Asian News

[Ichiro]

11feb-G-7 Urges Markets to Note Japan `On Track,' Omits Yen (Update2)

By Simon Kennedy and Rainer Buergin

Feb. 10 (Bloomberg) -- Finance ministers and central bankers from the Group of Seven nations urged investors to recognize that Japan's economic recovery is ``on track,'' stopping short of labelling the yen's decline as a threat to global growth.

At a meeting in Essen, Germany, the officials bridged a divide between Europeans who want the yen to strengthen, and the U.S. and Japanese who say investors should be free to set currency values without government interference.

With the yen trading near the record low reached against the euro last month, European officials signaled they'll keep sounding the alarm to speculators that the currency is out of kilter with Japan's expansion.

``It's a compromise,'' said Julian Callow, chief European economist at Barclays Capital in London and a former economist at the Bank of England. ``There are different interests at work.''

European Central Bank President Jean-Claude Trichet said the G-7 wanted to warn financial markets against making ``one-way bets,'' a reference to so-called carry trades, in which investors take advantage of Japan's low interest rates to borrow in yen and purchase higher-yielding assets in other markets.

Low Japanese Rates

Such trades have helped weaken the yen, given the Bank of Japan's benchmark rate of 0.25 percent lags behind the U.S. Federal Reserve's 5.25 percent and the ECB's 3.5 percent. Barclays estimates carry trades are at their most extreme since 1998, when Russia's economic crisis prompted traders to unwind their bets so rapidly that the yen soared 20 percent. Hedge-fund Long-Term Capital Management LP collapsed in the market turmoil.

These trades are ``not appropriate'' in current circumstances, Trichet told reporters in Essen.

In a review of the world economy, the G-7 said its performance remains ``favorable'' with U.S. growth becoming more sustainable, the European economy experiencing an ``increasingly broad-based upswing'' and Japan's recovery expected to continue.

``We are confident that the implications of these developments will be recognized by market participants and will be incorporated in their assessments of risks,'' the statement said.

info:

http://www.bloomberg.com/apps/news?pid=20601087&sid=al29wy72djiw&refer=home

 

[Ichiro]

11feb-IRRATIONAL EXUBERANCE IN CHINA
by Peter Schiff
Euro Pacific Capital
February 9, 2007

Recently voiced concerns from the Chinese government that their surging domestic stock market was crossing into bubble territory helped to set off last week’s sharp decline, including a single day plunge of 6.5% (the equivalent of more than 800 points on the Dow Jones.) While a bubble may indeed be forming in Chinese stocks, my guess is that there is room for a lot more air before it finally pops.

In fact, the recent warnings in China are reminiscent of Alan Greenspan’s infamous “irrational exuberance” speech in December of 1996. As history has shown, the Chairman was correct (perhaps for the only time in his tenure), but Greenspan failed to comprehend just how much irrationality the markets would bear before they finally gave in. In fact, after nearly four more years of unprecedented market exuberance, Greenspan himself took the “new era” bait hook, line and sinker. Surprisingly, he became one of the market’s greatest cheerleaders. My guess is that before a similar peak is reached in China, officials there will be snared on the same line.

Just as the bubble in U.S. stocks resulted from the inflationary monetary policies of the Fed, the bubble in Chinese shares is being created by the inflationary policies of the Bank of China. However, as Chinese authorities are creating yuan mainly to buy U.S. dollars, the Fed is in effect the driving force behind this bubble as well. As we export our inflation to Asia, the Chinese stock market bubble may be one of the few things in Asia that was actually “Made in the U.S.A.”

One major difference between the rise in the Chinese market in 2007 and the U.S. in 1997 is that much of the rise in China is actually justified by the fundamentals. Unlike the U.S., not all of the liquidity is the result of inflation. Much of it comes from the savings of millions of under-consuming Chinese workers, whose combined sacrifice has enabled business to finance capital investment that has led to enhanced productivity, greater earnings, and higher share prices. Liquidity produced by savings is genuine and the fact that it fuels legitimate investment is one of its primary benefits.

info:http://www.[[financialsense.com/fsu/editorials/schiff/2007/0209.html

 

[Ichiro]

12feb-G-7 Officials Urge Investors to Avoid `One-Way' Bets (Update1)

By Simon Kennedy and John Fraher

Feb. 12 (Bloomberg) -- Finance ministers and central bankers from the Group of Seven nations urged investors to recognize Japan's economic recovery may be stronger than they think, warning against making ``one-way bets'' against the yen.

The trades are ``not appropriate,'' European Central Bank President Jean-Claude Trichet said Feb. 10 after a G-7 meeting in Essen, Germany. ``We want the market to be aware of the risk in one-way bets, in particular on the foreign-exchange markets.''

Japan's currency has slumped to a record low against the euro, raising concern among Europeans their exports would become less competitive. The G-7 said in its concluding statement that Japan's economy will extend its longest expansion since World War II and it was confident this ``will be incorporated'' by investors.

The G-7 still refused to specifically identify the currency as a problem in its statement and U.S. Treasury Secretary Henry Paulson declined to join Europeans in stating that the yen's slide was out of kilter with Japan's expansion. He reiterated after the meeting that the yen is being freely set by the market.

That means investors may test policy makers' resolve to back their rhetoric with higher Japanese interest rates or yen purchases, analysts said.

`Suitably Vague'

``The statement implies that something is coming if the yen keeps falling, but it is suitably vague,'' said Jim O'Neill, chief economist in London at Goldman Sachs Group Inc. ``This isn't enough yet for markets to start buying the yen.''

info:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aD_Q3Wpfu.s0&refer=home

 

[Ichiro]

12feb-European Stocks Drop, Led by Lafarge, Hanson on Rate Concerns

By Sarah Thompson

Feb. 12 (Bloomberg) -- European stocks dropped as concern that borrowing costs will rise in the U.S. pushed construction shares down from a record and a slide in oil prices sent energy companies lower.

Lafarge SA, the world's biggest cement maker, and U.K. building materials company Hanson Plc had the steepest losses in at least two weeks on concern higher U.S. interest rates will cut sales in their largest overseas market. Total SA fell after oil slipped from a six-week high.

``There is generally poor sentiment in markets,'' said Kevin Lyne-Smith, an investment consultant at Julius Baer Holding AG's private banking division in Switzerland, which manages the equivalent of $100 billion. ``U.S. interest rates don't look like declining in the near-term.''

All but two of the Stoxx 600's industry groups dropped, paring the benchmark's 3.6 percent advance this year. Stocks have risen to a six-year high in 2007 on speculation earnings growth and takeovers will accelerate.

The Dow Jones Stoxx 600 Index slid 0.4 percent to 378.84 as of 12:53 p.m. in London. The Stoxx 50 dropped 0.3 percent and the Euro Stoxx 50, a measure for the 13 nations sharing the euro, lost 0.6 percent.

Earnings growth for companies in the Stoxx 600 will likely slow to 8.9 percent in 2007, according to estimates compiled by FactSet Research Systems Inc. in London. That compares with a forecast of 14 percent last year.

STMicroelectronics NV, Europe's largest chipmaker, led technology shares lower after Micron Technology Inc. of the U.S. said a collapse in the price of its chips had created a ``horrible situation'' for the company.

for info:

http://www.bloomberg.com/apps/news?pid=20601087&sid=akaSDk5Xn8ZU&refer=home

 

[Ichiro]

12feb-U.S. Stock-Index Futures Are Little Changed; Caterpillar Rises

By Sarah Jones

Feb. 12 (Bloomberg) -- U.S. stock-index futures were little changed before a retail sales report and testimony from Federal Reserve Chairman Ben S. Bernanke that may give clues on the outlook for economic growth and interest rates.

Caterpillar Inc., the world's largest maker of earth moving equipment, climbed in Europe. Wal-Mart Stores Inc., the world's biggest retailer, declined.

Exxon Mobil Corp., the world's largest oil company, fell as crude oil prices retreated. Novelis Inc. jumped after Hindalco Industries Ltd., India's biggest aluminum producer, agreed to buy the Atlanta-based company.

``Growth has been stronger than what people have been expecting so the markets will be waiting and watching for data to come through,'' said Alison Sinclair, a fund manager at Glasgow- based Resolution Asset Management, which oversees the equivalent of about $71 billion of assets. ``Everyone wants to hear what Bernanke will say.''

Futures on the Standard & Poor's 500 Index expiring in March decreased 1.40 to 1441.50 at 11:24 a.m. in London. Dow Jones Industrial Average futures slid 9 to 12,605. Nasdaq-100 Index futures decreased 1.75 to 1790.75.

U.S. stocks dropped last week, led by banks after Fed Bank of St. Louis President William Poole noted defaults in loans to risky borrowers and signaled interest rates may rise. Homebuilders fell for five straight days.

Retail Sales

Investors are looking to a Feb. 14 Commerce Department report on January retail sales, which will probably show an increase of 0.3 percent, according to the median estimate in a Bloomberg News survey of economists.

The gain is less than the 0.9 percent jump in December, partly a reflection of lower fuel prices that limited service station receipts.

info:http://www.bloomberg.com/apps/news?pid=20601084&sid=aF_LxWYlcBS8&refer=stocks

 

[Ichiro]

14feb-Asian Stocks Advance to Record on North Korea Nuclear Agreement

By Darren Boey

Feb. 14 (Bloomberg) -- Asian stocks rose to a record after North Korea agreed to end its nuclear-weapons program in exchange for aid. Samsung Electronics Co., the world's largest chipmaker, had its biggest advance in almost two weeks.

``The agreement relieves some of the uneasiness about the political situation,'' said Michiya Tomita, who oversees about $264 million for Mitsubishi UFJ Asset Management Co. in Tokyo.

BHP Billiton and Nippon Mining Holdings Inc. led gains by commodity shares as prices of copper and oil rallied. Sony Corp. jumped after Credit Suisse Group raised its rating on Japan's consumer electronics industry.

The Morgan Stanley Capital International Asia-Pacific Index rose 0.9 percent to 144.57 at 7 p.m. in Tokyo, an all-time high. Nine of the measure's 10 industry groups gained. Japan's Nikkei 225 Stock Average added 0.7 percent to 17,752.64, while South Korea's Kospi index rose 1.3 percent.

China's stocks climbed to a record. Citic Securities Co. advanced as a government report showing slowing inflation damped speculation the central bank will increase interest rates.

DBS Group Holdings Ltd. led gains in Singapore after the government increased its economic growth forecast. Markets around the region rose, except India, Pakistan and New Zealand.

Samsung, the most valuable company on the Kospi index, climbed 0.9 percent to 567,000 won. That was its biggest advance since Feb. 2. Kookmin Bank, South Korea's largest lender, rose 1.9 percent to 84,900 won.

North Korea agreed late yesterday with South Korea, the U.S., China, Japan and Russia to shut down its Yongbyon nuclear reactor within 60 days in exchange for energy aid. Implementation of the agreement would begin a month from now, said Christopher Hill, chief negotiator for the U.S.

info:
http://www.bloomberg.com/apps/news?pid=20601080&sid=af8jVjrNbLCQ&refer=asia

 

[Ichiro]

14feb-Snow Says China Needs to Open Markets to Create Jobs (Update3)

By Bei Hu and Catherine Yang

Feb. 14 (Bloomberg) -- Cerberus Capital Management LP Chairman and former U.S. Treasury Secretary John Snow said China needs to open the country's market for overseas investors to create the 25 million new jobs a year the nation needs.

New York-based Cerberus is opening a Hong Kong office to expand into China, the world's fastest-growing major economy, Snow said. Capital and expertise from overseas investors could improve the efficiency of the nation's companies and boost jobs, a key focus of the leadership in Beijing, Snow said.

``When you need to create 25 million new jobs every year, you have a heavy undertaking,'' he said in an interview in Hong Kong today. ``As treasury secretary, you wake up every morning thinking about jobs.''

Cerberus and rivals such as Blackstone Group LP are bulking up in China, even after the nation last year tightened rules on buyouts. Blackstone, seeking its first buyout in the country, last month hired former Hong Kong Financial Secretary Antony Leung to lead its foray into the nation.

``The best opportunities are obviously in places where you have sustainable growth, like China, like India,'' Snow said. ``But private equity will also go to places where it's welcomed. It will go to places where the rules are clear, and the laws are enforced, where there's a good judicial system, where there's a process for arbitrating disputes and so on.''

info:http://www.bloomberg.com/apps/news?pid=20601080&sid=aUhW.D_2YG.g&refer=asia

 

[Ichiro]

14feb-Euro Gains After Liebscher Says ECB Is Worried About Inflation

By Agnes Lovasz and Stanley White

Feb. 14 (Bloomberg) -- The euro rose to the highest in almost six weeks against the dollar after European Central Bank Governing Council member Klaus Liebscher said rate setters are concerned inflation will accelerate.

The currency rose the most in three weeks versus the dollar yesterday after an economic report showed growth in the 13-nation euro region accelerated in 2006 to the fastest in six years. Faster growth is bolstering odds that the central bank will add to six rate increases since December 2005. Liebscher told the Austrian daily Kurier that inflation is showing ``upside risks.''

``The risk is actually greater that the euro strengthens,'' said London-based Adam Myers, currency strategist at UBS AG, the world's second-largest foreign exchange dealer. ``We're forecasting 75 basis points in tightening this year. The risk is perhaps we get more.''

The euro rose to $1.3085 at 7:46 a.m. in New York from $1.3039 late yesterday. It touched $1.31 earlier. Against the yen, it climbed to 158.57 from 157.98, close to a record-high 158.99 reached on Feb. 12.

Losses in the dollar may be limited before a speech today by Federal Reserve Chairman Ben S. Bernanke that may signal the central bank has no plan to lower interest rates.

The U.S. currency may also draw support from a government report that will probably show retail sales rose for a third straight month in January, as Americans redeemed holiday gift cards and took advantage of lower fuel prices.

Sales increased 0.3 percent, according to a Bloomberg News survey, after a 0.9 percent jump in December, which was fueled by holiday-season purchases.

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

 

[Ichiro]

14feb-Carry Trades to Unwind as U.S. Slows, Dresdner Says (Update3)

By Stanley White

Feb. 14 (Bloomberg) -- The yen will rise to a 12-year high and the Swiss franc will climb to a record by year-end as a slowdown in the U.S. economy prompts investors to unwind carry trades, Dresdner Kleinwort said.

Relatively low interest rates in Japan and Switzerland encouraged investors to borrow the currencies to fund purchases of higher-yielding assets, known as carry trades. An index measuring investors' appetite for riskier markets tends to rise when the U.S. economy grows and falls when it slows, according to historical data from Dresdner Kleinwort.

``There's a big probability of carry trades unwinding and I'm not talking solely about the yen,'' Markus Krygier, London- based head of fixed-income and foreign-exchange strategy, told clients last week in Tokyo. ``A slowdown in U.S. growth will cause an increase in risk aversion. These trades will diminish over the course of this year.''

Against the dollar, the yen traded at 121.29 at 6 a.m. in London from 121.16 late yesterday in New York, and fell to a four-year low last month. The Swiss franc was little changed at 1.2473, down from an almost three-month low of 1.2572 in January.

Japan's currency will strengthen to 100 per dollar and the Swiss franc to 1.08 by year-end, according to Dresdner Kleinwort.

The Bank of Japan's benchmark rate is 0.25 percent, the lowest in the industrialized world. The Swiss National Bank's rate is 2 percent, below the Federal Reserve's 5.25 percent and the European Central Bank's 3.50 percent.

ifo:

http://www.bloomberg.com/apps/news?pid=20601083&sid=aSdVSKC57qTk&refer=currency

 

[Ichiro]

14feb-Treasuries Rise First Time in Four Days Before Bernanke Comment

By Anchalee Worrachate and Kevin Lim

Feb. 14 (Bloomberg) -- Treasuries rose for the first time in four days before Federal Reserve Chairman Ben S. Bernanke's testimony to Congress, in which he may say the economy is expanding at a moderate pace and inflation concerns remain.

The Fed chairman will present the central bank's forecast for economic growth, employment and inflation to the Senate Banking Committee today and the House Financial Services Committee tomorrow. Ten-year bonds dropped for the past three days on speculation Bernanke will douse expectations for an interest-rate cut any time soon.

``I suspect Bernanke is going to continue to sound caution on inflation, even though price pressures have cooled as risks are still there,'' said Douglas Roberts, director of investment in Edinburgh at Standard Life Investments. ``The Fed may be on hold for a while, although I still believe they will be able to cut interest rates later in the year.''

The yield on the benchmark 10-year note fell 1 basis point to 4.80 percent at 7:54 a.m. in New York, according to New York- based bond broker Cantor Fitzgerald LP. The price of the 4 5/8 percent security due February 2017 rose 3/32 or 94 cents per $1,000 face amount to 98 20/32. Yields move inversely to prices.

Fed regional bank presidents William Poole, Sandra Pianalto and Richard Fisher last week said rising prices of goods and services are a concern and mentioned the possibility of an increase in borrowing costs.

Mortgage applications in the U.S. rebounded last week, as refinancing rose to the highest level in a month, an industry report showed today.

info:

http://www.bloomberg.com/apps/news?pid=20601009&sid=a583IFwFBADc&refer=bond

 

[Ichiro]

15feb- AP-Fed Chairman Optimistic About Economy
Wednesday February 14, 10:12 am ET
By Jeannine Aversa, AP Economics Writer
Fed Chairman Remains Optimistic About Economy

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Wednesday that the economy should grow modestly this year despite lingering pain from a housing slump and he stuck to the Fed's forecast that inflation will continue to ebb.

ADVERTISEMENT
click here
Still, Bernanke wasn't prepared to declare victory and close the door on the possibility of further interest rate increases. Even with recent improvements in "core" or underlying inflation, the situation remains "somewhat elevated," he said. Core inflation excludes the more volatile categories of energy and food.

Bernanke, delivering the Fed's first economic report for 2007 to Capitol Hill, offered a mostly upbeat assessment of the economy's outlook. Besides improvements on the inflation front, the Fed chief also cited some signs of stabilization in the ailing housing market.

"Overall, the U.S. economy seems likely to expand at a moderate pace this year and next, with growth strengthening somewhat as the drag from housing diminishes," the Fed chief said in prepared remarks to the Senate Banking Committee.

Currently, interest rates are at a level that is "likely to foster sustainable economic growth and a gradual ebbing of core inflation," he added.

 

[Ichiro]

15feb- AP-Stocks Rise on Fed Chief Testimony
Wednesday February 14, 10:14 am ET
By Tim Paradis, AP Business Writer
Stocks Advance After Fed's Bernanke's Says Economy Growing, Inflation Will Ebb

NEW YORK (AP) -- Stocks rose after Federal Reserve Chairman Ben Bernanke told a Senate panel on Wednesday the economy should grow modestly this year despite a drag from the housing slowdown and that he expects inflation will continue to ease.


Also Wednesday, the Commerce Department said retail sales were essentially flat in January amid slumping automobile sales; it was the weakest showing in three months and below what Wall Street had forecast.

Coca-Cola Co. turned in a lower profit and DaimlerChrysler AG pleased investors by saying about 13,000 Chrysler workers would lose their jobs under a plan to restore the U.S. operations' profitability by next year.

The flurry of news follows a day in which stocks showed a sharp climb -- the Dow Jones industrial average gained 102 points -- after news that two companies were vying for aluminum producer Alcoa Inc. helped drive a notion that Wall Street would see an uptick in acquisition activity.

http://biz.yahoo.com/ap/070214/wall_street.html?.v=7

 

[Ichiro]

15feb-Japan's Economy Grows 4.8%, Fastest in Almost 3 Years (Update4)

By Lily Nonomiya

Feb. 15 (Bloomberg) -- Japan's economy grew at the fastest pace in almost three years as consumer spending rebounded and business investment jumped. The yen rose on speculation the central bank may raise interest rates.

Gross domestic product in the world's second-largest economy expanded at an annual 4.8 percent pace in the three months ended Dec. 31, the Cabinet Office said in Tokyo today, exceeding the 3.8 percent median estimate of 38 economists surveyed by Bloomberg News. Third-quarter growth was revised to 0.3 percent from 0.8 percent.

The chance the central bank will raise rates next week rose to 54 percent, from 40 percent late yesterday, according to calculations by Credit Suisse Group based on interest-payment trading. Bank of Japan Governor Toshihiko Fukui cited weak consumer spending and slow inflation as reasons his policy board kept borrowing costs at 0.25 percent at its last two meetings.

``The report increases the possibility the central bank will raise rates,'' said Satoshi Kon, who helps manage the equivalent of $19 billion in Tokyo at Pension Fund Association. ``Consumption was stronger than many of us anticipated.''

The yen rose to 119.88 against the dollar as of 11:10 a.m. in Tokyo from 120.72 before the report was published. Yields on the benchmark 10-year bond rose 1 basis points to 1.735 percent. The Nikkei 225 Stock Average climbed 0.5 percent as shares of Takashimaya Co., the nation's largest department store, jumped as much as 8.8 percent.

info:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aYb1F4Eep4fY&refer=worldwide

 

[Ichiro]

15feb-Yen Rises to One-Month High as Growth Boosts Case for Rate Rise

By Ron Harui and Stanley White

Feb. 15 (Bloomberg) -- The yen rose beyond 120 against the dollar for the first time in a month after a government report showed faster-than-expected economic growth, bolstering the Bank of Japan's case for an interest-rate increase next week.

The currency gained the most since Feb. 5 versus the euro as gross domestic product grew at a 4.8 percent annual rate in the fourth quarter. The yen surged against the New Zealand and Australian dollars on speculation investors are reversing carry trades, where they borrow in Japan to buy higher-yielding assets.

``GDP data were better than expected, raising expectations of a rate hike and prompting yen-buying,'' said Tomoko Fujii, a senior economist and strategist at Bank of America N.A. in Tokyo. ``The Bank of Japan will raise rates on Feb. 21.''

The yen advanced to 119.96 against the dollar as of 10:57 a.m. in Tokyo, after reaching 119.82, the strongest since Jan. 11, from 120.79 late in New York yesterday. It also climbed to 157.62 per euro from 158.60. It may rise to 115 per dollar by year-end, Fujii said.

The currency may extend gains should it break 119.75, a key technical level, said Jan Lambregts, head of research at Rabobank International in Hong Kong. A breach of the 50-day moving average may prompt a rally to 118 in coming days, he said. Traders use moving averages to identify levels of support, where they expect buying, or resistance, where they expect selling.

``The economy is robust, including consumer spending,'' said Seiichiro Muta, director of foreign exchange at UBS AG in Tokyo. ``Data point to a rate hike next week.'' The yen may rise to 119.00 against the dollar and 156.10 per euro today, he said.

BOJ Meeting

Options volatility on the yen against the dollar rose to a seven-month high as traders stepped up purchases of yen calls, which grant the right to buy Japan's currency.

Implied volatility on one-week options on the yen versus the dollar rose to 9.9 percent today from 8.5 percent in New York yesterday. Higher volatility may discourage carry trades, where investors borrow yen to buy higher-yielding currencies, as it implies greater exchange-rate fluctuation risk.

info:

http://www.bloomberg.com/apps/news?pid=20601087&sid=awaYQDNeA6mI&refer=worldwide

 

[Ichiro]

15feb-Asian Stocks Climb to Record on Japan's GDP, Bernanke Comments

By Stuart Kelly

Feb. 15 (Bloomberg) -- Asian stocks climbed to a record after Japan's economy grew at the fastest pace in three years and the U.S. Federal Reserve chairman damped concern interest rates will rise in the region's biggest export market.

Japan's Seven & I Holdings Co., the world's largest retailer by outlets, had its biggest jump in one year, while Samsung Electronics Co., South Korea's biggest exporter, advanced the most in four weeks.

``Most of the surprise in the GDP figure was the very strong private consumption,'' said Yuuki Sakurai, who helps manage about $48 billion in assets at Tokyo-based Fukoku Mutual Life Insurance Co. ``We'd had a very volatile market and that was because of the fear of inflation in the U.S.''

The Morgan Stanley Capital International Asia-Pacific Index added 0.9 percent to 146.04 as of 11:30 a.m. in Tokyo, an all- time high. Nine of the measure's 10 industry groups rallied. Stock markets advanced around the region.

Japan's Nikkei 225 Stock Average rose 0.5 percent to 17,844.97. Gross domestic product expanded at an annual 4.8 percent pace in the three months ended Dec. 31, the Cabinet Office said before the market opened. That was the fastest pace since March 2004.

Benchmarks in Australia and climbed to all-time highs. Markets in Taiwan were closed for a holiday.

The Dow Jones Industrial Average rose 0.7 percent to a record yesterday after Federal Reserve Chairman Ben S. Bernanke said inflation may be slowing. Interest-rate futures showed traders see a 20 percent chance the Fed will cut borrowing costs by August, up from 7 percent yesterday.

info:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJYUR8h8qrN0&refer=worldwide

 

[Ichiro]

15feb-Yen Volatility Rises on Quickening Japanese Growth (Update1)

By Liz Capo McCormick

Feb. 15 (Bloomberg) -- Volatility on options on the yen against the dollar rose the most in three weeks as a report showed Japan's economy accelerated last quarter.

Traders stepped up purchases of yen calls, which are options granting the right to buy a currency, amid speculation economic growth will make a Bank of Japan interest-rate increase more likely next week. Higher rates may lure investors to yen assets.

A stronger economy ``will firm up confidence for the Bank of Japan and lead to a rate hike next week or by next month,'' said Tom Levinson, a foreign-exchange strategist in London at ING Bank, the largest Dutch financial-services company.

Implied volatility on one-week options on the yen versus the dollar rose to 8.4 percent in New York yesterday, from 6.9 percent on Feb. 13, and approached a six-month high of 10.06 percent set Feb. 6. It was the biggest jump in volatility since Jan. 25.

The yen rose for a third day against the dollar, trading at 120.27 as of 9:30 a.m. in Tokyo, from 120.79 late in New York.

info:

http://www.bloomberg.com/apps/news?pid=20601083&sid=a9K2HjBfxI3M&refer=currency

 

[Ichiro]

23feb-Matthews International Capital Management---The Return of the Japanese Investor

David Ishibashi, Portfolio Manager
Taizo Ishida, Portfolio Manager
Matthews International Capital Management, LLC

Since the end of the great asset bubble of the late 1980s, the Japanese investor, has, at first glance, been conspicuously absent from the investment world. For the better part of a generation, the common view of the average Mr. or Mrs. Watanabe was that they just squirreled everything away, either in the kimono drawer or in the local bank, yielding 0.1% per year. Upon closer inspection, reality is different from appearance. The surface may look calm, but underneath, the currents are shifting; the Japanese household asset mix is dramatically changing and is much different from perception.

With the dawn of the 1990s, the average Japanese suffered a rude awakening. He was no longer rich. In the next ten years, he saw his home fall up to 70% from its highs, and equities were down 80% from 1989. From 1990 up until 2003, the best place for your money, the smartest place for your money and the safest place for your money was the bank, and better yet the Japanese Postal Savings Plan. Rates on passbook accounts fell to as low as 0.1%, and you were happy to take it. Risk was to be avoided.

With the advent of Japan’s financial system reform known as the "Big Bang" in 1998, financial institutions were deregulated and there was a small revolution in the financial products offered to the investing public. Gradually, new products offered an alternative to the savings account. And just as gradually, there was a shift from asset allocation to risk allocation. The hunt for return, after more than a decade, was on. Beginning in 2003-2004, investors looked for higher yields. They found it primarily in foreign sovereign funds, yielding as much as 12%. The funds invested in government bond funds of high-yielding countries such as Australia, New Zealand and Iceland. The funds also had the added attractiveness of paying dividends monthly, which was ideal for individuals seeking immediate return. About two years ago, money began to flow into Japanese Real Estate Investment Trusts (JREITS). Initially, cap rates (the return from rents generated over the cost of purchase) were as high as 6%. But real estate began to rise as demand for office space outstripped the creation of new buildings. Often new buildings were pre-leased to near 100% occupancy before ground was even broken, or the building itself was sold upon completion to a JREIT, bringing the most modern and profitable buildings in Japan into the public domain. Last year, new funds began to flow into emerging market equities, primarily into China and India funds. As Japan began to emerge from a recession, the increased commerce between the Asian continent and Japan attracted investors. China and India funds began to be actively marketed and actively bought. Japanese investors were beginning to come out of their cocoons, putting their money to work.

In 2006, Japanese investors bought a record ¥12.8 trillion (approximately $108 billion) worth of stock investment trust funds, pushing their total balances at year-end to ¥55.65 trillion, a 30% increase from the year before. That is still only 3.7% of the total financial assets held by all Japanese, but still an encouraging sign of a paradigm shift from "savings to investment". ¥5 trillion flowed out of savings accounts last year, as banks proactively encouraged their customers to invest in other investment vehicles. Unlike traditional brokerage houses that have relied on door-to-door sales tactics, people generally trust banks and listen to soft-spoken female bank clerks. The strategy is working, as banks now account for more than 50% of sales in total stock investment trust funds, up from 10% just five years ago. In addition, postal savings banks started offering the same type of service in October 2005 and grew assets quickly to ¥360 billion at the end of September 2006. They have a goal of ¥4.9 trillion by March 2009 as they introduce more products and distribute funds through more network branch offices. The postal savings banks began selling funds at only 575 branch offices. They are scheduled to sell at about 1,000 more branches in 2007 - still a small fraction of the 20,000 nationwide. On top of this, call centers have been set up in January and internet service will start in May. Given deposits of ¥200 trillion in postal savings, the estimate could easily go higher.

 

[Ichiro]

25feb-FOREX-Dollar falls vs yen and euro ahead of weekend
Fri Feb 23, 2007 4:23pm ET19


By Vivianne Rodrigues

NEW YORK, Feb 23 (Reuters) - The dollar weakened against the euro and yen on Friday, with German economic data boosting the case for higher European interest rates and investors cutting bets on further weakness in the Japanese currency.

The German Ifo business sentiment survey for February showed a larger decline than expected but did little to alter the outlook for euro zone interest rates to rise in March. The Federal Reserve, meanwhile, is expected to hold rates stable for some time.


"Euro zone (economic) fundamentals look better than U.S. fundamentals right now," said Meg Browne, senior currency strategist at Brown Brothers Harriman.

At 4 p.m. (2100 GMT), the dollar was down 0.4 percent at 121.02 yen <JPY=>, snapping the pair's first five-day advance since April.

"The speculative community is reducing its short yen positions against various currencies," Browne said. Short positions are bets against a currency.

Despite Friday's gains in the yen, this week the Japanese currency dropped about 1.4 percent against the dollar. And versus the euro, the yen rounded up its worst weekly decline since September 2005.

for info:

http://yahoo.reuters.com/news/artic...2-23_21-22-59_N23459950&type=comktNews&rpc=44

 

[Ichiro]

25feb- AP
Dollar Down Against Major Currencies
Friday February 23, 6:29 pm ET
Dollar Down Against Other Major Currencies After Iran Jitters

NEW YORK (AP) -- The dollar fell against the other major currencies Friday after news of Iran's refusal to suspend uranium enrichment shook up investors.

The euro bought $1.3162 in afternoon New York trading, up from $1.3126 late Thursday.

The dollar fell against the yen, dropping to 121.04 yen from 121.55 yen. The Japanese currency dipped Thursday even after the Bank of Japan, encouraged by signs of robust economic growth, raised its benchmark interest rate to 0.5 percent on Wednesday.

Investors were rattled after a U.N. official said Iran did not agree to Security Council demands to suspend its nuclear ambitions. Also weighing on the dollar was a U.S. government report that showed a larger-than-expected drop in gasoline and heating oil inventories, boosting crude prices above $60 a barrel.

Though blamed on worries about Iran, the weakening dollar was driven more by investors looking to sell the U.S. currency going into the weekend, said David Solin, a partner at Foreign Exchange Analytics in Essex, Conn.

for info:

http://biz.yahoo.com/ap/070223/dollar.html?.v=1

 

[Ichiro]

25feb- Daily FX
US Dollar Faces Many Risks in the Week Ahead
Friday February 23, 4:26 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com

• US Dollar Faces Many Risks in the Week Ahead
• Yen Pairs Hit By Profit Taking, But Be Careful of More Liquidation
• Australian Dollar Extends Rally as Gold Eyes $700


US Dollar
Throughout the past week, the value of the US dollar was determined almost exclusively by foreign developments. The dollar skyrocketed against the Japanese Yen on carry trade demand and slipped against the Australian, New Zealand and Canadian dollars on rising commodity prices. Against the Euro and British pound, the currency remained virtually unchanged. Even though there was barely any US economic data on the calendar, there was plenty of news that could affect the future direction of the US dollar, the most concrete of which is the potential rise in inflation. Consumer price growth was stronger than expected in the month of January which created a wave of concerns about inflationary pressures. The corresponding rise in oil prices exacerbated that concern as it was the most tangible driver of higher prices in months to come. The potential risk of a major blowup in sub-prime mortgages also sent investors fleeing into safer assets while Iran’s defiance of UN demands raised concerns for geopolitical risks. The pressure on the US dollar could continue to grow as we head into the busy data week. We are expecting durable goods, consumer confidence, existing and new home sales, preliminary fourth quarter GDP, Chicago PMI, personal income and manufacturing sector ISM. Aside from Chicago PMI and ISM, the market is not expecting dollar friendly data, especially at the beginning of the week. A drop in aircraft orders should weigh on durable goods orders while softer inventory data and downward revisions to non-residential and business investment could lead to a significant downward revision in GDP. This supports the technical outlook for the majors, which has turned dollar bearish on the last trading day of the week.

Japanese Yen
The Japanese Yen was this past week’s biggest market mover and we expect the currency to continue to be a dominant focus in the week ahead. Traders are getting tired of selling the Yen, especially after the Corporate Service Price index jumped to a 9 year high in the month of January. If US data begins to turn sour, today’s liquidation of short yen trades could exacerbate. Central Bank President Fukui has indicated that interest rates will remain low for sometime and we believe him, but any evidence of stronger inflation or consumer spending will still boost rate expectations. We will get “answers” hopefully next week with the release of retail sales, CPI, unemployment, industrial production and manufacturing PMI. 2007 could be the breakout year for the Yen, to read more about this see our Special Report.

for info:

http://biz.yahoo.com/fxcm/070223/1172269623643.html?.v=1

Commodity Currencies (CAD, AUD, NZD)