Asian News

[Ichiro]

Dollar Falls to Record Low Against Euro on Inflation, Fed View

By Min Zeng


Sept. 28 (Bloomberg) -- The dollar fell to a record low against the euro for a seventh straight day as slowing inflation encouraged traders to speculate that the Federal Reserve will cut borrowing costs a second time this year.

The U.S. currency weakened to $1.42 per euro for the first time since the 13-nation currency debuted in 1999 after a government report today showed core consumer prices last month had their smallest annual gain since February 2004. Former Fed Chairman Alan Greenspan said the chance of a U.S. recession is higher now than a few months ago.

``Continued dollar weakness probably is still in the cards,'' said Ihab Salib, who helps oversee $3 billion in international bonds in Pittsburgh at Federated Investments Inc. ``I expect another 3 to 5 percent depreciation in the dollar against major currencies including the euro and yen over the next two to three years.''

http://www.bloomberg.com/apps/news?pid=20601101&sid=aZ4vhVzMnz6M&refer=japan

 

[Birchtree]

Japan's nationwide core consumer price index fell for the seventh straight month, falling 0.1% in August from a year earlier. That suggests Japan has yet to escape from deflation. A lack of inflationary pressure will likely cast doubt on the Bank of Japan's decision to raise rates in the comoing months.

 

[James48843]

Yes, that dollar is fluttering down.

You would think that at some point it would hit bottom. But not anytime soon, I fear.

Makes our exports cheaper.

But it's too bad we don't make anything anymore.

 

[Ichiro]

FEDWATCH: THE DISCOUNT WINDOW HAS MOVED
by Anthony M. Cherniawski
The Practical Investor, LLC
September 28, 2007

(( I gotta work today to close the FY07 budget year...On Thursday I will be off to Hawaii to recuperate from all the stress from the year end closing of books. From Ichiro, the Budget Analyst)))

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The original $2 billion borrowed at the Fed discount window has been repaid. Two weeks ago, yet another $7.2 billion borrowed by other banks was outstanding. This week, there are no outstanding loans at the Federal Reserve Discount window. End of story…or is it?

The Federal Reserve has another tool called the Federal Temporary Open Market Operations (FOMO), which is used to influence the Federal Funds market. The purpose of FOMO is, “To implement monetary policy, short-term repurchase and reverse repurchase agreements are used to temporarily affect the size of the Federal Reserve System's portfolio and influence day-to-day trading in the federal funds market.”

The chart at the left tells us about continued “liquidity injections” or repurchase agreements between it and member banks. The Fed may enter a repurchase agreement to provide credit for a bank in exchange for assets that are “repurchased” by the Fed. Likewise, the Fed can enter into reverse repurchase agreements to reduce the amount of credit outstanding.

What this chart may be telling us is that the Federal Reserve Discount Window may have been getting a little too much negative publicity. In order to keep things quieter, the Fed may have simply moved the Discount Window transactions to the Federal Open Market Window, where scrutiny is less pervasive.

http://www.[[financialsense.com/fsu/editorials/cherniawski/2007/0928.html

 

[Ichiro]

STAGFLATION REVISITED
by Peter Schiff
Euro Pacific Capital
September 28, 2007

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Currently, Wall Street is divided into two camps: those who feel the Fed should fight recession, and those who feel it should fight inflation. The former feel that a recession can only be avoided if the Fed rescues the economy from the imploding housing market. To these analysts, inflation is not a problem as it will be contained by slower growth. The other camp maintains that the housing slowdown is not significant enough to derail the otherwise healthy U.S. economy, and should therefore not distract the Fed from its primary mission of fighting inflation. As usual on Wall Street, both camps have it wrong.

Both camps incorrectly assume that inflation (rising prices) and recession are somehow mutually exclusive. By concentrating solely on the demand side of the price equation, Wall Street ignores the impact of supply. In reality, strong growth increases the supply of goods and helps keep a lid on consumer prices. Weak growth reduces the supply of goods and has the opposite effect.

Similar to the 1970s we are experiencing what economists call "stagflation," a period when economic contraction occurs simultaneously with high inflation. Now that Bernanke has pulled the rug out from under the dollar, our currency has become a monetary black hole into which foreign lenders will be increasingly reluctant to trust their savings. The threat of substantial exchange rate losses will compel foreigners to demand greater compensation for loans to Americans. Thus what the Fed giveth in lower short-term rates, foreign creditors will take away in higher long-term rates. Higher long-term interest rates, tighter lending standards, and a reduction in the availability of credit will suppress asset values and consumer spending pushing the economy deeper into recession.

However, as the dollar falls, far fewer foreign products will be imported into the United States, and more domestic products will be exported from the United States. A reduction in the domestic supply of goods will offset the diminished demand brought about by the recession, causing consumer prices to rise. So while Americans will indeed buy fewer products, they will pay much higher prices for those that they do. The bottom line is that consumer prices will be headed much higher, not just despite the recession, but as a direct result of it!

http://www.[[financialsense.com/fsu/editorials/schiff/2007/0928.html

 

[CorMaGa34]

Enjoy your vacation Ichiro! and thanks for your posts!

 

[Ichiro]

AP-Stocks Surge on Hopes for Rate Cut
Monday October 1, 3:27 pm ET
By Joe Bel Bruno, AP Business Writer
Wall Street Surges After Manufacturing Report Raises Prospects for Another Interest Rate Cut

NEW YORK (AP) -- Wall Street shot higher Monday, sending the Dow Jones industrial average above 14,000 for the first time in 2 1/2 months as investors moved back into stocks at the start of the fourth quarter. The blue chip index rose more than 200 points as it surged to a new trading high.

While the beginning of the new quarter was an incentive for institutional investors to buy, the market was also encouraged that the worst might be over from the summer's credit and stock market turmoil. And new economic data might nudge the Federal Reserve toward another interest rate cut at its Oct. 30-31 meeting.

Investors bought financial shares on the belief that the industry has generally weathered the recent credit market upheaval. Both Citigroup and Switzerland's UBS AG issued third-quarter profit warnings, but indicated the current period might see a return to normal earnings levels.

The market grew more optimistic that the Fed might lower rates to boost the economy after a report showed that manufacturing grew in September at the slowest pace in six months. The Institute for Supply Management said its index of manufacturing activity registered at 52.0 in September, below forecasts for a reading of at least 52.5.

"People are getting more confident there is going to be an October rate cut," said John C. Forelli, portfolio manager for Independence Investment. "To some degree, it looks like Citi kitchen-sinked the quarter, and that from here going forward will be calmer. That's underpinning the financials."

Enthusiasm about acquisition activity picked up after Nokia unveiled an $8.1 billion offer to buy navigation-software maker Navteq Corp. The deal was seen as a signal that corporations are feeling comfortable in making big moves despite recent market turbulence.

In late afternoon trading, the Dow rose 212.08, or 1.53 percent, to 14,107.71. The Dow surpassed its closing record of 14,000.41 set in mid-July, and moved into record territory, rising as high as 14,115.51 and eclipsing its previous intraday high of 14,021.95 set July 17.

Broader market indexes also rose sharply. The Standard & Poor's 500 index rose 21.54, or 1.41 percent, to 1,548.29, nearing its all-time trading high of 1,555.90 reached in July. The Nasdaq composite index rose 40.70, or 1.51 percent, to 2,742.20.

http://biz.yahoo.com/ap/071001/wall_street.html?.v=36

 

[Ichiro]

AP-Dollar Rises Against Yen in Asia
Monday October 1, 3:09 am ET
Dollar Rises Against Yen in Asia Amid Yen-Carry Trades

TOKYO (AP) -- The dollar rose against the yen Monday in Asia despite better-than-expected Bank of Japan "tankan" data, as the yen-carry trade emerged again and strengthened the greenback.

The U.S. dollar was trading at 114.98 yen midafternoon, up from 114.74 yen late Friday in New York. The euro rose to US$1.4258 from US$1.4160.


The BOJ's quarterly survey of corporate sentiment for September showed that the survey's index for large manufacturers stood unchanged at 23, beating forecasts for a fall to 21.

http://biz.yahoo.com/ap/071001/asia_dollar.html?.v=1

 

[Ichiro]

Dollar Falls to Record Low Versus Euro as Bets on Fed Cut Mount

By Bo Nielsen and Ye Xie

Oct. 26 (Bloomberg) -- The dollar fell to a record low against the euro on signs climbing oil prices and a slump in housing are hurting U.S. consumer confidence, bolstering the case for the Federal Reserve to cut interest rates again.

The U.S. currency posted a third straight weekly drop versus the euro on speculation the housing recession will erode corporate earnings. Countrywide Financial Corp., the biggest U.S. mortgage lender, reported its first quarterly loss in 25 years as borrowers defaulted.

``The dollar-negative momentum continues to build up,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``We had a string of pretty ugly numbers, both from the real economy side and the financial side. That is weighing on the dollar.''

The dollar traded at an all-tome low of $1.4394 per euro at 4:38 p.m. in New York, from $1.4324 late yesterday. It declined against 15 of the 16 major currencies this week, falling 4.5 percent against South Africa's rand. Ruskin said the dollar may reach $1.50 per euro in March.

The dollar has dropped against all of the 16 most-actively traded currencies this year. The U.S. Dollar Index, measuring its performance against its six major peers, has lost 8 percent in 2007 and set a record low of 76.977 today.

Sales of previously owned homes fell last month by almost twice as much as economists forecast, while the median price dropped the most in almost a year, statistics from the National Association of Realtors showed this week.

``http://www.bloomberg.com/apps/news?pid=20601101&sid=a3nh7CXba5To&refer=japan

 

[Ichiro]

China Will Probably Raise Rates After 11.5% Expansion (Update1)


((Folks, this reminds me when BOJ constantly raised the interest rates during the bubble days in the late 1980s before Japan' stock market crashed....We need to keep an eye on China since we have many inexperienced investors there. ))


By Nipa Piboontanasawat and Patricia Chua

Oct. 26 (Bloomberg) -- China's central bank will probably increase borrowing costs for the sixth time this year to cool the stock market and inflation after the economy grew 11.5 percent in the third quarter.

The benchmark one-year lending rate will increase to 7.56 percent from 7.29 percent, according to 16 of 17 economists surveyed by Bloomberg News. The deposit rate will likely rise to 4.14 percent from 3.87 percent.

Inflation in September was 6.2 percent, more than double the bank's target, and the benchmark stock index has almost quadrupled in the past year. President Hu Jintao is trying to prevent a sudden slowdown that might throw millions out of work, drive up bad loans and undermine Communist Party rule.

``There are still more inflationary risks than deflationary ones,'' said Stephen Green, senior economist at Standard Chartered Bank Plc in Shanghai. ``Now is a good time for the central bank to raise rates again.''

Three economists expect rates to increase as early as today or the weekend after the government released data for the three months ended Sept. 30 yesterday. Economic growth topped 11 percent for a third straight quarter.

http://www.bloomberg.com/apps/news?pid=20601089&sid=a_rdOFgzFnLk&refer=china

 

[Ichiro]

Dollar Falls to Record Low Versus Euro as Bets on Fed Cut Mount

By Bo Nielsen and Ye Xie

Oct. 26 (Bloomberg) -- The dollar fell to a record low against the euro on signs climbing oil prices and a slump in housing are hurting U.S. consumer confidence, bolstering the case for the Federal Reserve to cut interest rates again.

The U.S. currency posted a third straight weekly drop versus the euro on speculation the housing recession will erode corporate earnings. Countrywide Financial Corp., the biggest U.S. mortgage lender, reported its first quarterly loss in 25 years as borrowers defaulted.

``The dollar-negative momentum continues to build up,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``We had a string of pretty ugly numbers, both from the real economy side and the financial side. That is weighing on the dollar.''

http://www.bloomberg.com/apps/news?pid=20601083&sid=a3nh7CXba5To&refer=currency

 

[Ichiro]

Hong Kong Monetary Authority Intervenes to Defend Peg (Update1)

((I think pretty soon other CBs will be entering their currency market to defend their currency since a high currency will be bad for their export market))).

By Aaron Pan
Enlarge Image/Details

Oct. 26 (Bloomberg) -- The Hong Kong Monetary Authority sold its currency for the second time this week to defend a 24- year-old fixed exchange rate, as a record stock rally increased pressure for appreciation.

The city's de facto central bank sold HK$775 million ($100 million) today after the Hong Kong dollar touched HK$7.75 per dollar, the top of its permitted trading range. The HKMA sold the same amount on Oct. 23, the first time it had intervened in the currency market in more than two years.

Foreign investment in the city's stock market and initial public offerings by Chinese companies have pushed the Hong Kong dollar up 0.8 percent against the U.S. dollar since June 30, fueling speculation the government may abandon the link. Hong Kong Chief Executive Donald Tsang and HKMA Chairman Joseph Yam have said this year they are committed to the peg.

http://www.bloomberg.com/apps/news?pid=20601083&sid=ar7bs6LEBF3M&refer=currency

 

[Ichiro]

Japan's Economy Can't Afford 43% Housing Plunge: William Pesek

By William Pesek

Enlarge Image/Details

Oct. 24 (Bloomberg) -- If housing starts fell 43.3 percent in the U.S., you can imagine the machinations it would cause.

Equity markets would plummet, Treasury Secretary Henry Paulson would be sent out to talk up the economy and Ben Bernanke would be hastily arranging conference calls with Federal Reserve officials. The dollar would almost certainly go into freefall.

When housing starts dropped by that amount in Japan, the response was of a completely different nature. The August decline to the lowest in 40 years was taken in stride and, rather than hinting at interest-rate cuts, Bank of Japan officials went on the speaking circuit reminding investors they still hope to raise borrowing costs.

Yes, Japan, as it's often said, is different. Yet the subdued response to recent data -- and Japan's exposure to the U.S. subprime-loan crisis -- may prove to be more about complacency than genuine confidence in the economy.

``We now believe the Japanese economy is already in recession,'' says Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong.

There are reasons to discount Japan's housing slump. One is that building approvals are taking four times as long under new rules, raising concern that sales may drop at construction, property and home-equipment companies. The delay relates to the June 20 introduction of regulations imposed in response to a 2005 scandal involving falsified earthquake-resistance data.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a3EXKmXnxR5o&refer=columnist_pesek

 

[Ichiro]

A DIFFERENT KIND OF RECESSION
by Andy Sutton
My2CentsOnline.com
October 26, 2007

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In a recent interview with Britain's Telegraph newspaper, Jim Rogers, the world-renowned investor declared the United States to be in recession. He didn't stop there. He has taken the next step and rid himself of the downtrodden US Dollar in favor of Chinese Yuan, Japanese Yen and the Swiss Franc. A bold move? A lone voice in a sea of complacency? Not so; Rogers is just the latest in a growing line of credible voices to abandon the US and its struggling currency.

The one thing that is puzzling is why there are so many folks who claim we are in a recession, yet there are even more who say things have never been better. How can there be such a dichotomy when a recession is clearly defined as two consecutive quarters of negative GDP growth? Once again we find ourselves staring the riddle of nominal vs. real directly in the face.

Prior recessions, particularly those in the 20th century have typically been consumer-centered. Inflation led to overproduction and misinterpretation of false demand. Eventually some crisis or trigger would lead to a wholesale reinterpretation of supply and demand dynamics. Consumers would react by retreating. Meaning consumers spent less money, increased savings, and which resulted in a contraction in GDP.

So far in the 21st century, we’ve seen plenty of inflation, but the overproduction this time is largely abroad. Our domination of manufacturing has been over for nearly two decades now. This means that any snap adjustments in demand cause problems abroad with mounting inventories as opposed to wreaking havoc on our economy.

Additionally, what has really served to distort things is the nearly direct manner in which money has been placed into the hands of the consumer. Rising home prices were the perfect vehicle for creating additional (albeit fictitious) credit. Most people view their home as their biggest asset even though they may actually own a very small percentage of it. This illusion of wealth made many consumers willing to take on additional debt that was poured into the economy vis a vis consumer spending. Total consumer debt has exploded in the US since the beginning of the 21st century:

http://www.[[financialsense.com/fsu/editorials/sutton/2007/1026.html

 

[Ichiro]

THE UNWINDING
by David Yu
Chartmentary.com
October 23, 2007


When the Tokyo Nikkei 225 Index dropped more than 400 points on Tuesday and Wednesday last week, the Japanese yen appeared ready to challenge the critical resistance of 86 (0.0086 per US Dollar). I alerted my readers, in my Wednesday's Follow-Up to last Sunday's Carry Trade Challenges, of a possible global selloff when the yen breaks through 86. The confluence of the Japanese yen pushing towards this critical resistance and the Dollar to yen exchange rate testing the vulnerable 38.2% Fibonacci Retracement support of 116.34 indicated a probable massive unwinding of the yen carry trade last week.

The Japanese yen had since jumped 2.2% to 0.00879 per US Dollar, and the Dollar had declined to below 114 per yen. And, the markets around the world sold off on Friday. The Dow Jones World Index dropped 1.65% on Friday with, most notably, 2 of the Dow Jones China indexes plunged more than 3% each. The selloff back in the U.S. slashed 366.94 points, or 2.64%, off the Dow Jones Industrial Average, which had turned back the clock and brought us right back to 9/18/2007, the day the Fed cut 0.50% off the Fed Fund's rate.

So, here we are. After all the re-inflation efforts by the Fed, we're now 217 points below the 9/18/2007 DJIA closing price. And, we're stuck with the Dollar at all time low and the oil price at all time high. It seems that the Fed's so called brilliant "surgical strike" had wreaked havoc for the Main Street and done nothing to save Wall Street from the inevitable. Consumers are now paying 44% more for eggs and 21% more for milk over the past 12 months. The USDA's thrifty food plan costs for a family of 4 (with children 3-5 years old) showed an increase of 5.54% in August, from the same month a year ago. And, that increase was just for food. August was also the month before the Dollar began to fall off the cliff. The bottom 50% in the U.S. are already fighting over the remaining 12% income. The last things they need are higher food and energy prices.

O.K. moving forward... The SPX (S&P 500 Index) lost 2.56% on Friday. 1.50% of the loss came in the afternoon session. As bad as that was, the money flow in the afternoon session had actually improved, except for the Consumer Goods and the Tech sectors (see Chart 1). This divergence indicates investors, who believed in buying on the dips, might've come back to do so in the afternoon.

http://www.[[financialsense.com/fsu/editorials/yu/2007/1023.html

 

[Silverbird]

A DIFFERENT KIND OF RECESSION
In a recent interview with Britain's Telegraph newspaper, Jim Rogers, the world-renowned investor declared the United States to be in recession. He didn't stop there. He has taken the next step and rid himself of the downtrodden US Dollar in favor of Chinese Yuan, Japanese Yen and the Swiss Franc. http://www.[[financialsense.com/fsu/editorials/sutton/2007/1026.html

How is Jim Rogers acquiring Chinese Yuan when its not a freely traded currency? Or am I behind the times?

 

[Ichiro]

Eventually the Chinese Yuan will be a freely convertible currency if they are to maintain a huge trade surplus with the other countries. But, It will take time. They are slowing changing but at a slower pace. I do hope that the different classes of Chinese stocks disappear in the near future...

Silverbird, what do you think?

 

[Ichiro]

AP-Housing Slump Likely to Worsen
Friday October 26, 4:27 pm ET
By Martin Crutsinger, AP Economics Writer
Current Housing Slump Expected to Worsen Still Before Possible Turn Around

WASHINGTON (AP) -- The current housing slump, which began in late 2005, probably has another year to go before things turn around. Before it is over, home prices -- which had soared during the boom years -- will probably have fallen by the largest amount of any downturn in the post World War II period.

The problems in housing have been a serious drag on the overall economy -- slashing more than a full percentage point off growth in some quarters. And those adverse effects will get worse in coming months, many private economists believe, reflecting the fallout from the severe credit crunch that hit in August.

The betting is that the overall economy will be able to avoid a recession, but it will be a close call with the point of maximum danger still ahead.

"I think the housing market has got another year of very weak sales, falling construction and lower home prices. And all of that assumes that the economy holds together reasonably well and we don't have a recession," said Mark Zandi, chief economist at Moody's Economy.com.

http://biz.yahoo.com/ap/071026/housing_prospects.html?.v=7

 

[Ichiro]

Daily FX-US Dollar At Record Low, Oil At Record High - Will These Extremes Moderate Next Week?

Friday October 26, 6:03 pm ET

By Terri Belkas, Currency Analyst strategist@dailyfx.com

The US dollar fell to yet another record low against the Euro on Friday as traders remain overwhelmingly bearish on the greenback. However, the markets have remained bullish on nearly everything else, including commodities. In fact, oil continued to trade near record highs above $90/bbl on Friday amidst escalating tensions between the US and Iran as well as Turkish warnings of a broader assault on Kurdish militants in Iraq.

The US dollar will find little support given the sharp rally in oil, and economic data isn’t helping the case either. The University of Michigan Consumer Confidence survey exacerbated fears of a consumer-led recession in the US, as the October reading was unexpectedly revised down to 80.9 – the lowest since June 2006. Stock market tumbles undoubtedly played a hand in the deterioration in sentiment, and further market routs will only leave consumers more pessimistic. Will the dollar’s woes ever end? Within the next few days: probably not. Indeed, the currency faces major event risk this coming week from the FOMC rate decision, the release of Q3 GDP, and non-farm payrolls.

http://biz.yahoo.com/fxcm/071026/1193436196807.html?.v=1

 

[Ichiro]

AP-Buffett Sees Subprime Woes Lingering
Thursday October 25, 12:58 pm ET

By Kelly Olsen, AP Business Writer

Buffett Projects Problems in US Subprime Market Will Affect Consumers for Up to 2 Years

DAEGU, South Korea (AP) -- American billionaire investor Warren Buffett said Thursday problems in the U.S. subprime mortgage market will likely weigh on consumers for up to two years, but the U.S. economy will weather the storm.

The subprime crisis "is having an impact," the chairman and chief executive of Berkshire Hathaway Inc. said on his first visit to South Korea. "It will have more of an impact."

Rising default rates among U.S. mortgage holders with poor credit histories have rattled global credit, stock and currency markets since August and raised concerns about a possible recession in the U.S. economy, a major export market for Asian companies.

"In the next 6 months, one year, two years the problems in the mortgage market can cause a lot of problems with consumers and hurt buying power in the United States," he said at a press conference after arriving earlier in the day from China on his private jet. Buffet rarely travels overseas.

However, the U.S. economy has often had to face various difficulties and the present was no exception, Buffett said.

"Overall the economy will make progress," he said.

Buffett came to Daegu, located about 300 kilometers (185 miles) southeast of Seoul, to inspect TaeguTec Ltd., which is owned by privately held Iscar Metalworking Cos., the Israeli industrial tool manufacturer that his company purchased 80 percent of last year for $4 billion in its first overseas acquisition.

Buffett, who received a hero's welcome from TaeguTec employees, also expressed pessimism on the U.S. dollar.

"We still are negative on the dollar relative to most major currencies," he said.

http://biz.yahoo.com/ap/071025/skorea_warren_buffett.html?.v=13