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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World crises are deepening

Somber figures from Japan,the US and other parts indicate World crisis are deepening. While Japan sank deeper into recession with industrial output tumbling and inflation slipping to almost zero, key U.S. data later on Friday is also expected to mirror the worsening global financial crisis.Here are news excerpts from Forexpros.com.

Japanese economy worsening:
Japan's industrial production fell a record 9.6 percent in December, while annual core inflation slowed to a mere 0.2 percent. Rising unemployment, slowing household spending and no improvement in the industrial outlook added to fears that Japan was flirting with deflation and would post a horror GDP figure in February if exports do not bail it out. Wider Asian stocks were down 1.1 percent, the first daily drop in a week. Those falls followed similar declines on Wall Street after record monthly U.S. unemployment figures.Japanese companies including the Toyota Motor Corp, Sony Corp along with rival Nintendo Co, Ford Motor Co and Eastman Kodak Co, provided daily evidence of how deeply the global crisis was biting, costing governments trillions of dollars and threatening millions of jobs in the company.

More bad news is expected in the United States on Friday:
Economists think the U.S. Commerce Department will say gross domestic product, the broadest measure of U.S. economic activity, shrank at an annualized 5.4 percent in the fourth quarter even as the recession in the US is getting hold. As more jobs and company wealth were lost, Obama railed against "shameful" Wall St bonuses paid to executives at a time when taxpayer money was being used to shore up the crumbling financial system. Four U.S. airlines, led by Continental Airlines Inc, also posted losses, while Boeing Co shares fell 5.9 percent after it said it planned 10,000 job cuts

The picture in Europe is hardly any sunnier:
German unemployment rose almost twice as much as expected in January, euro zone economic sentiment hit a new low, while hundreds of thousands of French workers staged a nationwide strike demanding more was done to protect jobs and wages.

Little appetite:
Australian private sector credit shrank in December for the first time since 1992 as foreign banks cut lending to local companies.
Reserve Bank of Australia figures showed that total credit fell 0.3 percent in December, well below a forecast 0.5 percent rise, fuelling expectations the RBA would announce another hefty interest rate cut next week. Across the Tasman Sea, the once-favored New Zealand dollar fell to another six-year low after the central bank said interest rates would likely have to be cut further, a day after the benchmark rate was slashed by 150 basis points.

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Intraday Currency Pair Update

Dear traders
Here’s the daily intraday Update for EUR/USD, EUR/GBP and GBP/ USD for Thursday 29th January, 2009 from AVAFX.

EUR/USD intraday: the downside prevails.
Pivot: 1.3210.
Our Preference: SHORT positions @ 1.32 with 1.304 & 1.2975 in sight.
Alternative scenario: The upside breakout of 1.321 will open the way to 1.333 & 1.345.
Comment: the pair has broken below its ST bullish channel lower boundary and remains under pressure, the RSI is turning down.
Trend: ST Ltd Upside; MT Bearish
Key levels Comment
1.345** Intraday resistance
1.333** Intraday resistance
1.321*** Intraday pivot point
1.311 Last
1.304*** Intraday support
1.2975** Intraday support
1.29*** Intraday support


EUR/GBP intraday: rebound expected.
Pivot: 0.92
Our preference: Long positions above 0.92 with targets @ 0.9315 & 0.938 in extension.
Alternative scenario: Below 0.92 look for further downside with 0.9125 & 0.905 as targets.
Comment: the pair is breaking above its declining trend line, the RSI is on the upside.

GBP/USD intraday: under pressure.
Pivot: 1.4255.
Our Preference: SHORT positions @ 1.4245 with targets @ 1.4015 & 1.39.
Alternative scenario: The upside penetration of 1.4255 will call for 1.4375 & 1.455.
Comment: the pair stands within a ST bearish channel, the RSI is on the downside.
Trend: ST Consolidation; MT Bearish
Key levels Comment
1.455** Intraday resistance
1.4375** Intraday resistance
1.4255** Intraday pivot point
1.4129 Last
1.4015*** Intraday support
1.39** Intraday support
1.375*** Intraday support


My site at Multiply Stevenson15
Multiply Forex Group Forexupdates
Visit Google Group Forexupdates

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US on Brink of Deflation

For the first time during the credit crisis, the Federal Open Market Committee’s statement yesterday indicated concern about the worldwide forex economy weakening “significantly,” with “some risk” that inflation would remain below ideal rates. The Fed signaled it’s moving closer to buying long-term Treasuries and expanding its $600 billion program to buy home-finance debt,reported Bloomberg.
Federal Reserve officials warned of a prolonged global economic slowdown that may push the U.S. to the brink of deflation.
The dollar has rallied sharply following the FOMC’s monetary policy announcement, surging from 1.3280 against the euro to just above the 1.31-figure and jumping to 90.75 versus the yen.Following is related news from Forexnews.com.

2009 Monetary Policy Remains Unchanged:
The Fed left monetary policy unchanged at its current range of 0%-0.25%, saying that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time”. The FOMC delivered a somber assessment of the economy; attributing the weakness to steep declines in industrial production, housing, and employment; thus prompting a retrenchment of spending by consumers and businesses.

Recovery Possible:
Although the Fed anticipates a rebound in the economy later in the year, it deems the downside risks as significant. Further, given the limited scope the Fed has to shift interest rates lower, it reiterated its stance to expand the quantity of agency debt and mortgaged-backed securities purchases to support the mortgage and housing markets. The FOMC also anticipates inflation pressures to remain subdued over the coming quarters.

Euro Withdraws:
US economic data is the focus for the Thursday session.The euro has retreated sharply following the FOMC’s policy statement. Traders are looking ahead to Germany’s January unemployment data, with the unemployment rate creeping higher to 7.7% from 7.6%.Visit my Google Group ForexUpdates for intraday currency pair updates.

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Tough time ahead for investors with the FOMC meeting beginning today

Investors will have a tougher time assessing Federal Reserve policy when officials today replace interest rates with emergency credit programs as their main tool for steering the economy. That means analysts can’t base their predictions for Fed decisions on a simple interest rate benchmark for the first time since the FOMC began releasing policy statements in 1994.The FOMC will release a statement at about 2:15 p.m (GMT) on in Washington at the conclusion of a two-day meeting.

The FOMC statement in recent years has followed a clear structure: After a decision on the main interest rate came a paragraph on the economy, one on inflation and another one on the policy stance. The release usually ran about 100 words, fitting on a single page.
Since October, US interest rates have been reduced from 2% to 0.25%. With the FOMC meeting starting on January 28th and Obama finally in office, investors’ attention is turning to policy decisions and the Fed’s response to the crisis.s
According to Reuters FEDWATCH, there is a 75% chance that interest rates will stay at 0.25% and a 25% chance that the rates will drop to 0% for the first time in USA history!
In this scenario, the USD is expected, by some analysts, to decline substantially against all other currencies.
Crude oil inventories will also dominate the calendar on the 28th, as the market will watch how big the slide in demand becomes (all eyes turn to China).
The combined two events are expected to have a significant impact on price action on Wednesday, and might provide big market movements and excellent profit opportunities!

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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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World News Update

Here is the world news digest from Bloomberg.com.President Barack Obama signaled that he would toughen restrictions on and oversight of banks as part of a fresh plan to aid the battered industry.
Obama blasted the banks yesterday over reports that they’ve spent money renovating offices after receiving billions of dollars from the government and vowed they would be held accountable for any aid they receive in the future.
The tough talk seemed designed to build support for a rescue plan that aides say Obama will roll out soon by reassuring lawmakers and voters that the administration will keep close tabs on money it hands out. Pressure for a plan is building after the Standard & Poor’s 500 Index fell for the third straight week, in part because of concerns about the health of the banks.

India's Prime Minister Manmohan Singh will undergo heart bypass surgery here for a second time as the ruling Congress party prepares for elections that must be held by May and the government battles an economic slump.
Singh, 76, will have the operation today at New Delhi’s All India Institute of Medical Sciences, the government said in a statement yesterday.
Singh’s heart problems may complicate election preparations and his government’s efforts to strengthen security following last November’s terrorist attacks in Mumbai that killed 164 people. He replaced the home minister after the assault and established a new federal agency to coordinate counter terrorism.
“The prime minister’s absence will definitely have some impact on the campaign,” said N.R. Bhanumurthy, an economist at the Institute for Economic Growth in New Delhi. “The Congress party would have banked upon him to sell their successes.”
Foreign Minister Pranab Mukherjee will deputize for Singh in his absence, NDTV 24x7 reported, citing officials it didn’t name. Mukherjee said that he planned to visit with Singh and had already met Congress party leader Sonia Gandhi, without elaborating.
“These are normal, routine things, the government is in place,” Mukherjee told reporters in New Delhi today, when he was asked about officiating as acting prime minister.

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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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