Month: November 2012

Source: ForexYard

The yen dropped to a 6 ½ month low against the US dollar in early morning trading today, after Japan’s opposition party leader, who is now favored to win in elections next month, said that he favored a policy of additional monetary easing. The USD/JPY, which currently stands at 80.83, has gained more than 100 pips in the last 24 hours.

The euro saw very modest gains against the dollar during Asian trading, as investors remained cautiously optimistic that Greece will receive a new round of bailout funds. The pair is currently at 1.2736, up close to 20 pips since last night.

Main News for Today

US Core CPI- 13:30 GMT
• Forecasted to come in at 0.1%
• Any worse than expected news could result in the dollar taking further losses against the euro

US Unemployment Claims- 13:30 GMT
• Forecasted to come in at 372K, slightly higher than last week
• Any higher than expected data may result in dollar losses

US Philly Fed Manufacturing Index- 15:00 GMT
• Forecasted to come in at 1.1, well below last month’s figure of 5.7
• If the figure comes in above expectations, the dollar could extend its gains against the yen

US Crude Oil Inventories- 16:00 GMT
• Forecasted to come in at 2.5M
• A higher than expected figure could result in the price of crude oil falling during evening trading

US Fed Chairman Bernanke Speaks- 18:20 GMT
• Due to speak about the US housing market
• If the Fed chairman speaks optimistically about the US housing recovery, the dollar could see gains

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.)

By Central Bank News

By Central Bank News
    The central bank of Jamaica held its policy rate steady at 6.25 percent, but said it would have cut its rate if it were not for global uncertainties that that fueled anxieties and lead to a further fall in its international reserves.
    The Bank of Jamaica, which has held its benchmark 30-day certificate of deposit rate steady since August 2011, said negative expectations during the last quarter stemmed from anxieties over talks with the International Monetary Fund (IMF) along with worries over global growth and the euro area’s debt issues.
    “In the absence of these uncertainties, the Bank would have been obliged to consider further reductions in its policy rate,” the bank said in a statement, adding:
    “It is possible that increased geopolitical tensions, adverse weather and stronger than anticipated global growth could lead to higher prices for international commodities and consequently higher domestic inflation.”
    Uncertainties in the domestic economy was reflected in demand pressure in the foreign exchange market and increased investor preference for short term domestic instruments. The Jamaican dollar fell 1.4 percent against the U.S. dollar in the third quarter, following a 1.6 percent decline in the second quarter, despite net sales of $US 214.8 million by the central bank to satisfy pent-up demand for foreign currency to finance trade. 
    The stock of gross international reserves amounted to $2.1 billion, or 14.1 weeks of imports, more than adequate to meet the central bank’s requirements, and the central bank said it was optimistic that an agreement with the IMF would have a positive impact on market confidence and foreign exchange flows.

    The Bank of Jamaica said it was still assessing the impact of Hurricane Sandy and a greater than expected impact could alter the forecast for inflation while the persistence of weak domestic conditions would contribute to a more favourable inflation picture.
    In the third quarter, headline inflation was 2.1 percent and the central bank is forecasting inflation of 3-4 percent for the final quarter with Hurricane Sandy having a net impact of about 0.7 percentage points.
    Despite the higher inflation in the December quarter, the Bank of Jamaica has revised downwards it forecast for 2012/13 to a range of 7.5-9.5 percent from a previous forecast of 10-12.0 percent due to a lower-than-expected pass though of tax measures and lower-than-expected international commodity prices.
    Jamaica’s economy is forecast to have contracted by 0.7-1.7 percent in the December quarter due to the impact of Hurricane Sandy on Jamaica’s economy and on tourism, with visitors from the U.S. East Coast accounting for almost 19 percent of visitors from the U.S.
    “The Bank is expecting a marginal rebound in economic activity in the March 2013 quarter which will contribute to real GDP growth for FY2012/13 being relatively flat in the range of 0.0 to minus 1.0 per cent,” the central bank said.

    www.CentralBankNews.info
    
    

GBPUSD continues its downward movement from 1.6174, and the fall extends to as low as 1.5836. Resistance remains at the downward trend line on 4-hour chart, as long as the trend line resistance holds, downtrend could be expected to continue, and next target would be at 1.5800 area. On the upside, a clear break above the trend line resistance will indicate that consolidation of the downtrend is underway, then sideways movement could be seen to follow.

Daily Forex Forecast

By MoneyMorning.com.au

‘Our industry has a long history of letting too many people go at the bottom of the cycle and hiring too many at the top.’ – Lloyd Blankfein, Chief Executive, Goldman Sachs

Mr Blankfein is a guilty man.

Not that we’re accusing him of breaking the law.

And we most certainly wouldn’t question the business practices of Wall Street investment banks like Goldman Sachs.

Rather, we’re saying Mr Blankfein is simply guilty of a common mistake. A mistake made by the CEO’s of big-end-of-town firms, mainstream commentators, most economists, and dare we say it…most investors.

It’s a mistake that guarantees these people and many more will be completely unprepared for the coming decade of economic and financial heartbreak…

In yesterday’s issue of Pursuit of Happiness (your editor’s new free twice-weekly email covering subjects to do with life, liberty and the pursuit of happiness), we mentioned how naïve property investors still didn’t get that things have changed.

They still don’t get it that they aren’t geniuses. They were just lucky to buy a house in the 1960′s or 1970′s and then hold on to it during the biggest and longest credit boom in living memory.

They think Australian housing is just in a bit of a funk. That soon the market will recover, and (laughably) that it will help drive the Aussie economy to more growth.

After all, they still think house prices double every seven years. That’s despite the numbers from the Australian Bureau of Statistics (ABS) that show Aussie house prices in the eight capital cities have gained just 41.2% since 2005. Pathetic.

(To read the full article in full click the following link on buying a house)

But the point of this letter isn’t to take a pop at housing chumps. The point of this letter is to take a pop at banking and business chumps…

Enjoy Those Bonuses While They Last

Like the housing investors, Mr Blankfein is guilty of not getting it. Like most CEO’s who ran businesses leading up to 2008, they thought they were superstars.

They thought only they could possibly succeed by borrowing lots of money, and then using the money to pay exorbitant takeover prices and expand their businesses.

Of course, for the most part it worked…because everyone else did it. Businesses and consumers borrowed and bought, and borrowed more and bought more. How could anything possibly upset this genius strategy?

But something did upset it. Since then things have gone badly wrong. Even so, CEO’s got to keep their seven-figure pay-cheques. And even though things are still bad, the big guys are getting their bread. As the Sydney Morning Herald reported this week:

‘Bank of Queensland’s chief executive was paid $1.8 million, including a half million dollar bonus, in the same year the company made a loss.

‘BoQ posted a loss of $17 million in the year to August 31, the first by a local bank in two decades.

‘The result was caused by $401 million in costs from unrecoverable loans due to BoQ’s exposure to the struggling property market in Queensland, where 60 per cent of its loans are written.’

We suggest Bank of Queensland’s CEO make the most of it. Shareholders may give a CEO their bonus for one year, even though the owners don’t make a bean…but we can’t see that continuing.

At the moment, the financial sector is living in denial. They know how the game works. They even think they know how business cycles work.

Trouble is they’ve never seen a business cycle like this one. They saw mini booms and mini busts within the longer-term bull market. But the busts didn’t last long. And every time the busts turned to booms, investors, businessmen and CEO’s felt smart.

They learned not to panic. They learned to love booms and busts…because busts soon turned to booms.

Not Any Old Recession

That’s why housing investors think the housing market is about to recover (it isn’t). And it’s why Lloyd Blankfein has warned investment banks not to fire too many staff, because he believes the world economy is about to recover (it isn’t).

As our colleagues and we have correctly pointed out over the past four years, this bust is different to anything in recent living memory.

This isn’t a common garden-variety slowdown or recession. You can tell by the scale of the meddling by governments and central banks that this is something different.

In our view, the current problems show that the world economy is going through nothing less than a full-scale depression.

Government bailouts and central bank money printing just give investors the illusion that things are getting better. But the newly printed money is piling up at central banks, because businesses and consumers have already maxed out their borrowing.

And with asset prices staying low, you don’t get the compounding effect of higher debt. In other words, when asset prices rise, investors can borrow more against higher valued assets.

But when asset prices are low, investors can’t use higher valuations to increase the value of their collateral…this means they can’t borrow more money. (Think about how you can increase the value of your home loan if the house price rises. If house prices don’t go up, banks can’t lend more money.)

But that’s only half the story. The other half of the story is how the intentional lowering of interest rates is having exactly the opposite effect to that intended by central banks.

This is a subject we’ll cover in more detail tomorrow…

Cheers,
Kris

From the Port Phillip Publishing Library

Special Report:
Retire Rich, Happy and Free From Money Worries

Daily Reckoning:
Australian LNG Projects Get Pricey

Money Morning:
Avoid the Slaughter: Watch This Key Stock Market Pointer

Pursuit of Happiness:
Thinking of Buying a House? If I Could Give You One Piece of Advice…

Australian Small-Cap Investigator:
How to Make Money From Small-Cap Stocks

Attention Investors: This Market is Worse Than it Looks

By MoneyMorning.com.au

Savvy investors know there is far more to the markets than sitting on your hands worrying about the fiscal cliff.

The world doesn’t revolve around the United States or the Western world.

In fact, The IMF’s World Economic Outlook projects an emerging markets forecast with growth at 5.6% in 2013. That’s down slightly from 2011 but far ahead of the measly 1.5% growth projected in the “advanced” economies.

That means investors need to focus heavily their investments in emerging markets.

However, there’s one new trick investors will have to learn going into 2013: the BRIC economies (Brazil, Russia, India and China) that have been so fashionable over the years, will all run into trouble next year and should be avoided.

The good news is the world is a big place and there are still emerging markets that offer investors the benefit of the world’s fastest economic growth. My favorites are listed below.

But first you need to understand why the BRICs lost their lustre.

2013 Emerging Markets Forecast

When Jim O’Neill of Goldman Sachs coined the BRICs acronym in 2001 it looked clever since all of them were poised to grow very rapidly and become major factors in the world economy over the next decade.

Of the four, Brazil looked like the weakest member at the time, since it was hovering close to bankruptcy. Meanwhile, Russia had a dynamic new leader, a new “flat tax” and incredible natural resource wealth.

As for the Far East, China was China, even then.

And India had a genuinely reformed its government under Atal Bihari Vajpayee, which helped cause growth to accelerate to very un-Indian levels.

I didn’t trust Russia or Brazil, and China was difficult to buy back then.

With Goldman Sachs (NYSE: GS) recommending them, all these BRICs had to do was keep their governments under control and maintain a reasonable facsimile of free-market policies, and they would be rich within a generation – or even sooner.

Indeed the progress over the intervening decade, in terms of Gross Domestic Product (GDP), has been rapid in all four countries. Yet in the wake of the financial crisis all four stock markets have been pretty disappointing, and now the prospects of the BRICs are nowhere near as bright as they once were.

You can chalk it up to the curse of too much money.

In the last decade monetary authorities worldwide, led by Fed chairmen Alan Greenspan and Ben Bernanke, have kept interest rates too low. Money has flooded into the emerging markets, especially the favored BRICs.

The result has been a surge of corruption in all four BRICs, accompanied by a surge in “malinvestment”, a term beloved of the Austrian school of economists and describing investments, like the Nevada housing market in 2004-06, that is entirely misdirected and a waste of resources.

In China, the economy is slowing and there is a gigantic morass of bad loans in the banking system, perhaps five times the size of the bad loans about which everyone worried a decade ago. A 2008-style banking collapse and government bailout in China seems inevitable – and we know what that does to an economy!

In India the fine Vajpayee government of 1998-2004 was replaced by an ungrateful electorate with a return to the socialist Congress party, which had wrecked India’s economy from 1947-1990.

The budget deficit in India, by both the central and regional governments, is gigantic now and is “crowding out” the private sector from the financial market. We also can expect a surge in inflation and a balance of payments crisis. Fortunately, there’s another election in 2014; we can hope that the Indian voters do a better job than in 2004.

As for Russia, Vladimir Putin has effectively established himself as President for life, and has taken control of the economy’s major sectors. The Rosneft buyout of TNK-BP indicates that the Russian state will use its resources to assert economic control. This is already working poorly, and it will stop working altogether when the price of oil drops.

Finally, Brazil is meddling in its major companies such as Petrobras and Vale, whose results have sharply deteriorated. Public spending is way out of control, mostly through subsidized loans from the state bank BNDES.

Like Russia, Brazil will fairly quickly run into a balance of payments crisis and certainly won’t enjoy its past rapid growth.

Since investors saw BRICs as a bloc on the way up, they will almost certainly panic simultaneously about all four on the way down, and cause a global financial crisis involving all four. That’s if the Eurozone’s problems or Japan’s government debt don’t cause one first.

Three Emerging Markets to Buy

As investors, we can only protect ourselves to a limited extent, and certainly should not “sell at the bottom”, as some unfortunates did in early 2009. Certainly we should not put our money in any of the BRIC trouble spots.

However, there are other emerging markets whose prospects remain excellent. They include Singapore, Chile and the Philippines. Here’s why emerging markets are better bets in 2013:

Singapore is now at European standards of wealth and is projected by the Economist team of forecasters to grow by 4% in 2013 after a slowdown in 2012. It also ranks top or close to it on international indexes of integrity and business-friendliness.

Chile remains the best-run country in Latin America, with high scores on integrity indexes and a strong mineral sector.

The Philippines has been off most investors’ radar screens, but is expected to grow 6.0% in 2013.

So yes, the parts of the world may be troubled right now, but that doesn’t mean investors need to stay on the sidelines. With the right emerging markets, real growth is easier than you think.

Martin Hutchinson
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in Money Morning (USA)

From the Archives…

APRA Spins Another Yarn On Australian Banks
9-11-2012 – Kris Sayce

The Secret Return to the Gold Standard
8-11-2012 – William Patalon

Forget the US Election, This Stock Market Event is the One to Watch For
7-10-2012 – Murray Dawes

The Greeks Giving Economists Nightmares
6-10-2012 – Bill Bonner

Super Fund Results: Whoopdeedoo
5-10-2012 – Nick Hubble

Forget the BRICs -These Emerging Markets Will Be the Next Rising Stars

By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.)

By Central Bank News
   The central bank of Ghana held its policy rate unchanged at 15.0 percent, saying the risks to inflation and growth were balanced despite the worsening in global economic conditions and uncertainties that  could adversely affect the country’s economy if prolonged.
    The Bank of Ghana, which has raised its rate by 250 basis points this year, said the domestic economy had improved in the third quarter and inflationary expectations had diminished.
    “The bank’s inflation forecast indicates that inflation has been well anchored within the projected band of 8.5, plus/minus 2 percent and is likely to end the year in a single digit,” the bank said.
    Ghana’s headline inflation eased to 9.4 percent in September from 9.5 percent in August, with food inflation stable at 4.4 percent, the bank said.
     Second quarter Gross Domestic Product growth was estimated at 2.5 percent, down from 20.6 percent in the same 2011 quarter, mainly due to the base effects from the addition of oil, the bank said.
    The bank added that exchange rate pressures, which threatened the economy’s stability and boosted inflation in the first half of the year, have eased and in the past two months the cede currency had appreciated marginally against the U.S. dollar, helping lower inflation expectations.

    www.CentralBankNews.info

By Central Bank News
    The Central Bank of Iceland raised its benchmark interest rate for the fifth time this year and said inflation should now start to decline to the bank’s target but warned this path could be upset by the upcoming wage settlement review.
    The central bank’s Monetary Policy Committee, which raised the 7-day collateralised lending rate by 25 basis points to 6.0 percent, said the economic outlook was broadly unchanged despite the global headwinds.
    “The economic recovery will continue, with growing investment and stable private consumption growth, and the slack in the economy will disappear during the forecast horizon,” the bank said.
    Interest rate hikes since August and falling inflation has withdrawn a “considerable amount” of the central bank’s accommodative monetary policy and the slack in monetary policy should disappear as spare capacity disappears from the economy, depending on the path of inflation.
    “The current baseline forecast indicates that the bank’s present nominal interest rate is sufficient to bring inflation back to the inflation target during the forecast horizon,” the bank said, but added:
    “However, this depends, among other things, on whether the outcome of the forthcoming wage settlement review at the beginning of next year is consistent with inflation declining to the target.”
     Iceland’s annual inflation rate eased slightly to 4.2 percent in October from 4.3 percent, but this is still well above the bank’s 2.5 percent target and inflation expectations were still above this target though they had fallen somewhat.
    Iceland’s Gross Domestic Product slumped by 6.5 percent in the second quarter from the first, for a 0.5 percent annual rate, down from 4.2 percent in the first quarter.
    The central bank has now raised its key rate by 125 basis points so far this year, with inflation also gradually easing from over 6.0 percent in the first half of the year.
    In its latest Monthly Bulletin, the central bank said 2011 output growth was weaker than previously estimated and the recovery in the first half of this year was weaker than stated in the August forecast. 
    Iceland’s output growth last year was previously estimated by Statistics Iceland at 3.1 percent but has now been revised down to 2.6 percent, the bank said.
    The bank now estimates growth this year of 2.5 percent, 0.5 percentage points down from August, mainly due to a stronger contraction in public consumption than previously forecast. But output growth is projected to be stronger next year than forecast in August and is expected to average just over 3 percent, in line with average long-term growth.
    Iceland’s economy, which was hard hit by the global financial crises, is expected to reach its pre-crises peak in the latter half of 2014 and close to that level in August 2015, the end of the bank’s forecast horizon.

    www.CentralBankNews.info