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Euro Rises After ECB’s Nowotny Doubts Rate Cut; Rand Gains

The euro strengthened versus the dollar after European Central Bank Governing Council member Ewald Nowotny said he doesn’t see a need to cut interest rates further at the moment.
The shared currency was supported as investors speculated a weak bond sale by Spain would add to pressure for the nation to request a bailout. South Africa’s rand rallied for a third day as investors bought the nations assets before an anticipated interest-rate cut. Canada’s dollar rallied after retail sales rose at the fastest pace in nine months.
“There has been speculation that an interest-rate cut would be coming in October as the ECB tries to ease policy further,” said Eimear Daly, a currency market analyst at Monex Europe Ltd. in London. “The market wants Spain to ask for a bailout. The market will start to test Spain and force them in to a bailout, which is ultimately euro positive.”
The euro gained 0.1 percent to $1.2945 at 9:20 a.m. New York time, after declining to $1.2887, the lowest since Sept. 13. It was little changed at 100.66 yen. The Japanese currency rose 0.1 percent to 77.77 per dollar, after earlier touching 77.66, the strongest level since Sept. 14.
The ECB cut the main refinancing rate in July to a record low of 0.75 percent and economists forecast another reduction by the end of the year, according to a Bloomberg News survey.
The yield on three-month Spanish debt auctioned today was 1.203 percent, compared with 0.946 percent at a previous sale on Aug. 28.

Source: Bloomberg

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Aussie Dollar Gains Versus Peers on Chinese Economic Data

Australia’s dollar gained against most of its major counterparts as a leading indicator for China’s economy rose in August, improving trade prospects for the South Pacific nation.
The Australian and New Zealand currencies erased declines after the Conference Board said its leading economic index for China rose 1.7 percent to 240.4 in August from the previous month. Demand for the so-called Aussie and kiwi dollars was limited amid concern disagreement among the euro region’s leaders is curbing prospects for growth.
“Risk aversion eased after the release of the Chinese economic indicator,” buoying riskier assets such as the Australian dollar, said Yuji Saito, director of the foreign exchange department in Tokyo at Credit Agricole SA. (ACA)
Australia’s currency climbed 0.1 percent to $1.0432 as of 2:45 p.m. in Sydney and lost 0.1 percent to 81.12 yen.
New Zealand’s dollar gained 0.1 percent to 82.34 U.S. cents, after sliding as much as 0.2 percent. The currency dropped 0.1 percent to 64.03 yen.
China is Australia’s largest trading partner and New Zealand’s second-biggest export destination.

European Focus

A report tomorrow will probably show a gauge of French consumer confidence fell to 86 in September from 87 last month, according to the median estimate of economists surveyed by Bloomberg News. That would be the lowest since February.
Economists estimate an index of French business confidence fell to 89 this month from 90 in August. The national statistics office releases the data today.
“Markets are still cautious. Europe is still going to be the key event this week,” said Alvin Pontoh, a Singapore-based strategist at TD Securities Inc.
The Aussie has weakened 1.5 percent in the past month, the second-worst performance among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s currency was little changed over the same period.
“The Australian dollar is looking softer,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “It looks as though the unstable situation in Europe could last for some time.”
Australian bonds advanced before the central bank’s policy board meets on Oct. 2. The yield on the benchmark 10-year note fell 3 basis points, or 0.03 percentage point, to 3.2 percent. Reserve Bank of Australia Assistant Governor Guy Debelle is scheduled to speak in Melbourne at 6:30 p.m. local time today.

RBA Meeting

“If we see another significant move up in the Aussie dollar to $1.06-$1.07, I think the RBA could lean against cutting rates to bring the currency down,” TD’s Pontoh said.
Swaps indicate an 83 percent chance policy makers will cut the overnight cash-rate target to 3.25 percent from 3.5 percent when they meet Oct. 2, according to data compiled by Bloomberg.
The RBA said Australian households are building a financial cushion by repaying mortgages faster and saving more, while businesses are indicating renewed willingness to borrow.
“Given the large share of households with mortgage prepayment buffers, along with relatively low unemployment and moderate income growth, most households appear well placed to meet their debt obligations,” the central bank said in its semiannual financial stability review released in Sydney today.

Source: Bloomberg

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Qatar Shares Fall to Week Low on Oil, Before Results; Oman Gains

Qatar’s benchmark stock index declined to the lowest intraday level in a week after oil posted its biggest weekly decline in three months and ahead of third- quarter results.
Industries Qatar QSC (IQCD), the Middle East’s second-largest petrochemicals maker, fell 0.4 percent. Masraf Al Rayan, the second-largest Qatari lender by market value, was set for the biggest decrease in two months. Qatar’s QE Index retreated 0.4 percent to 8,566, the lowest intraday level since Sept. 13, at 10:27 a.m. in Doha. The measure has gained 5.4 percent this quarter. Dubai’s DFM General Index (DFMGI) also dropped 0.4 percent.
“We’re getting closer to third-quarter results, so traders are waiting for signals, especially because the markets have already rallied,” said Nabil Rantisi, managing director of brokerage at Abu Dhabi-based Menacorp.
Companies in the Persian Gulf are scheduled to announce quarterly results next month. Industries Qatar, which posted a 3 percent retreat in first-half profit, may announce results on Oct. 11 and Masraf al Rayan (MARK) on Oct. 17. The Qatar benchmark’s 14-day relative strength index rose above 70 last week and dropped to 62 today. A reading above 70 signals to some investors that a security is poised to decline.
Crude oil tumbled 6.2 percent last week to $92.89 a barrel on the New York Mercantile Exchange. Oil may decline this week after data from Asia, Europe and North America increased investors’ concern that global economic growth is slowing, a Bloomberg survey showed. A Chinese manufacturing survey last week signaled the industry contracted for an 11th consecutive month, while Japan’s exports declined in August.

Profit Rises

Industries Qatar slipped to 141 riyals, set for the lowest close since Sept. 18. The company may this year post a 6 percent increase in earnings to 8.4 billion riyals ($2.3 billion), according to the mean estimate of 10 analysts compiled by Bloomberg. Masraf al Rayan fell 0.7 percent, set for the biggest drop since July 19, to 27.15 riyals.
The Bloomberg GCC 200 Index (BGCC200), Bahrain’s BB All Share Index (BHSEASI) and Abu Dhabi’s ADX General Index (ADSMI) declined less than 0.1 percent, while Oman’s MSM30 Index (MSM30) rose less than 0.1 percent and Kuwait’s Stock Exchange Price Index (KWSEIDX) gained 0.6 percent. Saudi Arabia (SABIC)’s stock market is closed for a national holiday.

Source: Bloomberg

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Getting Real On US Stock Market Gains

Since the US program of quantitative easing began in earnest in October 2008, stocks and gold are up -- that's no surprise. But how have your stocks performed if we measure them against gold instead of the usual dollar terms?

Security:   SPX, GLD, DXY
Position:   N/A

On September 13, 2012, Federal Reserve chairman Ben Bernanke ended speculation with his announcement that the Fed would begin a third round of quantitative easing (QE3) by spending $40 billion a month of mortgage-backed securities (MBS). But unlike QE1 and QE2, this latest QE program has no expiration date. The move followed on the heels of a similar move by European central bank president Mario Draghi a few days earlier to launch its Outright Monetary Transaction (OMT) program to buy the government bonds of distressed European nations. And while the two programs are patently different in detail, they both have the same broadcasted goal: to boost economic growth and reduce unemployment. Not broadcasted was the timing of the Fed's announcement with the surreptitious goal to provide a short-term lift to November 6. As Figure 1 shows, investors began to bet that QE on both sides of the pond was a forgone conclusion in the first week of September. In the first two weeks of September, the Standard & Poor's 500 gained 4%, GLD was up 4.4%, and the US Dollar Index fell 2.5%. So to gain 400 basis points, it cost the US dollar 250 basis points, leaving the nondollar gain of 150 basis points (1.5%).

FIGURE 1: DXY, SPX, GLD, DAILY. Here's a daily chart comparing the US Dollar Index (DXY), the S&P 500 in purple, and the SPDRS Gold Trust ETF (GLD) in orange since the beginning of September 2012.

However, if we look at the same chart since early October 2008 when the first round of quantitative easing began, we get a longer-term view of the effect that QE programs have had in real terms (see Figure 2). Since then, GLD is up 100%, the SPX has gained 16%, and the DXY is basically flat, compared to the basket of other currencies against which it is measured.

FIGURE 2: DXY, SPX, GLD, WEEKLY. Here's a weekly chart showing the longer-term relationship between the DXY, SPX and GLD.

When measured in gold, the S&P 500 has lost nearly 50% since October 2008. In a September 17, 2012, Bloomberg interview (http://goo.gl/rzhwT ), Frank Holmes of US Global Investors was asked if gold could go to $2,000 per ounce thanks to the latest round of quantitative easing. He gave this target a 12-month window. "Whenever you have negative real interest rates, gold rises," he says. In a healthy economy, interest rates generally run about 2% above the inflation rate, but in today's reality, 5% interest rates would be devastating to the economy, Holmes said. When asked what the "craziest" gold price target he'd heard lately, Holmes replied that if you looked in terms of money supply (M2) growth, gold should be worth $7,000 per ounce. But if the world were to go back to the days of the Bretton Woods agreement pre-August 1971 when gold was convertible into dollars, gold would be worth $40,000 per ounce. Although Holmes doesn't see either of those scenarios happening anytime soon, here is another fact for traders and investors to consider. Since July 1999, when the US stocks peaked in gold terms, the S&P 500 has lost 85% of its value when priced in gold. Given the current penchant for central banks to print their way to prosperity, don't expect this trend to end anytime soon.

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Asian Stocks Drop From 4-Month High on Japan, China Data

Asian stocks fell, with the regional benchmark retreating from its highest close since May, after Japan’s exports fell for a third month and on signs China’s manufacturing may contract for an 11th month.
Kyocera Corp. (6971), a maker of electronic parts that gets more than half of its sales outside Japan, slid 3.2 percent. Nippon Telegraph & Telephone Corp. (9432) surged 7.1 percent after Japan’s leading fixed-line phone company said it plans to buy back as much as 3.4 percent of its shares. Billabong International Ltd. (BBG) slumped 7.3 percent as a second bidder withdrew from the sale of Australia’s largest surfwear c

 

KDDI Corp.'s au brand smartphone Urbano Progresso by Kyocera Corp. Photographer: Kiyoshi Ota/Bloomberg

The MSCI Asia Pacific Index slid 1.3 percent to 122.60 as of 6:30 p.m. in Tokyo, with about four stocks falling for each that rose. The equity gauge yesterday rallied to its highest since May 3 as central banks from Europe to the U.S. and Japan took action to stimulate growth.
“We’ve very concerned about the near-term outlook for the global economic picture,” said Peter Elston, Singapore-based head of Asia-Pacific strategy at Aberdeen Asset Management, which oversees about $270 billion. “There’s some fairly significant weakness just around the corner and that’s going to have a fairly big impact on corporates and markets. We’re fairly cautious,” he told Bloomberg TV.
Japan’s Nikkei 225 Stock Average slid 1.6 percent after a Finance Ministry report today showed exports from the world’s third-largest economy declined 5.8 percent in August from a year earlier.
Australia’s S&P/ASX 200 Index (AS51) lost 0.5 percent, South Korea’s Kospi Index slipped 0.9 percent and Singapore’s Straits Times Index declined 0.4 percent.
Futures on the Standard & Poor’s 500 Index slid 0.3 percent today. The gauge rose 0.1 percent yesterday, snapping a two-day decline, after the Bank of Japan (8301) increased its asset-purchase target and sales of existing U.S. homes rose more than expected.

China Manufacturing

Hong Kong’s Hang Seng Index lost 1.2 percent and China’s Shanghai Composite dropped 2.1 percent as a preliminary report today showed China’s manufacturing may contract for an 11th month in September. The reading was 47.8 for a purchasing managers’ index released by HSBC Holdings Plc and Markit Economics. A number below 50 signals a contraction.
Exporters fell, with Kyocera sliding 3.2 percent to 6,700 yen. Canon Inc., a camera maker that gets 80 percent of its sales overseas, fell 3.2 percent to 2,771 yen. TDK Corp., a Japanese manufacturer of electronic parts that gets more than 25 percent of its revenue from China, declined 3.2 percent to 3,135 yen.

Annual Gain

The MSCI Asia Pacific (MXAP) Index gained 9.1 percent this year through yesterday compared with a 16 percent increase on the S&P 500 and a 12 percent advance for the Stoxx Europe 600 Index. The Asian benchmark traded at 12.9 times estimated earnings compared with 14.1 for the S&P 500 and 12.2 for the Stoxx Europe 600 Index.
New Zealand’s NZX 50 Index rose 0.6 percent after a report today showed the nation’s economic growth slowed less than forecast last quarter. Taiwan’s Taiex Index dropped 0.7 percent.
Billabong tumbled 7.3 percent to A$1.34 in Sydney, the biggest decline in two months, amid concern TPG may reduce its offer after a competing bidder walked away.
Luk Fook Holdings International Ltd. (590) fell 6.8 percent to HK$24.85. Paul Law, the company’s executive director and financial controller, will resign Dec. 1, the jeweler said yesterday.
Among stocks that rose, Nippon Telegraph advanced 7.1 percent to 3,855 yen. NTT will buy back as many as 42 million shares of common stock from Sept. 20 until March 29 “to improve capital efficiency,” the company said yesterday in a statement to the Tokyo Stock Exchange.

Source: Bloomberg

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Euro Remains Lower Before Region’s PMI Data; Kiwi Gains

The euro dropped the most in two months against the dollar as an index of services and manufacturing in the region shrank to a three-year low.
The 17-nation currency declined for a third day versus the yen as the data added to evidence the debt crisis is sapping growth in the euro area. The yen and the dollar strengthened against most of their major counterparts after separate reports showed China’s manufacturing and Japanese exports declined, spurring demand for safer assets. Australia’s dollar and South Africa’s rand led losses among high-yielding currencies.
“One of the big problems that remains unresolved in the euro area is a lack of growth,” said Lee Hardman, a foreign- exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We still anticipate the euro will continue to weaken and expect a move back to $1.20 over the next six to 12 months.”
The euro dropped 0.5 percent to $1.2978 at 9:48 a.m. in London after falling as much as 0.8 percent, the biggest decline since July 20. The shared currency weakened 0.8 percent to 101.50 yen after sliding as much as 1.2 percent. The yen strengthened 0.2 percent to 78.23 per dollar.
A composite index based on a survey of purchasing managers in both industries in the euro area dropped to 45.9 for September, the lowest since June 2009, London-based Markit Economics said in an initial estimate. A reading below 50 indicates contraction.

‘Get Worse’

“At these levels, euro is a sell” because of the state of the European economy, said Joseph Capurso, a strategist at Commonwealth Bank of Australia (CBA) in Sydney. “The economy is going to get worse before it gets better in Europe.”
The euro has slumped 4.4 percent in the past year, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.1 percent and the yen weakened 3.1 percent.
The Dollar Index advanced for the third time in four days after the data from China and Japan added to evidence that Asian economies are slowing.
A preliminary reading was 47.8 for a China purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics, compared with a final level of 47.6 last month. Japan’s overseas shipments slid 5.8 percent on weakness in demand from Europe and China.
The Dollar Index (DXY), which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six U.S. trading partners, rose 0.5 percent to 79.432.
Australia’s currency fell as the Chinese data clouded the prospects for the South Pacific nation’s resource exports.
“The market was probably expecting a bit more of a bounce” in the Chinese data, said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “The Aussie is a little bit lower. There’s just a little bit of disappointment there.”
The so-called Aussie dropped 0.8 percent to $1.03983. South Africa’s rand declined 0.7 percent to 8.3286 per dollar.

Source: Bloomberg

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Platinum Holdings Expand to Record on Mine Disruptions, QE3

Investors have accumulated record holdings of platinum assets as they seek to protect their wealth against the threat of inflation with a metal that also benefits from supply disruptions in South Africa, the largest producer.
Holdings in exchange-traded products, or ETPs, expanded 1.1 percent to 46.748 metric tons, surpassing the previous peak of 46.316 tons on Sept. 7, 2011, according to data tracked by Bloomberg. The hoard has risen 17 percent this year, beating the 7.6 percent gain in gold holdings, which stand at a record.

 

Platinum prices rallied to highest level since February this month as miners staged a six-week stoppage at Lonmin Plc’s Marikana mine, which accounts for about 10 percent of global output, and the U.S. central bank announced a third round of quantitative easing. Photographer: Tomohiro Ohsumi/Bloomberg

Platinum prices rallied to highest level since February this month as miners staged a six-week stoppage at Lonmin Plc’s (LON) Marikana mine, which accounts for about 10 percent of global output, and the U.S. central bank announced a third round of quantitative easing. The workers at Marikana yesterday agreed to accept a pay rise and return to work on Sept. 20.
“What’s happened in South Africa has been the prime driver, but there would have been a rub off from what happened in terms of quantitative easing,” said David Lennox, a resource analyst at Fat Prophets. “People have also taken the opportunity to run into platinum on the back of the discount to gold.”
Immediate-delivery platinum has advanced 17 percent this year, outperforming rallies in gold and palladium, while lagging behind silver’s 24 percent climb. It traded at $1,639.75 an ounce at 11:49 a.m. in Singapore compared with spot gold at $1,769.60. Platinum, used to make catalytic converters and jewelry, was last more expensive than gold in March.

Shot by Police

Platinum holdings in ETPs rose 6.6 percent in August, the biggest gain in 20 months. The dispute at Marikana left at least 45 people dead, including 34 protesters shot by police on Aug. 16. ETPs trade like shares and enable investors to bet on price changes without having to take physical delivery of commodities.
The amount of platinum now held in ETPs is equivalent to about 23 percent of global mined supply last year, according to Bloomberg calculations based on Johnson Matthey Plc (JMAT) data. Global mined production is expected to be 6.04 million ounces (171 tons) this year, Barclays Plc estimated last month, with South African output forecast at 4.38 million ounces.
The U.S. Federal Reserve on Sept. 13 announced a third round of quantitative easing to boost growth, saying it would buy $40 billion of mortgage debt a month and probably hold the federal funds rate near zero at least through mid-2015. The European Central Bank last week gave details of a plan announced in August to buy the debt of member states. The Bank of Japan said today that it would increase an asset-purchase fund, expanding its easing program in the third-largest economy.

‘Printing More Money’

“With the perception that central banks are printing more money, people are going to go into those assets that are more scarce,” said Michael Gayed, chief investment strategist at New York-based Pension Partners LLC, which advises on more than $150 million in assets. “The idea is that hard assets can keep up with any inflation.”
Gold holdings in ETPs climbed 1.1 percent, the biggest gain in 11 months, to an all-time high of 2,534.8 tons, data tracked by Bloomberg showed yesterday. That’s the third-largest stockpile when compared with national reserves, lagging behind the metal held by the U.S. and Germany, according to data compiled by Bloomberg and the International Monetary Fund.
The increase to record ETP holdings of platinum was predicted by Dominic Schnider, global head of non-traditional assets at UBS AG’s wealth-management unit. Gold’s characteristics as a store of value are also found in platinum, Schnider said on Sept. 12.

Source: Bloomberg 

 

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Aussie Drops From Near 6-Month High on Europe Concern

The Australian dollar declined from near its strongest level in almost six months as concern European leaders are struggling to find agreement on debt-crisis solutions curbed demand for higher-yielding assets.
The so-called Aussie slid versus most of its 16 major counterparts before Spanish Prime Minister Mariano Rajoy travels to Rome for talks with Italian Prime Minister Mario Monti this week. Australia’s currency and its New Zealand counterpart fell against the yen amid escalating tensions between Japan and China, Asia’s biggest economies, over the ownership of disputed islands.
“The plans are laid in Europe, but the actual implementation will be the challenge,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “Geopolitical tensions between China and Japan will not be good for the economy and trade. There’s room for selling the Aussie back again.”
Australia’s dollar lost 0.2 percent to $1.0527 as of 5:05 p.m. in Sydney from $1.0551 on Sept. 14, when it rose to $1.0625, the highest since March 20. It fell 0.3 percent to 82.45 yen. New Zealand’s dollar fell 0.1 percent to 82.84 U.S. cents from last week, when it touched 83.54, the strongest since March 2. The so-called kiwi traded at 64.89 yen, 0.2 percent below its 64.98 closing price on Sept. 14.
Australian bonds fell, pushing the 10-year yield up 15 basis points, or 0.15 percentage point, to 3.43 percent. That’s the biggest one-day rise in the rate since July 27. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose 4 basis points to 2.78 percent.

Meeting Deadlock

A meeting of European Union finance ministers last week in the Cypriot capital of Nicosia deadlocked over the timetable for a more unified European Union banking sector. The ministers also disagreed over the terms of bailout requests and the role of the European Central Bank.
Spain’s Rajoy will meet Italy’s Monti on Sept. 21. The following day, German Chancellor Angela Merkel will hold talks with French President Francois Hollande at a commemoration in Ludwigsburg, Germany.
The Reserve Bank of Australia today released information on the composition of other central banks’ foreign-exchange reserves in response to a Bloomberg News request under the Freedom of Information Act. Fifteen national central banks hold Australian dollar reserves -- including Sweden, Switzerland, Russia, Poland and Korea -- while eight others possibly do, the RBA said.

‘Major Beneficiary’

“Central banks have been diversifying not only out of the U.S. dollar, but also out of core foreign-exchange reserve allocations into so-called ‘other’ currencies,” Callum Henderson, Singapore-based global head of currency research at Standard Chartered Plc, said after the data was released. “The Australian dollar has been a major beneficiary of this flow.”
Standard Chartered raised its year-end forecast for the Australian dollar to $1.07 from a previous prediction of $1.05, according to a research note e-mailed to clients today.
The Aussie has weakened 2.1 percent in the past month, the biggest drop after the U.S. dollar among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s dollar lost 0.4 percent.

Territorial Dispute

The South Pacific currencies slid as a territorial dispute between China and Japan worsened, with Prime Minister Yoshihiko Noda saying he’ll demand the Chinese government ensure the safety of Japanese citizens amid protests in a dozen cities including Beijing, Shanghai and Guangzhou.
Demonstrators called for Chinese sovereignty over disputed islands, known as Senkaku in Japanese and Diaoyu in Chinese, and the boycott of Japanese goods. Tensions escalated after Noda’s government said last week it would purchase the territory from a private Japanese owner, prompting China to dispatch government vessels near the area. China is Australia’s largest trading partner and New Zealand’s second-biggest export destination.
The U.S. will announce a trade complaint against China today, alleging impermissible subsidies of auto- and auto-parts exports, according to an Obama administration official who asked to speak on condition of anonymity.

Source: Bloomberg

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Euro Falls From Four-Month High as Spain’s Debt Yields Climb

The euro weakened against the dollar for the first time in five days as Spanish bonds declined while Prime Minister Mariano Rajoy considered whether to request economic assistance for the indebted nation.
The 17-member currency fell from a fourth-month high versus the greenback after Spain announced it was selling 4.5 billion euros ($5.9 billion) of three- and 10-year debt on Sept. 20. South Africa’s rand weakened as violence in the nation’s platinum mines escalated. Taiwan’s dollar and South Korea’s won rallied as international investors increased holdings of Asian stocks.
“People are still waiting for news out of Spain and it’s essentially concern about when it will formally request a bailout,” said Chris Walker, a foreign-exchange strategist at UBS AG (UBSN) in London. The euro is weakening as “the market is taking a negative slant after Friday’s finance ministers’ meeting.”
The euro fell 0.1 percent to $1.3119 at 8:59 a.m. New York time, after climbing to $1.3169 at the end of last week, the most since May 4. The shared currency added 0.1 percent to 103.03 yen. The dollar rose 0.2 percent to 78.54 yen.

Market Measure

The euro’s 14-day relative strength index versus the dollar and the yen remained above 70 today, even with the price declines. A reading above 70 indicates an asset may have rallied too far, too quickly and is due for a correction.
Spanish 10-year bonds extended a decline, pushing the yield up 15 basis points to 5.93 percent.
The Dollar Index (DXY) rose 0.1 percent to 78.891 after weakening to the lowest since February last week.
The index, which IntercontinentalExchange Inc. uses to track the greenback against those of six U.S. trading partners, may pause its decline this week as it’s entering an “important” support zone, Niall O’Connor, a New York-based technical analyst at JPMorgan Chase & Co, wrote yesterday in a research note to clients. This area includes the 78.398 level that is the 50 percent retracement of its rise from 72.696 on May 4, 2011, to 84.100 on July 24, according to O’Connor. It also includes the May 1 low of 78.603.
The dollar has weakened 1.5 percent last week versus the currencies of nine developed-nation counterparts, according to Bloomberg Correlation-Weighted Indexes. The yen fell 1.7 percent and the euro strengthened 1.4 percent.

Rand Falls

South Africa’s rand tumbled against most its most-traded counterparts as violence in the country’s platinum mines continued. The rand fell 0.2 percent to 8.2205 per dollar.
Taiwan’s dollar rose against all its major counterparts, followed by South Korea’s won. The Taiwanese currency gained 0.4 percent to 29.307 versus the greenback and the won advanced 0.1 percent to 1115.97 per dollar.
Investors increased holdings of South Korean and Taiwanese equities by 537.6 million today as the Federal Reserve’s bond purchase plan announced last week spurred inflows in to the region’s higher-yielding assets.
Policy makers must control volatile capital flows as quantitative easing measures taken in the U.S. and Europe have a “negative spillover” into developing countries, Bank of Korea Governor Kim Choong Soo said on Sept. 14. The won added 0.1 percent to 1,115.97 per dollar.

Investor Sentiment

Rajoy’s government will unveil additional austerity measures by the end of the month based on recommendations made in July, including a possible increase in the retirement age, shifting from labor to consumption taxes and deregulating closed professions, according to European officials. Demonstrations two days ago in Madrid against fiscal cuts underpinned the political balancing act Rajoy faces.
Since July 26, when European Central Bank President Mario Draghi said he would do “whatever it takes” to save the 17- nation euro, the currency has appreciated versus each of its 16 major counterparts tracked by Bloomberg.
The euro touched a four-month high versus the dollar and the yen at the end of last week after a Federal Reserve decision to expand monetary stimulus boosted higher-yielding assets, undermining the U.S. currency.
What European policy makers “have shown so far is their willingness to support the currency union and do as much as they can,” said Mary Nicola, a New York-based currency strategist at BNP Paribas SA.
The Australian dollar fell 0.3 percent to $1.0517, after strengthening to $1.0625 on Sept. 14, the highest level since March 20.
The so-called Aussie weakened even as the Reserve Bank of Australia said the country’s currency is held by as many as 23 national central banks, according to internal documents released today under a Freedom of Information Act request by Bloomberg News.

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Dollar Drops Most in 11 Months as Fed Follows ECB With Stimulus

The dollar fell by the most in 11 months against the euro after the Federal Reserve said it would start a third round of asset purchases to boost the economy, which tends to debase the currency.
The greenback completed its longest stretch of weekly losses against the 17-nation currency since October 2010 after the European Central Bank said last week it would purchase bonds to address the region’s debt crisis. The dollar touched its lowest level in seven months against the yen before Japanese officials signaled they are ready to intervene to stem the currency’s strength. The Bank of Japan holds a policy meeting Sept. 19.
“The shift in the policy statement from the Fed was a welcomed surprise for risk-loving investors,” said Andrew Wilkinson, chief economic strategist at Miller Tabak in New York. “The other driver behind the scenes is the ECB, which has launched the boldest action in defense of the euro.”
Wilkinson said he expects the euro to rally to $1.3450 by year-end.
The U.S. currency fell 2.5 percent this week to $1.3130, after reaching a four-month low of $1.3169 yesterday. It rose 0.2 percent to 78.39 yen, after touching 77.13 on Sept. 13, the least since Feb. 9. The euro added 2.7 percent to 102.93 yen.

Dollar Bears

Futures traders boosted aggregate bets the dollar would fall against eight major currencies to a 13-month high.
Net-bets for a dollar decline were 228,176 in the week ended Sept. 11, up 72 percent from 132,997 the previous week, according to Commodity Futures Trading Commission data compiled by Bloomberg. That is the highest since Aug. 5, 2011.
The U.S. currency fell 1.3 percent this week versus the currencies of nine developed nation counterparts, according to the Bloomberg Correlation-Weighted Indexes. The yen had the biggest decline with 1.5 percent.
The Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, declined for a fourth week. The 1.8 percent loss is the biggest since October 2011. It fell to 78.851 after touching 78.601, the lowest since Feb. 29.
The Fed said it will expand its holdings of long-term securities with open-ended purchases of $40 billion a month of mortgage debt in a third round of quantitative easing. The Federal Open Market Committee said it would probably hold the federal funds rate near zero “at least through mid-2015.” Since January, the Fed had said the rate was likely to stay low at least through late 2014.

Liquid Markets

Anticipation of additional liquidity from the bond-buying program pushed the Australian currency, where interest rates are 3.5 percent, to a one-month high of $1.0625 versus the greenback. New Zealand’s dollar rallied to a six-month high of 83.54 U.S. cents.
The shared currency was buoyed against major counterparts as ECB President Mario Draghi said last week that policy makers agreed on an unlimited debt-buying program to address region’s debt crisis. A German court dismissed motions this week seeking to block the region’s bailout fund, while setting a cap of about 190 billion euros ($249 billion).
“The ECB actions were expected by the markets; it is helping the market to move away from two key risks, namely the financing of the U.S. and peripheral risks in Europe,” Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in New York said Sept. 13.
The cost of options granting the right to buy the euro against the Swiss franc climbed above the price allowing for sales for the first time since April 4. So-called three-month 25-delta risk reversal rate climbed to three basis points, or 0.03 percentage point, yesterday.

Bank Cap

The Swiss National Bank put a cap of 1.20 per euro on the franc in September 2011 to limit its strength after investors sought the currency as a refuge from the euro-area’s debt crisis.
The euro’s rally versus the dollar may stall as the 14-day relative strength index for the shared currency versus the greenback surged to 79.1. A reading of more than 70 indicates an asset may have moved too far, too quickly and may be due for a correction.
The yen fell against a majority of its 16 most-traded peers after Finance Minister Jun Azumi signaled he’s ready to intervene to weaken the currency.
Japan’s Azumi told reporters yesterday that he’ll take “decisive action,” if necessary. Azumi ordered the Bank of Japan to sell yen in markets on Oct. 31 after the yen strengthened to a postwar record of 75.35 per dollar.

Speculative Trades

Vice Finance Minister Takehiko Nakao told reporters in Tokyo on Sept. 13 the recent surge in the yen against the dollar has been “obviously speculative” and that Japan can’t overlook such moves.
There are “heightened intervention concerns, an easing of safe-haven demand for yen, and building expectations that the Bank of Japan, under increasing government pressure, may ease monetary policy next week,” Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, said yesterday.
The rand fell against all of the most-traded currencies tracked by Bloomberg as unrest in South Africa’s mining industry outweighed Fed stimulus measures. Workers at mines are holding illegal protests to demand higher pay, causing their companies to lose thousands of ounces of production each day.
The currency of Africa’s largest economy weakened against major currencies, falling 0.4 percent to 8.2059 per dollar.
Russia’s ruble had the biggest advance against the dollar among major global currencies after the country’s central bank raised the refinancing rate to 8.25 percent from 8 percent, the first increase since April 2011.
The currency rose 3.8 percent to 30.4579 per dollar.

Source: Bloomberg

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Egypt Stocks Rise as Fed Action Outweighs Protests; Dubai Gains

Egypt’s benchmark index rose to the highest since January 2011, leading gains in the Middle East, as the U.S. Federal Reserve’s plan to buy mortgage securities outweighed concern over violent protests in the region.
EFG-Hermes Holding SAE rallied to the highest intraday level since May after shareholders approved the creation of an investment bank with Qatar’s QInvest. In Dubai, Emaar Properties PJSC (EMAAR), developer of the world’s tallest tower, climbed 3.2 percent. Egypt’s EGX 30 Index surged 2.3 percent to 5,790.04, the highest since January 2011, at 12:45 p.m. in Cairo. The DFM General Index (DFMGI) rose 1.4 percent, Abu Dhabi’s index increased 0.8 percent and the Bloomberg GCC 200 Index (BGCC200) added 0.1 percent.
“Middle East and North Africa markets are shrugging off any concerns relating to disparate Islamic protests and focusing instead” on the Fed’s stimulus plan, said Julian Bruce, the Dubai-based director of institutional sales trading at EFG- Hermes Holding SAE. “The Gulf Cooperation Council is off to a solid start as overall sentiment improves.”
Global stocks climbed after the Fed said Sept. 13 it would embark on a third round of quantitative easing with open-ended purchases of $40 billion of mortgage debt a month as it seeks to boost growth and reduce unemployment. The MSCI World Index (MXWO) rose 2.7 percent last week, and crude oil for October delivery advanced by the same amount in New York. Gulf Arab oil exporters, including the United Arab Emirates and Saudi Arabia, supply about a fifth of the world’s oil.

Turkey Aid

Protests against a film denigrating Islam eased in the Middle East following violence in Libya, Tunisia, Sudan and Yemen. Clashes in Cairo’s Tahrir Square stopped yesterday after Egypt’s main Islamist groups called for calm. Police secured the square and arrested 220 people, the country’s Interior Ministry said in a statement. Egypt also secured $2 billion of economic aid from Turkey, according to an e-mailed statement from the Finance Ministry.
Demonstrations over the weekend “weren’t that big, it was more or less angry people on the streets,” said Teymour El- Derini, Cairo-based director of MENA sales at Naeem Brokerage. The rally in global markets also helped turn investor sentiment to “once again very positive and the market is moving in one direction.”
EFG-Hermes gained as much as 5.4 percent to 13.65 Egyptian pounds, the highest intraday level since May 9, before trading at 13.2 pounds. Shareholders also approved terms of the QInvest agreement including a condition that the Cairo-based company won’t compete with the entity to be established in Doha and will cede to it the EFG-Hermes trademark within a year of completing the transaction.

Emaar Hotel

Dubai, the second-largest of seven sheikhdoms that make up the U.A.E., relies on foreign trade, tourism and property for growth. About 221 million shares traded in the emirate today, compared with a 12-month daily average of 143 million.
Emaar gained to 3.58 dirhams, the highest since January 2011. The U.A.E.’s biggest publicly traded developer plans to build a hotel in Dubai near Burj Khalifa, the world’s tallest tower, to capitalize on the city’s hospitality boom.
Oman’s MSM30 Index (MSM30) advanced 0.6 percent and Bahrain’s measure rose 0.3 percent. Qatar’s benchmark increased 0.4 percent. Saudi Arabia’s Tadawul All Share Index (SASEIDX) and Kuwait’s gauge slipped 0.1 percent. Israel’s market was closed for a holiday.

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Pound Is Little Changed Versus Dollar, Euro Before Fed Decision

The pound was little changed against the dollar and euro as investors waited for a Federal Reserve statement that may announce a third series of bond purchases to stimulate growth in the world’s largest economy.
Sterling was within 0.3 percent of a four-month high versus the U.S. currency. Almost two-thirds of economists in a Bloomberg survey predicted the Fed will implement more asset purchases, or quantitative easing. U.K. 10-year bonds rose after the Bank of England said market contacts are skeptical that improvements in sentiment following measures to tackle the euro- area turmoil will be sustained. The nation sold 3.5 billion pounds ($5.64 billion) of gilts maturing in September 2022.

7:19

Sept. 13 (Bloomberg) -- Steven Barrow, head of Group-of-10 research at Standard Bank Plc, discusses the possible impact of a third round of Federal Reserve bond purchases on the euro and pound. Barrow talks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

“The dollar is under pressure going into the Fed decision and the pound could gain further if there is more QE in the U.S.,” said Melinda Burgess, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in London, referring to quantitative easing. If the Fed fails to announce more QE, “a broad risk-off move would support the dollar and bring the pound lower.”
The pound was little changed at $1.6090 at 2:45 p.m. London time after climbing to $1.6131 yesterday, the highest level since May 11. Sterling traded at 80.11 pence per euro. It touched 80.28 pence yesterday, the weakest since July 5.
The U.K. currency has gained 0.5 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The dollar fell 2.3 percent and the euro rose 2.6 percent.

Fiscal Squeeze

RBS has a year-end target of $1.54 based on “low growth” in the U.K. economy and expectations for further quantitative easing from the Bank of England, Burgess said.
Gross domestic product has contracted in the last three quarters, choked by the euro-area sovereign-debt crisis and an austerity program implemented by Chancellor of the Exchequer George Osborne.
The U.K. economy shrank 0.5 percent in the second quarter, the Office for National Statistics said on Aug. 24. The Bank of England downgraded its growth forecasts last month and said the outlook is “unusually uncertain.”
Bank of England policy maker Ian McCafferty said Sept. 11 Osborne “needs to maintain the austerity program” as any easing could push up gilt yields and hurt the central bank’s efforts to boost economic growth.

‘Negative Signals’

“Upside potential for pound-dollar is nearing its limitations, and we expect the pound to come back under pressure in the coming months,” Ian Stannard, head of European foreign- exchange strategy at Morgan Stanley in London wrote in a note today. “Many of our market-based leading indicators for pound- dollar are already giving renewed negative signals, and the domestic U.K. fundamentals remain far from inspiring.”
The median of 44 bank estimates in a Bloomberg survey is for the pound to end the year at $1.55.
The benchmark 10-year gilt yield fell three basis points, or 0.03 percentage point, to 1.81 percent. The 1.75 percent bond due September 2022 gained 0.235, or 2.35 pounds per 1,000-pound face amount, to 99.50.
“Market sentiment appeared to improve in the second half of the review period,” the Bank of England said in its Quarterly Bulletin published today in London. “Some contacts cautioned against placing much weight on this, however, given the seasonal lull in some financial markets during July and August, and the fact that many of the fundamental challenges facing the euro area remained.”
Today’s auction saw the securities sold at an average yield of 1.825 percent. The U.K. last sold 10-year gilts on July 12 at an average yield of 1.719 percent, the lowest since Bloomberg began compiling the data in 1998.
Gilts have returned 2.2 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 2.1 percent and U.S. Treasuries rose 1.7 percent.

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Gold Seen Falling Before Federal Reserve; Palladium Extends Gain

Gold may drop for a second day as investors wait for the Federal Reserve’s decision on monetary policy. Palladium extended the longest rally since 2008.
The central bank decides whether to add stimulus when it concludes a two-day meeting today. Gold jumped 2.1 percent on Sept. 7 on speculation of more steps to boost economic growth after U.S. jobs gains slowed. European Central Bank Governing Council member Panicos Demetriades said the ECB might not have to spend a cent on stimulus by buying government bonds.
“People have priced in quantitative easing and the disappointment factor is very high,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “If this quantitative easing does not materialize, you’d surely see prices fall.”
Gold for immediate delivery gained less than 0.1 percent to $1,731.40 an ounce by 11:13 a.m. in London. Prices declined 0.1 percent yesterday. The futures for December delivery were down 20 cents at $1,733.50 an ounce on the Comex in New York.
The one-month interest rate to lend gold in exchange for dollars was a negative 0.13 percent today, the lowest since April and compared with a negative 0.12 percent yesterday, according to data on Bloomberg. The lease rate is derived by subtracting the gold forward offered rate from the London Interbank Offered Rate. A negative reading means banks have to pay to have their gold deposits lent.

Fixing Falls

The metal sold at the morning “fixing” in London at $1,730.50 an ounce, down from $1,737 an ounce at the afternoon fixing yesterday. The fixing is used by some mining companies to sell their production.
Gold has climbed 11 percent this year as slowing economic growth boosted demand for assets other than stocks or bonds. Holdings in bullion-backed exchange-traded products expanded to a record 2,489.1 metric tons yesterday, data compiled by Bloomberg show.
Silver dropped 0.5 percent to $33.08 an ounce and platinum was up 0.1 percent at $1,648.24 an ounce after jumping 2.6 percent yesterday on labor unrest in South Africa, the world’s largest producer of the metal. Platinum has climbed 10 days in a row, the longest streak since Aug. 22, 2011. Palladium advanced 0.3 percent to $680 an ounce, also the 10th consecutive, the longest rally since Feb. 28, 2008.

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Gold Advances on Outlook for Further Stimulus From Fed

Gold rose as the outlook for more stimulus from the U.S. Federal Reserve spurred demand for the metal as a store of value.
The policy-setting Federal Open Market Committee will consider asset purchases at its Sept. 12-13 meeting, with unemployment stalled above 8 percent for 43 months. Chairman Ben S. Bernanke signaled last month that a third round of quantitative easing may be needed to reduce joblessness. Gold almost doubled from December 2008 to June 2011 as the Fed bought $2.3 trillion of debt in two previous rounds of QE.
“That’s where the focus is, especially for gold,” Marc Ground, a commodities strategist at Standard Bank Plc in Jonannesburg, said today by phone, referring to the Fed meeting. “The market is pricing in the order of $500 billion in outright easing, but I’m not sure the Fed would do something on that scale just yet. So we could see a pullback at the end of the week.”
December-delivery gold rose 0.1 percent to $1,734.10 an ounce by 7:05 a.m. on the Comex in New York. Gold for immediate delivery climbed 0.3 percent to $1,731.82 an ounce in London.
London-traded bullion rose to $1,745.40 on Sept. 7, the most expensive since Feb. 29, on speculation of additional stimulus. Assets in gold-backed exchange-traded products expanded to a record 2,480.4 metric tons yesterday, data compiled by Bloomberg show. Bullion’s so-called 14-day relative- strength index held today for a sixth day above the level of 70 that indicates to technical analysts that a drop in prices may be imminent.

Physical Demand

Physical demand remains “virtually non-existent” globally, UBS AG said today in a report. The bank’s volumes to India are down 22 percent so far this month from a year-earlier period, it said.
Palladium for December delivery fell for the first day in seven, declining 0.6 percent to $668.80 an ounce. Platinum for October delivery was down 0.3 percent at $1,598.60 an ounce. Silver for December delivery was little-changed at $33.545 an ounce.

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Euro Rises as German Court Says Bailout Ruling on Course

The euro rose to the highest in almost four months versus the dollar after Germany’s top constitutional court said it will proceed with a ruling on the country’s role in the European permanent bailout fund.
The dollar fell to the lowest in almost six weeks against the yen before the Federal Reserve starts a two-day meeting tomorrow amid speculation it will buy bonds to boost the economy in a third round of so-called quantitative easing. New Zealand’s dollar strengthened against all of its 16 major peers as Fitch Ratings affirmed the nation’s AA rating. The zloty led gains among emerging-market currencies versus the dollar after JPMorgan Chase & Co. raised its view on the Polish currency.

Sept. 11 (Bloomberg) -- Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd., discusses the outlook for the euro, Federal Reserve monetary policy and expectations for tomorrow's ruling by the German Federal Constitutional Court on the European Stability Mechanism. He speaks with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)

The German court said its decision “won’t be delayed, in response to some reports saying it could be,” said Jane Foley, a senior currency strategist at Rabobank International in London. “If the euro can rally on that news then the market is still in a euphoric mood.”
The 17-nation shared currency gained 0.2 percent to $1.2779 at 7:32 a.m. New York time. It earlier touched $1.2819, the highest since May 22. The euro dropped 0.2 percent to 99.66 yen. The dollar slipped 0.4 percent to 77.99 yen after dropping to 77.96, the weakest since Aug. 1.
The Federal Constitutional Court is due to decide tomorrow on Germany’s participation in the European Stability Mechanism, a 500 billion-euro fund that offers loans to member states and may buy their bonds to lower borrowing costs.

Unlimited Funds

A plaintiff in the case had asked for a delay after the European Central Bank last week pledged unlimited funds to buy euro-area government bonds as it seeks to tame the region’s sovereign-debt crisis. The bid won’t change the ruling date, the court said in an e-mailed statement today.
“The market is anticipating the German Constitutional Court will approve the ESM,” said Yoshitsugu Fujita, assistant vice-president of global markets in New York at Sumitomo Mitsui Trust Bank Ltd. “If it actually passes” the euro will be bought, he said.
The U.S. currency declined against all but two of its 16 major peers before Fed policy makers gather. They will keep their key interest rate at 0.25 percent, according to all 54 economists surveyed by Bloomberg before the announcement on Sept. 13.
The dollar will remain weak if the Fed expands its balance sheet, Chris Weston, an institutional dealer at IG Markets in Melbourne, said in an interview on Bloomberg Television. “I would be looking to sell any kind of big rallies in the dollar.”

Dollar Index

The Dollar Index, which IntercontinentalExchange Inc. (ICE) uses to track the greenback against the currencies of six U.S. trading partners, declined 0.3 percent to 80.184 after touching 80.122, the lowest since May 11.
The dollar has lost 1.3 percent in the past week, the worst performance among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro strengthened 0.6 percent, the second-biggest advancer after the New Zealand dollar.
The implied volatility of three-month options for Group of Seven currencies touched 7.81 percent, the lowest since October 2007, according to the JPMorgan G7 Volatility Index. A decrease makes investments in currencies with higher benchmark lending rates more attractive as the risk in such trades is that market moves will erase profits.

Kiwi Gains

New Zealand’s so-called kiwi advanced as Fitch affirmed the country’s AA rating, citing its strong governance and business environment.
The kiwi rose 0.7 percent to 81.44 U.S. cents and added 0.3 percent to 63.52 yen.
JPMorgan raised its view on Poland’s currency to neutral from underweight after the nation sold $2 billion of bonds yesterday at the lowest spread over U.S. Treasuries since 2005.
The zloty has become more attractive because of the “diminishing concerns surrounding the current-account deficit and bond valuations,” JPMorgan strategists George Christou and Laura Bierer said in an e-mailed report today.
The currency rose 0.4 percent to 3.2141 per dollar and gained 0.2 percent to 4.1074 against the euro.
The euro may strengthen to a four-month high against the dollar, UBS Ltd. said, citing trading patterns.
The shared currency may rise to $1.2935, the 61.8 percent retracement from its decline from the Feb. 24 high to the July 24 low on the Fibonacci chart, Richard Adcock, head of fixed- income technical strategy in London, wrote in an e-mailed note to clients today. That would be the highest since May 11, according to data compiled by Bloomberg.
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

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U.S. Stock Futures Rise on ECB Bond-Buying Speculation

U.S. stock futures gained, indicating the Standard & Poor’s 500 Index will rise for the first time in three days, as investors speculated the European Central Bank will detail its plan to buy government debt.
Amazon.com Inc. (AMZN) advanced 0.7 percent in early New York trading after the Verge reported that the world’s largest online retailer may announce a smartphone. Apple Inc. (AAPL), the world’s most valuable company, added 0.4 percent. VeriFone Systems Inc. (PAY) tumbled 12 percent after reporting third-quarter sales that missed analysts’ estimates.
S&P 500 futures expiring this month added 0.5 percent to 1,410.6 at 7:25 a.m. in New York. The equity benchmark rose for a third month in August as Federal Reserve Chairman Ben S. Bernanke pledged to deploy measures to improve the economy and the euro area’s leaders said they would resolve their region’s debt crisis. Dow Jones Industrial Average futures advanced 64 points, or 0.5 percent, to 13,114 today.
“If Draghi goes through with the bond-purchase plan,it’s a positive development and very welcome,” said Manish Singh, the head of investment at Crossbridge Capital in London, which has more than $2 billion under management. “What investors are looking for is clarity on seniority status, and whether the ECB will buy unlimited debt.”
The S&P 500 lost 0.1 percent yesterday as investors awaited the ECB’s policy meeting.

Draghi’s Plans

The central bank’s president, Mario Draghi, proposes to lower borrowing costs in Spain and Italy using unlimited purchases of government debt that will be sterilized to ensure a neutral impact on money supply, two central bank officials said yesterday. The plans were sent to members of the ECB’s Governing Council on Sept. 4.
Draghi will say how policy makers responded to the proposals at a press conference at 2.30 p.m. in Frankfurt.
In the U.S., the Institute for Supply Management’s non- manufacturing index, which covers about 90 percent of the economy, slipped to 52.5 in August, according to the median forecast of economists in a Bloomberg survey before the report at 10 a.m. today. The measure had a reading of 52.6 in July. A number greater than 50 signals expansion.
A separate release from ADP Employer Services may show that private employers hired 140,000 workers in August, fewer than the 163,000 they took on in July, economists projected in a Bloomberg survey.
A Labor Department report may show jobless claims were little changed at 370,000 last week, from 374,000 a week earlier, according to the median forecast of economists surveyed by Bloomberg.

Amazon, Apple

Amazon rose 0.7 percent to $248 in early New York trading after the Verge reported the company may announce a smartphone as early as today. It cited people familiar with the matter. Amazon will introduce at least three new devices, including two tablet computers and an e-book reader, at an event today, according to a Barclays Plc note from Sept. 4.
Apple, the maker of iPods and iPhones, climbed 0.4 percent to $673.21 in early New York trading.
Bank of America Corp. (BAC), the second-biggest U.S. lender by assets, advanced 1.3 percent to $8.05 after the lender agreed to sell Strategic Partners Inc. to private-equity investors Partners Group Holding AG and Avista Capital Partners.
Bank of America has sold more than $50 billion in assets and businesses since Brian T. Moynihan took over as CEO in 2010, as it seeks to increase capital before stricter international rules come into force.
VeriFone slumped 12 percent to $31.01 after the maker of credit-card terminals said late yesterday that third-quarter revenue rose to $489.1 million, missing the average analyst estimate of $498.7 million in a Bloomberg survey.

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Gold Tops $1,700 as ECB’s Bond-Buying Plan Bolsters Euro

Gold topped $1,700 an ounce for the first time since March as speculation that the European Central Bank will announce unlimited purchases of government bonds to defuse the region’s debt crisis boosted the euro.
The euro traded near a two-month high against the dollar after two central bank officials said that ECB President Mario Draghi will announce the purchases at a policy-setting meeting today. The bond-buying program will be sterilized to assuage concerns about printing money, according to the two. Gold tends to trade inversely to the U.S. currency.

 

December-delivery gold gained as much as 0.6 percent to $1,703.90 an ounce on the Comex in New York and was at $1,703.80. The price has risen 8.7 percent this year. Photographer: Ron D'Raine/Bloomberg

“The ECB action today is going to be beneficial for gold,” said Walter de Wet, the head of commodities research at Standard Bank Plc.
Spot gold rose 1 percent to $1,709.90 an ounce by 9:35 a.m. in London. The last time immediate-delivery bullion was above $1,700 an ounce was March 13. December-delivery gold gained 1.1 percent to $1,712.10 an ounce on the Comex in New York.
Gold will be at $1,840 an ounce by the end of 2012, Jeffrey Currie, head of commodities research at Goldman Sachs Group Inc., said in a Bloomberg Television interview today.
Policy makers’ stimulus is a “critical and direct driver of the outlook for gold,” Currie said. “In terms of the FOMC pursuing the QE3 it will be critical in putting more upward pressure on gold prices,” he said, referring to the U.S. Federal Open Market Committee and speculation about a third round of so-called quantitative easing, or asset purchases.
Assets in exchange-traded products expanded to a record 2,470.7 metric tons yesterday, data compiled by Bloomberg show. Bullion is up 9.3 percent this year.

‘Optimistic’ Market

“The market is optimistic about the ECB’s plan to rescue the region,” said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. “Gold is getting a lift from the strength in the euro.”
The ECB has been at the forefront of fighting the crisis, which has so far pushed five countries into bailouts and driven the 17-nation euro economy to the brink of recession. In July, Draghi said he would do “whatever it takes” to defend the euro.
Platinum for immediate delivery rose for a fifth day, climbing as much as 1.1 percent to $1,588.75 an ounce, the highest price since April 19, and was last at $1,583.25.
Investors are buying platinum at the fastest pace since 2010 after disruptions at mines in South Africa, the largest producer, caused the biggest loss of supply in at least seven years. Purchases through exchange-traded products were the most in 20 months in August, data compiled by Bloomberg show.
Spot silver gained as much as 2.3 percent to $32.995 an ounce, the highest level since April 3, before trading at $32.895. Palladium advanced 0.2 percent $646.25 an ounce.

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Oil Gains a Second Day as U.S. Stockpiles Drop to Five-Month Low

Oil rose for a second day in New York after an industry report showed stockpiles shrank to the lowest in more than five months in the U.S., the world’s biggest crude consumer.
Futures gained as much as 0.9 percent after the American Petroleum Institute said inventories slid 7.2 million barrels last week to 359.3 million, the lowest since the period ended March 23. An Energy Department report today may show supplies fell 4.95 million barrels as Hurricane Isaac curbed Gulf of Mexico output, according to a Bloomberg News survey. Europe’s central bank is set to announce President Mario Draghi’s proposal for bond purchases to tame the region’s debt crisis.
“We’ve been looking to see a persistent trend of firmer commodity use to get those inventories down,” said David Lennox, an analyst at Fat Prophets in Sydney. “If we see stockpiles declining tonight and refineries running above 90 percent capacity, I think that’s going to be a boost for oil. Throw in Draghi and I’d expect the price of crude to go up.”
Crude for October delivery climbed as much as 90 cents to $96.26 a barrel in electronic trading on the New York Mercantile Exchange and was at $96.11 at 2:25 p.m. Singapore time. The contract increased 6 cents yesterday to close at $95.36. Futures have lost 2.8 percent this year.
Brent oil for October settlement on the London-based ICE Futures Europe exchange advanced as much as 87 cents, or 0.8 percent, to $113.96 a barrel. The European benchmark crude was at a $17.61 premium to New York-traded West Texas Intermediate grade. The spread was $17.73 yesterday, narrowing for the first time in six days.

‘Golden Cross’

Oil may extend gains in New York as futures approach a “golden cross” formation on the daily technical chart, according to data compiled by Bloomberg. The 50-day moving average, at $90.84 a barrel today, has pared a discount to the 100-day mean to 67 cents, the smallest gap since May 24. Investors tend to buy contracts when a shorter-term moving average rises above a longer-term one.
U.S. gasoline stockpiles dropped 2.3 million barrels last week, the API data showed. Supplies are forecast to fall 3 million barrels in the Energy Department report, according to the median estimate of 12 analysts surveyed by Bloomberg News.
Distillate-fuel inventories, a category that includes heating oil and diesel, declined 132,000 barrels, the API said. A median 1.55 million-barrel decrease is projected in the Energy Department report, the survey showed.
About 680,749 barrels a day of oil, or 49 percent of production, were curtailed in the Gulf of Mexico as of 12:30 p.m. East Coast time yesterday, down from 710,866 barrels, the Bureau of Safety and Environmental Enforcement said on its website. About 26 percent of natural-gas output was shut in.

Bond Purchases

Oil extended gains after a report showed Australian unemployment unexpectedly declined. The jobless rate fell to 5.1 percent in August from 5.2 percent in July, the statistics bureau said today. Economists surveyed by Bloomberg forecast a gain to 5.3 percent.
Draghi will announce at a press conference in Frankfurt today whether ECB policy makers have agreed on the bond-purchase proposal. The plan involves unlimited purchases of government debt that will be sterilized by removals elsewhere to assuage concerns about printing money, according to two central-bank officials briefed on the plan.
U.S. Federal Reserve Chairman Ben S. Bernanke said in Jackson Hole, Wyoming, last week he wouldn’t rule out more stimulus to revive growth. Payrolls increased at a slower pace in August and unemployment exceeded 8 percent for a 43rd month, according to economist forecasts before a Labor Department report tomorrow.

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Saudi Arabia’s Stocks Climb as Oil Rises

Saudi Arabia’s stocks rose, heading toward their highest level in more than three months, as oil gained after Federal Reserve Chairman Ben S. Bernanke said he wouldn’t rule out more stimulus to support the U.S. economy.
Saudi Basic Industries Corp. (SABIC), which trades as Sabic, advanced the most in a week. Al-Rajhi Bank (RJHI), the kingdom’s biggest lender by market value, climbed the most since Aug. 27. Dar Al Arkan Real Estate Development Co. (ALARKAN) increased to its highest price since July 8.
The Tadawul All Share Index gained 0.2 percent to 7,153.5 at 1:12 p.m. in Riyadh, heading for its highest level since May 13. The biggest stock market in the Middle East and North Africa has rallied 12 percent this year.
“The optimism regarding new monetary stimulus initiatives has increased significantly,” Jarmo Kotilaine, the chief economist at National Commercial Bank in Jeddah, said by phone. “Markets are in anticipation mode.”
Oil completed its biggest monthly gain since October as Bernanke said that the Fed will “provide additional policy accommodation as needed to promote a stronger economic recovery.” The Fed chairman spoke at the Kansas City Fed’s annual economic-policy symposium in Jackson Hole, Wyoming. The Federal Open Market Committee’s next meeting comes in two weeks.
Oil for October delivery increased $1.85 to $96.47 a barrel on the New York Mercantile Exchange yesterday. Prices increased 0.3 percent last week and 9.6 percent in August.
Sabic, the world’s largest petrochemical maker, gained 0.5 percent to 92.50 riyals and Al-Rajhi added 0.7 percent to 74.25 riyals. Dar Al Arkan advanced 1.5 percent to 10.10 riyals.
Saudi Arabia (SASEIDX)’s stock exchange is the only Persian Gulf bourse that opens on Saturday.

Source: Bloomberg

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Dollar Drops as Bernanke Makes Case for More Monetary Stimulus

The Dollar Index (DXY) fell for a second week as Federal Reserve Chairman Ben S. Bernanke defended his unprecedented actions and made the case for further monetary stimulus to counter unemployment of more than 8 percent.
The euro rose versus the greenback for a third week, the longest stretch since March, as Bernanke said at an annual forum in Jackson Hole, Wyoming, that joblessness was a “grave concern” and that further bond purchases under quantitative easing shouldn’t be ruled out. The dollar declined versus the yen as reports showed U.S. business activity expanded more slowly this month. A Labor Department report Sept. 7 is forecast to show the U.S. added fewer jobs in August.
“Earlier in the week, there were more expectations that there could be further hinting at QE3 in September,” David Mann, regional head of research for the Americas at Standard Chartered in New York, said yesterday in a telephone interview. “By the time we got to the speech today, expectations were swinging back more in line with what we ended up with. The belief that further stimulus can help is still keeping the quantitative-easing view alive.”
The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trade partners including the euro and the yen, fell 0.5 percent to 81.204 this week. It dropped to more than a three-month low yesterday, touching to 80.964.
The dollar fell 0.5 percent to $1.2579 per euro this week in New York, after losing 1.4 percent in the five days ended Aug. 24. The yen was little changed at 98.46 per euro. The Japanese currency appreciated 0.5 percent to 78.28 to the dollar.

Net Shorts

The Canadian dollar was the biggest winner among its 16 most-traded peers this week, climbing 0.6 percent to 98.63 U.S. cents. New Zealand’s dollar was the worst performer, declining 1 percent to 80.31 U.S. cents.
Futures traders decreased bets the euro will fall against the dollar, Commodity Futures Trading Commission data showed. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 101,561 on Aug. 28, compared with 123,932 a week earlier. Net shorts reached a record 214,418 on June 8.
The greenback fell 1.5 percent this month, according to the Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The euro gained 0.9 percent, while Norway’s krone was the best performer, rising 3 percent.

Aussie, Kiwi

The Australian dollar touched its lowest point against its U.S. peer since July 25 as China’s Shanghai Composite Index (SHCOMP) slipped on Aug. 30 to its lowest level since February 2009. China is Australia’s largest export market.
The so-called Aussie lost 1.3 percent to A$1.2183 per euro. The currency dropped 0.8 percent to $1.0322 after decreasing to $1.0277, its lowest level in August.
New Zealand’s dollar also fell to its lowest point in August versus the greenback, touching 79.70 U.S. cents on Aug. 30, before trading down 1 percent at 80.34. The so-called kiwi decreased 1.4 percent to 62.93 yen.
“We have more and more signs coming out of Asia, especially China, that growth may not be that strong,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said yesterday in a telephone interview. “This raises some concerns over where things are going. The concern now is that you need better signs of growth.”

Norwegian Krone

Norway’s krone was the week’s second-biggest gainer against the euro even after Norges Bank Deputy Governor Jan F. Qvigstad warned speculators on Aug. 30 against testing the central bank’s resolve following the currency’s appreciation to a nine-year high in August.
“They can talk about whatever they want, but unless they’re acting or doing something significant to change the trajectory of it, it’s really hard to see why the markets would listen a vice finance minister,” Andrew Busch, a global currency strategist at Bank of Montreal (BMO) in Chicago, said in an Aug. 30 telephone interview.
The Norwegian currency advanced against most of its major peers on Aug. 28 amid speculation the Oslo-based Norges Bank, which has cut its main rate by 75 basis points, or 0.75 percentage point, since December, would leave its key policy rate at 1.50 percent, according to the median estimate in a Bloomberg survey. The bank left the rate unchanged.
The krone gained 0.6 percent to 5.7979 per dollar after appreciating to 5.7683 yesterday, the strongest level since May 4.

‘Nontraditional Policies’

Bernanke told central bankers and economists at the Kansas City Fed’s annual economics symposium that “nontraditional policies” shouldn’t be ruled out if economic conditions warrant them. He emphasized that a new round of bond purchases is an option, and repeated the Federal Open Market Committee’s last statement that the central bank “will provide additional policy accommodation as needed” to spur growth.
The Fed chief’s speech came two weeks before the next meeting of the policy-setting Federal Open Market Committee. Many policy makers at the committee’s previous meeting said additional stimulus probably will be needed soon unless the economy showed a “substantial and sustainable strengthening,” according to minutes of their July 31-Aug. 1 meeting.
The U.S. unemployment rate has stayed at or above 8 percent since February 2009. It was 4.4 percent in October 2006.
U.S. employers added 125,000 jobs in August, fewer than the 163,000-position increase in July, economists in a Bloomberg News survey forecast before the Labor Department reports the data on Sept. 7. The unemployment rate will remain at 8.3 percent, they projected.

Spanish Aid

The euro rose for a third week against the yen amid comments on Aug. 28 from European Union President Herman Van Rompuy that the region’s rescue fund is ready for rapid action to aid Spanish banks. Spain’s Prime Minister Mariano Rajoy said on Aug. 30 that his government would delay deciding whether to seek a sovereign bailout until the aid conditions are clear.
Chinese Premier Wen Jiabao pledged that same day to consider European bond purchases while urging Spain, Italy and Greece to take steps to prevent a worsening of the euro-region’s sovereign-debt crisis.
The European Central Bank’s Governing Council meets on Sept. 6 in Frankfurt and central-bank President Mario Draghi is expected to announce details of the bank’s new bond-buying program, a proposal that has been criticized by Germany’s Bundesbank.
“It’s quite clear at this point that a bond-purchase program will materialize,” Jens Nordvig, managing director of currency research at Nomura Holdings Inc. in New York, said in an Aug. 28 interview on Bloomberg Television’s “Lunch Money” with Sara Eisen. “That is enough to underpin the market for now. It doesn’t mean that the euro crisis has been solved, but it means that global markets can trade better for the time being.”

Source: Bloomberg

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