Forex trading,

FOREX-Dollar falls as Fed cut highlights low yield status

2008-03-19T03:58:00.001-07:00

The dollar weakened against the euro and yen on Wednesday, erasing gains made after a smaller-than-expected U.S. interest rate cut the previous day, as dealers maintained their bearish view on the low-yielding currency.

The Federal Reserve lowered its federal funds target rate on Tuesday by 75 basis points to 2.25 percent -- futures markets had broadly expected a full percentage point reduction -- which fuelled a relief rally in equities, tightening of a broad range of spreads and a rebound in the dollar.

The Fed's move gave an extra boost to stocks and broad market sentiment which had already been lifted by earnings reports from Lehman Brothers (LEH.N: Quote, Profile, Research) and Goldman Sachs (GS.N: Quote, Profile, Research). These weren't as gloomy as many analysts had feared, particularly following the near collapse of Bear Stearns (BSC.N: Quote, Profile, Research).

But the dollar's rally fizzled out in Asia. It was unable to hold above 100 yen, while implied volatilities on currency options edged back up as the dollar's bounce drew in sellers who were more worried about the currency's meagre yield and U.S. economy's bleak prospects.

"The Fed (cut) was a little bit less than what people were expecting although it gave some comfort to equity markets ... but the dollar is back under pressure again and that's reflective of the uncertainty over the U.S. economic outlook and the systemic risk (in the banking system)," said Phyllis Papadavid, currency strategist at Societe Generale in London.

"The dollar is losing its status as a safe-haven currency, and to the extent that these (financial market) uncertainties persist, the yen and Swiss franc will continue to benefit. Our bias is still to be short the dollar and recommend being short the dollar," she said.

Forex - Dollar sheds post Fed gains

2008-03-19T03:57:00.000-07:00

The dollar has shed most of yesterday's gains in the wake of Wall Street's sharp rally following the US Federal Reserve's decision to lower its benchmark interest rate by three quarters of a percentage point to 2.25 pct.

After the Fed's rate cut, which was slightly less than the market consensus for a full 100 basis point reduction, the Dow Jones index of leading US shares enjoyed its best day in five years, helping the US currency to rally too. The euro fell down towards the 1.56 usd mark while the dollar climbed back above 100 yen.

'This rally hasn't been sustained and there's already a bit of a hangover after yesterday's celebrations creeping in,' said James Hughes, analyst at CMC Markets.

'It's going to be a case of simply sitting back and seeing just how far the major crosses do unwind now and whether there is any net effect of the rate news, but so far saving that quarter percent for a later cut is looking as if it may be little more than a very brief shot in the arm,' he added.

The Fed's accompanying statement proved to be more hawkish than many had expected. It showed that the Federal Open Market Committee (FOMC) was divided, with two of the ten governors favouring 'less aggressive action.'
The Fed also indicated that it was giving increased attention to elevated inflation levels, thereby signalling that an end to the current rate cut cycle was fast approaching.

Antje Praefcke, currency strategist at Commerzbank Corporates & Markets, said the Fed's stance is unlikely to comfort markets for too long, given the ongoing uncertainty in credit and financial markets, despite good quarterly results yesterday from Goldman Sachs (NYSE:GS) and Lehman Brothers. (NYSE:LEH)

'It will take months before light is expected at the end of the write downs and revaluations tunnel and the flight into quality is likely to continue for the time being,' said Praefcke. 'Therefore, we think that the Swiss franc and the yen as well as the euro will push higher against the dollar.'
Analysts said renewed concerns about the credit crisis and the related economic damage are likely to set in again soon
Elsewhere, the pound will be in focus this morning when the Bank of England releases the minutes to the last meeting of the rate-setting Monetary Policy Committee and the statistics office releases the latest labour market report.

Bank watchers expect the Committee to have voted 8-1 to keep interest rates on hold at 5.25 pct in early March with David Blanchflower seen as odds on to have dissented and called for a cut.

If more vote for a cut, then the pound could be hit hard.

'This has the potential to weigh on sterling,' said Steve Pearson, chief currency strategist at HBOS.

Regarding the labour market report, sterling markets will be interested to see if there is a negative surprise. So far, employment levels have remained high despite signs of an economic slowdown elsewhere.

'In the case the labour market report comes in weak, the pound will immediately head south,' said Hans Redeker, global head of FX strategy at BNP Paribas.

Oil prices hit new high above 111 dollars

2008-03-17T01:33:00.001-07:00

Oil prices soared to new highs above 111 dollars in Asian trading Monday as the US currency slumped to another fresh low against the euro.

New York's main contract, light sweet crude for April delivery, briefly traded at a new high of 111.42 dollars before easing to 111.08 dollars.

New York oil prices closed at 110.21 dollars during US trading hours on Friday, a day after hitting 111 dollars for the first time.

'The US dollar's weakness remained a supportive factor for the oil price in US dollar terms,' said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.

Brent North Sea crude for May delivery was up 80 cents to 107 dollars. The April contract expired Friday at 107.54 dollars.

Oil prices are likely to trend higher after the euro rose to a fresh high above 1.59 dollars Monday for the first time, while the US unit dropped below 96 yen to a new 12-year low.

'We can continue to expect strong prices for oil and commodities like gold in the near term,' said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

The record-breaking spree in recent weeks was fuelled by investors rushing into commodities including oil, which they see as a safe haven amid rising concerns over the US economy and financial turmoil from a credit squeeze.

The ailing greenback has helped drive up oil prices because crude is priced in dollars and becomes more affordable for buyers holding stronger currencies.

Investors view oil futures as a hedge against inflation and the weak dollar.

Oil prices have rocketed by 90 percent over the past year as the market was driven by tight supplies, geopolitical concerns in key producer nations and fierce demand for crude from China and India.

Prices have gained about 9 percent in value since the start of 2008, accelerating after the OPEC oil cartel held output at current levels at a meeting in early March.

Dollar drops to fresh record low against euro, 12-yr low versus yen

2008-03-17T01:31:00.000-07:00

The US dollar slumped to a new low against the euro and dropped to a 12-year low against the yen in late morning Asian trade on Monday, as investors raised bets that the Federal Reserve will aggressively cut interest rates this week to calm the market.

The Fed will likely cut rates by 75 basis points on March 18, said Tomoko Fujii, head of economic strategy at Bank of America, who raised her forecast from half a percentage point last week.

Some speculators are betting the rate cut will be as much as one percentage point, she said.

'There are a lot of negative factors against the dollar in the pipeline, including a deeper rate cut,' Fujii said. 'That's why it is difficult to stop the dollar's decline.'

At 12.00 pm (0400 GMT), the euro was trading at 1.5848 dollars, after soaring earlier today to as high as 1.5905, its strongest level since the common currency began trading in January 1999.

The dollar was quoted at 96.75 yen, after dropping to as low as 95.75 earlier today, a level not seen since August 1995, according to traders.

The US currency continued its descent versus major currencies after the Fed earlier surprised the market with a 25 basis points cut in its discount rate, the rate at which it lends directly to banks.

Financial markets have roiled recently from the collapse of Wall Street heavyweight Bear Stearns, which has prompted the Fed to step in.

JPMorgan Chase said Sunday it will acquire rival Bear Stearns in an all-share deal valued at 236.2 million dollars, roughly 1 percent of what the investment bank was worth just 16 days ago.

The Fed will provide special financing to JPMorgan for the deal, as the central bank has agreed to fund up to 30 billion dollars of Bear Stearns' less liquid assets.

'The foregoing announcements from the Fed suggest that the committee might be preparing for a larger than normal move in the target fed funds rate on Tuesday or is subtly assessing the reaction in financial markets ahead of the Tuesday meeting or both,' said Thomas Lam, senior treasury economist at United Overseas Bank.

The Fed has slashed its benchmark rates by a cumulative 225 basis points since September to ease the credit crunch stemming from unpaid housing mortgages.

'Investors seem to have taken these moves as evidence of the deepening of the credit crisis, as they do well remember that the previous emergency rate cut by the Fed in late 2007 failed to quell the credit crunch,' NTT Smarttrade director Takashi Kudo said.

'Investors also seem to think that the Fed's action was a little too late and reactive,' he said.

Adding to the gloom, London's Telegraph reported that Goldman Sachs will this week announce asset writedowns worth about 3 billion dollars, its biggest to date.

The bank's 3 billion dollar writedown will be based partly on the declining value of its 4.9 percent stake in Industrial & Commercial Bank of China (ICBC), which is held separately on Goldman's balance sheet, according to the UK newspaper.

FOREX-Dollar nears record low against euro

2008-03-12T08:09:00.001-07:00

NEW YORK, March 12 (Reuters) - The dollar fell broadly on Wednesday and neared a record low against the euro as strong euro zone economic data renewed focus on the divergent paths of European and U.S. interest rates.

The greenback had rallied sharply the previous session after the Federal Reserve said it would lend primary dealers $200 billion in Treasury securities and accept a wider array of mortgage debt as collateral to help ease tight credit markets.

But those gains fizzled out in European trade as the dollar plunged by 1 percent versus the yen. The euro soared to $1.5491 , just shy of a record high, after euro zone data showed industrial output rose by much more than expected in January.

That bolstered the view that the European Central Bank need not rush to cut interest rates. The Fed, though, is still seen cutting its benchmark rate at a March 18 meeting despite its efforts on Tuesday to improve financial market liquidity.

"We're getting a reality check today," said Matthew Strauss, senior FX strategist at RBC Capital Markets in Toronto. "The market is realizing that the strength of recent euro zone data suggests the ECB is right to hold rates and focus on inflation."

Meanwhile, he said the Fed's recent move to get money flowing in financial markets "addresses short-term liquidity issues but doesn't address underlying credit concerns and the U.S. housing decline, which have not gone away."

The euro last traded at $1.5475, up 0.9 percent on the day and just below an all-time high of $1.5495. Strauss said a move to the round number of $1.55 could spark some dollar buying but said that was unlikely to be sustained.

Hong Kong shares close higher led by China stocks

2008-03-06T03:49:00.000-08:00

Mar. 6, 2008

HONG KONG (XFN-ASIA) - Share prices closed higher led by China stocks following a rebound in Shanghai, with commodities, financials and telecom counters in focus.

Commodity stocks surged after oil and gold prices hit new highs amid the US dollar's weakness, while China banks and insurance firms tracked A-share gains on the mainland.

China telecom stocks extended yesterday's gains after mainland media quoted a Chinese official as saying that the long-awaited sector restructuring could take place in the first half of 2008.

Strong earnings from local blue chips and a positive Wall Street showing also helped the local bourse snap a four-session losing streak, but dealers noted that the index came off the day's highs due to talk that China may raise interest rates.

Ping An Insurance was up 4.6 pct after shareholders approved the company's fund-raising plan, while shipping firm China COSCO surged over 5 pct on hopes of an asset injection by its parent.

The Hang Seng index closed up 228.39 points or 0.99 pct at 23,342.73, off a low of 23,254.31 and high of 23,615.18.

Turnover was low at 69.55 bln hkd.

'While the market ended up today, it's worth noting the continuing drop in turnover and the index's fall in the afternoon session from a 500-point gain at morning close,' said Linus Yip, strategist at First Shanghai Securities.

'Many investors were unwilling to trade and this was amply reflected by the low turnover as they continue to fret about global market uncertainties,' he said.

'Sentiment was also weighed down by rumors that China might raise interest rates in its bid to curb rising inflation,' Yip said.

Credit Swaps Thwart Fed's Ease as Debt Costs Surge

2008-03-06T03:48:00.000-08:00

March 6 (Bloomberg) -- Credit trading models used by Wall Street have gone haywire, raising company borrowing costs even as Federal Reserve Chairman Ben S. Bernanke cuts interest rates.

General Electric Co. is one of five U.S. companies rated AAA by both Standard & Poor's and Moody's Investors Service, making its ability to repay debt unquestioned. Yet when the Fairfield, Connecticut-based company sold 2.25 billion euros ($3.35 billion) of five-year bonds last week, its annual interest payment was $17 million higher than on a sale nine months ago.

Borrowers from investor Warren Buffett's Berkshire Hathaway Inc. to Germany's HeidelbergCement AG face the same predicament. Yelds on $5.12 trillion of corporate bonds tracked by Merrill Lynch & Co. average 2.05 percentage points more than U.S. Treasuries, the most since at least 1997.

The higher costs are an unintended consequence of securities that allow investors to speculate on corporate creditworthiness. So-called correlation models used to value them have become unreliable in the fallout from the U.S. subprime mrtgage crisis. Last month some showed the odds of a default by an investment- grade company spreading to others exceeded 100 percent -- a mathematical impossibility, according to UBS AG.

``The credit-default swap market is completely distorting reality,'' said Henner Boettcher, treasurer of HeidelbergCement in Heidelberg, Germany, the country's biggest cement maker. ``Given what these spreads imply about defaults, we should be in a deep depression, and we are not.''

Hedging Losses

The problem started in the second half of last year when subprime mortgage delinquencies started to rise, causing investors to retreat from complex instruments such as synthetic collateralized debt obligations, or packages of credit-default swaps that became hard to value. The swaps are contracts based on bonds and used to speculate on a company's ability to repay debt.

As values of CDOs began to fall, banks that had sold swaps underlying the securities started to buy indexes based on them instead, a method of hedging their losses on portions of the CDOs they owned. The purchases are driving the cost of the contracts higher, raising the perception that company bonds tied to the swaps are suddenly riskier and leading investors to demand higher yields throughout the corporate debt market.

The Markit CDX North America Investment-Grade Index, a gauge of credit-default swaps on 125 companies from Wal-Mart Stores Inc. to Walt Disney Co., more than doubled since the start of the year to a record 171 basis points on March 4. The index is up from last year's low of 29 in February. A similar benchmark in Europe rose to a record 139 basis points earlier this week.

Undermining Bernanke

The $1.5 trillion CDO market is undermining Bernanke's attempts to lower borrowing costs. The Fed cut its target rate for overnight lending between banks by 2.25 percentage points to 3 percent since September, and even debtors with the safest ratings are paying more. Money-market rates for euros and pounds climbed to the highest since mid-January yesterday, signaling the global squeeze on short-term bank lending may be returning.

The financing unit of GE, the world's most prolific borrower, sold the 4.875 percent five-year bonds last week at a yield 1.29 percentage points higher than similar-maturity government rates, Bloomberg data show. Last May, the company issued 750 million euros of 4.375 four-year notes at a spread of 0.27 percentage points.

The additional expense stems from credit-default swaps tied to GE's bonds. Their cost climbed to a record 165 basis points on March 4 from 12 points a year earlier, according to CMA Datavision in New York.

FOREX-ECB eyed as euro hits record high beyond $1.53

2008-03-06T03:47:00.000-08:00

LONDON, March 6 (Reuters) - The dollar hit lifetime lows versus the euro on Thursday beyond $1.53, with investors looking to the European Central Bank's interest rate decision and news conference later for fresh signals on monetary policy.

While the ECB is seen holding interest rates steady at 4 percent, all eyes are on the bank's president, Jean-Claude Trichet, for hints of a shift in policy that might provide respite for the greenback's broad fall.

The dollar's decline has been exacerbated by weak U.S. economic data and worries about a recession, which has galvanised the U.S. Federal Reserve to cut borrowing costs sharply to 3 percent, with further easing expected to come.

The euro's latest rally has already prompted some concerned comment from policymakers. Investors will scan Trichet's remarks to see if he echoes those.

"There are fears (Trichet) may comment on the euro's rise. If he says anything about sharp or brutal moves or that he's not happy with the euro's strength, it could lead to a fall in the euro," said Antje Praefcke, currency strategist at Commerzbank Corporates & Markets in Frankfurt.

By 0932 GMT, the euro had risen as high as $1.5345, the highest since the single currency's inception in 1999 .

The dollar struck an all-time low against a trade-weighted basket of major currencies, with the dollar index falling as low as 73.119 .DXY.

Forex - Pound comes off all-time low against euro after strong services PMI

2008-03-05T05:34:00.001-08:00

LONDON (Thomson Financial) - The pound came straight off a fresh all-time low against the euro after a key UK service sector survey came in much stronger than expected, cementing expectations the Bank of England will hold off cutting interest rates tomorrow.

The Chartered Institute of Purchasing and Supply's services PMI jumped to 54.0 in February from 52.5 in February, its highest level since September 2007. Analysts had expected the survey to drop to 52.2.

However the BoE will be alarmed to see the output and input prices sub-index both climbed to their highest level since the survey began, reinforcing their concerns about a strong uptick in consumer inflation over the coming months.

At 9.34 am GTM the euro was trading at 0.7667 stg, having hit an all-time high of 0.7689 stg seconds before the data was released. Against the dollar the pound climbed to 1.9770 usd from 1.9710 usd just before.

Forex - Dollar steady ahead of key US news

2008-03-05T05:33:00.001-08:00

03.05.08, 7:59 AM ET

LONDON (Thomson Financial) - The dollar remains steady against the euro ahead of some key US economic data this afternoon and on the eve of an interest rate decision from the European Central Bank.

Earlier, the US currency recovered some ground as traders squared up positions ahead of a raft of US economic data. The euro's move as high as 1.5250 usd during yesterday's session proved short-lived as investors awaited further clues on the health of the US economy and what the Federal Reserve will do at its next rate-setting meeting on March 18.

The most important news today is likely to be the Institute for Supply Management services index for February. Though this is expected to have risen to 47.5 from 44.6, it still remains in contraction territory.

The monthly ADP employment report, a closely-watched gauge of the US labour market, will also be at the forefront of the market's attention.

'If these data show that the credit crunch is starting to affect corporate activity and the labour market more severely than had been expected, the dollar may resume its nosedive,' said Mitsubishi (other-otc: MSBHY.PK - news - people ) UFJ Securities forex manager Minoru Shioiri.

Both the upcoming data and the corporate news may well determine whether the Fed cuts its benchmark funds rate by 75 basis points to 2.25 pct or by 50 basis points to 2.50 pct.

Elsewhere, attention will focus on Thursday's interest rate decision from the European Central Bank.

Though the ECB is unlikely to follow the lead across the Atlantic, there are growing expectations that the central bank's president Jean-Claude Trichet will sound a more dovish tone in his ensuing press conference.

Anything he says about possible intervention to stem the export-sapping rise in the euro will be particularly important to the near-term levels of the single currency.

Both EU Commission and Eurogroup lawmakers have fired warnings about the euro's level in recent days.

'Given the ECB's mandate to ensure price stability and the Fed's willingness to see further improvement in export growth, the risk of unilateral or coordinated intervention to precipitate a euro adjustment against the dollar is low at this stage,' said Ashley Davies, currency strategist at UBS (nyse: UBS - news - people ).

Elsewhere, the pound recovered its poise after a key survey into the services sector saw output growth accelerate and price pressures elevated.

Analysts said the prospect of another imminent rate cut from the Bank of England is likely to diminish further by the news that output in the UK services sector unexpectedly rose during February.

The survey from the Chartered Institute of Purchasing and Supply also showed that price pressures in the sector, which accounts for over two-thirds of UK GDP, are at their highest since records began more than a decade ago.

'The combination of faster growth and stronger price pressures shown in February's CIPS report on services undoubtedly supports the case for the MPC to be cautious about how quickly it cuts interest rates,' said Vicky Redwood, economist at Capital Economics.

Despite the sharp rise in the CIPS index, the euro is still trading near its new all-time high of 0.7689 stg.

Markit in Talks With Banks on Index Tied to Auto-Loan Bonds

2008-03-05T04:44:00.000-08:00

March 5 (Bloomberg) -- Markit Group Ltd., the owner of benchmarks for the $45.5 trillion credit-derivatives market, plans to start an index that would allow investors to bet on securities backed by auto loans, people with knowledge of the plan said.

Lehman Brothers Holdings Inc., Morgan Stanley, Bear Stearns Cos. and Merrill Lynch & Co. are among the firms in talks with New York-based Markit to create the index, said the people, who declined to be named because the discussions are preliminary. The index would be linked to debt backed by auto loans from issuers such as Detroit-based GMAC LLC and Ford Motor Credit Co.

The Markit index would be the first benchmark allowing investors to speculate on the credit quality of securities backed by auto loans in the same way they use indexes to bet on subprime and commercial mortgages. Those indexes plunged in the past seven months as subprime mortgage defaults rose to records, sending investors fleeing to safer assets such as U.S. government debt.

``The notion of an index linked to auto-loan securities makes sense because it will allow investors to short the consumer,'' said Jeff Salmon, portfolio manager at Bank of New York Mellon, which has $500 billion in assets under management.

Markit spokeswoman Teresa Chick in London declined to comment. Spokespeople for Lehman, Morgan Stanley, Bear Stearns and Merrill Lynch, all in New York, declined to comment.

Slowing Economy

Credit-default swaps are based on bonds and loans and used to speculate on a borrower's ability to repay debt. They were conceived to pay the buyer face value in exchange for the underlying securities or the cash equivalent should the borrower fail to adhere to debt agreements.

Derivatives are contracts whose value is derived from assets including stocks, bonds, currencies and commodities, or from events such as the weather or changes in interest rates.

The auto index would act as a credit-default swap contract and would be linked to bonds backed by auto loans and offer protection if the securities aren't repaid as expected, in return for regular insurance-like premiums.

Delinquencies on prime auto loans in securities issued in 2006 rose 18 percent compared with 2005 and exceed the ``historical highs'' of 2001, Standard & Poor's said in a report Jan. 22. Yields on three-year, AAA rated bonds backed by auto loans trade at 140 basis points more than benchmark rates, up from 75 basis points at the start of the year, according to Deutsche Bank AG data.

Forex - Dollar gets some respite ahead of US economic news

2008-03-05T04:14:00.000-08:00

03.05.08, 3:40 AM ET

LONDON (Thomson Financial) - The dollar recovered some ground as traders squared up positions ahead of a raft of US economic data.

The euro's move as high as 1.5250 usd during yesterday's session proved short-lived as investors awaited further clues on the health of the US economy and what the Federal Reserve will do at its next rate-setting meeting on March 18.

'Many are now looking for the ISM services index and ADP payroll survey today for near term direction, whilst the non-farm payrolls on Friday will also be keenly awaited,' said James Hughes, analyst at CMC Markets.

'The crunch point is going to be if the credit crisis of last year is seen to impact elements of corporate activity and if this is indeed the case then the greenback may well find itself under renewed pressure in the near term,' he added.

Both the upcoming data and the corporate news may well determine whether the Fed cuts its benchmark funds rate by 75 basis points to 2.25 pct or by 50 basis points to 2.50 pct.

Elsewhere, attention will focus on Thursday's interest rate decision from the European Central Bank.

Daragh Maher, senior FX strategist at Calyon, said he will be looking at tomorrow's press conference to see if there are any hints about intervention to stem the export-sapping rise in the euro.

'The likelihood is that the market will become progressively de-sensitised to the chatter if there is no meaningful threat of action,' said Maher.

'Tomorrow's ECB meeting will be the next port of call to see how potent the intervention threat becomes,' he added.

FOREX-Yen gains broadly as risk aversion rises

2008-03-04T08:21:00.000-08:00

Tue Mar 4, 2008 9:30am EST

NEW YORK, March 4 (Reuters) - The yen rose on Tuesday as weaker global equities encouraged investors to unwind carry trades, while the euro paused against the dollar after European officials voiced concerns about its latest rally.

Fears of a recession in the United States stemming from the subprime mortgage crisis have hammered the dollar, driving it to successive record lows against the euro and pushing it close to the psychologically important 100-yen mark.

"The yen is benefiting from risk aversion, which is the weakness in the equity markets across the globe. The second is the interest-rate compression between the dollar and the yen is starting to become very substantial," said Boris Schlossberg, senior currency strategist at DailyFX.com in New York.

Investors often borrow in the low-yielding yen to buy high-yielding currencies and assets. In periods of uncertainty, they tend to unwind these trades, boosting the Japanese currency.

In New York morning trade, the dollar was down 0.2 percent at 103.04 yen , after dipping to three-year troughs of 102.59 yen the previous session.

"As it gets closer to the 100 (yen) level you are going to see more speculative flows coming in, trying to test the Bank of Japan to see if they are willing to intervene at this point," said Schlossberg.

Remarks by Jean-Claude Juncker, chairman of the Eurogroup of finance ministers, that the euro was overvalued against other currencies, halted the common currency's five-day run of record highs versus the dollar.

Forex - Euro edges higher as dollar recovery loses momentum

2008-03-04T06:04:00.000-08:00

03.04.08, 8:18 AM ET

LONDON (Thomson Financial) - The euro edged higher against the dollar as the US currency's recovery overnight began to lose momentum.

The dollar had gained after both European and Japanese officials expressed concern about the recent sharp rises in their currencies against the US unit. Market players, however, are sceptical about the prospect of actual intervention to prop up the dollar, while there are still no fundamental reasons to buy the US currency.

'It is very difficult to make any case for the dollar to strengthen at the moment,' said Robert Howard at Thomson IFR Markets.

'The ECB will have to actually intervene or to surprise the market with an interest rate cut on Thursday,' he said.

In this respect, Thursday's interest rate decision by the European Central Bank -- where rates are fully expected to be left at 4.00 pct -- and president Jean-Claude Trichet's accompanying press conference will be closely watched, particularly for any comments by Trichet on the euro, Howard said.

The other factor to consider is whether there is any consensus within Europe on a need for intervention, particularly from Germany, while rate-setters may consider that a strong currency will help keep inflation down.

Speaking late yesterday, euro group president Jean-Claude Juncker said current exchange rates do not reflect economic fundamentals and that excessive volatility is not desirable for growth. He tempered these comments this morning, however, by saying the real economy is not being hurt by the euro's strength.

European Central Bank Governing Council member Guy Quaden meanwhile called on the US to reiterate that it favours a strong dollar, while Japanese officials warned about the strong yen's impact on consumption and company earnings.

Among other currencies meanwhile, the Canadian dollar was steady ahead of the Bank of Canada rate decision this afternoon.

The currency came under pressure yesterday after very weak GDP data increased speculation that the BoC could opt for a 50 basis point rate cut.

FOREX-Euro's run of record highs halted by Juncker comments

2008-03-04T05:21:00.000-08:00

LONDON, March 4 (Reuters) - The euro halted its five-day run of record highs versus the dollar on Tuesday after European officials voiced concerns about the sharp rise of the common currency.

Jean-Claude Juncker, chairman of the Eurogroup of finance ministers, said on Monday the ministers and European Central Bank President Jean-Claude Trichet had discussed exchange rate policy and agreed to express concerns about excessive moves.

However on Tuesday he seemed to slightly soften his stance, saying he sees no general harm to the economy from a strong euro and it is not wise to have targets for the exchange rate.

"I think that's a step in the direction of becoming more worried about the euro. Still it seems that he (Juncker) softened those comments this morning," said Johan Javeus, FX strategist at SEB in Stockholm.

"The market hasn't completely re-evaluated the situation based on these statements, but they have taken the edge off some of the euro strength we've seen recently."

By 1138 GMT the euro was steady at $1.5217 , off the $1.5275 high set on Monday according to Reuters data.

Commodities and inflation

2008-03-04T03:59:00.001-08:00

Prices are going up because prices are going up. That seems to be the rationale for $100 oil and (almost) $1,000 gold. As the Federal Reserve pulls the rug from under the dollar in an effort to stave off recession, so investors are buying raw materials as a hedge against inflation.

There are some fundamental factors – supply bottlenecks, resource industry consolidation, Asian demand – underpinning commodities prices. But these cannot explain the recent surge. This is bad news for the Fed. Steep rises in commodities prices make a mockery of the distinction between core and headline inflation, effectively taxing consumers and businesses. Ben Bernanke, the Fed’s chairman, dismisses talk of stagflation.

Forex - Dollar comes off highs after overnight recovery

2008-03-04T03:57:00.000-08:00

03.04.08, 4:53 AM ET

LONDON (Thomson Financial) - The dollar edged slightly lower after solid overnight gains as both European and Japanese officials expressed concern about the recent sharp rises in their currencies against the US unit.

While intervention to prop up the dollar is seen as unlikely, officials are increasing the pressure on the US administration to reiterate its strong dollar policy following the recent steep falls against a range of major currencies.

'Both Japan and Europe are becoming increasingly concerned by recent developments in the currency markets and are notably making very deliberate reference to wording from past G7 statements,' said Simon Derrick at the Bank of New York (nyse: BK - news - people ) Mellon.

Speaking late yesterday, euro group president Jean-Claude Juncker said current exchange rates do not reflect economic fundamentals and excessive volatility is not desirable for growth.

European Central Bank governing council member Guy Quaden also called on the US to reiterate it favours a strong dollar.

But attention will now turn to Thursday's interest rate decision and accompanying press conference by ECB president Jean-Claude Trichet, who has repeatedly focused on the risks of rising inflation.

'Any mention of euro strength by ECB President Trichet in the press conference (after the rate decision) is likely to weigh heavily on euro/dollar and euro/sterling,' said Steve Pearson (nyse: PSO - news - people ) at HBOS.

Meanwhile, the yen came off highs across the board after Japanese officials warned of the strong yen's impact on consumption and earnings at companies.

Among other currencies, the Australian dollar recovered slightly after sharp falls overnight. The losses came after the Reserve Bank of Australia raised interest rates as expected but noted the cumulative impact of four interest rate rises since mid-2007 have produced a substantial tightening in credit conditions.

This has raised speculation the central bank may be inclined to adopt a 'wait and see' approach before opting to raise-again.

The Canadian dollar has also remained on the weak side ahead of today's Bank of Canada rate decision, where the chances of a 50 basis point rate cut have increased after data yesterday revealed a sharp drop in GDP growth in December.

'Recent developments in Canada - very soft December GDP data pushing expectations toward a 50 basis point rate cut today - and Australia - a more dovish than expected tilt to the RBA statement last night and weaker than expected December retail sales - have sapped both the Australian and Canadian dollars of some momentum,' HBOS' Pearson said.

Forex - Dollar firmer after Europe, Japan air worries about currencies' strength

2008-03-04T03:55:00.000-08:00

03.04.08, 12:54 AM ET

HONG KONG (Thomson Financial) - The US dollar was firmer against the euro and the yen in afternoon trade in Asia on Tuesday after European and Japanese officials aired their concerns about the impact their strong currencies are having on their respective economies.

Luxembourg and Slovenia finance ministers have expressed worries about the rise in the euro, which has risen to record levels against the dollar since last week, while Japan's economic and policy head warned about the strong yen's impact on consumption and earnings at companies.

'The European officials are trying to slow down the rapid appreciation of their currency, which is bad for their exports,' said Mark Wan, chief analyst at Hang Seng Investment Services Ltd.

'But they are not trying to prevent its appreciation because there is no reason why the euro should not continue its appreciation. Economic data coming out of the US is not helping the dollar.'

Last month, the European Commission cut its 2008 growth estimate for its 15-member euro zone area to 1.8 percent from 2.2 percent.

At 1.00 pm (0500 GMT), the euro was trading at 1.5181 dollars, down from 1.5200 in Tokyo this morning. The euro rose to a fresh record 1.5275 dollars in New York trade Monday.

The dollar was quoted at 103.36 yen, up from 103.26 this morning. The greenback touched a three-year low of 102.62 yen overnight.

'The Japanese government should be worried about the strong yen because it will not help their already weak economy,' said Wan. Given its slowing economy, the yen should be trading at the 107-108 levels versus the greenback, he said.

The International Monetary Fund in January lowered its 2008 growth forecast for Japan to 1.5 percent from 1.7 percent previously.

The dollar was also supported by the Institute for Supply Management (ISM) report on Monday showing that the US manufacturing index came in at 48.3 in February -- higher than the 48.1 forecast by Thomson Financial/IFR.

Still, the greenback will remain under pressure because some analysts and traders are speculating that the Federal Reserve will probably slash its interest rates by up to 75 basis points on March 18, said Wan.

The euro may reach another record of 1.55 dollars, he said.

The Fed has trimmed its rates by a cumulative 225 basis points since September to stimulate the US economy reeling from rising jobless rate, falling consumer spending, higher inflation and a slumping financial and housing sectors.

Investors are now waiting for the release of the ISM service sector index on Thursday and the non-farm payrolls data, due out Friday, for fresh clues about the US economy and interest rates.

'Depending on the outcome of the ISM service sector report and non-farm payrolls data, the dollar may quickly resume its downtrend and test the 100 yen level,' said Mitsubishi UFJ Securities foreign exchange manager Minoru Shioiri.

The market is bracing for more US interest rate cuts after Philadelphia Federal Reserve president Charles Plosser said overnight that the spike in US inflation is 'worrisome, but also highly uncertain', suggesting the Fed hopes weaker growth will diminish price pressures.

Plosser said he does not believe the US is in a recession, but that the economy will experience 'very slow growth' in the first half of the year.

London shares outlook - higher as NY closes off lows, earnings news focus

2008-03-04T03:54:00.000-08:00

03.04.08, 1:59 AM ET

LONDON (Thomson Financial) - Leading shares look set to open higher as Wall Street closed overnight off lows with earnings news a likely focus as Admiral Group and Schroders report in the blue chips.

Spread bettors IG Index expect the FTSE 100 index to open up 23 points at 5,843 after closing off 65.7 points at 5,818.6.

Overnight in the US, Wall Street closed narrowly mixed after initially falling in early trade as investors wrestled with record-high commodities prices and data that pointed to a continually weakening economy.

The Dow Jones industrial average -- after slumping more than 100 points briefly during afternoon trading -- finished down 7.49 points to 12,258.90.

Separately, the Standard & Poor's 500 index rose 0.71 points to 1,331.34, while the Nasdaq composite index fell 12.88 to 2,258.60.

Stock markets across Asia were mixed following the lackluster session on Wall Street, the Nikkei 225 index closed up 0.10 points at 12,992.28, while the Hang Seng index was down 155.89 points at 23,429.08.

Elsewhere, oil prices edged higher in Asian trade as traders focused on the weak US dollar and news that OPEC would keep output steady.

New York's main contract, light sweet crude for delivery in April, gained 18 cents to 102.63 usd a barrel from 102.45 usd in New York on Monday.

London's Brent North Sea crude for April delivery rose 22 cents to 100.70 usd a barrel.

Turning to the blue chips, UK motor insurer Admiral Group may be in the spotlight today as it is expected to report a 17 pct increase in full-year profit today, buoyed by steady growth in customer numbers thanks to competitive pricing.

Admiral, which sells motor insurance direct to consumers through the

Admiral, Bell, Diamond and Elephant.co.uk brands, will deliver a 2007 pretax

profit of 172.4 mln stg, up from 147.3 mln in the previous year, according to an

average analyst forecast supplied by the company.

Elsewhere, fund management groups maybe a focus with Schroders expected to report a 28 pct increase in full-year profit today, helped by steady growth in the core asset management division on the back of buoyant stock markets in the first half of 2007.

Meanwhile, Cable & Wireless is not expected to announce any major restructuring plans including the oft-rumoured demerger when it addresses investors today, although there will be an update on the turnaround in Europe and more light shed on its prospects in Jamaica and across the international business.

The U.S. Dollar: Still Going Down

2008-02-29T01:51:00.000-08:00

The dollar's weakness does a lot more than alter your vacation plans—and there's good news and bad news in the currency's decline

You aren't planning a flight to Düsseldorf anytime soon. Yokohama isn't on your calendar, either. So should you care that the dollar has plunged in value against the euro, the yen, and other currencies? For sure. Because even a nation as big and relatively insulated as the U.S. is profoundly affected by changes in the value of its currency, in ways both good and bad.

The dollar's slide continued on Feb. 28, when it hit nearly $1.52 per euro, the most money it has taken to buy a euro since the common currency was launched a decade ago. The U.S. Dollar Index, which tracks the dollar vs. a market basket of six major currencies, fell to 73.7, which is a decline of about 4% so far this year and 39% since early 2002. Currency traders were unimpressed by the support for the dollar voiced Feb. 28 by President George W. Bush, who said: "We believe in a strong dollar policy, and we believe, I believe, our economy's got the fundamentals in place to grow and continue growing."

Here are six winners and losers from the dollar's swan dive:

Blue Collars Win: Factory workers have been among the biggest economic losers over the past two decades. Even over the past year, as the dollar fell, manufacturing lost another 269,000 jobs. But the cheap dollar should begin to turn that situation around. It makes it easier for American exporters like Boeing and Caterpillar to gain market share abroad, and helps U.S. companies fight off competition from imports. "The primary beneficiary of the cheaper dollar will be blue-collar labor." says James Paulsen, chief investment officer of Wells Capital Management in Minneapolis.

Consumers Lose: You'll pay more for French wine, Korean electronics, and products made from Chilean copper. Domestic producers may take advantage of the situation to sneak through some of their own price increases. That will help push up the overall inflation rate. Producer prices increased 7.4% in the year through January. Jeoff Hall, chief U.S. economist at Thomson Financial , argues that the Fed is making a big mistake by giving secondary consideration to the inflation threat as it fights the economic slowdown and credit crunch. Says Hall: "I don't think they're doing the consumer any favors by cutting rates."

Disney World Wins: American tourist destinations, from Disney World to New York City's Times Square to Chicago's Navy Pier, win two ways from the cheap dollar. First, "It's getting pretty darn cheap to visit if you're a Canadian or a European," so foreign tourism is increasing, says David Wyss, chief economist at Standard & Poor's. In Manhattan, Europeans and Asians are arriving in such throngs that some merchants have started accepting euros in payment. Meanwhile, upper-middle-class Americans who might have jetted off to Rome are spending their diminished dollars at home.

Banks Lose: Foreign investors, including the super-rich sovereign wealth funds of oil-exporting and Asian nations, are losing faith in the dollar as a storehouse of value. So they're beginning to shift their money out of the U.S. financial system to Europe and elsewhere. Plus, rising interest rates hurt bank profits by eroding the value of their holdings such as bonds and fixed-rate mortgages, notes Wyss.

Farmers and Miners Win: Prices of raw commodities such as wheat, soybeans, copper, and platinum are going through the roof. That's not just because of increased global demand—in fact, foreign growth is showing signs of slowing. It's a speculative bet on higher inflation that just so happens to benefit American commodity producers. "As the Fed deals with one bubble in housing it creates another in commodities," says Thomson's Hall.

Retailers Lose: These days, a huge percentage of the things you buy at retail—including clothing, toys, and electronics—is imported. Retailers are paying more for goods but having a hard time pushing through price increases to consumers, so their profit margins are narrowing. It's not a good time to be Wal-Mart .

Overall: Win or Lose?

While economists broadly agree on who the winners and losers are, they disagree on whether the bottom line of a cheaper dollar, netting everything out, is positive or negative. Thomson's Hall votes for negative. He says the Fed should stop cutting interest rates, or even raise them, to prop up the dollar's value in the currency market. "The Fed needs to back off from its accommodative stance," says Hall. "I think it's backfiring disastrously."

But Wells' Paulsen takes the opposite viewpoint. He notes that the cheaper dollar's effect in shrinking the trade deficit has contributed about one percentage point to economic growth over the past year, which has just about offset the big drag on the economy from the falloff in homebuilding. If the dollar hadn't fallen, says Paulsen, the economy would be in much weaker condition. "Right now," he says, "I'd argue that the good outweighs the bad."

Commodity Prices Surge, As Investors Seek a Haven

2008-02-29T00:09:00.001-08:00

The powerful rally in commodity markets is defying a global economic slowdown because investors are fleeing battered stock and bond markets, and the impact of their cash is being amplified by new, easier ways to buy and sell raw materials.

Demand remains strong and supply tight for many commodities, helping drive prices to record heights. But, in recent weeks, institutions, hedge funds and individuals have fueled much of the surge in everything from oil to wheat to platinum by pouring money into new investment vehicles that let them quickly and easily make big bets in relatively small markets.

Forex - Dollar steady ahead of Q4 GDP figures

2008-02-28T07:17:00.000-08:00

February 28, 2008: 08:11 AM EST

The dollar remained close to its all-time low against the euro but was trading in a narrow range ahead of US fourth quarter GDP figures.

The dollar has been in the doldrums this week following a series of weak US data and a downbeat assessment of the economy's prospects from Federal Reserve chairman Ben Bernanke yesterday. This all combined to reinforce expectations that US interest rates will be cut by 50 basis points at the Fed's next monetary policy meeting in March, sending the euro to an all-time high yesterday afternoon of 1.5143 usd.

The US economic outlook has been bleak for some time, but a reasonable week for equity markets coupled with firmer-than-expected euro zone data meant the greenback hasn't benefited from the safe-haven flows seen in recent weeks when equity market turmoil and fears of a global economic slowdown prompted investors to switch out of risky assets and into dollars.

'Although the growth outlook remains challenging globally and equity markets are well off their highs from the third quarter of last year, a substantial easing in market tension and more orderly corrections is contributing to better growth sentiment,' said Geoffrey Yu, currency strategist at UBS. (NYSE:UBS)

This afternoon sees the release of fourth quarter US GDP figures which analysts expected to show a 0.7 pct quarter-on-quarter rise. Ahead of this comes the weekly jobless claims numbers, with the number of people filing for unemployment insurance for the first time expected last week to edge up to 350,000 from 349,000 a week earlier.

'With sentiment becoming increasingly pessimistic as to the outlook for the US economy, it seems as if it will take a notable shift in sentiment if we're to see any real recovery for the USD so expect today's GDP and claims readings to be under some scrutiny,' said Gary Thomson, head of sales trading at CMC Markets.

Gold futures continue to surge, up more than 1%

2008-02-28T02:27:00.000-08:00

Metal earlier touches new record high of $967.70 an ounce
4:24 p.m. EST Feb. 27, 2008

Gold for April delivery rose $12.10, or 1.3%, to end at $961.0 an ounce on the New York Mercantile Exchange. Earlier, the contract hit a record $967.70 an ounce.

"We're definitely seeing the rally spurred by dollar weakness and a continued strong bid into all things commodity," said Zachary Oxman, senior trader at Wisdom Financial.

"Funds and speculators alike seem to be scrambling to get long commodities, gold especially," Oxman said.

Weakness in the U.S. dollar boosted gold's investment appeal. Gold, like many commodities, is denominated in dollars, and a lower U.S. currency makes it more affordable in other currencies.

The dollar was battered across the board, falling to a new record low of $1.5133 against the euro after downbeat durable-goods data and hints from U.S. Federal Reserve Chairman Ben Bernanke that more interest rate cuts are on the way. See Currencies.

The Commerce Department said new orders for durable goods fell 5.3% in January after a burst of orders in December, another sign that the economy is slowing. Economists surveyed by MarketWatch had anticipated a 5.1% drop. See Economic. Report.

After the data, Bernanke told Congress Wednesday that the central bank will remain on the course for additional rate cuts at least in the near term, and that downside risks to growth remain the key focus of monetary policy. See The Fed.

"Today's record lows in the U.S. dollar, record highs in gold and record highs on oil mark a key tipping point in currency markets, as traders further downgrade the U.S. currency to a low-yielding asset," said Ashraf Laidi, chief foreign-exchange strategist at CMC Markets US, in a note.

"The greenback is being damaged across the board on the notion that the ultra-low interest rates at the expense of escalating inflation is the only way forward to prevent further spreading of the U.S. recession," Laidi said.

On Tuesday, gold futures gained $8.40. Gold futures fell Monday after a senior Treasury official said the U.S. supports the proposed sale of part of the gold reserves held by the IMF.

Forex - Dollar steadies after sharp overnight falls ahead of Bernanke testimony

2008-02-27T08:45:00.001-08:00

February 27, 2008: 08:34 AM EST

LONDON, Feb. 27, 2008 (Thomson Financial delivered by Newstex) -- The dollar steadied against major currencies after sharp falls overnight as market players awaited today's testimony by Federal Reserve Chairman Ben Bernanke, as well as US durable goods data.

The dollar plummeted against a range of currencies in Asian trade, with the euro surging through the all-important 1.50 usd level. The move came as yesterday's very weak consumer confidence and housing market data emphasised the dangers of a recession in the US, while very strong PPI inflation data added stagflation fears into the mix.

'In the currency markets, nagging doubts over price stability have seen investors resume their focus upon currencies whose central banks are firmly in inflation-fighting mode,' said Neil Mellor at the Bank of New York Mellon. (NYSE:BK)

'Accordingly, despite a continued back-up in longer-term Treasury yields, the US dollar has come under renewed selling pressure with euro/dollar in particular capturing the headlines with a sharp ascent above the psychologically key 1.50 usd level,' he said.

Markets had also jumped on comments yesterday by Federal Reserve vice-chairman Donald Kohn that even aggressive interest rate cuts in the US 'will not forestall a period of economic weakness in the near term'.

For now, however, the market has calmed ahead of Bernanke's testimony, where investors will be looking to see whether he echoes the concerns expressed by Kohn.

Also in focus will be the release of US durable goods data this afternoon.

Given the European Central Bank's resolutely hawkish stance and its emphasis on the need to tackle inflation, the euro was one of the major gainers against the dollar, hitting a new all-time high of 1.5087 usd, helped by solid euro zone M3 and German consumer confidence data this morning.

The other winners have been the Australian and New Zealand dollars, where interest rates are among the highest in the developed world and in Australia are expected to rise further still.

These currencies, along with the Canadian dollar, have also benefited from a massive rise in commodity prices overnight in the wake of falls in the US dollar.

The Australian dollar was hovering just below the important 0.94 usd level which would take it to a 23-year high, the New Zealand dollar hit a 24-year high of 0.8213 usd, while the Canadian dollar hit a 14-week high of 0.9756 per US dollar.

Elsewhere, the pound remained under pressure. The UK currency had come close to the 2 dollar mark again overnight but fell back on rumours of trouble at a UK bank.

The first estimate to UK fourth quarter GDP were released today and as expected left growth unrevised at a quarterly 0.6 pct. The details of the release were disappointing, however, with UK household spending coming in below forecasts while government spending was above forecasts.

Forex - Pound falls in jittery market on rumours of trouble at a UK bank

2008-02-27T05:09:00.000-08:00

02.27.08, 5:34 AM ET

LONDON (Thomson Financial) - The pound fell against the euro and the pound as rumours circulated about possible trouble at a UK bank in an already very jittery market.

'Euro/sterling has ascended ... amid talk that a UK clearer might be having trouble raising funds -- and that this could even spur an emergency BoE base rate cut,' said Robert Howard at Thomson IFR Markets.

Many are sceptical, however, about how much truth there is in the rumour, especially given that a very jittery market is awash with rumours on a day when the euro has surged through the psychologically important 1.50 usd mark.

'There have been a bundle of rumours today and the market is just so reactive to everything at the moment,' said Mic Mills, a trader at TradIndex.com.

He added that there is also market talk of a possible liquidity injection by the Bank of England. The Bank of England was not immediately available for comment, however.

So far, BoE data shows that there was no demand for the central bank's standing facility, which attracts a punitive rate of interest, at 6.25 pct which is 100 basis points above the base rate of 5.25 pct.

'Given the highly nervous state of the markets this is however unlikely to be the end of the speculation where participants remain very much on the look out for any signs that a Northern Rock mark II is in the offing,' said David Corbell at Thomson IFR Markets.

The memory of the Northern Rock debacle last summer is still fresh in most minds. The bank had to go to the BoE for funding and a run on its deposits ensued. Northern Rock has since been nationalised.

At 10.09 am, the pound was trading at 1.9902 usd well below its earlier high of 1.9971 usd, while the euro was trading at 0.7570 stg, up from around 0.7540 at 8.30 am.

Rumours have also circulated, meanwhile, that the European Central Bank may be looking at intervening to curtail the euro's rise, though, again, this is seen as unlikely.

Oil Rises Above $102 as Weak Dollar Boosts Commodities Prices

2008-02-27T03:05:00.000-08:00

Feb. 27 -- Crude oil rose to a record above $102 a barrel as a weakening dollar spurred investors to buy commodities priced in the U.S. currency.

Futures jumped in New York and London as the dollar fell to an all-time low against the euro. The UBS Bloomberg Constant Maturity Commodity Index rose to the highest ever, on gains for gold, silver, sugar, copper and coffee. A government report later today is expected to show U.S. crude inventories rose last week.

``This record is purely a play on the weakness of the dollar, as investors use both crude and gold as a hedge against inflation,'' said Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland. ``If the dollar keeps getting weaker, and we don't have inventory builds today, it could drive prices towards $105.''

Crude oil for April delivery rose as much as $1.20, or 1.2 percent, to $102.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $101.35 at 10:52 a.m. London time.

Prices pared gains after a Persian Gulf official familiar with Saudi Arabian oil policy said prices are higher than they should be and inventory gains are likely to continue through to the second quarter.

The dollar weakened to $1.5088 a euro, the lowest since the European single currency was introduced in 1999. The dollar has declined against all of the world's 16 biggest currencies in the past 12 months apart from the Korean won and South African rand.

`Intrinsic Value'

``Because oil has an intrinsic value, it's not exactly sensible that it becomes cheaper in other currencies so you get an adjustment upward in the U.S. dollar value of oil,'' said David Moore, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``The general strength of commodity prices would instantly improve sentiment toward the oil price.''

Gold, up 15 percent this year, rose to a record $963.09 an ounce today in London, while silver advanced to a 27-year high. Among agricultural commodities, Robusta coffee climbed 2.1 percent on the Liffe exchange.

Brent crude for April settlement climbed as much as $1.06 to $100.53 a barrel on London's ICE Futures Europe exchange, the highest since trading began in 1988. It traded at $99.90 at 10:52 a.m. local time.

Hedge-fund managers and other large speculators increased net-long positions, or bets on higher oil prices, in the week ended Feb. 19, according to a Commodity Futures Trading Commission report issued at the end of last week.

Inflation worries creep in

2008-02-26T08:42:00.000-08:00

2/26/2008 11:05 AM ET

Producer prices rise in January. Home Depot reports a drop in profit and misses Wall Street's estimate. Mortgage foreclosures soar. MBIA lowers its dividend.

Higher energy and food prices sent producer prices surging in January.

The Producer Price Index jumped 1% in January, the Labor Department reported this morning, much higher than the 0.4% increase economists had expected. The PPI had fallen 0.3% in December.

Core PPI, which excludes volatile food and energy prices, rose 0.4% last month, 0.1% higher than the consensus estimate.

Year-over-year, the PPI is up 7.4%.

Stocks turned around by midmorning, adding to Monday's strong rally. At 11:05 a.m. ET, the Dow Jones Industrial Average was up 45 points to 12,614 after soaring 189 points Monday. This morning, the Nasdaq Composite Index had added 4 points to 2,360, and the Standard & Poor's 500 Index was up 1 point to 1,373.

Light, sweet crude oil was down 33 cents to $98.90 a barrel this morning.

Companies from Kellogg to Hershey have been forced to raise prices on their products because of surging costs for commodities like wheat and cocoa.

The Federal Reserve has been struggling to monitor inflation growth while keeping the economy on track, but some critics worry that the Fed has cut rates too much and too quickly, and "stagflation" has returned to the economic vocabulary.

Still, former Treasury Secretary Larry Summers said worries about stagflation, when inflation rises and economic growth slows, are not a huge concern.

"I just don't see (stagflation) as anywhere near around the corner right now in the U.S. I think you have inflation expectations pretty securely anchored in the 2-plus-percent range. If you think back to the 1970s, where people were thinking they were going to lose half the value of their money in a year, I don't think we're anywhere near that kind of thing," Summers, now managing director of D.E. Shaw Group, said on CNBC this morning.

Ahead of the Bell: Home Price Index

2008-02-26T06:05:00.000-08:00

The Associated Press February 26, 2008, 6:23AM ET

Two readings of U.S. home prices to be released Tuesday will give investors and homeowners a sense of how far the housing market slipped at the end of 2007.

The Standard & Poor's/Case-Shiller monthly report on home prices for December is due at 9 a.m. EST. The Office of Federal Housing Enterprise Oversight releases its fourth-quarter 2007 report at 10 a.m. EST.

The indexes offer different pictures of the housing market. The Case-Shiller index, which focuses on major U.S. cities, has shown falling prices for months, while the government's year-over-year index has yet to slip into negative territory.

The government's index is calculated using loans of $417,000 or less that are bought or backed by government-sponsored Fannie Mae and Freddie Mac. It does not include properties bought with some of the riskier varieties of home loans that have gone sour over the past year.

Since peaking in mid-2005, the rate of home price appreciation in the government index has dropped off sharply to an increase of 1.8 percent in the third quarter of 2007, the smallest increase since 1995. It close to flat in parts of 1990 and 1991, but index has never dropped compared with a year earlier.

Both indexes examines price changes for the same properties over time instead of calculating a median price for houses sold during a particular month or quarter. Doing so prevents the data from being skewed by changes in the mix of houses sold. For example, sales of more expensive homes in any particular month or quarter would push median prices upward.

Home prices as measured by the 10-city Case-Shiller index fell in November for the 11th-straight month, dropping a record 8.4 percent. A broader reading measuring 20 metropolitan areas fell 7.7 percent in November.

Monday brought more bad housing market news, as the National Association of Realtors reported that sales of existing homes fell to the lowest level in nearly a decade in January while the median price for a home dropped for the fifth straight month. The median price of a U.S. home sold in January slid to $201,100, a drop of 4.6 percent from a year ago, according to the Realtors group.

Forex - Euro surges after forecast-busting Ifo

2008-02-26T04:09:00.000-08:00

02.26.08, 4:30 AM ET

LONDON (Thomson Financial) - The euro surged higher after a closely-watched survey into German business sentiment came in above market expectations, further reinforcing expectations that the European Central Bank will not be cutting rates any time soon.

Earlier in the session, the euro had come under pressure on talk the Ifo would disappoint to the downside.

In the event, the research institute revealed that its headline business climate index rose to 104.1 in February from 103.4 the previous month. Analysts polled by Thomson Financial News were expected the index to drop to 102.7.

The talk in the market before the release was that it would fall to 101.0 and that pushed the euro down to 1.4777 usd from 1.4839 usd.

'Offers into the 1.4830/40 usd area will now come into view as the pair looks to regain the losses out through amid the early weak headline speculation,' said Thomson IFR Markets analyst Matthew Foster Smith.

The IFO is likely to stoke talk that the European Central Bank's next forecasts in early March will be relatively buoyant, thereby fuelling talk that the central bank will keep borrowing costs on hold for a while longer.

The ECB has kept its key refi rate unchanged at 4.00 pct for eight months, unlike the US Federal Reserve and the Bank of England, both of whom are cutting rates, though at far different tempos. This has helped underpin the euro.

'The Fed's contrasting tone with that of the ECB and investors' search for higher returns should keep the euro supported for now even though we retain our medium to long term bearish view on the currency,' said Ian Stannard, currency strategist at BNP Paribas .

With most ECB watchers expecting the central bank to stay pat until June, the rhetoric of policy-makers will be closely monitored. A speech today from Axel Weber, the president of the Bundesbank, could well be important in this regard.

'Any sense that this typically hawkish policymaker is more nervous about growth could provide the excuse for the euro to push lower once again, and we continue to target 1.4450 usd,' said Daragh Maher, senior FX strategist at Calyon.

Citi's Hits: 15 Times $100 Million

2008-02-26T03:36:00.000-08:00

Citigroup Inc. disclosed that traders in its investment bank piled up daily losses of more than $100 million on 15 separate occasions last year.

Those 15 financially disastrous days, which Citigroup disclosed in its annual report filed late Friday but declined yesterday to describe in detail, added to worries the New York bank's problems are deeper than those that led to about $20 billion in mortgage-related write-downs last year, the ouster of its chief executive and a sinking stock price.

Forex - Dollar steady vs yen, euro in afternoon trade in Asia ahead of US data

2008-02-25T22:54:00.000-08:00

HONG KONG (Thomson Financial) - The US dollar hardly moved against the euro and the yen in afternoon Asian trade on Tuesday as investors opted to move to the sidelines ahead of key economic data due for release later this week.

On Friday the US Commerce Department will announce last month's consumer spending, which accounts for more than two-thirds of gross domestic product. Before that, new homes sales for January will be out on Wednesday.

'The currencies are stuck in a pretty narrow range. The currency market is focused on the US economic data,' said David Mann, currency strategist at Standard Chartered Bank. 'We should see some further increase in dollar selling' should the data confirm market fears that the world's largest economy is on the brink of a recession.

At 1.00 pm (0500 GMT), the euro was quoted at 1.4829 dollars from 1.4832 in Tokyo this morning. The dollar was at 107.92 yen from 108.04.

The dollar, though, may strengthen gradually against major currencies in coming weeks because 'we are nearing the end of the dollar weakness,' said Mann.

Existing home sales stronger than expected; Lowe's reports 33% profit drop

2008-02-25T11:55:00.000-08:00

Last update: 2:51 p.m. EST Feb. 25, 2008

NEW YORK (MarketWatch) -- U.S. stocks rallied Monday afternoon as investors found relief after Standard & Poor's affirmed its triple-A ratings for bond insurers MBIA and Ambac Financial.

"It was taking MBIA and Ambac off credit watch by S&P, both names rallied and are taking the whole market with them," said Art Hogan, chief market strategist at Jefferies & Co.

"The headlines appear to be more bullish than the negative underlying message," said analysts at Action Economics.

After rising more than 100 points earlier on, and detouring into negative territory, the Dow Jones Industrial Average was up 135.79 points to 12,516, with 24 of its 30 components posting gains.

The recent volatility in the stock market is likely to continue, with 150-point swings in the Dow likely, said Paul Nolte, director of investments at Hindsdale Associates.

"We've seen credit spreads widen out in the last few weeks; as long as they continue to widen, markets are still at risk because it indicates people are not interested in taking risk," said Nolte.

Energy, financials lead benchmark to higher close

2008-02-25T05:39:00.000-08:00

The benchmark S&P/TSX Composite Index rose 76.38 points, or 0.6%, to 13,585.93.

On the Toronto Stock Exchange, advancers led decliners 819 to 754.

Seven of the TSX's 10 component sector gauges finished in positive territory, with the financial sector and the energy gauge both adding about 1%.

Royal Bank of Canada ended 0.2% higher, reversing earlier sharp losses. The country's largest bank announced an all-stock takeover offer for independent fund manager Phillips, Hager & North Investment Management Ltd.

Bank of Montreal (CA:BMO: news, chart, profile) rose 1.2% and Canadian Imperial Bank of Commerce (CA:CM: news, chart, profile) rose 2.8%.

The late recovery in financial issues came after CNBC reported that a plan by several big banks to bail out struggling U.S. bond insurer Ambac Financial could be unveiled on Monday or Tuesday.

Crude-oil futures ended Friday's volatile session modestly higher, with the front-month benchmark contract ending near $99 a barrel. See Futures Movers.

EnCana Corp. (CA:ECA: news, chart, profile) , the nation's second-largest energy producer by revenue, rose 1.1%.

Oil and gas industry helicopter operator CHC Helicopter Corp. (CA:FLY.A: news, chart, profile) surged 38.3% on news that it will be acquired by U.S. private-equity firm First Reserve Corp. in a deal reportedly valued at C$1.5 billion ($1.48 billion).

Uranium One Inc. (CA:UUU: news, chart, profile) was the most actively traded issue by volume for a second straight day, shedding 13.1% after a 17.4% drop Thursday, when it cut its 2008 production forecast.

FOREX-Strong services PMI sends euro to 2-week high vs dlr

2008-02-25T05:36:00.000-08:00

LONDON, Feb 22 (Reuters) - The euro hit a two-week high versus the dollar on Friday as stronger than expected euro zone service sector data contrasted with regional U.S. factory activity putting on its weakest show since the last recession.

The euro zone services PMI rose to 52.3 in February from 50.6 the previous month, moving away from the 50 watermark between contraction and growth and further dampening expectations of near-term interest rate cuts.

That was in stark contrast to Thursday's Philadelphia Fed's business index which fell to minus 24 in February, showing the deepest contraction in activity since 2001 and much worse than forecasts for minus 11. [ID:nN21572086]

U.S. markets are now fully pricing in a 50 basis point cut at the Federal Reserve's next meeting in March to 2.50 percent and factor in a small chance of an even bigger 75 basis points.

That would add to an unusually aggressive 125 basis points of cuts in January as the Fed tries to fend off a recession in the world's biggest economy. FEDWATCH

"It is a weak dollar story more than anything else. As you saw yesterday the Philly Fed was really what hurt the dollar," said Niels Christensen, FX strategist at Nordea in Copenhagen.

The euro rose to a two-week high of $1.4850 , from around $1.4815 before the PMI data.

Asian stocks gain with Wall Street on hopes for Ambac bailout

2008-02-25T03:53:00.000-08:00

25 February 2008

Asian stocks end mostly higher Monday, tracking late-day gains on Wall Street Friday on a report that a rescue package for struggling bond insurer Ambac Financial could be announced this week.

The Dow Jones Industrial Average reversed early losses to close up about 97 points after cable news channel CNBC reported that a bailout for Ambac could come Monday or Tuesday.

'It always helps to see the US market go up,' said Andrew Sekely, head of Australian equities at Intersuisse.

Financial stocks rose across the region and pulled benchmarks higher. The Nikkei led the advance, closing up 3.1 percent at 13,914.57. The Topix rose 2.6 percent to 1,355.54.

'Although [the Ambac bailout] will not resolve the whole problem of monoline bond insurers, it will at least ease some concerns, as one negative factor may disappear,' said Soichiro Monji, chief strategist at Daiwa SB Investments.

Forex - Dollar up on talk of Ambac rescue; Australian dollar enjoys solid gains

2008-02-25T03:13:00.000-08:00

CNNMoney.com (February 25, 2008: 04:39 AM EST)

LONDON, Feb. 25, 2008 (Thomson Financial delivered by Newstex) -- The dollar remained well-supported against major currencies, boosted by reports of a rescue plan for troubled bond insurer Ambac Financial Group (NYSE:AKT) (NYSE:AKF) (NYSE:AFK) (NYSE:ABK) , while a pick-up in risk appetite gave a significant boost to the high-yielding Australian dollar.

Market sentiment has been bolstered by a report late Friday of the rescue for Ambac, which had risked losing its AAA credit rating due to losses on securities linked to unpaid housing mortgages.

'News that Ambac looks likely to receive a bail-out has done something to build confidence and the greenback has posted some gains as a result,' said Gary Thomson, head of sales trading at CMC Markets.

Meanwhile, Asian equities were boosted overnight by a newspaper report suggesting that China's new sovereign wealth fund plans to buy up Japanese stocks.

The pick-up in risk appetite meanwhile has given a further boost to the high-yielding Australian dollar, which hit a fresh three and a half month high against its US counterpart of 0.9264 usd.

The Australian currency has benefited from sharp rises in the gold price, a buoyant economy and the Reserve Bank of Australia's recent interest rate hike.

'With gains of 2 pct so far this month taking it to year-to-date highs, the Aussie looks well-positioned to challenge last October's 24-year high against the US dollar and some positive Australian lead economic indicators on Wednesday would certainly help in that respect,' said Neil Mellor at the Bank of New York Mellon. (NYSE:BK)

Elsewhere, the pound was on the weak side after the latest Hometrack survey showed UK house prices fell for the fifth consecutive month and as investors awaited mortgage lending data from the British Bankers' Association this morning.

Later today, attention will turn to the release of US existing home sales data this afternoon and a speech tonight by European Central Bank president Jean-Claude Trichet.

Forex - US dollar rebounds vs euro, yen on hopes for Ambac bailout

2008-02-25T01:02:00.000-08:00

Forbes Magazine (25 February 2008)

HONG KONG (Thomson Financial) - The US dollar rebounded against the euro and yen in afternoon trading in Asia on Monday, buoyed

by speculation of a rescue plan for troubled bond insurer Ambac Financial Group

Ambac risked losing its AAA credit rating due to losses on securities linked to unpaid housing mortgages. The insurer may announce this week a rescue package that includes a fresh capital infusion arranged by a group of lenders.

'The dollar got some boost from the report late Friday about the rescue package for Ambac. It's one less thing to be nervous about and provides a relief for the troubled credit market,' said David Cohen, director of Asian economic forecasting at Action Economics.

At 1.00 pm (0500 GMT), the euro was down at 1.4812 dollars from 1.4834 dollars in Sydney this morning. One dollar was buying 107.38 yen, up from 107.20 yen.

'The dollar's strength is a late reaction on Ambac,' said Tim Condon, research head at ING Financial Markets. 'It's also a reflection of the growing risk appetite of investors.'

Investors were encouraged to borrow from Japan, where the 0.5 percent benchmark rate is the lowest among developed countries, and invest the proceeds in higher-yielding securities including stocks elsewhere, weakening the yen.

Asian stock markets including Japan, Hong Kong and South Korea were mostly higher this

morning, tracking gains on Wall Street Friday.

Over the next few weeks, the dollar will continue to remain under pressure on speculation that

the Federal Reserve will further trim its key interest rates while the European Central Bank is likely to keep rates unchanged in the first half of 2008.

'The pressure on the dollar will not go away. There are views that the US is on the brink of a recession. But we have yet to get a confirmation on that,' said Action Economics' Cohen.

The Fed may cut rates by 50 basis points when policy makers meet on March 18, Cohen said. The Fed has slashed rates by a cumulative 225 basis points since September.

In the meantime, the market will be keeping an eye on US economic data releases that this week include last month's consumer spending and home sales, both new and existing.

The Fed last week cut its 2008 growth forecast for the US economy to 1.3-2.0 percent from as much as 2.5 percent, while raising its inflation estimates.

The ECB followed the Fed in reducing its growth estimate and raising its inflation expectations.

Inflation in the 15-member euro zone area may rise to an average of 2.6 percent this year from a previous estimate of 2.1 percent, raising speculation that the ECB won't cut rates soon to boost the region's economy.

News- Hedge Funds

2008-02-23T05:34:00.000-08:00

Hedge Funds Feel New Heat

The Wall Street Journal (23-02-2008)

The past decade has been the era of the hedge fund, as investors snapped them up for their track record of beating the market with often highly complex trades.

But now, as the credit crunch upends financial markets, that very complexity is coming back to bite some of them.

In the past year, shares of Fortress Investment Group LLC -- which became the symbol of hedge-fund success when it went public last February -- are down 50% as investors wring their hands about the value of its real-estate, debt and other holdings. A Fortress official declined to comment.

A pair of $2 billion funds run by AQR Capital Management Inc. are down about 15% this year. And yesterday Citigroup announced a bailout of an in-house hedge-fund group clobbered in part by bad bets on highly complex mortgage-related securities. (See related article.)

Last month alone, so-called "quantitative" hedge funds (which make investments based on sophisticated mathematical formulas) fell 6% as a group, according to data-tracker Hedge Fund Research Inc.

Financial instruments in Forex trading

2008-02-21T23:48:00.000-08:00

Spot

A spot transaction is a two-day delivery transaction, as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the spot market. Spot has the largest share by volume in FX transactions among all instruments.

Forward

One way to deal with the Forex risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be a few days, months or years.

Future

Foreign currency futures are forward transactions with standard contract sizes and maturity dates — for example, 500,000 British pounds for next November at an agreed rate. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.

Swap

The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not standardized contracts and are not traded through an exchange.

Option

A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world.

Exchange Traded Fund

Exchange-traded funds (or ETFs) are Open Ended investment companies that can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the S&P 500 (e.g. SPY), but recently they are now replicating investments in the currency markets with the ETF increasing in value when the US Dollar weakness versus a specific currency, such as the Euro. Certain of these funds track the price movements of world currencies versus the US Dollar, and increase in value directly counter to the US Dollar, allowing for speculation in the US Dollar for US and US Dollar denominated investors and speculators.

Foreign exchange market

2008-02-18T22:59:00.000-08:00

The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. This is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions.
The average daily trade in the global forex and related markets currently is over 3 trillion US$.
Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks, and are subject to forex scams.the chart you can see the evolution of forex trade since 1989 to date. The small volume from 2001 is mainly because the US economy going down and the 9/11 attacks.
Foreign exchange trading increased by 38% between April 2005 and April 2006 and has more than doubled since 2001.

The forex history

2008-02-18T08:26:00.000-08:00

The Forex Trading is being called "today's exciting new investment opportunity for the savvy investor".
Maybe you ask why?
The reason is that the Forex Trading Market only began to emerge in 1978, when worldwide currencies were allowed to 'float' according to supply and demand, 7 years after the Gold Standard was abandoned. Up until 1995 Forex Trading was availabl only to banks and large multinational corporations. Since then, thanks to the proliferation of the computer and a new era of internet-based communication technologies, this highly profitable market is open to everyone. The Forex Trading Market's growth has been unprecedented, explosive, and continues to be unequaled by any other trading market.