Asian Market and US futures advanced in the first trading session

The US futures and Asian markets advanced in the first trading session of the week, in spite of the Nikkei being closed for business tonight, as the country observes the Greenery Day Holiday.

There were no important news releases in the weekends. However, in Asia, a group of nations decided to set up a $120 billion foreign-currency reserve fund with Japan offering another $60 billion in swap facilities to assure the Yen’s liquidity.

There have been discussions for quite long time about such measures in the area, but up till now the Asian nations failed to make an agreement. The reserve fund, also called the Chiang Mai Initiative which allow the Asian countries to borrow as much as 20% of a pre-decided amount without any limitations, but the rest of the 80% will only come after numerous restrictions have been place.

This measure is very good for the region’s constancy and will also allow some countries like Japan, China and South Korea to establish themselves as regional economic leaders, experts said. The three nations will add substantial amounts to the funds, which help them in development.

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Asian Market Raise on US Consumer Spending

Asian markets grew for the first time in last few days of trading which help by positive US reports. The US futures market continued to increase in the after-hours session, something that helped the Asian markets.

Even though the US GDP numbers came in much poorer than estimated, the financial market found the power to progress as consumer spending increased, while stockpiles decreased, which can make the perfect environment for the economy to improve later this year.

The combination of consumers rising their spending, where companies decrease their inventories may give the financial markets expect that the economy will rebound in the coming months, expert said. They also said that at this point, the market is in very positive form it overcame a report saying that 6 banks failed in the Treasury’s stress-test.

As such companies that have direct disclosure to the overseas markets placed important gains during the Asian session. Retail companies advanced also in the Asian equity markets, increased the gains from the US session.

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US Futures Declined at a Strong Pace, But Asian Market Rise

US Futures post significant decline tonight, although Asian markets are trading in the green. The main cause of concern seems to be the swine flu that just hit the US borders.

It seems that the swine flu is the problem to hit the US and the global financial system. For now, the investors are anxious that the cost of combating the new disease will only add another streak on the government’s budget, already influenced by the huge rescues that financial sector requisite. Also, like this time, consumers tend to spend less, which will also affect the business cycle rising significantly the recovery period. Experts said.

However, Asian equity markets seem unaffected up to now, reaching the maximum valuation in the last three months of trading. The financial sector constant to progress tonight, helped by the unofficial, preliminary stress test outcomes, which show that most banks have a sufficient capital base. Equally with the financial sector, pharmaceutical companies also placed some major gains tonight, as drug sales are possibly to raise up.

Additionally, the Japanese government decreased yet again the GDP projections for 2009, down to 3.3%, something that should have pulled the Asian markets worse.

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Car Factory output falls in Japan; Asian Stocks plummet

Japan's car factory output has fallen sharply for the fifth consecutive month in February.
Annual car production in Japan has fallen by more than 9% in this financial year. An independent industry data has showed that Car production in Japan had plummeted by 56% in the previous month.
In Fx trading today, yen rose against the euro on speculation investors will reduce holdings of higher-yielding assets.


IMF predicts gloomy picture:
Revenue from exports have seen a sharp fall as the worldwide demand for goods has been sapped. Output in related sectors like the passenger cars, trucks and buses has fallen as we well.
The IMF expects Japan, one of the largest economies in the world, to register a contraction of up to 5.8% in the up coming financial year.

The finance minister has said that Japan plans to inject a stimulus package worth more than 2% of its GDP.

Asian Stock Nosedive:
World stocks fell on concerns the global slump is deepening.Worst performers have been the Asian stocks which nose dived on speculation over persistent problems in the US car industry.

GM's chief executive has been asked by the US president to step down even as GM and Chrysler, two of the car firm giants, requested another round of Government bail-out.


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Forex and global stocks fall sharply on fears financial sector could worsen

Forex and financial markets have been gripped by fears the global financial sector may perform worse than calculated. Investor confidence has already been hit by talk that US insurance giant AIG will need a further injection of government cash with its report due to be released today.

In Europe, the UK's FTSE 100 fell by 3.2%, while Germany's Dax was down 2.76% and France's Cac 40 lost 2.67%.Earlier in Asia, Japan's Nikkei 225 index closed down 288.27 points, or 3.8%, at 7,280.15. In Hong Kong, the Hang Seng fell 3.9% to 12,314.5 points.

China's manufacturing sector had declined further last month. South Korean imports and exports slumped to a record as well. Japan reported a steep drop in car sales. Weak economic data from China and South Korea has also underscored fears about Asia's export-dependent economies.

Monday morning slide in forex and stock indices was followed by a poor performance on Wall Street on Friday last week after data showed that economic growth was even weaker than thought.

This is turning out to be one of the most tumultuous times on record in the global financial markets. "You're seeing the U.S. is sinking lower and lower, and we're still desperately searching for a bottom," remarked an analyst.

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Forex-Currency update on Monday

Forex Daily Currency Update
2nd March 2, 2009 Monday

EURO:
Euro fell to a one-week low vs the dollar after European Union leaders rejected calls to back an aid package for eastern Europe, fueling concern the 16-nation region’s recession will deepen.

YEN:
The yen may extend its worst month in 13 years into March on speculation traders will keep reducing holdings of long positions in the currency that bet on a rise in the exchange rate. Japan’s currency weakened 7.9 percent versus the dollar in February, the poorest month since August 1995.

NZD & AUD:
New Zealand’s dollar fell to a 6 1/2-year low and Australia’s currency extended three weeks of declines after U.S. and Asian shares slumped, prompting investors to seek the safety of the greenback.

ASIAN CURRENCIES:
The South Korean won and the Indonesian rupiah led declines in Asian currencies on concern the global recession is worsening, deterring investors from buying emerging-market assets.

RUPEE:
India’s rupee slid to a record low as mounting global stock losses added to concern investors will pull money out of riskier emerging-market assets.The currency extended a two-week slump on speculation Standard & Poor’s will soon cut the nation’s debt rating to junk. The rupee also fell on concern the current-account deficit will widen from a record as exports decline amid a deepening global economic slump.

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Downturn Creeping Into Asia

Japan’s exports fell by 46 percent in January, and Hong Kong’s economy contracted 2.5 percent in the last three months of 2008, furthering signs that the economic downturn in Asia is set to drag on through this year.

Japan leads recession in Asia:
The Japanese economy was one of the first in Asia to tip into recession since last three months of 2008 as weakness stemming from poor domestic demand was mixed with evaporating demand from overseas. Exports plunged 46 percent from a year earlier and imports dropped 32 percent. Similar sharp declines have been reported recently by China and Taiwan also.

Worsening Yen:
Japan’s export decline was significant from a grim December 2008, when exports fell 35 percent. The yen — whose strength against the dollar has made Japanese goods more expensive for American consumers — has weakened during the last three weeks, trading at around 97 to the dollar on Wednesday, compared with about 89 in early February.
Exporters have continually cited the yen as a main reason for sharply reduced sales that are expected to lead to deep losses this year.


Rest of the Continent:
In Hong Kong, the government said on Wednesday that it expected the economy to shrink 2 to 3 percent in 2009. Elsewhere in the region, South Korea said it would start a $13.2 billion fund to bolster its commercial banks .India had Malaysia have already recorded the slowest growth in at least last seven years.
Much of Asia’s growth in recent years was based on an export boom, allowing the recession in the United States and Europe to spread through a region that had been insulated from the American financial troubles that ignited the current downturn.

Read details on NYTimes

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FOREX-Daily Market Digest

Yen sees gain:
The yen gained in currency trading for a third day against the euro on speculation European banks will reveal increasing losses due to the financial crisis in the region.

Yen strengthened versus 13 of the 16 most-active currencies on concern stock declines will spur investors to sell higher-yielding assets they bought with funds from Japan. The euro traded near a 10-week low against the dollar. The Risk-averse sentiment is being seen as likely to persist. “The yen may be bought.” Traders noted demand for the yen increased after Asian equities fell. The Nikkei 225 Stock Average slipped 1.4 percent and the MSCI Asia- Pacific Index of regional shares weakened 1 percent, prompting investors to reduce holdings of higher-yielding assets.

AUD weakens:
Australia’s currency may slide to as low as 50 U.S. cents as the global recession can drive down commodity prices. The central bank may lower borrowing costs to a record. The global economic collapse, the weakness of commodity prices, the prospect of Australian interest rates going to 2 percent or less and a severe domestic recession suggest the Australian dollar could weaken sharply, accordingly to analysts.

BSE and NSE move upwards:
Indian shares turned positive after opening 1.1 percent lower on Wednesday as investors hunted for bargains in the battered market that had fallen 6.2 percent in the previous two days. Technically, the market had become oversold-so now it is rebounding, remarked an analyst here in Mumbai. By 10:05 a.m. (0435 GMT), the 30-share BSE index was up 0.38 percent at 9,069.26 points, with 21 components rising. The 50-share NSE index was up 0.47 percent at 2,783.60.

Current recession one of the worse:
Alan Greenspan, the former U.S. Federal Reserve Chairman on Tuesday said the current global recession will be the longest and deepest since the 1930s and more government rescue funds will be needed to stabilize the U.S. financial system. In a speech to the Economic Club of New York Greenspan said The U.S. Treasury's Troubled Asset Relief Program (TARP) designed to help bail out banks has been partially successful and that additional funds will be required to stabilize the American banking system and restore normal lending.

News compiled from the Reuters and Bloomberg.

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FOREX-Top Headlines on Monday Morning

Yen Rises, South Korean Won drops to two month low:
The yen climbed to 91.65 against the dollar as of 2 p.m. in Tokyo from 91.93 late in New York on Feb. 13 in forex trading. It advanced to 116.92 per euro from 118.37. Japan’s currency gained 1.2 percent to 59.63 versus Australia’s dollar and rose 1.1 percent to 47.50 against New Zealand’s dollar. The U.S. dollar gained to $1.2756 per euro from $1.2862 in New York last week, and climbed to 1.1668 Swiss francs from 1.1590. The British pound fell 1 percent to $1.4214 and weakened 0.2 percent to 89.75 pence per euro.

The yen snapped two days of losses against the dollar from the Friday session last week.

South Korea’s won shed 11 percent this year, the biggest drop among the 10 most-traded Asian currencies outside Japan, on concern that a deepening global economic slump will discourage investors from buying emerging-market assets.
A forecast revealed the Korean economy will shrink 6 percent this year as the world recession takes a bigger toll on over-leveraged households and smaller companies than during the 1998 Asian crisis.

Geithner Pressed By G-7 to Push Ahead With Bank Bailout Plan:
Finance chiefs from the Group of Seven nations joined the chorus of U.S. investors and lawmakers pushing Treasury Secretary Timothy Geithner to move faster to fix the banking system. The G-7 repeated its traditional message that “excess volatility” and “disorderly movements” in exchange rates must be avoided. The group accounts for about two-thirds of the world economy composing of the U.S., Japan, Germany, U.K., Italy, Canada and France. The yen rose against the euro and the dollar after finance ministers from the Group of Seven nations said the “severe” global slump will persist for most of 2009 and Japan’s economy shrank by the most since 1974, spurring investors to sell riskier assets.

White House dampens stimulus expectations:
President Barack Obama's aides warned Americans on Sunday not to expect instant miracles from the $787 billion economic stimulus bill he will sign this week, but said it would help eventually. "The acceleration in job loss probably means that this economy is going to get worse before it gets better," he said. The Republicans kept up their criticism on the bill saying it is incredibly expensive. “It has hundreds of billions of dollars in projects which will not yield in jobs," said John McCain, whom Obama defeated in last year's presidential election.

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FOREX and Other Headlines on Friday Morning

Yen Falls on hope Risk Appetite Will Revive:
The yen dropped against the euro and the U.S. dollar as optimism about government efforts to revive global growth improved investors’ appetite for riskier assets, pushing up Asian stocks and Forex market for the first time this week. The yen also weakened against the Australian and New Zealand dollars after Australia’s Senate approved a 42 billion AUD ($28 billion) stimulus package aimed at ensuring the economy doesn’t enter its first recession in 18 years. The greenback fell for the first time in four days on speculation a U.S. report will show that confidence among consumers declined in February, adding to signs the recession in the world’s largest economy is worsening.

G7 Meeting:
Finance ministers and central bankers from the Group of Seven major industrial nations meet in Rome here today and tomorrow. They plan to discuss exchange-rate developments.

Indian shares rise:
Indian shares rose 1.8 percent on Friday as investors speculated on a fiscal stimulus package in an interim general budget on Monday and supported by firmer Asian markets. Traders said expectations an interim railway budget, scheduled to be presented to Parliament at 11 a.m. (0530 GMT), would propose lower freight rates also underpinned sentiment.

Stimulus Aims Two-Phase Jolt at U.S. With Tax Cuts, Spending:
The stimulus plan emerging from Congress may jolt the U.S. economy in successive waves: relief to cash-strapped consumers, businesses and states, then a job- creating lift from spending on roads, utilities and public transit. Economic activity begins to tick up in third quarter of 2009, but the biggest effect of the stimulus bill is being expected in 2010.The hope is, with the stimulus, that we actually stop losing jobs by the end of this year, marked an analyst. The stimulus bill contains about $54 billion to help states with expenses. The plan has more than $60 billion to increase unemployment benefits and a boost to food-stamp programs, housing assistance programs and other aid for the hardest-hit Americans.

Obama Pays Tribute to Abraham Lincoln:
The United States on Thursday 12th February, marked Lincoln's 200th birthday with ceremonies at the US Capitol in Washington and at historical sites across the country, including his presidential library in Springfield, Illinois and the Gettysburg battlefield in Pennsylvania. President Barack Obama often invokes the name and symbols of the assassinated president who ended slavery and brought the U.S. through the Civil War. Both men rose from the Illinois state legislature to the highest office in the land and both built reputations as skilled political orators.

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Asian Stocks Fall on Doubts U.S. Stimulus Will Revive Growth

Asian stocks fell for a fourth day, led by financial and consumer-related companies, on concern U.S. measures to alleviate the financial crisis won’t be enough to revive the world’s largest economy. The U.S. stimulus plans are still lacking in details,” remarked an analyst from China. “It’s still unclear how they are going to bailout the banks. The market had been awaiting the financial bailout plan with high hopes, but what was announced didn’t have much meat on the bone,” said a Tokyo-based strategist in an interview with Bloomberg Television.

The MSCI Asia Pacific Index fell 1.5 percent to 81.75 at 11:32 a.m. in Tokyo, with about three stocks advancing for each one that declined. The gauge has lost 8.8 percent this year, extending 2008’s record 43 percent, as the credit crisis triggered by the collapse of the U.S. housing market dragged the world’s biggest economies into recession.


The Nikkei 225 Stock Average slumped 1.7 percent, to 7,814.01, resuming trade following a holiday yesterday.

Indian shares started 0.6 percent lower on Thursday following losses in Asian markets on uncertainty about the global economic outlook.Top-listed Reliance Industries and outsourcer Infosys Technologies were the main losers.

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Asian Currencies Climb This Week on Efforts to Revive Economies

An Asian currency gauge rose for a second week as policy makers stepped up efforts to revive economies reeling from the global recession, raising speculation overseas investors are returning to emerging markets.

The Philippine peso capped the biggest weekly advance in a month. India’s rupee had a second week of gains with an advance of 0.3 percent this week to 48.7250 versus the U.S. currency. Malaysia’s ringgit traded at a one-week high as regional stocks rallied. . Malaysia is prepared to take “radical” steps to boost the economy, the government said on Feb. 5, while the Indonesian rupiah rose 0.3 percent to 11,720 today, paring this week’s decline to 2.4 percent. Indonesia a day earlier cut interest rates for a third straight month. The peso climbed 0.5 percent yesterday to 47.202 per dollar, a weekly gain of 0.4 percent Taiwan will offer tax breaks and subsidized loans to lure local investors back from China, which is increasing export tax rebates for textiles. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, rose 0.4 percent for the week to 105.10. Elsewhere, The Thai baht fell 0.2 percent on the week to 35 per dollar and Vietnam’s dong was little changed at 17,485.

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World News and Currency Update

EUROPE

The euro traded near a two-month low against since yesterday the dollar on concern the economic slump in Eastern Europe will deepen the recession in the 16-nation currency bloc.The currency may weaken for a second day against the yen on speculation the European Central Bank will signal it plans to cut interest rates again this year, after leaving them unchanged at a meeting today. The Czech koruna approached a two-year low versus the dollar before a government report that may show the trade deficit widened to the most in four years. Russia’s ruble was near an 11-year low after Fitch cut the nation’s debt rating.

ASIA

Indonesia’s central bank is seeking to expand its $6 billion currency swap deal with Japan and add new agreements to bolster the rupiah after foreign-exchange reserves slumped by $10 billion since July.Indonesia, which has similar agreements with China and South Korea for $3 billion each, may also initiate talks with a fourth nation, central bank Governor said, without identifying the country. The rupiah, which fell 16 percent last year, the most in eight years, declined 1 percent to 11,788 against the dollar at 10:19 a.m. in Jakarta.

US
Years of deepening recession in the developed world gnawed at investors on Thursday, after glum earnings from U.S. corporate stalwarts such as Kraft Foods and as the Bank of England looked set to cut record low rates further.As governments worldwide seek measures to ease the pain from the worst financial crisis in decades, the U.S. Senate voted to soften a "Buy American" clause in a $900 billion stimulus plan after President Barack Obama voiced concerns it could spark a trade war.

Excerpts taken from Bloomberg.com.

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Currency Updates for the Day

US dollar
The dollar edged up against a basket of currencies in cautious trade on Wednesday before jobs data in the United States and interest rates decisions by central banks in Europe. The U.S. currency made up for some of its losses the previous day, when an unexpected rebound in housing data and hopes for fresh stimulative economic packages in the United States sapped investor demand for the dollar as a safe haven.
"Investors are basically looking to buy the less-risky yen against other currencies because they are still avoiding risks, though the dollar is the next beneficiary currency, underpinned by prospects for economic stimulus plans," said an analyst at Shinkin Central Bank.
The dollar edged up 0.1 percent to 89.53 yen from late U.S. trading on Tuesday, but Japanese exporters selling of the U.S. currency capped its gains, dealers said. The euro slipped 0.3 percent to $1.2999 and was little changed at 116.34 yen, reported Reuters.

AUD & NZD
Bloomberg reported the Australian and New Zealand dollars rose for a second day as regional stocks gained and government spending worldwide boosted investor appetite for higher-yielding assets. Australia’s currency climbed the most in seven days after a government report showed December retail sales posted the biggest gain in more than eight years. The government yesterday announced a A$42 billion ($27.2 billion) spending package and the central bank cut interest rates to the lowest since 1964 to help the economy avoid a recession.

EURO
The euro fell toward an eight-week low against the dollar before a report that may show retail sales slid for a seventh month, supporting the case for the European Central Bank to cut interest rates.

POUND
The British pound weakened versus the greenback on concern an industry report will show U.K. services shrank at close to the fastest pace in 12 years. The yen may gain for a fifth day versus the dollar on speculation widening credit-market losses will erode corporate earnings, prompting investors to sell higher-yielding assets financed in Japan.

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Yen,AUD,Rupee and Crude Oil Update

YEN
The yen fell, ending three days of gains versus the dollar and euro, after the Bank of Japan said it will buy 1 trillion yen ($11.1 billion) of shares held by financial companies, reviving demand for higher-yielding assets. Japan’s currency dropped from near a one-week high versus the greenback after the central bank said in a statement it will purchase the equities through April 2010 to boost the capital of financial institutions.

AUD
The Australian and New Zealand dollars also ended a three-day losing streak against the yen after the Australian government said it will spend 42 billion AUD ($26.8 billion) to help prevent the economy entering a recession. The Australian dollar gained after the central bank cut interest rates to the lowest since 1964 and the government announced a stimulus package to avoid a recession. New Zealand’s currency rose from near a six-year low.


RUPEE
India’s rupee strengthened the most in a week even as Asian stock gains tempered speculation overseas funds will increase equity sales. The rupee climbed as much as 0.4 percent to 48.7325 a dollar, the strongest intraday since Jan. 19, before trading at 48.775 as of 10:16 a.m. in Mumbai, according to data compiled by Bloomberg. All 10 most-active Asian currencies outside Japan strengthened.

OPEC
Crude oil rose in New York on speculation that OPEC, led by Saudi Arabia, cut its output in January to avoid a supply glut and bolster prices. Production from the Organization of Petroleum Exporting Countries averaged 28.565 million barrels a day last month, down 3.5 percent from December, according to a Bloomberg News survey of oil companies, producers and analysts. A government report yesterday showed U.S. consumer spending fell in December for a record sixth consecutive month, cutting fuel consumption.

The above is compiled news excerpts from Bloomberg.com.

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Japan sees investment opportunities in Asia, US

Japanese companies see plenty of opportunities to make acquisitions and investments in Asia and in environmental business in the United States, the Japan External Trade Organisation JETRO said on Friday.But the strong yen and credit crunch mean investment into Japan is likely to continue falling, Yasuo Hayashi, chairman and CEO of JETRO, which promotes trade and investment between Japan and the rest of the world, told Reuters.Here's the compiled news excerpt from Forexpros.com.
Hayashi said India would offer major investment opportunities because the authorities lacked basic infrastructure.

Japanese companies were also well placed to pick up investment projects in China, especially in the environment sector, he said in an interview.
"Japanese business is looking very eagerly at business in China and sales to China of environmental equipment," he said.

Even in the United States there were opportunities, despite the economic crisis, because the new administration of President Barack Obama wanted to invest in the environment sector, an area of expertise for Japanese firms, he said.

Japanese companies will also look for investment opportunities in Southeast Asia, including plans to construct an industrial corridor linking India and Vietnam, and in commodities-rich countries in Latin America and Africa seeking to develop their resources, he said.
The long-term approach of Japanese business meant it was well placed to exploit opportunities even when commodities and energy prices were low, he said.

"For companies that are cash-rich, strong and able, now is a good opportunity," he said.Because many Japanese companies have relatively strong balance sheets after restructuring following Japan's financial crisis, they are well placed to make foreign acquisitions as well as investments, he said."Many find it a good opportunity to purchase good foreign companies which are in trouble at a reasonable price," he said.

As a result, Japanese foreign direct investment (FDI), which fell 4.7 percent year-on-year in the first 11 months of 2008 to 4.48 trillion yen, could increase this year, he said.
But FDI into Japan would continue to decline, after falling 13.5 percent in the first 11 month of 2008 to 6.43 trillion yen, reducing the outstanding stock of inward investment in the country.Hayashi said investment to Japan was falling because the financial crisis made it difficult for investors to raise capital and the strength of the yen was also a deterrent.

The poor state of the Japanese economy, which suffered a record 9.6 percent fall in industrial output in December, also discouraged inward investment, he said.

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Yen falls for the second day; Pound on a high

The yen weakened for a second day against the dollar and the euro as gains in stocks reduced demand for the currency as a haven from the financial crisis. Japan’s currency also fell against the Australian dollar and the Brazilian real as measures of bond risk declined after Barclays Plc said it doesn’t need to raise further capital because revenue increased last year. The British pound and the euro strengthened as speculation eased that losses will widen at European banks.
“We’re seeing an improvement in sentiment because it appears Barclays has avoided a crisis,” said Akio Shimizu, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest publicly listed lender. “People will trim their bets on declines in the euro and the pound. There’s a bias for the yen to weaken.” The yen declined to 89.50 against the dollar as of 1:29 p.m. in Tokyo from 89.10 late yesterday in New York. Japan’s currency fell to 118.46 per euro from 117.51. The euro climbed to $1.3236 from $1.3189.
Sterling on the other hand touched a one-week high of $1.4080 after Barclays said yesterday it retains more than 17 billion pounds ($23.9 billion) even after it wrote down another 8 billion pounds of bad loans. The currency rose to $1.4059 from $1.3993.

Britain’s currency plunged to $1.3503 on Jan. 23, the lowest level ever since September 1985, after the government announced a second bank bailout in three months and a further injection of funds into Royal Bank of Scotland Group Plc.

Recommendations:
UBS recommends selling the euro with a target of $1.25 and an automatic buy order at $1.3450 to limit losses, according to the report. The dollar gained 5.6 percent against the euro and 3.9 percent against the pound this month, extending rallies of 4.4 percent and 36 percent last year, respectively, as investors fled higher-yielding assets and sought protection in the world’s reserve currency.

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Emerging countries currencies can continue to lose on risk

Emerging-market currencies will extend losses in the first quarter as investors’ appetite for risk worsens amid the global recession, according to Brown Brothers Harriman & Co. in New York,reported Bloomberg.com.
“Markets are only now beginning to fully appreciate the heightened risks to the global economic outlook and emerging markets remain vulnerable to class-wide waves of selling,” according to a weekly outlook report from Brown Brothers issued yesterday. “We remain most negative on emerging Europe, Middle East and African currencies due to poor fundamentals and are most constructive on Asian currencies in this environment.”
Investors should continue to buy dollars on dips against emerging-market currencies, the report said.
China on the other hand refuted U.S. President Barack Obama’s claims that China is manipulating its currency because economic conditions for the Yuan to gain “don’t exist".
The global recession has narrowed China’s trade surplus in the past few months and reduced inflows of dollars, cooling demand for the nation’s currency, Hua, chief economist at China Construction Bank Corp and formerly a senior economist at the World Bank, said in a telephone interview. China Construction is the nation’s second-largest lender.
“Naturally the conditions for the Yuan’s appreciation don’t exist any more,” he said. “The Yuan can’t be strong also because the dollar has much strengthened versus other currencies in the past few months.”
The new U.S. administration believes China is “manipulating” its currency, Timothy Geithner, Obama’s nominee for Treasury secretary, told lawmakers yesterday. The Yuan’s appreciation halted in July, after the currency gained 21 percent since a dollar peg was scrapped in July 2005.“I was very disappointed and surprised at the remarks,” Hua said. “We are concerned about rising trade protectionism in the U.S.”

China’s currency fell 0.08 percent to 6.8429 per dollar as of 1:08 p.m. in Shanghai, from 6.8371 yesterday, according to the China Foreign Exchange Trade System.

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Rupee and Asian Market update

Volatility in India’s rupee rebound from a four-month low as the currency declined on sales of the nation’s assets by overseas funds,analysts from Bloomberg reported.
A measure of India’s exchange-rate swings fell to the lowest since September this week, approaching levels before Lehman Brothers Holdings Inc. filed for bankruptcy, even as the rupee headed for a monthly loss. The deepening global economic slump can prompt foreigners to dump riskier emerging-market assets, increasing rupee volatility and losses,observed one analyst.Asian currencies including the rupee look set to decline against the dollar as investors remain risk averse amid the deteriorating global economic situation with the spot rupee market showing the way for options.

The rupee lost 0.7 percent this month, adding to the 19 percent slump since last year, as global funds sold $728 million more Indian stocks than they bought. All of the 10 most-active Asian currencies outside of Japan fell against the dollar this month.The rupee closed at 49.13 per dollar in Mumbai yesterday and could weaken to 50 in the coming weeks. Implied volatility on one-month dollar-rupee options was at 14.75 percent yesterday, the lowest since Sept. 26, Bloomberg data show. The gauge of fluctuations touched 33 percent on Oct. 27, the highest in at least nine years. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of option prices.

India’s Sensitive Index (Sensex) fell 6 percent in two days after Royal Bank of Scotland Group Plc forecast on Jan. 19 the biggest loss in U.K. corporate history, fueling concerns that mounting bank losses will renew risk aversion among global investors.
More excerpts from Forexpros.com. Asian markets overall opened slightly above the breakeven line, helped by the gains seen in the U.S. session. However, incoming data from the Asian economies look very downbeat.

The dollar traded in risk acceptance mode as stocks began their rally at about 11:00 EST, falling 0.78% on the euro, 0.27% to the pound and 1.77% against Australia's currency. The yen jumped after options expired at 10:00 EST, and the dollar ended up losing 0.40% for the day.

Crude oil was pulled higher by the gains in the U.S. stock market. Crude oil for February delivery gained $0.45 to $44.00.

Gold followed the commodities market closely, especially crude oil. Bullion for immediate delivery added $2.50 to $852.50.

Previous European trade: In Europe, the U.K. Ftse fell 31.52 points (-0.77%) to 4,059.88, while the German Dax rose 21.30 points (0.50%) to 4,346.77.

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Asian stocks continue to slump

Asian stocks declined for a second day, led by financial companies and metals producers, on concern mounting bank losses worldwide will deepen the global recession and squeeze demand for the region’s commodities.The following is excerpts from forex site Bloomberg.com.

Worldwide effects:
HSBC Holdings Plc, Europe’s largest bank, lost 3.7 percent in Hong Kong amid speculation banks globally need to bolster capital. BHP Billiton Ltd., the world’s biggest mining company, fell 2.1 percent after saying it will take a charge after closing a nickel mine. DBS Group Holdings Ltd., Singapore’s No. 1 lender, led the city’s equities lower after the government cut its economic forecast for the second time in three weeks.
It’s uncertain how big loan losses at the banks will be as the economy continues to deteriorate. The average valuation of companies on the measure has fallen about two-fifths in the past year to 10 times reported profit. Financial stocks led U.S. equities lower yesterday as Barack Obama was sworn in as president. The Dow Jones Industrial Average declined 4 percent, its biggest Inauguration Day decline. The concern is that banks around the world are short of capital said one analyst.

Leaders pledge action:
Australian Prime Minister Kevin Rudd said yesterday his government will take “whatever action is necessary” to stabilize financial markets. French President Nicolas Sarkozy also agreed to provide more funds to the country’s biggest lenders; a day after the U.K announced its second financial rescue plan in three months.

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