 2005. All Rights Reserved.

FOREX-Dollar slips on doubts about more U.S. rate rises

2005-06-08T02:21:00.000-07:00

Wednesday, June 8, 2005 6:01:30 AM
http://www.reuters.com

By David McMahon

TOKYO, June 8 (Reuters) - The dollar fell against the euro on Wednesday as some traders bet that the Federal Reserve may be nearing the end of a cycle of interest rate raises.

Fed chief Alan Greenspan did not directly address monetary policy in remarks at a conference in Beijing on Tuesday. But some dealers noted that he offered little to counter comments made last week by Dallas Fed President Richard Fisher that the central bank may be near the end of its tightening cycle.

"Greenspan's comments were as cryptic as always, but on the whole they seem to have been taken after the fact as slightly dollar negative," said Hideaki Furumaya, forex manager at Trust and Custody Services Bank in Tokyo.

"I'd say the dollar is looking a bit vulnerable, especially with the trade data and G8 coming up," he said.

Still, the dollar crawled up from near a one-month low against the Japanese currency.

Traders said the yen was sold after a report in the Financial Times newspaper suggested several foreign companies might pull out of Japan if proposed changes to the country's commercial code, which would increase their costs, go through.

The dollar was up around 0.2 percent on the day at 106.90 yen as of 0533 GMT after slipping to around 106.55 yen, just shy of a one-month low of 106.50 yen struck on Tuesday.

The euro bought $1.2325 , up around 0.3 percent from the late New York level and well above last week's eight-month low of $1.2158.

Analysts said that Fisher, who suggested that the Fed's tightening policy could be close to an end by likening it to the final stretch of a baseball game, had created a near-term ceiling for the dollar's 5 percent rally in the past month.

"After gaining too much, too fast against the euro ... the dollar has reversed its course on the Fisher comments," said Shogo Nagaya, forex manager at Nomura Trust and Banking.

"Although the euro-selling mood hasn't dissipated, it is becoming harder to buy dollars."

The euro climbed 0.5 percent to 131.70 yen, nearly one yen above an 11-month low of 130.74 hit on Tuesday.

Rupee hits a 10-day closing high against dollar

2005-06-07T08:20:00.000-07:00

Mumbai, June 7 (PTI): The rupee today hit at a 10-day closing high of Rs 43.54/55 per dollar, as the recent rally gathered further momentum on steady trade and foreign fund inflows amid a retreating dollar overseas in mostly quiet and thin trade at the interbank foreign exchange (forex) market.

Opening around Rs 43.54/55 per dollar, the rupee was confined to a tight band of Rs 43.53 and Rs 43.55 per dollar in mostly muted business, before ending around morning levels.

Meanwhile, the outlook for the currency has turned better due to softening global oil prices and steady FII inflows into the equity markets.

Proceeds from external commercial borrowings and dollar inflows from large software companies overseas offerings would also boost rupee sentiments, dealers said.

The rupee had last closed on firmer ground at Rs 43.53/54 per dollar on May 27. It has recovered most of the losses incurred early last week after a tumble to 1-1/2 month lows of 43.77/78 per dollar.

World oil prices slipped to USD 54.18 a barrel in Asian trade due to an increase in US stock inventories.

"Although the rupee rally gathered steam today, the forex spot trade remained quiet and range-bound due to lack of market moving factors. However, the currency benefitted from a weak dollar overseas and rising foreign institutional investors (FIIs) inflows," a forex dealer said.

FIIs were reported to have made USD 220.7 million of share purchases in June, after being net sellers in earlier months.

FOREX-Dollar dips on U.S. rate concerns, euro off lows

2005-06-07T07:19:00.000-07:00

Tuesday, June 7, 2005 12:18:09 PM
http://www.reuters.com

By Katie Hunt

LONDON, June 7 (Reuters) - The dollar hit a 3-week low versus the yen on Tuesday and lost ground on other currencies after comments from Federal Reserve chief Alan Greenspan added to uncertainty about the U.S. interest rate outlook.

The euro moved off an 11-month low against the yen after European Central Bank President Jean-Claude Trichet sought to quell expectations of an imminent interest rate cut.

Greenspan said that "new forces" were behind the unusual environment of low global long-term interest rates and this situation was unlikely to change soon.

The comment, which boosted high-yielding currencies like the New Zealand dollar, came after a surprisingly weak U.S. jobs report on Friday raised expectations the Fed could soon end raising interest rates, which currently stand at 3 percent.

"Greenspan's comments reinforce the focus on return potential," said Lena Komileva, market economist at Collins Stewart Tullet.

"The dollar has benefited from the run of hikes in Fed funds rate in a low yielding environment globally. The question is whether this is going to be sustained on a trend basis."

By 1157 GMT the euro stood at $1.2292 , up 0.3 percent on the day and the dollar hit a 3-week low against the yen at 106.55 yen.

The dollar also fell against the Swiss franc , and sterling but losses were most pronounced against the New Zealand and Australian dollars , which benefit from some of the highest interest rates among industrialised nations.

Against the yen the euro traded at 131.16 yen after hitting its lowest level since late June 2004 earlier in the session.

Forex-Euro falls to 11-month low versus yen

2005-06-07T07:18:00.000-07:00

Tue Jun 7, 2005 3:29 AM BST
reuters

By Brent Kininmont
TOKYO (Reuters) - The euro hit an 11-month low against the yen on Tuesday, hurt by the bleak outlook for further European political and monetary integration and after remarks by European Central Bank chief Jean-Claude Trichet that some in the market saw as a hint of rate cuts.

The ECB would do "all it could" to reinforce consumer and business confidence and economic reforms were "absolutely fundamental" to boost growth in the euro zone, Trichet said in a discussion among central bankers from China, Europe and Japan in Beijing.

Some traders speculate that chances of an interest rate cut by the ECB are growing, given tepid economic growth in the euro zone and after referendums in France and the Netherlands rejected a new European constitution.

The euro tumbled almost 3 percent against the dollar after the referendums.

Trichet's comments come a day after ECB Chief Economist Otmar Issing said policy strategy did not rule out an interest rate cut. A cut in rates would further underscore the dollar's interest rate advantage over the euro. U.S. rates stand at 3.0 percent, compared with 2.0 percent in the euro zone.

Prospects for the new EU constitution dimmed further on Monday, when Britain said it had shelved legislation on holding a referendum on it.

"The turmoil is still affecting the euro," said a trader at a European brokerage in Tokyo.

"Even after the U.S. non-farm payrolls and yesterday's dollar weakness in Asia, the euro still looks pretty heavy on the topside."

By 0153 GMT, the euro fetched around 130.95 yen, after falling as low as around 130.85, its lowest level since late June 2004.

The dollar was little changed at around 106.95 yen, holding near a three-week low of 106.72 yen struck on Monday.

FX Trading

2005-06-07T06:25:00.000-07:00

This is from the Financial Times on Tuesday morning:

Alan Greenspan, Federal Reserve chairman, on Monday night highlighted the unusual behavior of global bond markets, and acknowledged that investors might be correctly signaling a period of economic weakness ahead. ""The economic and financial world is changing in ways that we still do not fully comprehend," Mr Greenspan said.
And it goes to the point we tried to make about economics on Monday - science it is not. If the world's top economist doesn't fully comprehend, how are we supposed to?

Now that we know science and economics are not, shall we say, closely linked fields, let's take one step further toward the end of the diving board with the help of Benoit Mandelbrot, the fractal master, from his book, The Misbehavior of Markets (our emphasis):

... The implicit assumptions in all this: If one knows the cause, one can forecast the event and manage the risk. Wish it were so simple. In the real world, causes are usually obscure. Critical information is often unknown or unknowable, as when the Russian economy trembled in August 1998. It can be concealed or misrepresented, as during the Internet bubble or the Enron and Parmalat corporate scandals. And it can be misunderstood: The precise market mechanism that links news to price, cause to effect, is mysterious and seems inconsistent. Threat of war: dollar falls. Threat of war: dollar rises. Which of the two will actually happen? After the fact, it seems obvious; in hindsight, fundamental analysis can be reconstituted and is always brilliant. But before the fact, both outcomes may seem equally likely. So how can one base an investment strategy and a risk profile entirely on this one dubious principle: I can know more than anybody else?

In response, the financial industry has developed other tools. The second-oldest form of analysis, after fundamental, is "technical". This is a craft of recognizing patterns, real or spurious ... This discipline, in disfavor during the 1980s, expanded in the 1990s as thousands of neophytes took to the Internet to trade stocks and insights. It truly thrives, however in currency markets. There, all major "forex" houses employ technical analysis to find "support points", "trading ranges". And other patterns in the tick-by-tick data of the world's biggest and fastest market. And in the fun-house mirror logic of markets, the chartists can at times be correct. Sterling/dollar quotes really can approach a barrier. But this is a confidence trick: everybody knows that everybody else knows about the support points, so they place their bets accordingly. It beggars believe that vast sums can change hands on the basis of such financial astrology. It may work at times, but it is not a foundation on which to build a global risk-management system.
Wow! Game, set and match goes to Mandelbrot. His point, and though it may be refuted, makes eminent sense to us: financial theory is badly flawed. One only need view reality to see theory get crushed daily. Mandelbrot believes there is a lot more risk in the system, at times, than we realize. Bingo!

So now we debate the risk and virtues of low long-term interest rates. Is it a harbinger of recession? Or will it juice the wheels of industry? And because it is so difficult to even forecast rates, let alone the eventual impact, let's all go one step further (we plead guilty) and use this flawed forecast to then decide how it will impact currency markets. We couldn't make this stuff up if we tried.

Dollar correction day two! Or is it a new trend? Step right up and place your bets!

forex capital market

2005-06-06T18:52:00.000-07:00

What Is Forex Trading?
Foreign Exchange (Forex) Trading is a nonstop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets while traders increase or decrease value of an investment upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.