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March 10, 2011

3 Months From Now, US Fed Will Stop Buying

Filed under: Uncategorized — bigcapital @ 5:43 pm
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3 Months from now, US Fed Will Stop Buying.

Thursday, March 10, 2011 — http://marketpin.blogspot.com

== US Fed bond buys to finish, greenback and global stocks on radar ==

Fed’s Fisher warns could vote to stop bond buying

WASHINGTON (Reuters) – A senior U.S. Federal Reserve official warned on Monday that he would vote to scale back or stop the central bank’s $600 billion bond-buying program if it proves to be “demonstrably counterproductive.”

Dallas Federal Reserve Bank President Richard Fisher, who has repeatedly said he would not support any more bond buying after the program ends in June, said he was doubtful the purchases were doing much good.

“I remain doubtful enough as to its efficacy that if at any time between now and June, it should prove demonstrably counterproductive, I will vote to curtail or perhaps discontinue it,” Fisher said in remarks prepared for delivery to an Institute of International Bankers’ conference in Washington.

“The liquidity tanks are full, if not brimming over. The Fed has done its job,” he said.

The Fed launched its bond buying program in November to help an economic recovery that was struggling with high unemployment after the worst recession since the 1930s.

But since then, the economy has shown signs of strengthening with the jobless rate falling to a nearly two-year low of 8.9 percent in February.

Fed officials are due to meet March 15 to discuss the bond purchase program. In January, Fisher voted with the rest of the central bank’s policy-setting Federal Open Market Committee to continue it.

In comments to the bankers’ conference, Fisher said he did not feel that further monetary accommodation would help put more Americans back to work.

“It might well retard job creation, should it give rise to inflationary expectations,” he said, adding that perhaps the Fed’s policy has compromised the central bank by implying it is “a pliant accomplice to Congress’ and the executive branch’s fiscal misfeasance.”

== How About U.S dollar ? ==

Stretching out Treasury purchases past the end of June while reducing the monthly amount would help bond dealers adjust to the Fed’s withdrawal from the market, said Lou Crandall, chief US economist at Wrightson ICAP in Jersey City, N.J

NEW YORK – The Federal Reserve’s $US600 billion bond purchase program will be completed as planned, top Fed officials signalled, though they saw heightened economic uncertainty from unrest in the Middle East.

US central bank officials from Atlanta, Chicago and Dallas said they were keeping an eye on the risk higher oil prices could feed through into broader inflation, as well as their potential to hurt growth.

Atlanta Fed President Dennis Lockhart said he would not rule out more bond buys if the recovery dwindles. Dallas Fed President Richard Fisher said he would vote to end the program early if higher oil prices fed into broader inflation.

The program, announced in November to bolster a fragile economic recovery, is due to end in June. Since it began there have been signs the recovery is picking up steam.

Mr Lockhart, a policy centrist, said he was more concerned about the risk to growth from the oil price rise. He said he would be “very cautious” about increasing the size of the purchase program.

“Given the emergence of new risks, however, I prefer a posture of flexibility,” Mr Lockhart said.

He expected overall price pressures to remain subdued and warned it is too early to “declare a jobs recovery as firmly established”.

Mr Fisher, an inflation hawk, said he “fully expected” the $US600 billion program to “run its course.”

Mr Fisher told an international bankers’ conference he would vote to curtail or stop the program, however, if it proves to be “demonstrably counterproductive.”

The Fed meets on March 15 for its policy-setting meeting, at which it is expected to reaffirm its purchase plan. Fisher is a voter on monetary policy this year, Mr Lockhart is not.

In a CNBC interview, Chicago Fed Bank President Charles Evans said the Fed was closely watching rising oil prices, adding that they were “obviously” a headwind for growth.

Revolutions beginning in Tunisia and Egypt have spread to other countries in the region, including Libya and Bahrain. This has pushed the price of oil above $US100 a barrel, complicating the Fed’s objective of stimulating economic growth while keeping prices under control.

That said, Mr Evans pointed to the improving job market and said he expected economic growth of four per cent this year and next. He called the size of the purchase program “good”.

“I continue to think the hurdle is pretty high for altering our currently announced” program, Mr Evans, seen as a monetary policy dove and one of the most outspoken proponents for quantitative easing, said. Mr Evans does not have a vote on monetary policy this year.

Mr Fisher said the question will be whether the oil price rise is sustained.

“It is really a question of how that works its way through,” he said. “We have already seen very high gasoline prices. That’s one of the ways that it most affects the consumer.”

http://marketpin.blogspot.com

February 3, 2011

Euro Is Still Not Out Of Dangers Zone

Filed under: Uncategorized — bigcapital @ 5:43 am
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Euro Is Still Not Out Of Dangers Zone

February 02, 2011 – http://marketpin.blogspot.com/

 

NEW YORK (Market News)– The European Central Bank has become more political since its decision to buy euro-zone government bonds last year, and is therefore unlikely to raise interest rates early even if inflation surges, according to Commerzbank chief economist Joerg Kraemer. “Even if inflation moves towards 3%, the ECB is still unlikely to raise rates until the fourth quarter [of this year]” Kraemer says

EUR/USD is “teetering” lower on profit-taking, strong U.S. data and concerns about further turmoil in Egypt, says HiFX senior trader Stuart Ive. “The markets are still preoccupied with Egypt to a degree especially after (Egypt’s President) Mubarak supporters protested after his speech yesterday.”

The euro fell from the near three-month high against the dollar it reached earlier Wednesday, as social unrest in Egypt combined with the euro zone’s ongoing debt crisis to inject some caution into bullish traders.

Boiling instability in Egypt tempered a revival in an appetite for riskier investments, as violence erupted between antigovernment forces and supporters of embattled President Hosni Mubarak. Nervous investors bought dollars as a haven, pulling the U.S. currency up from its weakest level against the euro since early November.

Developments in Europe’s debt crisis also doused some of the market’s enthusiasm for the euro, reminding traders that the euro zone’s woes have not disappeared.

German Deputy Finance Minister Joerg Asmussen rejected the idea of creating a euro-zone bond, reiterating that any revisions to the existing euro-zone fiscal rescue facility will likely require fiscal concessions from euro-zone governments. Elsewhere, ratings agency Standard & Poor’s lowered its assessment of six Irish banks and placed them on watch for further downgrades.

“People are watching with one eye what’s going on in the streets in Cairo, and it’s causing second thoughts about” taking the euro higher, said Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J.

Risk aversion coalesced with fears that the process for resolving Europe’s debt issues could turn “sloppy,” Dolan added. “There’s a question of some further [euro] weakness as the move-up stalls and some people head for the exits.”

The euro slipped to new U.S. session lows underneath $1.3780, below its offshore trading high at $1.3862. Against the yen, the euro purchased Y112.72, slightly higher on the day. Meanwhile, the dollar bought Y81.80, up slightly from Tuesday.

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

February 02, 2011

December 31, 2010

Estonia Joins Euro Club Currency 2011

Filed under: Uncategorized — bigcapital @ 10:21 am
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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/

October 21, 2010

Australian Dollar Pullback Will Be Buying Opportunity, ING Says

Filed under: Uncategorized — bigcapital @ 6:23 am
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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.

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