BIGCAPITAL's Blog

December 31, 2010

Estonia Joins Euro Club Currency 2011

Filed under: Uncategorized — bigcapital @ 10:21 am
Tags: , , , , , , , , , , ,

Estonia Joins Euro Club Currency 2011

via Bloomberg.com – Dec 31, 2010

Estonia Joins Euro Club as Currency Expands East Into Former Soviet Union

Estonia tomorrow becomes the first former Soviet republic to join the euro, putting at least a temporary cap on the currency bloc’s expansion as the sovereign debt crisis ripples through Europe.

Wedged between Russia and Latvia on the Baltic Sea, Estonia will at midnight become the 17th country to switch to the currency. Gross domestic product of 14 billion euros ($19 billion) makes it the second smallest euro economy after Malta.

As Europe grapples with the financial crisis, Estonia is likely to be the last addition to the euro club for several years. Lithuania and Latvia, the next in line, are aiming for 2014 and bigger eastern countries have shied away from setting target dates.

“The euro is still generally seen as a positive for the applicant countries as long as the conversion rate is somewhat competitive,” Elisabeth Gruie, an emerging-markets strategist at BNP Paribas SA in London, said in an email. High deficits are keeping Poland out and an “inner desire for independence” is the obstacle in the Czech Republic, she said.

Debt estimated by the European Union at 8 percent of GDP in 2010 will make Estonia the fiscally soundest country in a currency bloc plagued by budget woes that forced Greece and Ireland to fall back on European and International Monetary Fund aid.

Confidence in Euro

“It is a sign of the confidence of Estonia toward the euro, despite the current difficulties, which will be a positive signal to the markets,” Joseph Daul of France, floor leader of center-right parties in the European Parliament, said in an e- mailed statement.

Estonia’s central bank chief, Andres Lipstok, 53, will join the European Central Bank’s policy-setting council, taking part in his first interest-rate vote on Jan. 13 in Frankfurt.

Some 85 million euro coins featuring a map of Estonia and 12 million banknotes go into circulation tomorrow, according to the central bank, starting a two-week phase out of the national currency, the kroon. One euro buys 15.6466 krooni.

The 1.3 million Estonians have little experience of monetary autonomy. In June 1992, less than a year after regaining independence from the Soviet Union, Estonia shifted from the Russian ruble to a national currency that it immediately pegged to the German mark. The exchange rate was locked to the euro when the first 11 countries began using it in 1999.

Source: http://marketpin.blogspot.com/

Rogers: Europe is Doomed…but I’m Still Long The Euro (and Breakfast)

Filed under: Uncategorized — bigcapital @ 9:30 am
Tags: , , , , , , , , , , ,

 

Rogers: Europe is Doomed…but I’m Still Long The Euro (and Breakfast)

Via CNBC Television – December 2010

 

http://plus.cnbc.com/rssvideosearch/action/player/id/1687065072/code/cnbcplayershare

I’ve never brought a guest such an elaborate breakfast- but when legendary investor Jim Rogers wants to come on my show- I go all out. Truth be told, it wasn’t entirely Suzy Anchorwoman of me—it was secretly a good jumping off point for his favorite topic these days- inflation.

“Have you tried to buy any cotton recently? Have you tried to buy any sugar recently?” he said pointing down to the spread in front of him.

Co-hosting with me this morning on “Worldwide Exchange” over a breakfast of Diet Coke, candy and bagels, CEO of Rogers Holdings Jim Rogers was as usual all about commodities as an inflation hedge: the sugar he adores along with gold and silver

“Prices are going up. I don’t know who these guys are who say prices are not going up. I look in the real world, and I see what’s happening. And everybody watching this show knows that prices are going up.”

Knowing Rogers’ vehement opposition to printing money (he said in a recent interview that Fed chairman Bernanke is “a disaster” and that “all he understands is printing money”), I asked him about the rumors that there would be more money printing in QE3 and QE4.

“I know there’s talk of it. It’s dumbfounding,” he said. “It’s stupefying to me that we have a Central Bank in the United States that thinks all they have to do is print money. That has never worked, anywhere in the world in the long term or the medium term.

He added that US central bankers see printing money as an easy solution, “Because that’s all they know.”

On the other hand, he said that the Central Bank’s current policy of printing money is “not good for the world, but at least they’re not raising taxes.”

So he’s staying far away from debt, saying it’s all overpriced and sticking his beloved commodities along with currencies.

“I own the Euro, I’m long the Euro, and I’m staying with it,” he said even though he knows Europe is doomed.

“You need to let Ireland go bankrupt,” he told me. “They are bankrupt. Why should innocent Germans, or innocent Poles, or innocent anybody pay for mistakes made by Irish politicians and Irish banks? That is unbelievably bad morality and it’s bad economics as well.”

“Let the bank’s shareholders lose money. Let the bank bondholders lose money. Let Ireland reorganize and start over. That’s the only thing that’s going to work. Propping people up and carrying lots of zombie banks and zombie companies is not going to work.”

“Greece is insolvent, Portugal has a liquidity problem, Spain has a liquidity problem, Belgium has been faking the books for a long time, Italy’s been faking the books for a long time. The UK is totally insolvent,” he said.

EUR/CHF hits another fresh all-time low after having earlier dropped to a series of all-time lows. Pair dips as low as 1.2678 from 1.2785 late Friday, according to EBS via CQG. Investors pressuring EUR over continued worries over the region’s sovereign debt. SNB not likely to step in to stem CHF strength, says Landesbank Baden-Wurttemberg’s Martin Guth, noting he would expect the Swiss central bank to stay on the sidelines at least until the pair drops to 1.25. “So far, especially [in] last month’s interest rate decision, in my opinion they didn’t give any hints that they are about to intervene,” he says.

UBS, Switzerland’s largest bank, is one of the biggest financial institutions in the world said : “No Sharp Decline In Global Risk Appetite”; – The Eurozone sovereign debt crisis remains contained, and has not yet leaked out to affect emerging market currencies and risk appetite more broadly, said UBS, judging on the basis of its own flow data from lat week. “There was no sign of the broad-based and indiscriminate selling that would be associated with a sharp decline in global risk appetite,” it said in a note to clients.

December 22, 2010

Moody’s Sees No Europe Defaults

 

MOODY’s SEES NO EUROPE DEFAULTS

LONDON –The euro zone “retains significant financial strength” and has the “resources, incentives, and political cohesion” needed to contain the sovereign debt crisis, Moody’s Investors Service Inc. said Tuesday.

“We believe that policymakers have sufficient resources and will use them as necessary to restore financial stability,” the ratings agency said in a report.

Moody’s said that all its euro-zone sovereign ratings with the exception of Greece are investment grade, reflecting its view that “the risk of a euro-zone sovereign default is very small.”

Beginning late October, euro zone sovereign bond markets have experienced a second wave of volatility this year, on worries about the health of sovereign borrowers and about proposals for a post-2013 crisis resolution mechanism that could penalize private lenders.

This prompted the European Central Bank to step up purchases of bonds issued by peripheral euro-zone members under its Securities Market Program.

Germany has resisted some ideas floated to deal with the crisis, such as increasing the size of European Financial Stability Facility, or issuing common euro-zone bonds.

Moody’s Investors Service said it doesn’t foresee defaults or maturity extensions on euro-area debt because the region will likely backstop weaker members, and reiterated that Portugal will likely stay investment-grade.

“Moody’s base-case scenario remains that over the medium term, no euro-zone country will suffer a payment default or otherwise impose losses on private-sector lenders through maturity extensions or other forms of distressed exchange,” the company said in a report today. “The collective willingness of the euro zone to support weaker members through the provision of liquidity will remain an important element of investor protection.”

 Its euro-zone sovereign ratings “reflect a range of factors including high intrinsic economic and financial strength and ready access to financial resources,” including those made available by other euro-zone members, Moody’s said.

FED EXTENDS DOLLAR LOAN PROGRAM WITH FOREIGN BANKS

WASHINGTON — The Federal Reserve on Tuesday extended a program set up during the European debt crisis to make it easier for foreign central banks to get access to U.S. currency to distribute to commercial lenders.

The Federal Open Market Committee said it’s extending, through Aug. 1, its U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the European Central Bank, the Bank of Japan and the Swiss National Bank.

The swap arrangements, established in May, had been authorized through January.

Back in May, money markets were rattled by the strains in Greece, which subsequently received 110 billion euros of assistance through the International Monetary Fund and euro-zone nations. Since then, a similar package was arranged for Ireland, and there are worries that Spain and Portugal could need them as well.

The swap lines with the European Central Bank, the Bank of England, the Swiss National Bank and the the Bank of Japan will enable the central banks to conduct tenders of U.S. dollars in their local markets at fixed local rates for full allotment, similar to arrangements that had been in place previously, according to the Fed.

As the world’s reserve currency, the dollar is highly sought after outside the United States to settle trades — in commodity markets, for example.

 They are designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets, the Fed said.

“It is a bond-bullish recognition that back-up liquidity facilities are still warranted in the current environment,” said analysts at CRT Capital.

November 30, 2010

Estonia On Final Countdown To Euro Adoption

Filed under: Uncategorized — bigcapital @ 8:37 pm
Tags: , , , , , ,

Estonia on final countdown to euro adoption

 

With only one and a half month to go before the introduction of the euro in Estonia, the Commission today assessed the state of its practical preparations for the changeover. The Commission concluded that Estonia’s preparations are well advanced, while recommending further efforts in some areas during the final phase of the changeover. Estonia will be the 17th member of the euro area and will bring to 330 million the number of people in the European Union who share the single currency.

 

The Commission today adopted the eleventh regular ‘Report on the practical preparations for the enlargement of the euro area’. It focuses on Estonia, which will adopt the single currency on 1 January 2011.

 

“I am looking forward to welcoming Estonia in the euro area in January. The preparations in the financial sector are well advanced and the authorities are informing the public about the euro. I am confident everything will go well and I am convinced that Estonia will continue to pursue the stable and sound budgetary and macro-economic policies that will enable it to take full advantage of the euro”, said Olli Rehn, European Commissioner for Economic and Monetary Affairs.

 

Estonia has ordered around 45 million banknotes and 194 million coins to introduce the euro in cash. The banknotes will be borrowed from a National Central Bank in the euro area (Finland), in line with the practice in the recent changeovers. The euro coins are provided by the Mint of Finland following a public tender procedure.

 

The Central Bank of Estonia will start providing euro banknotes to commercial banks (so-called frontloading) in mid-November. The frontloading of euro coins started already in mid-September. As from 1 December 2010, all those retailers and businesses that have signed a specific contract with their bank will also be provided with euro cash. . All professional euro cash transports will be assured with the highest security.

 

As from 1 December 2010, 600,000 ‘euro coin mini-kits’ will be on sale at banks and post offices for people to by them in advance of the changeover. They will also be able to exchange their kroon cash holdings free of charge at the official conversion rate (1 EUR= 15.6466 EEK).

 

During the first two weeks of the changeover, Estonian kroons and euro will circulate in alongside each other. . Shops are however expected to give change in euro only whenever possible. This is important in order to speed up the changeover and reduce the cost of having to handle two currencies simultaneously.

 

In order to address consumers’ concerns about price increases and abusive practices in the changeover period, a Fair Pricing Agreement was launched at the end of August. The subscribers to the Agreement (e.g. retailers, financial institutions, local governments, internet shops etc) commit not to increase their prices without justification during the changeover to the euro and to respect the changeover rules. This is a very important initiative and special attention should be paid to improve its coverage, especially among small and medium-sized companies.

 

According to the latest Eurobarometer survey, carried out in September 2010, there has been an important income in the degree to which respondents in Estonia feel informed about the euro in comparison with May 2010, with 65% now feeling well informed (+15pp). This is encouraging, but efforts need to be pursued in order to reach all Estonian residents, in particular vulnerable groups, in time with the necessary information.

 

A staff working document attached to the report looks at the state of preparations in the other Member States that have not yet introduced the euro (except UK and Denmark that have a formal opt-out from the single currency)

 

=Estonia at a glance=

 

Estonia joined the European Union in 2004 and will adopt the euro on 1 January 2011

Surface area: 45 230 km2
Population: 1 340 341(Eurostat 2009)
Joined the European Union: 1 May 2004
Currency: kroon (EEK). Euro as of 1 January 2011

 

=Euro information=

Status: As of 1 January 2011, Estonia will be a member of the euro area. The kroon joined the Exchange Rate Mechanism (ERM II) on 28 June 2004 and observed a central rate of 15.6466 to the euro with standard fluctuation margins of ±15%. On 13 July 2010 the Council gave its green light to the adoption of the euro by Estonia on 1 January 2011.

 

Fixed conversion rate: €1 = 15.6466 Estonian kroonid

 

Adoption of the euro: Estonia will adopt the euo as of 1 January 2011

 

INFO : http://baltic-review.com/2010/11/12/estonia-on-final-countdown-to-euro-adoption/

 

Sent from BlackBerry® NEWS

November 19, 2010

Bernanke Fires Back At Criticism About Fed Easy Money Policies

Filed under: Uncategorized — bigcapital @ 1:01 pm
Tags: , , , , , , ,

Bernanke Fires Back At Criticism About Fed Easy Money Policies

WASHINGTON (Dow Jones)–Federal Reserve Chairman Ben Bernanke fired back at criticism from home and abroad that his easy money policies are designed to cheapen the U.S. dollar, arguing China and other emerging economies are causing problems for themselves and the rest of the world by preventing their currencies from strengthening as their economies grow.

By keeping their currencies artificially low, Bernanke argued in remarks prepared for delivery in Frankfurt Friday, China and some other emerging markets are allowing their economies to overheat and are producing what he called “a two-speed…recovery” that isn’t sustainable. Their “strategy of currency undervaluation,” he warned, had “important drawbacks” for them and the world economy.

Bernanke has come under attack for deciding to buy $600 billion in U.S. Treasury bonds in an effort to drive down long-term interest rates. Critics in the U.S say it could cause inflation. Those abroad say the flood of dollars that the Fed is effectively printing to finance the purchases is causing investors to pour money into overseas economies and could cause asset bubbles. Some have accused the Fed of trying to weaken the dollar to spur U.S. exports.

Bernanke countered that argument, saying the Fed’s policies are aimed at strengthening the U.S. economy, which in turn should benefit the U.S. dollar.

The Fed chief underlined that the U.S. dollar’s status as a safe haven during times of financial market turmoil, such as Europe’s debt crisis earlier this year, stems from the underlying strength and stability the U.S. economy has shown over the years. The fact that when global investors get nervous, they prefer the U.S. dollar to any other currency is a good thing which the U.S. wants to maintain, Bernanke signaled.

“Fully aware of the important role that the dollar plays in the international monetary and financial system, the (Fed) believes that the best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States.”

Bernanke effectively acknowledged the U.S. currency does need to weaken against currencies in emerging markets because their economies are growing so much faster than economies in the developed world.

“The exchange rate adjustment is incomplete, in part, because the authorities in some emerging market economies have intervened in foreign exchange markets to prevent or slow the appreciation of their currencies,” the former Princeton professor said.

Though scholarly in tone, the Fed chairman’s message was unusually blunt in laying blame for inflationary pressures in emerging markets and tensions over currencies on countries like China.

“Why have officials in many emerging markets leaned against appreciation of their currencies toward levels more consistent with market fundamentals?” he asked. Mainly because they believe that will spur exports and boost growth, he said, but that strategy is threatening global growth.

Central banks in many countries intervene in currency markets to manage exchange rates. As dollars flood into their economies from exports, the central banks hold on to the dollars and use them to purchase assets like U.S. Treasury bonds rather than converting them into back into their domestic currencies, which would make those currencies rise in value. Bernanke noted that by selling so much yuan in exchange for dollars to keep the yuan low, China has accumulated a massive $2.6 trillion stock of U.S. dollars assets.

Countries like China that keep their currencies undervalued could face important costs at home, including a reduced ability to use monetary policies to stabilize their economies and the risks associated with excessive or volatile capital inflows. Some economists fear inflation could take off in China’s over-heating economy, or a property bubble may be developing.

Bernanke also tried to respond to domestic critics of the Fed’s recent move, laying out a case that unemployment could keep rising without action by the central bank and that inflation was too low and could fall further.

Though critics say inflation could soar because of the Fed’s actions, Bernanke said he was committed to keeping inflation at around 2%. It is now around 1%, by the Fed’s preferred measures, which strip out food and energy prices.

“On its current economic trajectory the United States runs the risk of seeing millions of workers unemployed or underemployed for years,” Bernanke warned. “As a society, we should find that outcome unacceptable.”

Bernanke got one voice of support from an important internal skeptic Thursday. Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said in comments in Chicago, that he supported the Fed’s easing program. He had expressed some skepticism about its need and effectiveness in the past, but described the program Thursday as “a move in the right direct” though he added he didn’t think it was a cure-all for the U.S. economy, a point that Bernanke echoed in his Frankfurt comments.

(END) Newswires

November 18, 2010 21:00 ET (02:00 GMT)

A web front page of today’s most important business and market news, analysis and commentary

November 13, 2010

Peru Central Bank May Raise 2010 GDP Growth Forecast To Over 8%

Filed under: Uncategorized — bigcapital @ 8:35 pm
Tags: , ,

 

Peru Central Bank May Raise 2010 GDP Growth Forecast To Over 8%

 

 

LIMA (Dow Jones)–The Central Reserve Bank of Peru could increase its official economic growth forecast for 2010 to more than 8.0%, the bank’s chief economist said Friday.

 

During a conference call with journalists, Adrian Armas said there was “a possibility” of an upward revision from its current official forecast of 8.0% for 2010 in the bank’s next official report due out in December.

 

Armas also explained that the central bank’s decision Thursday

 

-The Wall Street JournaL-Saturday, November 13, 2010 As of 3:41 AM (GMT +8 hours)

October 21, 2010

Australian Dollar Pullback Will Be Buying Opportunity, ING Says

Filed under: Uncategorized — bigcapital @ 6:23 am
Tags: , , , , , , ,

Australian Dollar Pullback Will Be Buying Opportunity, ING Says

 

Australia’s dollar may fall to the low 90 U.S. cent level if the Federal Reserve disappoints investors looking for extra monetary stimulus, presenting an opportunity to buy the Aussie, ING Investment Management said.

A decline in Australia’s currency will enable investors to “reset” wagers on its longer-term appreciation, said Mark Robertson, a senior portfolio manager at the unit of the biggest Dutch financial services company. Fed policy makers will announce roughly $500 billion of Treasury purchases at their next meeting on Nov. 2-3, and indicate they are ready to buy more, Goldman Sachs Group Inc. said last week.

“There is a lot of expectation built into what the Fed’s going to do so it wouldn’t be surprising to see some near-term U.S. dollar strength on perhaps a winding back of some of those expectations,” said Robertson, who helps oversee the equivalent of $19 billion as part of a multi-strategies group in Sydney. A pullback in the Aussie “would be an opportunity to reset the portfolio with a little more Aussie dollar exposure,” he said.

ING Investment has been “overweight” the Australian currency since August, said Robertson, who forecasts it may strengthen to $1.10 over the next 12 to 18 months.

The Australian dollar, which briefly rose above parity with the U.S. dollar on Oct. 15, traded at 97.11 U.S. cents as of 11:35 a.m. in Sydney from 96.86 cents in New York yesterday. The currency has gained 9.9 percent in the past three months.

Fed Purchases

The U.S. dollar has dropped against all 16 of its most- traded counterparts in the past quarter amid mounting speculation the Fed will expand a program to purchase Treasuries. The central bank completed purchases of about $1.7 trillion of U.S. debt in March.

Chicago Fed President Charles Evans said yesterday the central bank will need to buy securities on a large scale several times to carry out his preferred strategy of aiming to raise inflation temporarily. Additional Treasury purchases can lower long-term interest rates, he said.

“There’s still going to be a very large and sustained increase in the amount of U.S. dollars in circulation, which has to be Aussie dollar positive,” Robertson said. “The Aussie is a bit like the price of gold, you don’t know how high it’s going to go but you just know it’s going higher.”

Gold rose to a record $1,387.35 an ounce on Oct. 14. The metal will average $1,400 next year, UBS AG analysts wrote in a report Oct. 18, increasing their forecast from $1,295.

China Rates

Australia’s dollar slid the most since June yesterday after China unexpectedly raised interest rates, sparking concern slowing growth in the Asian nation will damp demand for commodities. Australia, which is the largest shipper of iron ore and coal, counts China as its biggest trading partner.

“The rate hike will no doubt be a short-term negative for local and regional equity markets as it was slightly unexpected,” Robertson said. “The intentions behind the move should be seen as supportive of sustainable growth for China over the long term.”

Robertson forecasts that Australia’s benchmark interest rates will rise toward 5 and 5.5 percent over the next 12 months. Governor Glenn Stevens raised the key rate six times beginning October 2009 before beginning a five-month pause in June.

Analyst picks long-term strength

AMP Capital Investors chief economist Shane Oliver says while the Australian dollar is vulnerable to a correction, after rising so quickly since August, it is likely to hold around the parity level for the “next few years”, due to the strength of the economy and strong commodity prices.

“While the high $A will make life tough for trade exposed companies without a natural hedge, on balance it is more of a positive for the Australian economy. It is unambiguously positive for consumers and will help limit the extent to which interest rates have to rise,” Mr Oliver said.

Charts suggest the local currency could rise as high as $US1.0236 in coming weeks, the 161.8 per cent Fibonacci projection level of the currency’s fall between November 2009 and May 2010.

The Australian dollar has been the strongest major currency since the country skirted through the global financial crisis without falling into recession. In fact, its economy picked up steam, and the currency has surged 66 per cent since touching a low of $US0.6007 in October 2008.

Unlike other countries griping about excessive currency strength against a sliding dollar, Australia’s central bank has considered a stronger currency a natural outcome of the country’s booming resources trade and a tool for fighting inflation.

Travellers uncertain

Travellers at Sydney International Airport, who were heading on holidays on Saturday afternoon and those returning home to the US, expressed their surprise, delight and indifference to AAP.

Friends Helen Foulis and Debra Thorsen – who were flying to San Francisco, Las Vegas and New York for a two-week break – said the strong Aussie dollar was encouraging for their shopping trips.

“The shopping trips are going to be mega,” Ms Foulis said.

“Same for me, I’m going shopping for clothes, shoes, jeans,” Ms Thorsen said.

Christine Chong, who planned to visit friends and family in Los Angles, said the historic parity didn’t make much of a different to her.

“If you’re going to travel, you’ll travel,” she said.

“I don’t spend much anyway so it doesn’t make a difference.”

American business traveller Chris Phipps said the two currencies had been close for a long time.

“Being parity is like being at home and I’m going to spend the normal way,” he said.

October 12, 2010

Emerging Market Equity Fund Inflows Exceed $6 Billion in Week, EPFR Says

Filed under: Uncategorized — bigcapital @ 3:52 pm
Tags: , , , , ,

Emerging Market Equity Fund Inflows Exceed $6 Billion in Week, EPFR Says

Overseas investors pumped the most cash into emerging-market equities since late 2007 in October and Asia bond funds attracted more capital on further signs growth in developed nations is slowing, according to EPFR Global.

The equity funds received net inflows of more than $6 billion in the week ended Oct. 6, the biggest amount in 33 months, the Cambridge, Massachusetts-based research company said in an e-mailed statement. Investors added $1.1 billion to funds dedicated to emerging-market debt, it said. They took out $3.2 billion from U.S. stock funds, the most in five weeks.

Inflows are breaking records since EPFR started tracking the data in 1995 on speculation central banks will join Japan’s monetary easing, releasing more capital that can be invested in higher-yielding assets. The Bank of Japan cut its benchmark interest rate to near-zero on Oct. 5, while the European Central Bank yesterday left borrowing costs at 1 percent, unchanged since May 2009.

“Liquidity is really ample, driving equities higher,’ said Chu Moon Sung, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages about $28 billion. Rate policies “should continue to boost asset prices and money inflows into emerging countries will continue.”

Create a free website or blog at WordPress.com.