Month: August 2011

The People’s Bank of China has been reported as broadening the base of reserves it requires lenders to deposit with the central bank; including “margin deposits” i.e. collateral deposited by customers for acceptances, letters of credit and letters of guarantee, as part of the calculations for required reserves.  The move has been seen as punishing fast expansion of liquidity in this area, and it is estimated it will drain as much as 900 billion yuan of liquidity from the banking system, and will be implemented from early September.  The move will have a similar effect to tightening the reserve requirement ratio (equivalent to about 100bps), indicating that China continues to hold a tight monetary policy stance.

Article by Harjeet

Indian Laws governing the investment opportunities by NRIs are governed by Foreign Exchange Management Act, 1999 (FEMA), according to which NRIs and PIOs in India (non-resident Indians and Persons of Indian Origin) are prohibited from buying agricultural land in India. Under the general permission granted by Reserve Bank of India, properties other than land, farm house and plantation property can be acquired by foreign citizen of Indian Origin provided the purchase consideration is met either out of inward remittance in foreign exchange through normal banking channels or out of funds from the purchaser’s NRE (Non Resident External Rupee Account) or FCNR ( Foreign Currency Account) accounts maintained with Indian banks. The reason relating to the prohibition clause, about agricultural land is mainly to protect farmers from foreign conglomerates looking to buying up land.

Indian NRIs cannot buy agricultural land in India and this is applicable to the whole of India. Approval is required from the Reserve bank of India which one can assume is not easily available and this would depend only on individual circumstances. In addition to that, some State Governments in India have rules that allow only farmers to buy this type of land in their State and this restricts even Indian citizens from buying land unless they come from a family of farmers. Therefore, one cannot complain that due to the above prohibition, NRI investment options have been mitigated. On the other hand, NRIs who have acquired foreign citizenship, are sometimes mislead into believing that they cannot continue to hold the land as foreigners cannot hold land in India. But this is not all encompassing, because Indian NRI’s can continue to hold land or any other property they own in India provided they had acquired them legally before accepting foreign citizenship. NRIs and Foreign Citizens of Indian Origin cannot acquire land, even by way of gift. However they can acquire agricultural land by way of inheritance and an agricultural property or land thus acquired can only be sold to a resident in India and not to an NRI.

Just like every cloud has a silver lining, therefore, even if it seems like there are a lot of obstacles involved in the process of inheriting an agricultural land as an NRI, but eventually, the initiative generates one of the biggest advantages eliminating the hurdle of paying any inheritance tax for NRIs. Also, NRIs can sell the inherited agricultural land to a resident Indian, but they will have to pay capital gains tax on the sale proceeds. Once the tax is paid the remaining sale proceeds can be remitted abroad which again should not exceed 1 million USD in any financial year. Therefore, these are a few attributes an NRI must keep in mind while deciding on investment strategies to the best of their suitability.

Therefore, the conclusion lies in the fact that, inheritance of agricultural land is not covered by the ban on NRIs, but in fact it is an exception to the rule.

About the Author

Harjeet is an Indian – born mass-market novelist, who covers the world internet related topics . He writes columns and articles for various websites and internet journals in the domain of Investing in India and Investment options.

GBPUSD rebounded from 1.6208, suggesting that a cycle bottom has been formed on 4-hour chart. Range trading between 1.6208 and 1.6460 is expected in a couple of days, as long as 1.6460 resistance holds, the rise from 1.6208 is treated as consolidation of downtrend from 1.6617, and one more fall towards 1.6000 is still possible after consolidation.

Forex Signals

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators cut their long positions of the euro against the US dollar last week while bets on the British pound sterling were on the rise. Non-commercial futures positions, those taken by hedge funds and large speculators, added to their long positions in favor of the Swiss franc, British pound sterling, Australian dollar and the Canadian dollar directly against the US dollar while decreasing their bets for the euro, Japanese yen, New Zealand dollar and the Mexican peso, according to data on August 23rd.

This week’s notable changes were Australian dollar positions rebounding to over 43,000 net long contracts after a sharp decline on August 9th while British pound sterling positions increased back over to a net long amount of contracts after being on the short side by 3,096 contracts on August 16th.

EuroFX: Currency speculators decreased their futures positions for the euro against the U.S. dollar after a rebound in the previous week’s futures positions. Euro positions dipped as of August 23rd to a total of 2,539 net long contracts from the previous week’s total of 6,726 net long contracts on August 16th. Euro positions on August 9th were at their lowest point since January 11th when net contracts were on the short side at -45,182.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: British pound sterling positions rebounded after declining for two consecutive weeks and ascended back over to a total net long position as of August 23rd. Pound positions increased to a total of 10,961 long positions following a total of 3,096 short positions as of August 16th.

JPY: The Japanese yen net contracts dipped slightly as of August 23rd from the previous week. Yen net long positions edged lower to a total of 47,139 net long contracts reported on August 23rd following a total of 47,348 net long contracts reported on August 16th.

CHF: Swiss franc long positions rose higher for a second consecutive week after falling to the lowest level all year on August 9th. Speculators increased bets on Swiss currency futures to a total of 9,637 net long contracts as of August 23rd following a total of 9,008 net long contracts as of August 16th. Swiss franc speculative futures positions had dropped to their lowest level in over a year on August 9th at a total of 4,655 net long contracts.

CAD: The Canadian dollar positions increased after declining sharply for two consecutive weeks. CAD net contracts rose to a total of 8,804 net long contracts as of August 23rd following a decline to a total of 4,121 net long contracts on August 16th.

AUD: The Australian dollar long positions rose for a second consecutive week as of August 23rd following a sharp decline on August 9th. AUD futures positions advanced higher to a total net amount of 43,574 long contracts as of August 23rd following a total of 29,723 net long contracts reported as of August 16th. The August 9th level at 29,723 marked the lowest level for Australian dollar speculative positions since November 2010.

NZD: New Zealand dollar futures positions declined for a third consecutive week to a total of 16,876 net long contracts on August 23rd following a decline to 18,417 net long contracts registered on August 16th. NZD contracts had increased for five straight weeks to their highest level in over a year at 24,126 net long positions as of August 2nd before declining for three consecutive weeks.

MXN: Mexican peso long contracts edged lower and declined for a fourth straight week as of August 23rd. Peso positions declined to a total of 21,835 net long speculative positions as of August 23rd following a total of 22,634 contracts that were reported as of August 16th. Peso positions are currently at their lowest level since September 14th of 2010 when net contracts equaled 14,957.

COT Data Summary as of August 23, 2011
Large Speculators Net Positions vs. the US Dollar

EUR +2539
GBP +10961
JPY +47139
CHF +9637
CAD +8804
AUD +43574
NZD +16876
MXN +21835

 The top 5 trading currencies in the Forex Market

Currencies are traded for profit on the Forex Market, with traders speculating on the value of international currencies before exchanging one for another.
Opening each day in Australia and closing in New York, Forex operates across international time zones, trading currencies 24/7.
Read on for more on currency trading and the top five Forex traded currencies …

Who trades currencies?

Banks, businesses and individuals each use Forex to trade currencies.

Why trade currencies?

Traders speculate on fluctuations in international currency values to make a profit by trading currencies on the Forex market.
It’s been estimated that 95 per cent of Forex transactions are carried out as a form of profit speculation, while 5 per cent facilitate international
payments and currency conversions in daily commerce.*

Why do Forex currency values fluctuate?

Fluctuations in currency values allow traders to profit by trading one currency for another.
Although currency values tend to fluctuate slightly throughout any given day, international currency values can seriously depreciate or appreciate depending
on a region’s economic and political stability, allowing for significant profits or losses to be made when trading one currency for another.

Trading currencies on the Forex market:

Each Forex transaction involves the purchase of one currency and the simultaneous sale of another.
As such, Forex traders refer to currencies in pairs. A currency pair is made up of the two currencies exchanged
during any one given Forex transaction.
Some currency pairs are traded more often than others on the open Forex market. The seven most traded currency pairings are called major currency pairs,
while other less-common couplings (especially those which don’t feature the USD) are known as cross-currency pairs.
Experts advise new traders to begin trading using the major currency pairs.

The Top 5 Forex traded currencies are:

1. USD
2. EUR
3. JPY
4. GBP
5. AUD

The top 5 Forex traded currencies explained:

The seven most traded currency pairs on the Forex market – the major pairs – are thought to account for 75 to 80 per cent of Forex’s daily trading volume**,
meaning some currencies are traded much more frequently than others.

Each of the top 5 Forex traded currencies is a part of at least one of Forex’s seven major currency pairs.

The US Dollar

The US Dollar is the central currency against which all other currencies are traded. As a result, most Forex transactions involve trading the USD for another
currency.

The Euro
The EUR/USD is the most actively traded Forex currency pair, and by some estimates accounts for 28 per cent of daily Forex trading***.
The Japanese Yen
The JPY/USD is the second most actively traded Forex currency pair, and is thought to account for 13 per cent of daily Forex trading****. JPY/USD is
generally used as the regional currency proxy for China and other Asian countries.
The Great British Pound
The GBP is most commonly traded against the Euro and the US Dollar – the two most traded Forex currencies. The
GBP/USD currency pair is estimated to account for 12 per cent of Forex’s daily trading volume.
The Australian Dollar
The AUD is commonly traded against the USD to comprise one of Forex’s seven major currency pairs, explaining the AUD’s entry as the fifth most traded Forex
currency.
*
**
***
****According to data from the most recent Bank for International Settlements (BIS) survey of current Forex market activity.

By Clint Starr, cashzilla.co.uk

Federal Reserve Chairman Ben Bernanke used this years Economic Symposium to challenge Fed policymakers to “make the difficult choices that are necessary to put the country’s fiscal house in order”. Bernanke also repeated last year’s message that despite record low interest rates and yields on Treasuries, the Fed still has policy tools at its disposal to stimulate the economy.

Unlike last year’s gathering however, Bernanke did not make any specific announcement on the timing of any actions the Fed may have in mind. The only commitment from Bernanke is to say that September’s policy meeting would be extended by a day to allow a “fuller discussion” of the state of the economy.

QEIII On Hold?

In the days leading up to the symposium there was much conjecture on the possibility that the Fed would announce another round of quantitative easing. Bernanke made no mention of kicking off a third program of bond buying to inject more liquidity into the banking system but this option likely remains a matter to be discussed at next month’s meeting.

Investors were no doubt disappointed that today’s address offered no official confirmation of further spending. As a result, markets responded negatively in the aftermath of Bernanke’s comments but by mid-afternoon both the Dow and the Nasdaq were back in positive territory.

Bernanke Challenges Policymakers

In a surprising move, Bernanke directed a considerable part of his speech to the nation’s policymakers including a strong indictment of how Congress dealt with the recent credit ceiling debate.

In what can only be described as a rebuke to Congress, Bernanke urged federal legislators to take the problems facing the economy more seriously. Bernanke practically implored lawmakers to set aside the politics and to act now “to put in place a credible plan for reducing future deficits over the longer term”.

“The negotiations that took place over the summer disrupted financial markets and probably the economy as well,” declared Bernanke. “Similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses.”

This is certainly the strongest language to date for the Fed Chairman and may possibly underscore a growing sense of desperation at the Federal Reserve. It is fine for Bernanke to tout the Fed’s policy tools but these have been tried with limited success. Bernanke now appears to be handing the ball to the fiscal policymakers.

Scott Boyd is a regular contributor for the OANDA MarketPulse FX blog.

Free Report Available Now

By Elliott Wave International

During the past few years, The Federal Reserve has engaged in a “deliberate inflating policy.”

This policy earned disfavor, both at home and abroad.

Robert Prechter said this in the July Elliott Wave Theorist:

“Foreign powers have been irate over the Fed’s deliberate inflating policy. At its outset, QE2 generated ‘a chorus of criticism’ from China, Russia, Japan, Brazil and Germany. It prompted one of China’s three credit rating services to lower its rating on U.S. debt from AA to A+, on the basis that QE2 is a scheme to defraud the Treasury’s creditors.

(Inflation is a scheme to rob everyone.) Whether or not that rating decision was politically motivated, it represents foreign resistance to the Fed’s machinations.”

[Note: The credit rating service in China is not alone in downgrading U.S. debt. History was made August 5 when Standard & Poor’s downgraded the United States’ credit rating from AAA to AA+.]

External resistance to the Fed’s policies is one thing. But the machinations of America’s central bank are also encountering resistance from within the Fed itself, albeit “behind closed doors.” Let’s return to the July Theorist:

It is not just outsiders who criticize the Fed’s policies. Kansas City Federal Reserve Bank President Thomas Hoenig voted against all seven of the Fed’s policy decisions in 2010. He disagreed with QE2 on the basis that it would generate inflation. He went public with his views at a Republican meeting in Washington on December 2. Richmond Fed President Jeffrey Lacker and Philadelphia Fed President Charles Plosser have also expressed concerns. Even Kevin Warsh, at that time a Fed governor-at-large who had never failed to support Bernanke, in a New York speech “warned of ‘significant risks’ associated with the program” (AP, 11/9) and expressed doubt that it would help the economy at all. His op-ed piece for The New York Times “expressed deep skepticism” of the plan. Richard Fisher, president of the Dallas Fed, in a San Antonio speech called QE2 the “wrong medicine” for the economy.

The “wrong medicine” indeed! If anything, the economy seems as unhealthy now as it was before QE2.

In a June 30 CNBC interview, former Fed Chairman Alan Greenspan himself said, “There is no evidence that [the] huge inflow of money into the system basically worked.”

Prechter has extensively studied and written about the Fed for more than a decade. He has “pulled back the curtain” on the nation’s “lender of last resort” and his findings are more relevant today than ever. Prechter’s research is now available in a Free Report titled: Understanding the Fed: How to Protect Yourself from the Common and Misleading Myths About the U.S. Federal Reserve This special free report is now available for you to read by simply joining Club EWI. Membership is also free, and there are no obligations when you join. When you become a Club EWI member, you gain instant access to a wealth of EWI Educational Resources. Get your Free Report about the U.S. Federal Reserve now by following this link for the quick and easy sign-up!

The past week in monetary policy saw 8 central banks reviewing interest rates and monetary policy settings.  Just one bank adjusted its main interest rate, with Thailand adding  +25bps to 3.50%.  Meanwhile the other central banks held interest rates unchanged: Turkey 5.75%, Hungary 6.00%, Namibia 6.00%, Egypt 8.25%, Sierra Leone 23.00%, Denmark 1.55%, and Mexico 4.50%.  Aside from interest rates, the much watched annual Jackson Hole Economic Policy Symposium kicked off, with Ben Bernanke presenting the keynote speech where he stopped short of signalling QE3 but noted that the FOMC is actively considering options, and also talked at length about the role of fiscal policy in maximizing sustainable long term economic growth.

Outlined below are some of the key quotes and comments from the central bankers that reviewed monetary policy settings in the past week:

• Bank of Thailand (increased rate +25bps to 3.50%): “The MPC agreed that the slowdown in advanced economies would partially weigh on Thai exports.  However, expanding  intra-regional trade  in tandem with the continued growth of domestic demand  in Asian economies as well as export diversification to new markets will help mitigate the impact.  Domestic consumption and investment are expected to expand due to favorable employment conditions, improved confidence, robust growth in credit demand, and fiscal stimulus going forward.”
• Banco de Mexico (held rate at 4.50%): “productive activity in Mexico maintains a positive trend, although the rate of growth has lost some momentum,”… and “If the performance of the national economy and international financial markets results in an unnecessary tightening of monetary policy, the Governing Board will reflect on the appropriateness of adjusting it,”
• Danmarks Nationalbank (held rate at 1.55%):  “The interest rate reduction follows Danmarks Nationalbank’s purchase of foreign exchange in the market.  The short euro market rates have fallen and the spread to the equivalent Danish rates has tended to strengthen the Danish krone.”
• Magyar Nemzeti Bank (held rate at 6.00%): “Hungary has also been affected by the decline in global risk appetite due to the euro-area sovereign debt crisis and uncertainty surrounding the outlook for growth in developed countries.  The Monetary Council has decided to leave interest rates unchanged in light of the above considerations.  Over the period ahead, the Council’s interest rate decisions may be influenced by the success of measures to solve the euro-area debt crisis, in addition to expected developments in domestic inflation.” 
• Central Bank of the Republic of Turkey (held rate at 5.75%): “The Committee has agreed that the measures taken at the interim meeting on August 4, 2011 have contained the downside risks for the economy for the time being, and thus decided to keep the policy instruments unchanged at this meeting.  However, given the uncertainties regarding the global economy, it is important to monitor all developments closely, and to deliver the required policy response in a timely manner.  The Committee has also reiterated that all policy instruments may be eased should global economic problems further intensify and the  slowdown in domestic economic activity becomes more pronounced.”

Looking to the central bank calendar, next week should be relatively quiet on the monetary policy front with only two central banks scheduled to meet.  Elsewhere the US Federal Reserve will release the minutes from the 9th of August FOMC meeting on the 29th of August.

• ILS – Israel (Bank of Israel) – expected to hold at 3.25% on the 29th of August
• BRL – Brazil (Banco Central do Brasil) – expected to hold at 12.50% on the 31st of August

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/08/monetary-policy-week-in-review-27.html

The Banco de Mexico maintained its overnight interest rate target unchanged at 4.50%.  In its monetary policy statement the Bank noted: “productive activity in Mexico maintains a positive trend, although the rate of growth has lost some momentum,”… and “If the performance of the national economy and international financial markets results in an unnecessary tightening of monetary policy, the Governing Board will reflect on the appropriateness of adjusting it,”.  Markets took the comments as indicating a possible rate cut, pricing in one 25 basis point rate cut by late 2012, according to Reuters.

Aug. 26 (Bloomberg) — Richard Koo, chief economist at Nomura Research Institute, talks about the outlook for the U.S. economy and Federal Reserve policy. Koo speaks with Deirdre Bolton on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)