Reuters | Sep 14, 2010 | 4:36pm IST
The yen hit a 15-year high versus the dollar on Tuesday after Japan’s Prime Minister Naoto Kan won a ruling party leadership vote, while concerns about a shaky recovery knocked global stocks off a 4-month peak. The euro fell against the dollar while euro zone bond prices gained as a sharp fall in German investor morale suggested the recovery in Europe’s largest economy is poised to lose momentum. In Japan, Kan’s victory over party heavyweight Ichiro Ozawa, who had made more strident calls to curb the yen’s rise, raised speculation that Japanese authorities would not intervene imminently. The yen firmed to 83.07 per dollar, its strongest since mid-1995.
European shares were steady while U.S. equity futures pointed to a slightly lower opening on Wall Street on nervousness that U.S. retail sales data at 1230 GMT could give another bleak picture of the U.S. economy. These concerns helped push the MSCI world equity index down 0.1 percent to 297.93. Earlier, the index had hit a four-month peak of 298.50 as stocks benefited from a wave of more optimistic sentiment generated by solid Chinese data and relief at new Basel III banking rules. "Trading in global equity markets is dominated by short-term views. Equity strength is fraught with dangers as investors are very fearful about what is around the corner," said Maurice Pomery, managing director at consultants Strategic Alpha. Investors’ search for safe-haven assets also set gold on track for its biggest one-day rise this month, while the dollar fell below parity versus the Swiss franc for the first time since December last year.
Growth in Japan’s economy slowed to a crawl in the second quarter and analysts see more weakness ahead. The government is considering new stimulus measures including boosting graduate employment and the corporate sector, Kyodo News Agency said late on Monday, after data that testified to slowing growth in Japan’s main export destinations such as the United States and China and a stimulus-driven domestic recovery that has petered out. Against a backdrop of concerted efforts to talk down the yen after it surged to a 15-year high against the dollar last week, quarterly gross domestic product grew just 0.1 percent. That was well below the median market forecast of 2.3 percent and the United States’ 2.4 percent annualised growth in the same quarter. It followed revised 4.4 percent annualised growth in the first quarter, when both exports and a stimulus-driven recovery in consumption contributed to overall growth.
In the April-June quarter the stimulus effects have worn off, leaving exports as the sole engine of growth and with its contribution to growth halved to 0.3 percent. Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa are expected to meet later this week o discuss possible policy responses. Citing government sources, Kyodo said the growth-boosting government measures are expected to include stimulating personal consumption of eco-friendly products, helping new graduates find jobs and revitalizing small and midsize companies, Kyodo quoted the sources as saying.
Reuters | Fri Jul 30, 2010 | 3:04pm IST
China has overtaken Japan to become the world’s second-largest economy, the fruit of three decades of rapid growth that has lifted hundreds of millions of people out of poverty. Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No.1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others. China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China’s chief currency regulator mentioned the milestone in passing in remarks published on Friday. "China, in fact, is now already the world’s second-largest economy," he said in an interview with China Reform magazine posted on the website (www.safe.gov.cn) of his agency, the State Administration of Foreign Exchange. Cruising past Japan might give China bragging rights, but its per-capita income of about $3,800 a year is a fraction of Japan’s or America’s. "China is still a developing country, and we should be wise enough to know ourselves," Yi said, when asked whether the time was ripe for the yuan to become an international currency.
CAN IT BE SUSTAINED?
China’s economy expanded 11.1 percent in the first half of 2010, from a year earlier, and is likely to log growth of more than 9 percent for the whole year, according to Yi. China has averaged more than 9.5 percent growth annually since it embarked on market reforms in 1978. But that pace was bound to slow over time as a matter of arithmetic, Yi said. If China could chalk up growth this decade of 7-8 percent annually, that would still be a strong performance. The issue was whether the pace could be sustained, Yi said, not least because of the environmental constraints China faces. In an assessment disputed by Beijing, the International Energy Agency said last week that China had surpassed the United States as the world’s largest energy user. If China can keep up a clip of 5-6 percent a year in the 2020s, it will have maintained rapid growth for 50 years, which Yi said would be unprecedented in human history. The uninterrupted economic ascent, which saw China overtake Britain and France in 2005 and then Germany in 2007, is gradually translating into clout on the world stage.
Bloomberg | Jul 23, 2010
The euro slumped against the dollar after a draft document said the 91 banks being stress-tested were only examined on European sovereign debt losses for the bonds they trade, rather than those they hold to maturity. “If that’s the case, that would be a huge disappointment,” said Kathy Lien, director of currency research, with online-currency trader GFT Forex in New York. “In order to restore investor confidence it needed to look at the entire balance sheets of these banks.” The yen fell versus the dollar as Japanese policy makers for a third straight day signaled that a stronger currency poses a danger to growth, spurring speculation they will take steps to counter that risk. The euro rose earlier as Germany’s IFO institute said its business climate index jumped to 106.2, the highest level since July 2007. Hungary’s forint snapped a three- day gain as Moody’s Investors Service said it may reduce the nation’s credit rating. The 16-nation European currency fell 0.4 percent to $1.2837 at 9:47 a.m. in New York, from $1.2893 yesterday. The yen weakened 0.5 percent 87.35 per dollar from 86.95 yesterday. “It’s mostly a funding switch and people betting on the funding switch and being disappointed right now,” said Sebastien Galy, a currency strategist at BNP Paribas SA in New York.
Regulators are scrutinizing European banks to assess if they have enough capital, defined as a Tier 1 capital ratio of at least 6 percent, to withstand a recession and sovereign debt crisis, according to a document from the Committee of European Banking Supervisors. Lenders that fail the trials will be made to raise additional capital. The results will be published by CEBS and national regulators starting at 6 p.m. Brussels time. “The haircuts are applied to the trading book portfolios only, as no default assumption was considered,” according to a confidential document dated July 22 and titled “EU Stress Test Exercise: Key Messages on Methodological Issues.” The tests will assume a loss of 23.1 percent on Greek debt, 14 percent of Portuguese bonds, 12.3 percent on Spanish debt, and 4.7 percent on German state debt, according to the document obtained by Bloomberg News. U.K. government bonds will be subject to a 10 percent haircut, and France 5.9 percent.
BBC NEWS | 2009/09/29 07:25:33 GMT
The yen has weakened from Monday’s eight-month highs against the US dollar following comments from Japanese Finance Minister Hirohisa Fujii. It hit 88.23 to the dollar on Monday after Mr. Fujii made comments taken to mean that he was comfortable with the yen’s strength. But on Tuesday, he said the government might intervene in the currency markets if exchange rates made irregular moves. The yen gave up most of Monday’s gains, returning to about 90 to the dollar.
“If [exchange rates] move abnormally, we could take appropriate measures for our national interest,” Mr. Fujii told a news conference. Mr. Fujii became finance minister last month after the Democratic Party of Japan (DPJ) ended more than 50 years of almost unbroken rule by the Liberal Democratic Party. “Perhaps [Mr.] Fujii didn’t realise how much the market would move on his comments after he became finance minister. But now he realises that this isn’t such a good thing,” said Tokichi Ito at Trust & Custody Services Bank in Tokyo. Japan has not intervened in the currency markets since March 2004.