2010/08/17 18:36DJ Japan PM: Want To Continue Necessary Communication With BOJ -Kyodo
TOKYO -Japanese Prime Minister Naoto Kan said Tuesday that he wants to continue yen-related discussions with Bank of Japan Gov. Masaaki Shirakawa, Kyodo News reported. 'Just as up to now, I want to continue necessary communication with the BOJ' on measures to deal with the rising yen, Kan said, according to the report.
2010/08/17 18:31*DJ 3-Month Sterling Libor Falls To 0.72850% Vs 0.73% Monday
2010/08/17 18:30*DJ 3-Month USD Libor Falls To 0.35219% Vs 0.36188% Monday
2010/08/17 18:29*DJ 3-Month Euro Libor Rises To 0.83406% Vs 0.83188% Monday
2010/08/17 18:15*DJ German Econ Ministry: Forecasts To Be Revised Strongly Upward
2010/08/17 18:14*DJ German Econ Ministry Expects GDP Expansion For Coming Months
2010/08/17 18:09*DJ German Econ Ministry: Exports Remain Main Support
2010/08/17 17:33*DJ BOE King: Stand Ready To Expand Or Reduce Monetary Stimulus
2010/08/17 17:26=DJ DATA SNAP: German ZEW August Survey Weaker Than Expected
MANNHEIM, Germany -Expectations for Germany's economy fell in August, according to a closely-watched survey published Tuesday by the ZEW economic research institute. ZEW said its economic expectations index fell to 14.0 in August, from 21.2 points in July. The outcome was well below economists' forecasts of an unchanged reading of 21.2 points. 'The current decrease of the economic sentiment indicates that the enormous growth observed in the second quarter is unlikely to continue,' ZEW said. It said that the export-heavy structure of the German economy leaves it exposed to a slowdown in the global economy, evidence for which has mounted in recent weeks. The report is in line with other forecasts Germany, the largest economy in Europe, will slow down in the second half of the year after posting its fastest rate of growth in 20 years in the second quarter. The Federal Statistics Office Destatis reported last Friday that German gross domestic product, which measures the total value of goods and services in an economy, grew by 2.2% in the second quarter, fuelled by a boom in export orders, and also supported by business investment. The extremely buoyant spring and summer were reflected in the strongest ever monthly rise in the sub-index that tracks current conditions. This rose to 44.3 from 14.6 in July. ZEW Web Site: http://www.zew.de
2010/08/17 17:01*DJ German Aug ZEW Econ Expectations Forecast At 21.2
2010/08/17 17:00*DJ German Aug ZEW Econ Expectations 14.0 Vs 21.2 In Jul
2010/08/17 17:00*DJ German ZEW Aug Current Conditions 44.3 Vs 14.6 In Jul
2010/08/17 16:55=DJ DATA SNAP: UK Inflation Rate Dips In Line With Expectations
LONDON -U.K. inflation slowed as expected in July in a sign that the rate of price growth is gradually falling back towards the Bank of England's target, official data showed Tuesday. However, the annual rate still obliged the BOE Governor Mervyn King to write another letter to the Chancellor of the Exchequer George Osborne explaining why it is more than one percentage point away from the bank's 2.0% target. The annual inflation rate dipped to 3.1% in July from 3.2% in June, the ONS said. That's in line with the market consensus estimate from a Dow Jones Newswires survey of economists last week. On a monthly basis, the consumer price index fell 0.2% in July after a 0.1% rise in the June. Economists were expecting a 0.1% drop in July. There are signs that underlying inflationary pressures are easing. Core inflation, which excludes volatile energy, food, alcohol and tobacco prices, slowed to 2.6% on the year in July from 3.1% in June, the lowest level since November last year, the ONS said. The BOE said last week that it expected inflation to remain above target for all of next year, then fall below target in early 2012 and stay under that level until mid-2013. Economists expect the central bank to maintain its ultra-loose monetary policy for some months to come, but there have been concerns that if the rate of price growth remained stubbornly high it could push up public inflation expectations, resulting in higher consumer prices. Andrew Sentance, a member of the BOE's interest rate-setting Monetary Policy Committee, voted in June and July to raise interest rates to dampen inflation pressures, although economists don't expect his view to garner much support in the near-term. Earlier this month the BOE kept its benchmark interest rate at a record low of 0.5%, where it been since March last year, and left its bond-buying program unchanged at GBP200 billion Aug. 5. ONS Web site: www.ons.gov.uk
2010/08/17 16:47*DJ Japan PM: To Discuss Additional Ecomonic Steps With 3 Ministers
2010/08/17 16:46=DJ DATA SNAP: Euro-Zone June Current Account Deficit Narrows
BERLIN -The current account deficit of the euro area narrowed slightly in June, the European Central Bank said Tuesday, amid a rise in exports. Exports rose 1.4% from May to EUR134.0 billion. The current account deficit narrowed to EUR4.6 billion from the EUR7.4 billion deficit in May, due to deficits in income and in current transfers which were partly offset by surpluses in goods and services, the ECB said. Over the 12 months through June, the cumulative current account deficit was EUR45.1 billion, or some 0.5% of euro-area gross domestic product. On the financial account, the ECB said the euro area recorded net portfolio inflows of EUR3.2 billion, due largely to inflows of EUR15.9 billion in equity investment. However, there was an outflow in debt securities solely due to an outflow in money market instruments of EUR17.4 billion while there was an EUR4.7 billion inflow in purchases of bonds and notes. Website: http://www.ecb.int
2010/08/17 16:32*DJ UK Jul Core CPI Was -0.4% On Month; +2.6% On Year
2010/08/17 16:32*DJ UK Jul RPI Was Forecast -0.3% On Month; +4.7% On Year
2010/08/17 16:31*DJ UK Jul RPI -0.2% On Month; +4.8% On Year
2010/08/17 16:30*DJ UK Jul CPI Was Forecast -0.1% On Month; +3.1% On Year
2010/08/17 16:30*DJ UK Jul CPI -0.2% On Month; +3.1% On Year
2010/08/17 16:19=DJ Forex Focus: Why The Dollar Should Rise Some More
LONDON -Confidence in the dollar should be growing. Over the last week, the risks of U.S. deflation have receded. On the other hand, the outlook for the Japanese economy has deteriorated and hopes for an early end to the euro zone's debt crisis appear to have been too high. In other words, the attraction of the U.S. currency should continue to rise. See how the euro has started to slide against the dollar this month: http://www.dowjoneswebservices.com/chart/view/4433 Let's look at the U.S. itself. The economic recovery there remains fragile, as reflected in the Fed's decision to sustain market liquidity levels for now and remain on guard to extend quantitative easing if needed. However, gentle improvements in consumer confidence, a rebound in retail sales and even the latest consumer price figures suggest that the recovery may not be stalling quite as badly as many feared. In fact, inflation numbers last Friday suggested there has been little increase in deflation pressure over the last month and the need for more quantitative easing is that much less likely. This slightly more robust view of the U.S. contrasts with developments in both Japan and the euro zone. News on Monday that Japan had achieved annualized growth of only 0.4% in the second quarter came as a shock, given forecasts for growth of 2.3%. This will only increase political pressure on the Bank of Japan to pour even more liquidity into financial markets, not only to help the economy by easing policy but by helping to cut off the yen's recent rise. Japan has been suffering of late from the yen's safe haven role, that has pushed the currency higher and poses a threat to the country's export-led upturn. Developments in the euro zone may have been different but are no less negative for the euro. The cost of debt funding in peripheral euro-zone debtor countries has started to rise once again, making it more expensive for these countries to refinance their borrowing and increasing the risk of default. This has combined with data showing that growth in Germany is soaring not only ahead of expectations but well ahead of most of its euro-zone neighbors. For the euro, however, this of little consequence. Global investors are well aware that the risks for the single currency are all associated with the problems of the peripheral countries. They will be more focused on the results of the latest bond auctions in Ireland and Portugal, later Tuesday and Wednesday, respectively, for any evidence that funding costs are still rising. However, there is another reason why investors will steer clear of the euro. The diverging growth patterns between core euro-zone members, such as Germany, and the rest of the region, suggest the European Central Bank will face an even greater difficulty setting monetary policy at an appropriate level for all members. So while interest rates are likely to remain low in most countries for the time being, those in the U.S. could well be increased first in a move that would leave Japan and the euro zone lagging far behind. Early Tuesday, the euro was finding a little support on hopes that the Irish bond auction, which should raise about EUR1.5 billion, proves successful. The market will not only be looking at overall demand for bonds but also the price Ireland has to pay. More good news could come from Germany too, in the form of the latest ZEW business sentiment survey, especially if the current conditions index comes in up at 21 from 14.6 as forecast. By 0645 GMT, the euro had risen to $1.2834 from $1.2818 late on Monday in New York, according to EBS. The single currency was also up at Y109.49 from Y109.35. The dollar ticked up a little to Y85.35 from Y85.30 as speculation over Bank of Japan intervention to halt the yen's rise increased after former finance ministry official Hiroshi Watanabe said Tokyo may intervene if the yen rises too rapidly, but that there is no need to act on the yen for now. Investors are also looking ahead to a meeting between Prime Minister Naoto Kan and BOJ Governor Masaaki Shirakawa next Monday to see if they decide to introduce any further monetary easing.
2010/08/17 16:04*DJ Euro-Zone Deficit Was EUR7.4B In May
2010/08/17 16:03*DJ Euro-Zone 12-Month Current Account Deficit EUR45.1B In Jun
2010/08/17 16:02*DJ Euro-Zone Jun Adj Current Acct Deficit EUR4.6B
2010/08/17 15:56DJ UK Osborne: Plan To Cut Deficit Has Stabilized UK Economy
LONDON -U.K. Chancellor of the Exchequer George Osborne Tuesday said the government's austerity measures have begun to stabilize the economy and have placed the country on the road to recovery. 'I believe the plan we have put forward to deal with that [deficit], which includes tax rises as well as spending reductions, has stabilized the British economy and helped reduce market interest rates and stimulate the economy in that way,' Osborne said on BBC Radio 4. 'It is absolutely essential as a path to recovery.' Osborne said the government's spending review, due to be made public in the autumn, was making 'very good progress.' However, he said the government had inherited a difficult situation, which would require 'substantial' spending cuts. Later Tuesday, Osborne will give a speech at Bloomberg L.P. in London, where he is expected to indicate that the government won't water down its consolidation plans despite recent economic data suggesting the economic recovery has lost some momentum.
2010/08/17 15:44JGB Yields At Multi-Year Lows On Views BOJ May Ease Policy
TOKYO - Japanese government bond yields fell to multi-year lows Tuesday due to heightened views that the Bank of Japan may be forced to take further easing measures to cope with the strong yen and slowing economic growth. Several local media outlets reported during the day that Prime Minister Naoto Kan and BOJ Gov. Masaaki Shirakawa will meet next Monday to exchange views on recent currency market moves. The meeting would follow the greenback's slide to a 15-year low of Y84.72 last week, a headache for the export-reliant economy. The economy expanded by only by 0.1% during the April-June period from the previous quarter, the government said Monday. This fueled speculation that the central bank will be forced to ease its already easy monetary policy in the near term, which would bring down JGB yields, analysts said. "The greatest concern for JGB investors is whether the BOJ will loosen its policy further, and I'd say the chance is increasing," said RuiXue Xu, a rates strategist at RBS Securities Japan. The benchmark 10-year JGB yield briefly fell to 0.920%, its lowest point since August 2003. Xu said the house forecasts the yield will fall to 0.800% by the end of September. Analysts are also bullish about the sovereign bonds because of high demand for the U.S. Treasurys, which are closely correlated with their Japanese counterparts. The 10-year Treasury yield touched 2.570% Monday, its lowest level since March 2009. Elsewhere on the curve, the five-year JGB yield fell to 0.265%, its lowest since June 2003, while the 20-year JGB yield dropped to 1.570%, a level unseen since August 2003. The 30-year yield slipped to 1.585%, its weakest point since August 2003. Lead September JGB futures were up 0.02 at 142.70 as of 0600 GMT.
2010/08/17 15:38DJ BOJ Thinks Recent Yen Rise Doesn't Pose Immediate Threat To Real Economy - Sources
TOKYO -Japan's central bank believes the yen's recent rise doesn't pose an immediate threat to the economy but is ready to consider additional monetary steps should the currency surge higher or political pressure to act increase, said people familiar with the situation.The yen's recent appreciation has caused alarm in Japan's government, which is concerned it could throttle a recovery in the country's economy by reducing exporters' earnings and intensifying deflation. The government last week reiterated its stance that it will continue to work closely with the Bank of Japan to fight the yen's strength, and BOJ Gov. Masaaki Shirakawa issued a rare statement expressing concern about volatility in the yen and Japanese share prices.But some half a dozen people familiar with the central bank's thinking told Dow Jones Newswires the central bank considers the yen's recent gains to be relatively mild compared to its sharp moves late last year. The threat to the overall economy--so far--appears limited, as the yen's rise hasn't been excessively fast and hasn't dealt a significant blow to business sentiment, they said.'The current yen's appreciation is different in terms of speed, substance and degree' from a similar surge late last year, said one of the people. Still, 'it would be regarded as risky if (the yen started to rise) rapidly and in an erratic manner,' the person added.Another person familiar with the situation said if political pressure on the central bank to curb the yen's appreciation strengthens further, the BOJ might have to take some additional steps.Local media have reported Japanese Prime Minister Naoto Kan and Shirakawa will meet next Monday to exchange views on the yen's rise and how to deal with the issue.The dollar, which traded at nearly Y95 in early May fell last Wednesday to a 15-year low of Y84.72. Tuesday at 0657 GMT, the dollar was quoted at Y85.31. Some analysts point out that in real, trade-weighted terms, the yen isn't as strong as it was 15 years ago, given years of deflation in Japan and a change in the composition of Japan's trading partners.
2010/08/17 15:17DJ Forex Options: Dollar/Yen Options Drop Tad On Calm Spot Market
TOKYO -Dollar/yen currency options declined slightly in Asia Tuesday as a calm spot market stifled demand for protection against sharp fluctuation in the U.S. unit.Falls in implied volatilities, however, were short-lived as some players scooped up options on the view that the dollar could fall below the psychologically important Y85.00, an options dealer at a major Japanese bank said.The dealer added that players are watching for any moves by Japanese exporters, who could start selling the dollar if they consider its upside limited for the time being. Their selling could curb any sharp gains in the currency.The U.S. unit kept to a range of Y85.11 to Y85.45 in Asian trading. As of 0620 GMT, it stood at Y85.32.Benchmark one-month at-the-money dollar-yen volatilities declined slightly to 11.00%/11.70% from 11.10%/11.80% in New York Monday.Implied volatilities may slide another 20 percentage points if the dollar rises to Y85.70, the dealer said.
2010/08/17 14:41=DJ WORLD FOREX: Yen Falls On Report Japan PM, BOJ Gov To Meet
TOKYO -The yen weakened slightly in Asia Tuesday after local media reported that Japanese Prime Minister Naoto Kan and Bank of Japan Gov. Masaaki Shirakawa will meet Monday, stoking speculation they could move to tackle the yen's recent strength.The top officials are expected to discuss what to do about the yen, which is trading near 15-year highs against the dollar. Speculation is mounting that politicians, fearing that the yen's rise will hurt Japan's fragile, export-led recovery, might pressure the BOJ to ease policy further to weaken the yen.The dollar, which slipped Wednesday to a 15-year low of Y84.72, climbed about 20 sen on the report to Y85.37. At 0525 GMT the U.S. currency was at Y85.35 compared with Y85.30 late Monday in New York.The report in the daily Asahi Shimbun supported views that the authorities could take steps, such as BOJ monetary easing, which could prompt yen-selling, said Minoru Shioiri, a senior dealer at Mitsubishi UFJ Morgan Stanley Securities. But without 'concrete details,' players remained unwilling to sell the yen aggressively, limiting the market impact.Also behind the yen's falls were remarks by Japanese former finance ministry official Hiroshi Watanabe that Tokyo may intervene if the yen rises too rapidly, but that there is no need to act on the yen for now.The comments caused short-term players to sell the yen on the view there could be currency intervention if the dollar falls sharply against the yen.As of 0600 GMT the U.S. currency was at Y85.31, compared with Y85.30 late Monday in New York. The euro stood at Y109.70, compared with Y109.35.Still, traders said the yen may resume rising later Tuesday. Recent weakness in share markets may weigh on players' confidence and encourage buying back of the yen, regarded as a safe-haven. Market participants will pay attention to how upcoming U.S. data affect equities.U.S. housing starts and building permits data will be released at 1230 GMT, while industrial production and capacity utilization will come out at 1315 GMT.The euro may fall to Y109.00 and the dollar to Y85.00 in the global day if the data disappoint, adding to expectations the U.S. economic recovery may slow ahead, Tokyo traders said.Economists surveyed by Dow Jones Newswires say housing starts may rise 0.2% in July, compared with a 5.0% fall in June. Industrial output for July may gain 0.7% from a 0.1% rise the previous month.At 0425 GMT, the European single unit was at $1.2850 from $1.2818 late Monday as players sold the dollar amid the recent downward trend in U.S. Treasury yields, denting demand for dollar-denominated securities, said Resona Bank senior trader Akihiro Tanaka. The 10-year Treasury yield overnight hit its lowest levels since March 2009.The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.314 from 82.470 Monday.
2010/08/17 14:14=DJ MONEY TALKS: Time For Japan To Get Tough
It's time for Japan to stop playing Mr Nice Guy. The country has been holding back from currency intervention for months, but the case for action is becoming overwhelming. After all, why not intervene? The yen is clearly far too strong. It hit a 15-year peak against the dollar last week and remains elevated on a trade-weighted basis, or simply by comparison with other regional heavyweights like the yuan or the won. And this is clearly hurting. Just take a look at the gross domestic product data released earlier Monday. Japan's economy grew by a seriously floppy 0.1% in the second quarter of this year. Economists had predicted a rise of 0.6%. Wobbly exports are a big reason for this weakness, and the strong yen has to take part of the blame as it makes Japanese products more expensive abroad. What's more, the rise in the currency is completely out of whack with economic fundamentals. Japan has a massive debt burden, no growth, interest rates at zero, a deflation problem, grim demographics... you name it. Traders have been buying the yen but not because they are positive about Japan's prospects. No, it's largely down to its role as a perceived safe haven, and even that makes no sense. The yen is not safe. It just tends to climb when markets get the heebeejeebies, because Japanese accounts are traditionally enthusiastic investors in overseas assets. When they get frightened, they sell up, buying yen in the process. Other traders, rationally enough, piggyback on this to make a nice little return. That doesn't make the yen safe, it makes it a bet on safety. So, here we have a currency that has snapped its link with reality and is causing damage to its economy. That's reason enough for other countries to stop the rot. Why haven't the Japanese authorities acted already, either by selling yen or by easing monetary policy further? Some reasons make sense. One is that, at the moment, monetary policy is not in further easing mode. Intervention rarely works unless it's in synch with the path of interest rates. Another is that, while the yen's climb has grim repercussions, it is not, in itself, disorderly. It's not yet rising at the sort of pace which clearly calls for an official hand to slow it down. The last main obstacle, though, is widely seen as the most significant, and it is also arguably the weakest: it lacks international support. Japan does not appear to have the go-ahead for a zap on the yen and, as a good global citizen fully signed up to the international mantra of freely-floating exchange rates, it appears to feel obliged to let the market do its work, for good or ill. However, that does not stop anyone else. China has allowed a little more flexibility on the yuan, but that currency is certainly not climbing as such. The U.S. Federal Reserve has said it may consider more bond purchases to support the economy--a de facto slap to the dollar. The Bank of England made no secret of its joy at the fall in sterling at the start of this year, as that should, all things being equal, boost U.K. exports. The fear of currency strength affects monetary policy decisions elsewhere, too. Norway, for example, has held back from raising rates at some points this year because it fears making the krone even stronger than it is already. To be fair, unilateral interventions of the currency-selling variety don't generally work. Just ask the Reserve Bank of New Zealand about its ill-fated 2007 maneuver. So, in a way, Japan is right to wait until it draws other major powers into a dollar-buying spree. If, however, Japan does feel constrained by the sense of fair play that many market-watchers point to, then that is misplaced. Verbal interventions may be working for now, restraining short-term yen gains, but don't be surprised if the Ministry of Finance decides enough is enough pretty soon.
2010/08/17 13:59*DJ Japan Ex-MOF Watanabe: Yen To Weaken Soon - Reuters
2010/08/17 13:59*DJ Japan Ex-MOF Watanabe: Dollar Won't Fall Much Below Y85 - Reuters
2010/08/17 13:59*DJ Japan Ex-MOF Watanabe: May Intervene If Yen Rise Becomes Rapid - Reuters
2010/08/17 13:56*DJ Japan Ex-MOF Watanabe: No Need To Act On Yen Now - Reuters
2010/08/17 12:47=DJ FED WATCH: Boston Fed: Economics Can't Reveal Housing Bubble
NEW YORK -Should economists and policy makers have identified the housing market bubble before it burst? The answer is most likely no, says the Federal Reserve Bank of Boston, because economic theory was not up to the challenge. 'Economic theory provides little guidance as to what should be the 'correct' level of asset prices -- including housing prices,' the new paper published by the bank says. It was written by economists Kristopher Gerardi, Christopher Foote and Paul Willen.***********'While optimistic forecasts held by many market participants in 2005 turned out to be inaccurate' those projections were not 'unreasonable' given what was understood about the economy and housing market dynamics in the years before housing prices crashed and helped create one of the worst economic downturns in generations.The paper notes economists were clearly not of one mind about the implications of rising housing prices. Some saw them as consistent with economic fundamentals, and driven by factors like the need for shelter to house a growing population, a favored explanation of central bankers themselves during those years. Others simply punted, offering no view.Then there were those with negative views, many of whom have been sharply critical of the economics profession, and of policy makers.'The pessimistic case was a distinctly minority view, especially among professional economists,' the paper observed. 'The small number of economists who argued forcefully for a bubble often did so years before the housing market peak, and thus lost a fair amount of credibility' in the process. Others called a bubble with 'arguments fundamentally at odds with the data' that became available after the fact, the economists write.That paper notes that for the most part, regardless of the view economists held on housing, the science of economics wasn't really even equipped to deal with the issue. 'Academic research available in 2006 was basically inconclusive and could not convincingly support or refute any hypothesis about the future path of asset prices.' That meant anyone could argue anything.This lack of insight suggests there are limitations to what policy makers can do when confronted with unexpected gyrations in asset markets. 'Since bubbles arise even in the most controlled environments, we may need to acknowledge that we do not currently have the ability to prevent a bubble from forming or the ability to identify a bubble in real time,' the paper said.Historically, Fed policy makers have agreed with that conclusion. But that has not dissuaded a core of officials from saying that asset market issues must figure more centrally in the making of monetary policy. While interest-rate policy may not be the best tool to burst a bubble before it causes greater economic damage, some central bankers believe the Fed may well be able to spot imbalances and tackle them with some sort of a tailored regulatory response.This shift from the longstanding Fed orthodoxy is driven by the experience of both the tech and housing market bubbles, which caused considerable economic damage. Since central bankers are charged with promoting economic stability, experience is leading central bankers to be more proactive about asset markets. But they have yet to face a time where they need to put this new thinking to the test.
2010/08/17 12:26=DJ MONEY TALKS: World GDPs' Divergence Shows Currency Mismatches
NEW YORK -If you think currencies don't matter, look at the second-quarter growth rates of the world's four biggest economies.They revealed some striking divergences in a period in which currencies moved more than in any other since the crisis. It's evidence that what ails the global economy stems in large part from global imbalances in spending, savings and exchange rates.Those of us who worry about these imbalances are not just scapegoating foreigners for flaws in U.S. policy and consumer behavior. They represent a very real structural problem and a serious impediment to effective economic policymaking.Exhibit A: Japan's 0.4% annualized second quarter growth rate. This pathetic result came as Japanese exports slowed due to the yen's 6.5% appreciation against the dollar and its 13.5% gain against the euro. That meant exporters could not sufficiently pick up the slack for Japan's perennially spending-shy consumers.Also disappointing: a preliminary 2.4% annual growth rate for the U.S., a figure certain to be downgraded to around 1.5% when the second GDP estimate incorporates last week's report of an imports-driven explosion in the June trade deficit.Contrast this with Germany, where a weak euro drove a surge in exports to produce a 9% annualized GDP growth rate for the quarter, its fastest since reunification in 1990. This remarkable result came in the same quarter that the euro crisis took hold.And then there's China, which grabbed headlines Monday by officially surpassing Japan as the world's second biggest economy. Its 10.3% growth rate came while its severely undervalued currency, the yuan, remained fixed against the dollar, a policy that left it down 6.2% against the yen.Of course currencies matter. In fact, they matter more as we grapple with a combination of global deflationary pressures, financial turmoil and policy mismatches.In different ways, each of these four economies suffers from weak domestic consumption. In the U.S. and Japan, consumer demand is flat-out weak. In Germany and China, it's a proportional concern, with high-saving consumers playing a lesser role in the economy--especially in China, where consumption represents a mere 36% of GDP.In these circumstances, exports have elevated significance; they help sustain growth while domestic demand lags. But because everyone's domestic market is weak, the only way to achieve this is by taking market share away from domestic producers in those foreign markets. A currency depreciation is he fastest way to achieve that.In a perfect world of free-floating currencies, these opportunities would quickly disappear as exchange rates adjust to reflect economic fundamentals.But four distorting factors are preventing this and driving exchange rates into long-lasting over- and under-valuations.One is the low-yielding yen's role as a funding currency and its relationship with a second factor, that of financial stress. When turmoil hits world markets as it did during last quarter's euro crisis, investors flood to the yen 'safe haven,' despite near-zero returns and sky-high government debt.A third factor helps keep the dollar well bid regardless of the weak U.S. economy: its status as the world's reserve currency. This is reinforced by a fourth distorting factor: China's pegged exchange rate policy, which generates excess dollars in need of reinvestment in U.S. assets.For now, we can't do much to fix the first three distortions, but the fourth one can and should be changed. China needs to do much more to properly revalue the yuan. With the dollar strengthening again versus the euro and the yen at 15-year highs, an unbalanced world can't afford this distortion to go on much longer.
2010/08/17 12:23*DJ 5-Yr JGB Yield Hits 0.265%; Lowest Since June 2003
2010/08/17 11:38DJ Japan PM Kan, BOJ Gov Shirakawa To Meet Next Monday - Report
TOKYO -Japanese Prime Minister Naoto Kan and Bank of Japan Gov. Masaaki Shirakawa will meet next Monday, Fuji TV reported Tuesday.The two are expected to exchange views on the yen's recent appreciation and how to deal with the issue.The top-level meeting would follow the dollar's drop last Wednesday to a 15-year low of Y84.72, which stoked worries that a strong domestic currency may take more steam out of the nation's already decelerating export-led growth.
2010/08/17 11:03PRESS RELEASE: Fitch: European Risks Not Yet Material for Most Asian Tech Companies
Fitch Ratings-Taipei/Seoul/Hong Kong-16 August 2010: Fitch Ratings has today commented in a just published special report that the negative impact of the European currencies' recent depreciation and fiscal consolidation programmes are not material enough to affect the ratings of Asian technology companies, although these events have added a level of uncertainty to the outlook of these companies. "Dampened demand from Europe as a result of weakened currencies and consumer confidence will likely place downward pressures on Asian technology companies, but mitigating factors on a case by case basis include non-European currency denominated sales contracts, FX hedging, the ability to increase selling prices and rising component exports to Europe. Furthermore, the likely negative impact on demand brought on by the austerity plans will not be material before end-H111," says Kevin Chang, Director in Fitch's Telecommunications, Media and Technology ratings team. Six of the 15 Asian technology issuers rated by Fitch generate more than 20% of their sales in Europe, namely Acer Inc., ASUSTeK Computer Inc. (ASUS), Quanta Computer Inc. (Quanta), Samsung Electronics Co., Ltd. (Samsung), Sony Corporation (Sony) and LG Electronics, Inc. (LGE). However, actual exposures to European currencies are very small for Quanta and GLOBALFOUNDRIES Singapore Pte. Ltd. given that almost all of their revenues are denominated in USD. Based on Fitch's observation, some Asian technology companies have adjusted their selling prices upwards to protect profit margins in the context of declining European currencies (Euro and GBP) and potential lower volumes. That said, companies like ASUS, Sony and LGE will likely face greater pressure on profitability than their major competitors as a result of an aggressive attitude towards growing market share and/or a lack of product differentiation. Furthermore, Asian component makers may potentially benefit from an increase in component exports to Europe from Asia. AU Optronics Corporation, Hynix Semiconductor Inc., LGE and Samsung would be able to increase their shipments to Europe due to greater sales by their exporting customers in Europe, who are enjoying stronger price competitiveness thanks to the depreciated European currencies. The agency expects that the fiscal consolidation plans by several European governments increase the uncertainty about demand growth in Europe, but will not have a significant negative impact on Asian technology companies by end-H111. The downside risks from Europe's fiscal tightening will intensify in 2011 but the impact on demand will take some time to be felt. Besides, credible fiscal plans should reduce uncertainty among private enterprises and consumers. >> Fitch has made major improvements to its credit research on EMEA and AsiaPac corporates.-0
2010/08/17 10:43DJ US Commerce Secretary Announces Grants for Louisiana, Gulf -Unified Command
U.S. Commerce Secretary Gary Locke on Monday announced $31.3 million in coastal restoration and economic development grants for Louisiana and the Gulf Coast, the Deepwater Horizon Joint Information Center said on its website. 'These grants are another sign of this administration's commitment to help the Gulf Coast's economy and environment recover in the wake of the BP oil spill,' the center quoted Locke as saying. Locke visited Louisiana Monday to hear from local business owners and community members affected by the Deepwater Horizon/BP PLC (BP) oil spill, the center said. Deepwater Horizon Response website: http://www.deepwaterhorizonresponse.com/go/site/2931/ -0
2010/08/17 08:14*DJ 10-Year JGB Yield Falls To 0.920%; Lowest Since Aug 2003
2010/08/17 03:16DJ US Official: US Wins WTO Dispute With EU On High-Tech Products
GENEVA (AFP)--The World Trade Organization has backed the U.S., Japan and Taiwan in their complaint against EU duties on high-technology products, according to a ruling published Monday. 'Having found that the European Communities has acted inconsistently ... we recommend that the Dispute Settlement Body request the European Communities to bring the relevant measures into conformity with its obligations,' the WTO panel of arbitrators said. The ruling was issued confidentially to the parties involved in July. The plaintiffs had accused the EU of violating the WTO's Information Technology Agreement by imposing duties on imports of products including television set-top boxes, flat-screen panels and printers with multiple functions. Brussels countered that the agreement did not apply since the products in question had taken on multiple functions. For example, the EU maintained that the flat-panel computer monitors cited by the U.S. should properly be classified as video monitors because they can also be used with DVD players and thus fall outside the scope of the WTO agreement. Likewise, set-top boxes with Internet access should be seen as video recorders because they can record live television, the EU said. All these arguments were thrown out by the WTO panel. The U.S. had accused the EU of 'manipulating tariffs to discourage technological innovation.' The U.S. estimates that global exports of the affected products were worth more than $70 billion in 2007.
