Sept.30,2009 -- The Philippine peso will gain 3 percent by the end of March as economic growth accelerates amid increased spending and because the central bank will refrain from raising interest rates, Standard Chartered Plc said.
The $167 billion Southeast Asian nation’s economy will expand 1.5 percent this year and 3.3 percent in 2010, the U.K. bank predicted in a research note today, raising previous forecasts of 0.7 percent and 2.7 percent. Rising remittances from 9 million Filipinos overseas and foreign investment in stocks will boost the external balance of payments surplus and support peso appreciation, according to Standard Chartered.
“The peso will outperform currencies of major trading partners like the U.S., Japan, Europe and China in the next three to six months,” Thomas Harr, a Singapore-based currency strategist at the bank, said in an interview.
Capital outflows that have restrained gains in the peso this year will return, Standard Chartered said, expecting the currency to “gradually catch up” with strength in other Asian exchange rates such as those of the South Korean won and Indonesian rupiah.
The currency, which traded at 47.395 per dollar as of 2:10 p.m. in Manila, will climb 0.8 percent to 47 by year-end and rise to 46 by March 31, Standard Chartered forecast. The peso appreciated 1.6 percent this quarter, lagging behind an 8 percent gain in the won and 5.6 percent for the rupiah,according to data compiled by Bloomberg.
Downgrade Unlikely
Standard Chartered says the Philippines is unlikely to face a credit-rating downgrade because of a widening budget deficit as the increase in spending will support economic growth ahead of elections scheduled for May 2010.The bank kept its budget deficit forecast for 2009 at 320 billion pesos ($6.8 billion) as the rebuilding following Tropical Storm Ketsana will require additional spending. The government projects a record shortfall of 250 billion pesos.
“Even with the higher deficit, the Philippines does not face a near-term risk of a rating downgrade,” Harr said. “Investors are not yet focused on next year’s elections,” muting political risks, he said.The central bank, which meets on monetary policy tomorrow, will keep its overnight borrowing rate at a record low of 4 percent and hold it there for 2009 and 2010, Harr wrote.
“We expect the Philippine economy to recover over the next two years,” according to the note that Harr co-wrote with economist Simon Wong. “Remittances tend to pick up in the fourth quarter, ahead of Christmas.”
Standard Chartered raised its short-term rating on the peso to “overweight” from “neutral.”
Wednesday, September 30, 2009
Philippine Peso (PHP) to ‘Catch Up,’ Rise 3%, Standard Chartered Says
Friday, September 25, 2009
Yen Rallies to Seven-Month High as Japan Opposes Intervention
The yen rose to a seven-month high versus the dollar as Japan’s new government reiterated its opposition to intervening to stem a currency’s gain and the Federal Reserve pledged to keep interest rates low.
Sterling dropped to a three-month low below $1.60 this week after Bank of England Governor Mervyn King was quoted by a newspaper as saying the pound’s weakness is aiding in rebalancing the U.K.’s economy. The dollar reached a one-year low versus euro on increased demand for riskier assets before a report next week forecast to show U.S. job losses slowed.
“The yen is getting a benefit from the fact that there is no political intervention, and that it’s not the whipping boy,” said Boris Schlossberg, director of currency research in New York at the online currency trader GFT Forex.
Japan’s yen advanced 1.8 percent this week to 89.64 per dollar, from 91.29 on Sept. 18. It touched 89.51 yesterday, the strongest level since Feb. 5. The currency gained 2 percent to 131.70 per euro, from 134.33 The dollar rose 0.2 percent to $1.4689 per euro, from $1.4712, after touching $1.4844 on Sept. 23, the weakest level since Sept. 22, 2008.
A break in the yen below 89.50 per dollar would “rechallenge” 87.15, wrote Thomas Anthonj, a technical analyst at JPMorgan Chase & Co. in London in a note yesterday. The yen reached 87.13 on Jan. 21, the strongest level since 1995.
Canada’s currency dropped 2 percent to C$1.0910 per U.S. dollar in its biggest weekly loss since June as crude oil, the nation’s biggest export, declined 8.3 percent to $66.07 a barrel. The currency appreciated 12 percent this year.
Bank of Canada
Bank of Canada Governor Mark Carney said he’s concerned when the Canadian dollar moves away from “fundamental” levels, according to the transcript of an interview with the Canadian Broadcasting Corp. released yesterday.
Sterling slid 2.1 percent versus the dollar this week after the Newcastle Journal reported on Sept. 23 that King called the currency’s drop “very helpful.” The pound fell yesterday to $1.5918, the lowest level since June 8, and depreciated to 91.19 per euro, the weakest level since April 1.
Barclays Capital lowered its three-month forecast for the dollar to $1.52 per euro yesterday, from $1.40. “Excess liquidity” stems from a Fed monetary policy that’s “buoying risky assets indiscriminately while punishing” the greenback, wrote David Woo, global head of foreign-exchange strategy in London in a note.
Fed Asset Purchases
The Fed said on Sept. 23 that it would end its $1.45 trillion in purchases of mortgage-backed securities and housing agency debt in March rather than in December and left the fed funds target at zero to 0.25 percent. Policy makers recommitted to keeping the rates “exceptionally low” for an “extended period,” even as the economy shows signs of recovery.
U.S. companies probably cut 180,000 jobs in September, after shedding 216,000 in the prior month, according to the median forecast of 58 economists surveyed by Bloomberg News. The Labor Department is due to release the report on Oct. 2.
The yen advanced against all its major counterparts except the South Korean won as Japan’s Finance Minister Hirohisa Fujii said at the Group of 20 meeting in Pittsburgh on Sept. 24 that he has been questioning the idea of “easy intervention.”
Fujii, whose Democratic Party of Japan took office for the first time this month, referred in comments to reporters to a previous pledge of the nations to refrain from pursuing a currency-devaluation strategy.
Fujii on Yen
“I don’t intend to take a strong yen policy but, at the same time, a deliberate weaker-currency policy was denounced” at the G-20 summit in London earlier this year, Fujii said.
Fujii said last week he didn’t support a “weak yen,” fueling speculation Japan won’t resort to intervention to curb yen’s appreciation. Central banks intervene in foreign-exchange markets by selling and buying currencies.
Japan’s currency rose 3.6 percent to 142.90 versus the pound this week and appreciated 3.8 percent to 6.62 against the Mexican peso.
The yen gained 7.3 percent against the dollar this quarter and advanced 2.7 percent versus the euro. The rally contributed to a 36 percent decline in Japan’s exports in August from a year earlier and weighed on Japanese stocks. The Nikkei 225 Index rose 4.8 percent in the past three months, compared with a 14.2 percent increase in the Standard & Poor’s 500 Index.
The yen’s current level of about 90 per dollar is “painful,” Toyota Motor Corp. Executive Vice President Yukitoshi Funo told reporters yesterday.
Goldman Sachs View
“While policy statements on the yen remain confusing, the tightening in Japanese financial conditions is having a damaging impact,” wrote Dominic Wilson, a senior global economist at Goldman Sachs Group Inc. in New York, in a note to clients yesterday. “The market appears to be voting that the economy ‘needs’ a weaker yen, even if it is not yet getting it.”
The yen also gained on prospects the nation’s exporters will take advantage of an April 1 rule change that waives taxes on repatriated profits. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings. The first half of Japan’s fiscal year ends Sept. 30.
South Korea’s won rose for a fifth week versus the dollar in its longest winning streak since April as confidence the economy is recovering from a recession helped draw funds from abroad. The won gained 1.8 percent and touched 1,185.30 per dollar yesterday, the strongest level since October 2008. The won increased 0.1 percent to 13.2148 versus the yen.
(Source Bloomberg News)
Tuesday, September 22, 2009
Technical Analysis in Forex
What is Market Trend?
Trend is simply the overall direction in which prices are moving-- UP, DOWN, OR FLAT.
Types of Trends
The direction of the trend is absolutely essential to trading and analyzing the market. In the Foreign Exchange (FX) Market, it is possible to profit from both UP and Down movements, because the buying and selling of one currency is always linked to another currency e.g. BUY US Dollar SELL Japanese Yen.
As the trend moves upwards the US Dollar is appreciating in value
Down Trend
As the trend moves downwards the US Dollar is depreciating in value.
Sideways Trend
Prices are moving within a narrow range (The currencies are neither appreciating nor depreciating)
The basic trend line is one of the simplest technical tools employed by the trader, and is also one of the most valuable in any type of technical trading. For an up trend line to be drawn, there must be at least two low points in the graph, where the 2nd low point is higher than the first. A price low is the lowest price reached during a counter trend move.
Forex News: US Dollar
The US Dollar experienced an exciting trading day on Monday as a rise in risk averse trading helped add an early morning boost, followed by a retracing of Friday's levels. Against the EUR, the greenback climbed to as high as 1.4610 before coming back down and closing the day at 1.4717. Versus the British Pound, the USD gained as much as 90 pips, with a high mark of 1.6134, before coming back up and closing out the trading day at the 1.6250 level.
With a decision regarding the Federal Funds Rate looming, traders are becoming more aware of the potential delay in any increase to short-term interest rates due to the instability of global economies recently. Britain has made similar overtures, as did the Euro-Zone in its recent discussions. However, the question still remains over whether the global economy is indeed recovering as many were expecting. This uncertainty drives many investors back into safe-havens for the short-run until things become clearer.
As far as the North-Western Hemisphere is concerned today, the United States is not due to release much data of concern. Canada, on the other hand, is going to release vital data regarding its retail sales levels, which last week caused a stir among the USD and EUR. Growth in Canadian sales may help return the Loonie back to a bullish posture, but forecasts appear modest at best. This Wednesday's US interest rate decision appears to be this week's primary event for Dollar traders.
Monday, September 21, 2009
Hatoyama Yen Repels Goldman Seeing 8% Slide on Growth
Hirohisa Fujii, Japan’s new finance minister, says he doesn’t support a weak yen. The world’s biggest banks say that’s just what he may get.
While the yen gained against all but one of the 16 most- actively traded currencies since early August as the Democratic Party of Japan became the likely winner in national elections, forecasters say it will decline 5.2 percent against the dollar and 0.7 percent versus the euro by year-end. The economy is too weak to support a stronger rate, based on the median of 40 estimates in a Bloomberg survey.
Japan will be the only Group-of-10 nation that won’t raise borrowing costs in 2010, keeping its benchmark interest rate at a record low 0.1 percent, the survey shows. The economy will expand 0.8 percent next year after contracting 6 percent in 2009, according to median forecasts, putting assets in the world’s second-biggest economy at a disadvantage to those in countries with higher borrowing costs.
“Everyone is seemingly buying the yen, which I think is ridiculous,” said Jim O’Neill, head of global economic research at Goldman Sachs Group Inc. in London. “The true underlying fundamentals for the yen in my book have deteriorated significantly.”
New York-based Goldman Sachs, which earned more than $100 million from trading for a record 46 days last quarter, predicts the yen will weaken to 98 per dollar and 142 per euro by the end of the year, from 92.23 and 135.25 as of 7:09 a.m. in New York today. Bank of America Corp., the biggest U.S. bank, and HSBC
Holdings Plc, the largest in Europe, are even more bearish.
Yen’s Rally
The yen rallied 6.6 percent against the dollar and 3.3 percent compared with the euro as the Democratic Party of Japan, led by Yukio Hatoyama, 62, gained in the polls on the way to an election victory in the lower house of Parliament on Aug. 30 that broke 55 years of almost uninterrupted rule for the Liberal Democratic Party. Only the South African rand has risen more.
During the campaign, the DPJ said a stronger yen will boost household spending by making imported goods less expensive.
That’s in contrast to the former administration’s focus on public works spending and keeping the yen weak to help exporters.
Fujii, 77, reiterated that message on Sept. 16, the day the DPJ officially took over, saying he doesn’t support a “weak yen.” The comments drove the currency to 90.13 per dollar, its strongest level since February. The following day, he said it was an “absurd idea” that a weak yen is better for exports.
Suffering Exporters
Shares of Aichi-based automaker Toyota Motor Corp., which makes about 75 percent of its revenue outside of Japan, dropped 1.1 percent on the day of Fujii’s comments even as the Nikkei
225 Index added 0.5 percent.
In a Cabinet Office survey released April 22, exporters said they can remain profitable as long as the yen trades at 97.33 per dollar or weaker. A rising currency hurts exporters by making their goods more expensive to foreign buyers and reducing the value of profits earned abroad. Exports account for 12
percent of Japan’s economy, compared with 6 percent in the U.S.
Tokyo-based Canon Inc., the world’s biggest maker of office equipment, said in its latest financial report every 1 yen change against the dollar would alter its second-half operating profit by 4.2 billion yen ($46 million).
“Fujii’s words will come to haunt him,” said Richard Benson, who oversees $14 billion of currency funds at Millennium Asset Management in London. “The DPJ’s strong-yen policy will hurt the Japanese stock market, leading domestic investors overseas in search of returns, selling the yen in the process.”
Exports Plunge
Exports plunged at an unprecedented 26 percent rate in the three months ended March 31, contributing to the economy’s record 15.2 percent contraction in the quarter. The public debt is almost 200 percent of the economy, compared with about 48 percent in the U.S., according to data compiled by Bloomberg.
The surplus in Japan’s current account, the broadest measure of trade because it includes investment, is shrinking relative to the size of the economy. The measure will fall to 2.1 percent of gross domestic product this year, based on median estimates in Bloomberg economist surveys, from 4.8 percent in 2007 and 3.2 percent in 2008. The household savings rate will drop to 2 percent this year from 3.3 percent in 2008 and more than 10 percent a decade ago, Goldman Sachs says.
Strength ‘Illusion’
“Yen strength is an illusion with short-term investors,” said Tomoko Fujii, Tokyo-based senior currency strategist at Bank of America Securities-Merrill Lynch. The Charlotte, North Carolina-based firm expects the yen to weaken to 105 per dollar and to 158 per euro by Dec. 31. “They’re jumping to the conclusion that the government change will boost the yen, but that’s not the case because there’s no benefit in killing off the exporters,” she said.
Deutsche Bank AG, the world’s biggest currency trader, says the yen will rally to 80 to the dollar by year-end. U.S. interest rates near zero will encourage investors to finance purchases of higher-yielding assets with the U.S. currency at the same time that the improving world economy boosts demand for Japan’s exports.
“Yen is back,” Bilal Hafeez, Deutsche Bank’s London-based head of foreign-exchange strategy wrote in a report to clients on Sept. 17. “The yen may end up being the biggest winner against the dollar.” The three-month dollar London interbank offered rate, or Libor, fell below the comparable Japanese rate last month for the first time since April 1993. Dollar Libor was 0.29 percent on Sept. 18, while yen Libor was 0.35 percent, according to the British Bankers’ Association in London.
Options Bets
Options traders are betting the yen will rise against all other Group of 10 currencies in the next three months. The cost of contracts used to bet the yen will appreciate versus the dollar are the most expensive relative to those betting on a decline since July 30, so-called 25-Delta Risk Reversals show.
Japanese investors are showing less confidence in their currency. They bought the most foreign bonds in four years last week, purchasing a net 1.66 trillion yen in the period to Sept.12, according to Ministry of Finance figures released Sept. 17. The drop in short-term rates reduces the expenses of hedging purchases of foreign bonds, said Keiko Onogi, a Tokyo- based debt strategist at Daiwa Securities SMBC Co., a unit of Japan’s second-largest brokerage.
Exchange Rates
Individual investors in Japan added to foreign currency mutual funds every month since January, according to Investment Trust Association data. Assets in the funds reached 26.9 trillion yen in August, the most since September and up from 20.7 trillion yen in January.
Bank of Japan Governor Masaaki Shirakawa told reporters in Tokyo on Sept. 17 that while stimulus measures, including buying $20 billion of government debt a month, have helped the economy,
policy makers are “not confident about the strength” of consumer demand “after those effects fade.”
The central bank is monitoring the exchange rate, which is contributing to a drop in inflation, he said. Consumer prices excluding food plunged at a record 2.2 percent pace in July while the jobless rate hit an unprecedented 5.7 percent the same month, government reports showed.
“The yen is inappropriately strong,” said David Bloom, global head of foreign-exchange strategy in London at HSBC. The government “will mind given the massively deflationary threat Japan is still facing,” he said.
HSBC, the biggest European bank, is telling its clients that the currency will weaken to 105 per dollar and 158 per euro by March 31.
Intervention History
Japanese officials have responded to yen strength in the past by intervening in currency markets, including when Fujii was finance minister between 1993 and 1994. Authorities sold the currency on all four of the last five times since 1995 when the yen approached the 100-per-dollar mark to support exporters.
The Bank of Japan, on behalf of the Ministry of Finance, sold a record 20.4 trillion yen in 2003 and 14.8 trillion yen in the first quarter of 2004, when it traded as high as 103.42 per dollar. The yen declined to an eight-month low of 114.88 versus the dollar in May that year. “I suspect the people at the Bank of Japan and the Ministry of Finance will start briefing Fujii on what he should and shouldn’t say,” said Neil MacKinnon, global macro strategist in London at VTB Capital Plc, an investment bank.
“Incoming policy makers often make a public view on a currency, only for it to be clarified, reviewed or withdrawn once their advisers have a word with them.”
Tuesday, September 1, 2009
A Little About Forex Brokers
Many of you must have seen glossy ads for Forex Trading claiming a great amount of profit & a high leverage. Although it would not be proper to say that all the claims are sham, one can safely say that the claims are always inflated to attract gullible investors. No doubt, forex could lead you to the path of prosperity provided you are well equipped with proper strategy & in-depth analysis.
Here the need for forex broker comes into picture. This article would discuss the meaning & rational for existence of forex brokers in the currency market.
As many of you must be knowing the forex trading is mainly of OTC (Over the counter) nature. Now what do we mean by OTC? OTC means ‘Non Exchange Traded’. Let me elaborate this a little more. In case of Equity (stocks) & Futures the trade occurs on one or more Stock exchanges. In case of OTC products, which includes Forex, the trading that is buying & selling is done between the private parties & they are in more vicinity than any trade you may enter for Equity & Futures. When you buy or sell any equity or future you buy it from the Stock Exchange & you don’t know who is selling what the scrip you are buying or vise a versa.
Conversely, in case of OTC trades you are buying & selling from individual parties as no designated place such as Stock Exchange is involved.
Coming back to Forex trading, OTC in this context means Over the Counter of Banks & other Financial Institutions who usually trade currencies in millions & greater amounts.
This accounts for the major part of total world wide currency trade.
Now you would ask then how come it would be possible for us to start Forex trading with a few hundred Dollors as many of the Ads claim that you can definitely make a start with small amounts like $500? This is possible due to Forex brokers.
Although the majority of forex trade occurs at Banks’ & FIIs’ level the forex brokers facilitate for retail forex trade where individual investors can trade forex with a small & affordable amount.
Forex brokers acts as a link between the big forex market (where large dealers like banks & FIIs trade) & the individual retail traders.
So why do we need forex brokers? The first & most important reason is to facilitate the individual retail investors to enter the forex market although indirectly & that through forex brokers. Forex brokers trade with the collective amounts of all small retail investors.
Now once you start the trading through the forex brokers what next?
You need to make reasonable profit from the forex trading.
Believe me, its not an easy task to make instant profit as many of the forex programs claim. To make a profit from forex trading you need to understand all the intricacies of forex trading. As all of you know the forex trading is 24x7 & is carried out all over the globe. To do any analysis you need trading data. In case of listed securities the data can be easily available through Exchanges. However, in case of forex trading the data is not so easily available mainly because of dispersion of trading places across the markets over the globe. Also the traders being individual parties the data is not in a standardized format.
A forex broker could help you to understand the forex market & may guide you with their own analysis. Forex brokers can afford to hire specialized professionals who do all the complex market analysis & help you to make a trading decision.
To summarize a forex broker is a link between the retail investor & larger forex market players who facilitates the retail forex traders to enter the forex market who otherwise could not have entered due to the large amounts involved.
Following points would summarize the rational of there being forex brokers in currency market:
1)The amount involved in forex trading is usually very huge. Forex brokers are required for an individual retail forex trader to enter the forex market. This is facilitated by the leverage which many forex brokers usually offer.
2)The individual retail investor might not be well versed with all the technicalities of Forex trading. So without an analysis of the market it could be a fatal thing to trade forex & the trader might end up losing all the capital.
3)With proper guidance & tips from the forex broker one can reap the benefits of speculation in the currency market.
As all of you would agree, you should be very careful while selecting the forex broker. This is really important because the whole fortune of your forex trading endeavor depends on the expertise & honesty of your forex broker.
In case of normal exchange traded securities like stocks & futures you are dealing with the Stock Exchange & the risk of contract for buying & selling of securities not being honored by any party (Yourself or the Exchange) is NIL. The exchange takes the guarantee that all the contracts are honored as agreed between the parties involved.
In case of forex trading, in the absence of designated exchange, the risk of default from either side is high. (This risk is prevalent in almost all kind of OTC products).
Forex trading although of OTC nature is now a days well organized & regulated. You need to check that whoever broker you select should be well regulated & should follow the underlying guidelines as might be prescribed by the Regulating Authority.
