Reymount Blog - Online Forex &amp; CFD, Precious Metals Trading

Monday, September 17, 2012

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

Reymount Investment Products & Services:

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.

Reymount Investment Products & Services:

Sunday, September 16, 2012

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

Reymount Investment Products & Services:

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.

Reymount Investment Products & Services:

Thursday, September 13, 2012

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.

Fed Action Seen to Push Euro as High as $1.35

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.

Reymount Investment Products & Services:

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.

Reymount Investment Products & Services: