Thread: Asian News

From Mainichi Daily ---8 Feb 06:


Dollar flat against yen in Asian trading as traders await BOJ meeting

The dollar was almost flat against the yen Wednesday in Asia as traders adjusted their positions amid mixed sentiment over the Japanese central bank's monetary policy.

The dollar was trading at 118.02 yen by mid-afternoon in Tokyo, down 0.07 yen from late Tuesday. The euro rose to US$1.1975 from $1.1973 in New York.

Traders said U.S. hedge funds and Japanese securities firms bought dollars for yen, helping the U.S. unit climb back above 118.00 yen to hit an intraday high of 118.13 yen on EBS, after briefly dipping to a low of 117.54 yen.

But the U.S. currency failed to extend much gains as traders were cautious of selling yen too actively on lingering speculation that Bank of Japan Governor Toshihiko Fukui may express more hawkish views about ending Japan's ultra-easy monetary policy when he meets the press on Thursday, traders said.

Some other Tokyo players, however, were taking a different view, which was partly behind the yen's rises against major currencies overnight in New York, other players say.

"The most important thing is

when Japanese interest rates actually start to rise, and that's still a long way off," said Takehiko Jimbo, chief foreign exchange manager at Mitsubishi UFJ Trust Bank.

Fukui will meet reporters after the end of the BOJ's two-day policy meeting, where board members are widely expected to keep the central bank's ultra-easy monetary settings intact.

Senior BOJ officials, including Fukui, have suggested that the BOJ may end quantitative easing, in which it floods the money market with excess liquidity, as early as this spring. But many analysts expect the BOJ to keep short-term interest rates near zero for some time even after changing the current policy framework.

Higher interest rates tend to make a country's currency more attractive to investors.

The euro was also largely unchanged against the dollar, lacking a clear sense of direction due to a dearth of major U.S. economic indicators this week for gauging the course of U.S. monetary policy, traders said.

The dollar was higher against other Asian currencies, rising to 3.7350 Malaysian ringt from 3.7335 the previous day, and to 32.220 Taiwan dollars from 32.120. It also rose to 51.790 Philippine peso from 51.560. (AP)

February 8, 2006

Ichiro, I will get back to you, hopefully later on this evening FiveTears, if you don'thave the stomach for it, shift back to the G Fund 100%. I've come across some info. that the European, Asian and American equity markets are going to be taken down a notch or two over the next four to six weeks and that the dollar will remain range bound with a little upward movement over the same time frame. I am actually considering shifting for the second time in over two years. I'll keep researching. Good luck.

Yuan May Rise Less Than Forecast, Provoking China, U.S. Tension

Feb. 9 (Bloomberg) -- China's government, placing job growth ahead of trade relations with the U.S., Europe and Japan, will limit the yuan's rise this year.

Since July 21, when China took the first step in a decade toward allowing a freely traded currency by allowing it to gain 2.1 percent against the dollar, the yuan has barely risen. Chinese government reports since then showed China's trade surplus expanded to a record $102 billion last year, and triggered threats of tariffs from U.S. Senators Charles Schumer, a New York Democrat, and Lindsey Graham, a Florida Republican.

``Demands for a dramatic appreciation are a non-starter,'' Qing Wang, a senior currency strategist at Bank of America Corp. in Hong Kong, said on Feb. 1. Chinese officials are concerned that a stronger currency may cause companies ``to go bankrupt and people to lose their jobs,'' he said.

The yuan will rise 3 percent to 7.8 per dollar by year-end, according to the median estimate of 27 traders and analysts surveyed by Bloomberg News between Dec. 28 and Feb. 1. A similar reading last August predicted the yuan would strengthen 4.3 percent.

China grew 9.9 percent last year, the fastest among the world's major economies, passing France and the U.K. to become the fourth largest. Exports surged 28 percent, accounting for about 40 percent of the $2.3 trillion economy, the government said on Jan. 25 in Beijing.

`Sizzling' Economy

U.S. Treasury Secretary John Snow, IMF Managing Director Rodrigo de Rato and Japanese Finance Minister Sadakazu Tanigaki all said last month that the yuan is undervalued, giving China's exporters an unfair advantage. European Union industry commissioner Guenter Verheugen said on Dec. 12 he didn't ``exclude the possibility'' of referring China to the World Trade Organization this year.

``That economy is sizzling and we take that into consideration in our negotiations,'' Tim Adams, the U.S. Treasury's top official for international issues, said in a Jan. 25 interview at the World Economic Forum in Davos. ``It does make it more complicated for them to say whatever we've asked them to do is detrimental to growth.''

People's Bank of China Assistant Governor Ma Delun said the difference between wages in China and its partners, not currency policy, is responsible for the trade gap. ``Workers' pay in China is 1/33rd of that of a U.S. worker,'' Ma said in an interview in Shanghai on Jan. 18. He said the market decides the currency's value.

Official Numbers

China reports the unemployment rate for its cities, not for rural areas where people live on about $300 per year and earn about a third of those in urban areas, according to a United Nations Development Program report released on Dec. 16. China's urban unemployment rate was 4.2 percent last year, the government said on Jan. 25.

``The official unemployment rate is on the low side,'' Shen Minggao, an economist in Beijing for Citigroup Inc., the largest U.S. financial services company, said in an interview on Feb. 6. China's urban jobless rate may be as high as 11 percent, he said.

The yuan has risen 0.7 percent since the revaluation, which pegged the currency to a basket that includes the dollar, euro, and yen. At the time, the government said the currency could move as much as 0.3 percent per day. The biggest swing has been less than 0.1 percent against the dollar. The yuan is a denomination of China's currency the renminbi.

Small Swings

China ``should have a dramatically more flexible currency,'' Kenneth Rogoff, professor of economics at Harvard University and former chief economist for the International Monetary Fund, said in an interview on Jan. 10. ``They're better to introduce a bit of flexibility now before it's forced on them.''

Rogoff expects the yuan to strengthen between 3 percent and 5 percent this year.

The People's Bank of China is taking steps to encourage more trading of its currency. The central bank on Jan. 4 named 13 institutions including Citigroup and HSBC Holdings Plc, Europe's biggest bank by market value, as market makers, firms that stand ready to buy and sell the currency.

Six lenders including Mitsubishi UFJ Financial Group Inc., the world's biggest bank by assets, were told on Sept. 19 they could offer forward contracts, which allow investors to speculate on the future value of the yuan to hedge their investments.

The Hong Kong forwards market, where contracts are settled in dollars instead of yuan, indicates traders expect the currency to reach 7.7 to the dollar in a year. In August 2005, the contracts indicated a rise to 7.875 in 12 months.

`China Is Ready'

``China is ready,'' said Jonathan Anderson, chief Asia economist in Hong Kong for UBS AG, the world's second-biggest currency trader. ``They've given us the market-maker system. They've introduced the forwards market. That's really all you need.''

Snow has avoided putting public pressure on Chinese officials. ``The situation come March will look different than we see today,'' he said in a Dec. 1 interview.

The July revaluation kept the U.S. Treasury from naming China a currency manipulator in its quarterly review of trading partners' exchange-rate policies released on Nov. 28. The next report is due April 15.

``It will be gradual,'' Donald Straszheim, president of Straszheim Global Advisors, said in an interview on Jan. 17 from Los Angeles. ``China's financial markets and their banking system are extraordinarily fragile. They cannot endure the rough and tumble of the global financial markets.''

Some economists say the trade surplus and accelerating economy mean there's little reason to be patient.

``This will increase the political pressure from outside for China to allow the currency to appreciate,'' Frank Gong, chief economist for Greater China at JPMorgan & Chase Co., said in Hong Kong. ``Domestic demand is much stronger than expected. They can afford to rely less on exports.'' Gong said he expects the yuan to strengthen 12 percent this year.

Q4 2005 USD/CNY
Deutsche Bank AG 7.7
UBS AG 7.85
JPMorgan Chase & Co. 7.00
Standard Chartered Plc 7.9
Merrill Lynch 7.48
HSBC Holdings Plc 7.85
Citigroup Inc. 7.8
Credit Suisse 2 to 3 percent appreciation
Deutsche Asset Management 7.68 or 7.69
Sumitomo Mitsui Banking Corp. 8.04
Bank of America 7.63
Goldman Sachs Group Inc. 7.8
United Overseas Bank 7.78
Brown Brothers Harriman 7.86
Morgan Stanley 7.8
ANZ Investment Bank 7.78
BNP Paribas 7.6
Dresdner Kleinwort Wasserstein 7.7
Rabobank 7.81
Royal Bank of Scotland 7.6
ABN Amro Bank 7.65
Skandinaviska Enskilda Banken 7.31
Westpac Banking Corp. 8.01
ING Bank NV 7.9
Mizuho Research Institute Ltd. 7.8-7.9
CFC Seymour Ltd. 7.75

Median (27 forecasts) 7.78
Average (27 forecasts) 7.73
High 7.00
Low 8.04


To contact the reporter on this story:
Christina Soon in Singapore csksoon@bloomberg.net

Last Updated: February 8, 2006 11:08 EST

Greenspan: Fed Troubled by Rates

From MoneyNews.com and NewsMax.com --date 8 Aug 06.

At a business dinner Tuesday, recently retired Federal Reserve Chairman Alan Greenspan revealed that the central bank is deeply troubled by its inability to control long term interest rates.

At the private meeting Greenspan told attendees that short-term U.S. interest rates might have to rise even further, according to a report from Bloomberg News.

Greenspan departed as Fed chairman on January 31, but before doing so led the central bank in raising short term rates dramatically - some 14 times to a rate of 4.5% - the largest aggregate rate increase in two decades.

Greenspan and others had claimed the rate rises were implemented to cure inflation.

But Greenspan's private comments suggest the Fed was also concerned about the housing market bubble. [Editor's Note: Financial Intelligence Report detailed that Greenspan's actions would lead to a coming recession and housing bust. Read more Go Here Now.]

An unidentified participant at the private New York gathering related that Greenspan told an assembly of Lehman Brothers clients that low long-term rates were inhibiting the Fed's attempts to control the economy and that further rate hikes may be necessary as "homeowners are borrowing more against the value of their homes to finance spending."

But the ex-chairman was vague, failing to specify exactly how high rates would go. Ominously, he indicated that the markets were underestimating just how much more tightening the Fed had to do.

At the same meeting Greenspan reportedly offered a positive view of the U.S. economy.

But his comments were not the first time he has expressed concern about key factors driving the economy, including several remarks he made last September including:

* Greenspan offered a strong warning saying that Wall Street investment firms could prove incapable of handling all the financial risk posed by mortgage giants Fannie Mae and Freddie Mac.

* France's Finance Minister revealed that Greenspan told him the U.S. had "lost control" of its budget deficit.

Finance Minister Thierry Breton quoted Greenspan expressing exasperation at U.S efforts to curb its growing budgetary red ink.

"The United States has lost control of their budget at a time when racking up deficits has been authorized without any control (from Congress)," Breton said.

* In a speech to the National Association for Business Economics in Chicago, Federal Reserve Chairman Alan Greenspan sounded the alarm to American consumers that the long era of low interest rates was coming to an end.

"History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets," Greenspan said.

In his speech to the NABE, Greenspan reiterated that Americans counting on low rates to refinance homes and buy big-ticket items might soon see a markedly different interest rate environment. [Editor's Note: Could interest rate increases cause a housing bust? Read More Here.]

That same week, Greenspan told a banker's group in California that homeowners with considerable debt should be on high alert. Specific borrowers and lenders "could be exposed to significant losses," he told the group.

The markets appeared to coolly accept reports of Greenspan's remarks at the Lehman Bros. dinner. The Dow Jones rose slightly, as did the Nasdaq and S&P by the close of trading Wednesday.

NewsMax's lead analyst and trader Andrew Wilkinson said Greenspan's comments "could create a short-term spike in the dollar but should have a longer-lasting effect on the price of gold, from an inflationary perspective."

He added that the former Fed chair's words were "negative for bonds, although stocks are still going up since it means the economy is strong."

I was thinking of jumping to the I fund but with the low dollar the fund should go up good today but then the Witchdoctors and their magic wands are there to goof you up! The question is you don't know what your buying at?

I-fund is volatile, yes, Cowpoke. You take the natural variability of the (overseas) markets, the variability of the exhange rates, and the variability imposed by the fund managers and you can get some big swings.

For me the answer was to hold on to it for a minimum of 30 days at a time. Last year there were lots of times when when the I-fund was the only thing holding up my account. This year I have 25% of the Kitty riding the I-fund.

Dave

Cowboy,

I know you won't let a few variations hold you back from the I fund - just close your eyes and do it. The FTSE is in rocket mode - the ECB I believe mentioned they have no desire to raise their interest rates for the next months. Ben, are you listening? You need to show us you are incharge - Greenspan is now retired - pause and help GM.

Dennis

I think I ment BOE and not ECB.

Just trying to draw the Wizard back into conversation.

I am currently all S fund right now and it isn't chicken feed to me. I got this gut feeling to set tight. But hard to tell what tomorrow brings. Im trying to learn patience hopefully it pays off. So far I am happy with the move I made. The I fund only swung a pitiance down compared to the US markets and its voltile swings it can have. So making me think it hasn't yet bottomed out but maybe the others didn't bottum either. I believe the markets are treading water at this time and were going up the high side of the wave.

Bank of Japan governor expects inflation to rise

By David Pilling in Tokyo Thu Feb 9, 4:40 AM ET

Toshihiko Fukui, Bank of Japan governor, said on Thursday he expected inflation would begin to rise by a wider margin in the first quarter, adding to speculation that the central bank is preparing to end its super-loose quantitative-easing policy.

"We could not say today that the consumer price index has stabilised above zero, but from the January data onwards, CPI will show a relatively clear rise," he said, speaking at a press conference after a two-day policy board meeting.

Private economists expect the core CPI, which includes fresh food prices, to rise by 0.4 per cent in January and February, compared with an increase of just 0.1 per cent in November and December, and negative rates until last September.

The BoJ is committed to keep its four-year-old ultra-loose monetary policy in place until the core CPI stabilises above zero and until a majority of the policy board considers it will stay that way.

In spite of his optimism on the likely progress of inflation, the governor would not be drawn on the likely timing of any move, which bank watchers say could come in March or in one of two meetings scheduled for April.

The bank is expected to end quantitative easing by mopping up excess liquidity. The governor has made clear that interest rates could remain at zero long after that.

"I cannot say if a policy shift is in sight," Mr Fukui said, though he added that policy considerations were becoming more important with each successive meeting.

The nine-member board ended Thursday's meeting by keeping policy unchanged, flooding the market with Y30,000bn-Y35,000bn of liquidity, compared with the roughly Y6,000bn needed to push overnight rates to zero.

Two members voted against the resolution, arguing that quantitative easing, adopted in March 2001 to head off a deflationary spiral, should be ended now.

Mr Fukui on Thursday indicated his apparent dislike for inflation targeting, saying that stable Japanese prices tended to be lower than those in other countries. In the 1980s, average inflation was about 1.3 per cent, the bank said.

Mr Fukui described comments from observers suggesting that the bank target an inflation rate of 2-3 per cent as "mysterious".

Haruhiko Kuroda, president of the Asian Development Bank and former Japanese vice-minister of finance, said most central banks built in a margin of error into their inflationary calculations. Anything above a 1 per cent rate of CPI change was deflationary he said, since the CPI overestimated inflation by about 1 point.

"Deflation is not yet overcome," said Mr Kuroda, who favours the adoption of an inflation target. "The only objective of monetary policy is to obtain sustained price stability and that's not achieved. So it is not a good time to change policy."

Kiichi Murashima, economist at Nikko Citigroup, said the bank was likely to start reducing its liquidity targets at the April 28 meeting, though he did not rule out a move before then.

By April 28, the BoJ would have three more sets of monthly CPI data as well as the results of its Tankan business confidence survey. If these were both positive, the bank would probably feel able to reduce liquidity targets in an orderly way, he said.

South Korea raises interest rate again. Other asian countries (Thailand, Malaysia and India) raised their interest rates in the past several months. The rising oil price is causing an inflationary environment worldwide and we sure need to find an alternative to oil.


South Korean Central Bank Raises Benchmark Rate to 4% (Update5)

Feb. 9 (Bloomberg) -- South Korea's central bank raised its benchmark interest rate by a quarter percentage point to a three- year high to keep inflation from accelerating.

Bank of Korea Governor Park Seung and his six fellow policy makers raised the overnight call rate to 4 percent at a meeting in Seoul today, the third increase in five months. Five of 12 analysts polled by Bloomberg News expected the decision.

Park, whose four-year term ends March 31, ignored calls by government officials such as Vice Finance Minister Kwon Tae Shin to keep rates unchanged. The governor expressed confidence that Asia's third-largest economy will expand at least 5 percent this year, the fastest in four years, even as a stronger won threatens to curb export growth.

``Today's decision is a very strong recognition that the Bank of Korea is backing a recovery in the domestic economy,'' said Huw McKay, senior economist at Westpac Banking Corp. in Sydney, who expected a rate increase. ``It shows they're prepared to back that forecast in the face of a strong won exchange rate.''

South Korea's Kospi index rose 0.8 percent to close at 1321.66 at 3 p.m. The benchmark, which soared 54 percent last year, reached a record 1426.21 on Jan. 17. The won, which rose 6.2 percent in the past 12 months, fell 0.2 percent to 972.70 against the dollar.

Bonds also rose on optimism the won's strength will prompt the bank to pause in raising rates. The yield on the benchmark three-year government bond fell 10 basis points to 4.85 percent at 3:30 p.m., according to the Korea Securities Dealers Association. The yield reached the lowest level since Oct. 21.

Uncertainty Lifted

``The rate increase lifted the uncertainty that has long kept investors from increasing their holdings,'' said Shin Joo Hyun, a fund manager at Industrial Bank of Korea in Seoul. ``The view is now that raising rates further is hard given that a stronger won clouds the economic outlook.''

Central banks in Asian countries such as India, Thailand and Malaysia have raised interest rates in past months as rising domestic demand and soaring oil prices threaten to fan inflation. The Bank of Japan today held rates at almost zero as it gathers more evidence that deflation has ended.

The U.S. Federal Reserve raised its main lending rate to 4.5 percent on Jan. 31.

Consumers increased spending at the fastest pace in a decade in December and companies boosted investment, the National Statistical Office said on Jan. 27. A separate report today showed consumer confidence rising to a nine-month high in January.

`No Problem'

Rising spending by consumers and businesses may stoke inflation this year, according to the central bank. Consumer prices rose in January at the fastest pace in 10 months, gaining 0.8 percent from December. From a year earlier, prices rose 2.8 percent.

Inflation will accelerate to 3 percent this year from 2.7 percent in 2005, the central bank said in December. Core inflation, which excludes food and energy, will probably accelerate to 3.3 percent in the second half of 2006 from 2.1 percent in the first six months, it forecast. The central bank targets core inflation of 2.5 percent to 3.5 percent.

``The economy is recovering faster than expected and the monetary policy should gradually move to a neutral stance to reduce the side effects of a low interest rate policy,'' Park said at a press briefing in Seoul. ``There are some negative factors like the won gains and higher oil costs but after our studies, we confirmed that there'll be no problem in achieving a 5 percent growth despite those factors.''

The economy grew 4 percent last year, the central bank said.

Government Opposition

With today's increase, Park has brought the call rate back to where it was when he became Governor in April 2002. Park raised interest rates a month after taking over. He then went on to slash borrowing costs to record lows in 2004 as South Koreans were struggling to shake off the burdens of a credit-card binge that left many mired in debt.

Park, 69, increased borrowing costs even after some government officials expressed concern that such a move may stunt economic growth.

``It is advisable for interest rates to be maintained at the current level,'' vice minister Kwon said in an interview with a local cable television Feb. 7. He cited the rising won and higher oil prices as sources of concern for South Korea's economy. Finance Minister Han Duck Soo yesterday said he hopes the Bank of Korea won't ``tighten too much.''

A stronger won makes imported goods cheaper, easing pressure on consumer prices to climb. At the same time, it hurts sales for South Korean exporters such as Samsung Electronics Co. Exports, which account for about 40 percent of the economy, grew 4.3 percent in January, the commerce ministry said on Feb. 1.

To contact the reporter on this story:
Seyoon Kim in Seoul at skim7@bloomberg.net

Last Updated: February 9, 2006 03:22 EST