Forex Forum Archive for 11/30/2008

Syd 23:59 GMT November 30, 2008 Reply   
Gloom hits manufacturing
Australian manufacturing activity dropped to an all-time low in November as new orders faltered, according to a report out today.The Australian Industry Group performance of manufacturing index plummeted 7.7 points to hit 32.7 in November, from 40.4 points in October, the sixth consecutive month of scores below 50, which separates expansion from contraction in the gauge.November's result was the lowest since the index began in 1992."This does not auger well and suggests a poor end to 2008 and an equally weak start to the new year," AIG chief executive Heather Ridout said in a statement.Ms Ridout noted November's weaker reading came amid an already sluggish pace of manufacturing activity."Of particular concern is the alarming fall in new orders," Ms Ridout said.New orders dropped by 14.4 points to 24.5 points in November, also an all-time low, with food, beverages, textiles, clothing and construction materials among the hardest hit.Employment also dropped to 33.2 index points from 37.6 in October.Official figures put the unemployment rate at 4.3% in October, but economists widely expect joblessness to rise in coming months as the domestic demand slows and companies shed positions to remain profitable.The poor manufacturing numbers are consistent with a general drop in economic activity in Australia which is being weighed down by a global recession exacerbated by the financial crisis.The Government has taken steps to stimulate the economy and spur growth.Most recently, Prime Minister Kevin Rudd announced $3.5 billion to be funnelled into state health and education projects in an effort to create more jobs.Tomorrow, the RBA is expected to cut its key cash rate by at least 75 basis points from 5.25% to 4.5%.Investors, though, are pricing in an even bigger cut, with a reduction of 125 basis points, or 1.25 percentage points, to 4% seen as more likely.

Deflation worries build as prices drop
Monthly inflation has fallen the most in six years as demand cools, heralding what may be the beginning of a bout of deflation brought on by the global financial crisis.
For November, the TD Securities-Melbourne Institute monthly inflation gauge dropped 0.6%, adding to October's 0.2% decline, as prices for petrol, holiday travel and wine edged down. It was the largest drop in prices since TD Securities began the gauge in August 2002.Commodities prices have dropped 49% since hitting their peak in early July, according to the closely watched Reuters-Jefferies commodities index. Fears about the future of the economy and the health of corporate profits, triggered by the financial crisis, have pushed the Australian share down to about half of its value since November 1, 2007.''The substantial turnaround in inflation fundamentally changes the economic and policy outlook," Mr Williamson said. "The previous inflation problem has been turned on its head."
"The move from high inflation to low inflation or even deflation is being experienced in many other countries at the moment," he said.That shift in focus has been followed by the Reserve Bank which is poised to cut the 5.25% interest rate when its board meets tomorrow, after lopping off two percentage points in the past three months in an effort to draw consumers back into the market and stoke economic activity.The RBA is expected to cut its key cash rate by at least 75 basis points, taking it to 4.5%, the lowest since May 2002.
However, investors are betting on an even bigger cut, with a reduction of 125 basis points, or 1.25 percentage points, to 4% seen as more likely.''The growing risk of broadly based deflationary pressure and the pathetically weak nature of global financial markets have encouraged us to change our forecast for Australian interest rates," said Stephen Koukoulas, Global Strategist at TD Securities. "So extreme is the news on inflation and the recent global economic and market trends, we now anticipate the RBA having to lower the cash rate to 2.5 per cent by the middle of 2009, starting with a move of at least 100 basis points at the RBA Board meeting tomorrow."The RBA will learn more how the how much commodities prices are contributing to the Australian economy when third quarter gross domestic product growth figures are released on Wednesday. A survey of analysts by Bloomberg expect the annualised GDP growth to be 1.8% from 2.7% in the second quarter.

HAJ MAXXIM 23:32 GMT November 30, 2008 Reply   
lkw dr ive jj 21:49 GMT November 30, 2008

Lahore FM 23:28 GMT November 30, 2008
crude post holiday opens lower a doll and a half but is still a buy!

lkwd jj 21:49 GMT November 30, 2008
i think you could make the same case for usa(usd).

singapore td 17:28 GMT November 30, 2008 Reply   
i think december is the month of stock rallies and thus selling jpy trades, eurjpy should be comfortable enough to stay above 120 and usdjpy also would hold 95 level for a run higher

Syd 07:25 GMT November 30, 2008 Reply   
New Europe Weekly
Recently there has been a lot of debate in the media about possible rouble devaluation. Anticipation of a weaker rouble is connected to lower oil prices (which is weakening Russia's external balances), worries over Russia's large external debt levels, and greater political risk after the Caucasus crisis.

So far the rouble has been remarkably stable in 2008. Against its dual currency basket (55% USD and 45% EUR) it has only dropped roughly 4.5% this year - see chart one. Further, the rouble has outperformed other commodity currencies since the beginning of August, when commodity prices peaked - see chart two.

However, with oil prices below USD 50 a barrel and Russia's inflation above 14% y/y, we believe the rouble is significantly overvalued at current levels. The Russian authorities know this, which is why the Russian central bank (CBR) on three occasions over the last couple of weeks widened the basket/RUB trading band by 1% each time - de facto devaluations. The latest action was this morning when the basket/RUB went from 31.00 to 31.30.


Meanwhile the CBR this week warned market participants not to speculate on rouble devaluation. More specifically, the CBR urged banks not to increase their foreign currency longs in December, as it hinted that such moves could affect the banks' abilities to participate in the CBR's collateral-free auctions.


In our view, it isn't constructive to try and force market players not to hedge their exposure towards a weaker rouble. Indeed, such a move could easily increase pressure on the rouble, as foreign market participants might view this as a step towards a more protectionist direction, thereby pushing risk premiums up further and generating more distress on Russian financial markets. Instead, we believe it would make sense to move more quickly with the devaluation process in order to remove mounting speculative pressure on the currency, rather than distort market participants' decision making.

Syd 05:14 GMT November 30, 2008 Reply   
BERLIN (AFP)--German Finance Minister Peer Steinbrueck has defended Berlin's refusal to back a proposed multi-billion-euro economic stimulus plan, dismissing it as "ineffective populist measures."

Germany doesn't have to go along with the idea of spending more to ease the economic crisis just because other countries are doing so, Steinbrueck told the weekly newsmagazine Der Spiegel.

DUBLIN (AFP)--Irish Prime Minister Brian Cowen ruled out a "burst" of borrowing to bail out Ireland's recession-hit economy Saturday, which is battling a bursting property bubble and the world financial crisis.

Although his opinion-poll ratings are plummeting, Cowen said it was "no time for soft options, quick fixes or political expediency," adding that Ireland faced a "critical fight" following the end of the Celtic Tiger boom.

"We cannot afford to indulge in a burst of borrowing to fund a significant increase in current spending," he told local councillors.

"We cannot afford to take an ill-judged gamble on jump-starting the economy by imposing a sharply increasing debt burden on the next generation."

Cowen said the challenge for Ireland was severe, with economic growth of 6% last year set to be followed by an expected contraction this year and next.

"Put simply, we have less money to meet growing public expenditure demands - EUR6,500 million less collected in taxes in 2008 than expected," the taoiseach -- as the Irish leader is known - said.

He aid that despite corrections in what was a hugely unpopular emergency tax-raising and cost-cutting budget in October, day-to-day expenditure next year will exceed revenue by EUR4.7 billion.

That represents more than EUR1,000 for every person in the country.

"As a national priority, we must reduce the budget deficit to a reasonable and sustainable level," Cowen said.

His comments came after British Chancellor of the Exchequer Alistair Darling earlier this week announced a GBP20 billion economic stimulus package to be funded by borrowing more and raising income tax on the wealthy from 2011.

Syd 04:36 GMT November 30, 2008 Reply   
Given the speed at which countries and companies have been brought to their knees in recent months, it is no longer hard to envision a scenario in which foreign investors become spooked by the UK's soaring debts and flee.

http://www.thefirstpost.co.uk/45968,opinion,bankruptcy-beckons-for-not-so-great-britain