Market Rumours

2010/07/16 16:06DJ JGBs Fall On Profit-Taking; US Earnings, Bernanke Remarks Awaited
TOKYO -Long-term Japanese government bonds ended slightly lower as investors tried to lock in profits before Japan's long weekend, but moves were limited due to caution ahead of upcoming events in the U.S. With the U.S. economic outlook being a major market concern recently, JGB players will closely examine soon-to-be-released earnings reports from U.S. financial companies, including Citigroup Inc. (C) and Bank of America Corp. (BAC) due later in the global day, as well as what Federal Reserve Chairman Ben Bernanke has to say at planned testimonies before Congress. 'Market players are especially interested in hearing from Bernanke how serious members were when discussing the necessity to consider further policy actions,' said Nobuto Yamazaki, executive fund manager at DLIBJ Asset Management. The Fed's June meeting minutes, released earlier this week, showed 'the Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably.' That revived additional easing speculation by the Fed and pushed JGB prices sharply higher in the previous session. 'The market is now facing a second wave of yield declines (due to growing expectations for quantitative easing), following the first wave of the Greek debt crisis,' said Tetsuya Miura, chief market analyst at Mizuho Securities. 'Given the fact that the yen is biased upward, JGB yields are likely to test their downsides,' he added. Miura said the benchmark 10-year cash JGB yield could break below 1% by the end of this month. The 10-year yield was up 0.5 basis point at 1.085%, as of 0600 GMT. Analysts also say the Ministry of Finance's sale of Y1.1 trillion worth 20-year bonds on Thursday would also be a touchstone to see how investors view the course of the superlong yields. DLIBJ Asset's Yamazaki said he is concerned about the tender results, as the investor base is very limited in the superlong zone, and domestic life insurers--major players in the zone--may be cautious about the new issue due to an expected low coupon.

2010/07/16 15:01DJ Forex Options: Yen Options Up As Dollar On Brink Of Sharp Decline
TOKYO -Dollar/yen currency options rose on Tokyo Friday on growing speculation that increasing bearishness toward the U.S. economy will prompt investors to push the greenback to the psychologically important Y85.00 in the near term.Currency investors have been actively selling the U.S. unit so far in the global day as they speculate that markets may factor in a possible further easing by the Federal Reserve--a factor negative to the dollar, dealers said.They believe so because U.S. central bank officials were 'surprisingly dovish' in the recently released policy-setting meeting minutes. Weak economic data there has also fueled such thinking, said a senior dealer at a major Japanese bank.That translated into declines for the dollar. As of 0200 GMT, it was at Y87.22, down from Y87.46 in New York Thursday. For the moment, investors will watch for whether the greenback falls below the technical mark of Y86.96. If that is broken, the dollar may fall sharply to Y85.00, a level unseen since November last year.In the options markets, some investors have already purchased hedge contracts to protect against such a slide. As a result, benchmark one-month at-the-money dollar/yen options volatilities increased to 10.95%/11.65% from 10.75%/11.45% in New York Thursday.An options dealer in Tokyo said they may even rise above 12.00% very soon.

2010/07/16 13:57=DJ WORLD FOREX: Yen Hits 2-Week High Vs Dollar As Asia Stocks Fall -3-
TOKYO -The yen hit a two-week high against the dollar and climbed versus the euro in Asia Friday, as a combination of worsening U.S. growth prospects and falling Asian stock markets lifted demand for currencies seen as safe investments. Speculators, led by short-term Asian investors, pushed the U.S. currency down to Y86.97, its lowest since hitting Y86.96 on July 1 and around half a yen down from New York late Thursday. The euro lost about half a yen to an intraday low of Y112.29, giving back some of its overnight gains. The dollar is likely on course to fall to Y85.00 within this month, traders said. That's because its Japanese counterpart is not only strengthening as a safe currency amid a murky global growth outlook but also from multiple dollar-negative factors. Among them are signs of deterioration in the U.S. economy, falling U.S. interest rates and expectations for extended U.S. monetary easing. During Asian hours, the yen drew demand as Japanese stock prices took a hit amid 'anxiety over how much the global economy will slow' along with the U.S. economy, said Satoshi Okagawa, a senior trader at Sumitomo Mitsui Banking Corp. in Singapore. The Nikkei Stock Average index stood down 2.42% at 9451.40 at around 0500 GMT. But Okagawa added that 'we are not in the kind of crisis we've seen recently, such as the one after the collapse of Lehman Brothers or the one related to Greece. This means that things (including yen appreciation) will likely make progress only gradually.' The greenback could drop to Y85.00 for the rest of this month, he said. It is unlikely to strengthen above Y90.00. The euro, meanwhile, stayed steady versus the dollar, and traders attributed it to easing concern over Europe's debt crisis and the health of the continent's banking sector. Okagawa said the common currency could rise to $1.3500 in the coming weeks. The near-term focus of market participants is on U.S. economic data as well as European and U.S. stock markets. The U.S.'s June consumer price index data are due later in the global day. The core index likely rose 0.1% that month, increasing at the same rate as in the previous month, said economists polled by Dow Jones Newswires. Traders will also scrutinize the July University of Michigan preliminary consumer sentiment index slated for release later in the global day, which economists expects will come in at 75, below the previous month's 75.5. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.373, up from 82.555 in New York late Thursday.

2010/07/16 13:41DJ BOJ Keeps Economic Assessment In July Monthly Report
TOKYO -The Bank of Japan kept its economic assessment unchanged for the third straight month in July, as the economy is recovering at the central bank's expected pace on the back of steady exports and a pickup in domestic demand. 'Japan's economy shows further signs of a moderate recovery, induced by an improvement in overseas economic conditions,' the BOJ said in its monthly economic report released Friday. The central bank also restated its optimistic view on the economic outlook, saying, 'Japan's economy is likely to recover at a moderate pace' as the uptrend in exports and production continues and domestic demand could improve further. At a two-day policy board meeting which ended Thursday, the central bank upgraded its growth projections for this fiscal year to a 2.6% expansion from 1.8% forecast three months earlier, while leaving its policy interest rate unchanged at 0.1%. But many analysts say the BOJ could be pressured to take further action as fears grow that sovereign debt concern in Europe may continue to rattle financial markets and drag on the global economy.

2010/07/16 10:32=DJ FOREX VIEW: Goldman Sachs Raises Forecasts For Euro
NEW YORK -Goldman Sachs is officially back in the euro bull camp.After slashing its euro forecasts as recently as June 10, the investment bank has yanked its longer-term forecasts back up, citing a retreat in political and fiscal disruptions in the euro zone and reasonably solid data from the region. Weaker U.S. growth, evidenced by a recent string of disappointing employment, housing and production statistics, will also help the euro rise against the dollar over the next year, Goldman analysts said.The bank now sees the common currency rebounding to $1.35 in six months and $1.38 in 12 months, a significant bump from its June forecast which called for the euro to trade at $1.15 over the three- and six-month time frames and $1.25 over 12 months. The bank maintained its three-month forecast at $1.22, saying it was too early to sound the 'all clear' on the euro.The shift by Goldman, long one of the staunchest euro bulls, represents a catching-up to moves in the foreign exchange market. The euro jumped above $1.29 Thursday for the first time since May 10 after a raft of U.S. data showed an economy inching forward more slowly than expected. The currency has gained over 8.5% since hitting a low of $1.1876 in early June.Fears about sovereign debt risk in the euro zone likely have hit their zenith, said Thomas Stolper, chief currency strategist at Goldman Sachs in London. 'I think we are moving in the right direction,' he said. 'Our view is ultimately, yes, this is all going to get sorted out.'As the situation in Europe stabilizes further over the coming months, expect the common currency to rally, said Mark Tan, a global markets economist at Goldman Sachs in New York. 'Eventually, a more positive outlook on euro-zone fundamentals--relative to the U.S. especially--should make for a stronger euro,' he said.Goldman is optimistic in the longer term because a number of potentially disastrous political and fiscal issues have failed to materialize. Despite debt ratings downgrades, Greece and Portugal have held successful debt auctions, and the European Central Bank rolled over a massive one-year funding program into shorter maturities without much fuss. Threats to Angela Merkel's coalition government in Germany also failed to derail the euro's recent upward momentum.The new forecasts also factor in fairly strong business and consumer sentiment, as well as the potential for the stress tests of European banks, due July 23, to further ease investor anxiety.Against this backdrop, fears about U.S. growth and fiscal health will take the spotlight, said Tan.With the boost from fiscal stimulus measures 'fizzling out,' and unemployment high, he expects a protracted slowdown in the U.S. economy, which will weigh on the dollar.

2010/07/16 09:05=DJ Fed's Lacker: Consumer Spending, Business Investment To Slow
NORFOLK, Va. -Federal Reserve Bank of Richmond President Jeffrey Lacker said Thursday that consumer spending and business investment will slow to a 'pace that is less robust than has been typical of past recoveries.''I would not be surprised to continue see somewhat choppy economic reports for a time,' Lacker said in remarks to business leaders in the Hampton Roads region.The Fed official, however, still believes there will be enough spending and investment to support some growth. In particular, Lacker projected increased spending for business equipment and software this year and beyond, primarily attributable to stable sales in the technology sector.'As a result, there's an array of opportunities to deploy new capital to improve business processes,' he said.Lacker's comments come on the heels of disappointing economic data released this week showing the economy may be faltering.According to minutes from the latest Federal Open Market Committee meeting released Wednesday, officials downgraded their growth outlook, projecting that gross domestic product would expand between 3% and 3.5%.While Lacker isn't a voting member of the interest-rate setting committee this year, he remains influential on some policy decisions.On inflation, barring unforeseen shocks, Lacker anticipates an 'upward drift' in coming quarters.'The stability of inflation implies confidence that the Federal Reserve will act to keep inflation low and stable as the recovery continues and the economy improves,' he said.The Fed has been holding interest rates at around 0%, and Lacker has said he's comfortable with this policy.When the central bank does move to tighten policy, Lacker said it'll be straight forward; sell assets, shrink the Fed's balance sheet and raise the level of short-term interest rates.The problem is acting too soon. 'Recognizing the right time to begin normalizing our monetary policy settings is going to be hard,' Lacker said.He added, 'For my part, I will be looking for the time at which economic growth is strong enough and well enough established to warrant raising our policy rate.'

2010/07/16 05:53=DJ WORLD FOREX: Euro Soars To Two-Month High Vs. Dollar
NEW YORK -The euro soared to a two-month high against the dollar Thursday as easing concerns over euro-zone sovereign debt combined with growing worries that the U.S. economic recovery may be stalling.The common currency rose above $1.29 and targeted the psychologically important $1.30 level. The euro has been on a steady march since hitting a four-year low of $1.1876 in early June.Worries about the euro zone's fiscal crisis have been somewhat allayed by successful debt raisings by Greece, Spain and Portugal. Also, investors are anticipating that stress tests of European banks will paint a picture of a healthy regional financial industry."People are looking at all the measures the Europeans are putting in place," said Chris Turner, head of foreign exchange strategy at ING Financial Markets in London. Those measures have calmed investors, he said.The dollar also fell sharply against other major currencies after data showed a slowing U.S. economy, underlining this week's report by the Federal Reserve that revised growth figures downward."Thursday brought a terrible cross-section of data," said David Semmens, U.S. economist at Standard Chartered Bank in New York. "This clearly points to a slowing in activity and a very weak start" in the U.S. for second half of the year, Semmens said.Thursday afternoon, the euro was at $1.2900, above $1.2735 late Wednesday, according to EBS via CQG. The common currency ticked as high as $1.2918. The dollar was at Y87.46, down from Y88.19, while the euro was at Y112.81, up from Y112.29. The U.K. pound was at $1.5412, up from $1.5261. The dollar was at CHF1.0439, below CHF1.0540.The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.555, down from 83.385 late Wednesday. The index hit its lowest level since May as the dollar flagged against its competitors.To see the euro's performance against the dollar, please see:http://dowjoneswebservices.com/chart/view/4277A lower-than-expected jobless claims number contrasted with the Empire State Manufacturing and Federal Reserve Bank of Philadelphia survey data, which showed that sector continued to expand but at a much slower pace. A falling producer price index should further cement expectations the Federal Reserve would wait until next year before it starts raising ultralow key interest rates, keeping pressure on the dollar.Meanwhile, U.S. industries boosted production in June, but only slightly--a sign the sector that has led the economic recovery is cooling.The minutes from June 22-23 Federal Open Market Committee meeting, released Wednesday, noted a "relatively modest" worsening in the U.S. economic outlook, and said further monetary stimulus could be needed if the economy showed more signs of slowing."The market got the picture that the Fed was less optimistic than it had been," Turner said. "That's really kind of undermined the dollar."But not all higher-yielding currencies benefited from the improved investor sentiment over the euro zone, as worse-than-expected Chinese growth figures weighed on some currencies closely tied to the pace of global growth, such as the Australian dollar, which fell nearly 0.2% against the dollar.Some analysts are skeptical of the euro's rally, noting as the euro gains, investors with antieuro bets have been forced to unwind their positions, squeezing the common currency higher, especially in thin summer markets."The euro appears to be benefiting from a retrenchment in expectations for the U.S.," said Steven Englander, head of G10 strategy at Citigroup in New York. "Nevertheless, the policy response to mitigate the fallout from the sovereign debt crisis still presents a short-term hurdle for the euro," he said.With the ICE Dollar Index weakening, Deutsche Bank's PowerShares U.S. Dollar Index Bearish exchange-traded fund was up 1.09% from late Wednesday, while its PowerShares U.S. Dollar Index Bullish was down 1.2%. The two exchange-traded funds are based on Deutsche Bank currency futures indexes, whose composition mirrors that of the ICE's Dollar Index.