Daily Morning Report 07/12/2012 | Forex Trading Analysis

 The number of Americans  applying for first-time claims for unemployment insurance payments came climbed less than expected. The Labour Department reported that applications for unemployment benefits rose to 370,000 last week, following an upwardly revision to 395,000 from 393,000 initially reported the previous week.

The BoE left its monetary policy unchanged at today’s meeting, maintaining the main interest rate at 0.5 percent and the asset purchases at £375 billion. Britain’s central bank is in a difficult position as inflation remains above the target, limiting the bank’s ability to ease the policy, while the recession calls for more accommodative measures.

Eurozone GDP showed a third-quarter contraction of 0.1 percent, to reflect a 0.6 percent drop in annual. German factory orders was the exception to the overall negative tone with orders rising 3.9 percent in October, to represent a 2.4 percent contraction in annual terms

Daily Morning Report 27/11/2012

 The dollar weakened against the world's major global currencies on Tuesday after IMF and EU policymakers agreed to reduce Greece's debt-reduction target by EUR40 billion to 124% of gross domestic product by 2020, an accord needed by IMF to free up aid. Greece will cut debt burdens down further to 110% by 2022, while EU and IMF policymakers agreed to trim interest rates on Greek loans, extend their maturity by 15-30 years, and grant the country a 10-year interest repayment deferral. Greece is set to avoid default.

 In Spain’s Catalonia region separatist parties won the majority of the public vote in elections held over the weekend, which tempered the euro's rally. Catalonia accounts for nearly a fifth of Spain's economic activity and provides the most tax revenue to the central government.

 Later US are to release official data on durable goods orders, a leading indicator of production, as well as industry data on house price inflation. US consumer confidence data will also be published and FED chairman is to deliver brief remarks at the National College Fed Challenge Finals, in Washington DC.

Daily Morning Report 23/11/2012 | Forex Trading Analysis

EU leaders just finished first round of negotiations to agree on a budget for next year, still with not a final decision over it, as Germany PM Angela Merkel has said at the end of the meetings, a few hours ago: "I believe that the positions are quite far apart, in certain respects," Merkel told journalists, as Reuters reported earlier.

The Euro traded lower against the British Pound on Friday. Meanwhile, the Euro was up against the U.S. Dollar and down against the Japanese Yen.

The Asian market session was a very quiet one to end the week, since USD traded modestly lower.

Later Friday, Destatis is expected to release the quarterly German GDP report, while the Ifo Institute for Economic Research is expected to release the monthly German Ifo Business Climate report.

The EU Economic Summit is on its 2^nd day as the Heads of state are due to meet in Brussels about Spain, Greece, and plan for deeper economic and monetary integration.

Elsewhere, the Statistics Canada is expected to release its monthly Consumer Price Index data.

Daily Afternoon Report 21/11/2012 | Forex Trading Analysis

The euro was unchanged against the U.S. dollar on Wednesday, as optimism that an agreement on a delayed bailout payment for Greece is close. The euro fell against the greenback earlier after talks between euro zone finance ministers and the International Monetary Fund concluded on Tuesday without reaching a deal on unlocking Greece’s bailout package, amid disagreements on how best to reduce the country’s debt to sustainable levels. Jean-Claude Juncker said that a deal was close, but he didn’t know when Athens would receive its next aid installment. The talks are set to continue next Monday. The pair showed reaction after the US Department of Labor announced the number of individuals filing for initial jobless benefits last week declined to a seasonally adjusted 410,000, in line with expectations. Jobless claims for the preceding week were revised up to 451,000 from a previously reported 439,000. Volumes are falling lower due to US Thanksgiving holiday on Thursday.

Daily Afternoon Report 19/11/2012 | Forex Trading Analysis

  The U.S. dollar was lower against the other major currencies on Monday, as optimism over signs of progress in resolving the U.S. fiscal cliff and hopes that Greece will soon receive its next aid installment dampened demand for the greenback. Traders were looking ahead of a meeting of the eurogroup of euro zone finance ministers on Tuesday to discuss whether Greece will receive its next tranche of financial aid. A decision on unlocking Greece’s next bailout aid has been delayed by disagreements between officials from the International Monetary Fund and Europe on how best to reduce the country’s debt to manageable levels. Concerns over the economic outlook for the euro zone persisted after Germany's central bank warned earlier that economic growth in the bloc’s largest economy is weakening as a result of the crisis in the region, as well as problems in the global economy.

  On Monday, the National Association of Realtors said that U.S. existing home sales rose by 2.1% to a seasonally adjusted 4.79 million units in October from September’s revised total of 4.69 million. September existing home sales were initially reported at 4.75 million units. Analysts had expected U.S. existing home sales to rise to 4.75 million units in October.

Daily Afternoon Report 14/11/2012 | Forex Trading Analysis

The U.S. dollar rallied against the broadly weaker yen on Wednesday, but turned lower against the euro, as speculation that aid payments for Greece could be bundled into one large lump sum supported the single currency.

The euro remained supported after German newspaper Bild reported Tuesday that Greece could receive three bailout installments in one single payment of EUR44 billion, citing German government sources.

The euro hit session highs against the greenback earlier after Italy saw borrowing costs fall to the lowest level since October 2010 at an auction of three-year government bonds. In addition to that, the Italian 10-year government bonds advanced for a second day as borrowing costs fell as the nation sold 5 billion euros ($6.4 billion) of debt. Italy auctioned 3.5 billion euros of notes due in 2015 and a total of 1.5 billion euros of 2023 and 2029 bonds, the latter being the longest maturity the nation has sold this year.

But concerns that the economic outlook for the euro zone is worsening were underlined after official data showed that industrial production in the bloc tumbled 2.5% in September, compared to expectations for a 1.9% decline.

Meanwhile, the Bank of England’s quarterly inflation report said that it will take until the third quarter of 2014 before inflation will fall below the bank’s 2% target, nine months longer than the bank forecast in August and added that growth looked likely to remain sluggish.

As the Bank of England Governor Mervyn King said, the U.K. economy may shrink in the current quarter and its recovery will be subdued, prompting officials to keep open the option of further asset purchases to aid growth.

Earlier Wednesday, official data showed that the number of people in the U.K. claiming unemployment benefits rose by 10,100 in October, the largest increase since September 2011, but the unemployment rate ticked down to 7.8% from 7.9% in September.

In the U.S., retail sales fell in October for the first time in four months, influenced by the effects of superstorm Sandy, which hurt receipts for some and helped for others. The 0.3 percent drop followed a 1.3 percent increase in September that was larger than previously reported, Commerce Department figures showed today in Washington.

Furthermore, wholesale prices in the U.S. unexpectedly fell in October for the first time in five months as energy and vehicle costs dropped. The 0.2 percent decline in the producer price index came after a 1.1 percent increase the prior month, Labor Department figures showed today in Washington.

Later Wednesday, the Federal Reserve is to publish the minutes of its most recent policy-setting meeting.

Daily Morning Report 09/11/2012 | Forex Trading Analysis

The Australian Dollar is trying a comeback after China's CPI print came at 1.7%, when a 1.9% was the consensus, and 5.5% was the number for Oct last year. Local share markets and SP500 futures are correspondingly having some relief rally after heavy losses in last 2 days.

The Bank of England decided not to increase the asset purchase target in November, although the spending on the stimulus measure is expected to be finished by the end of the month. The asset purchase target was kept at 375 billion Pounds; the interest rate was also kept at 0.50%.

The U.S. trade deficit unexpectedly narrowed in September to its smallest gap since December 2010, as exports rose to a record high. The U.S. Department of Commerce reported that the trade deficit shrank by 5.1 percent to $41.5 billion in September from $43.8 billion in August.

French Finance Minister Moscovici said he expects France to maintain a 0.8% growth target for 2013. He also said that it’s crucial to reach an accord on the Greek debt deal. Greek PM Samaras just accomplished to pass the austerity measure in the Greek parliament; the austerity measure is meant to win the approval for the next round of bailout funds. 

Daily Morning Report 08/11/2012

The New Zealand Dollar traded sharply lower versus its major counterparts as disappointing employment data came across the newswires prompting Forex traders to unwind their high yielding positions in the kiwi on speculation the RBNZ may issue a rate reduction effectively diminishing the currencies most attractive feature. The unemployment rate in New Zealand increased to 7.3 percent in the third quarter up from 6.8 percent in the second quarter while the participation rate remained at 68.4 percent.

Greek lawmakers approved a multibillion-euro austerity package early Thursday in an effort to win more bailout funds, but the measures also threaten to deepen the country's brutal recession and destabilize the country's fragile three-party coalition government. Greece's parliament must also approve a troika-approved 2013 national budget in a separate vote set for Sunday.

in Japan machine orders fell by 4.3 percent in September marking the second consecutive month of fading industrial activity while the trade deficit narrowed to -471.3 billion yen in September down from -644.5 billion the prior month.

The Australian Dollar found support as the Aussie economy added 10,700 new jobs in October, but failed to drag the unemployment rate down from 5.4 percent. 18,700 workers found full time work where 8,000 part timers lost their pay.

Daily Morning Report 07/11/2012 | Forex Trading Analysis

The EUR/USD rallied back above the 1.2800 as the market trades back and forth in a extensive range today ahead of the US Presidential election results due and the Greek austerity bill that goes for a vote at Parliament. 

The British pound strengthened on early Wednesday and rose to fresh highs above 1.6000 versus the dollar as investors sentiment improved. The National Institute of Economic and Social Research in the UK released the October estimate of the country's GDP taking in account the last three months, pointing at 0.5% growth. The September figure was revised higher, from 0.8% to 1.0%.

Obama wining the overall election for US presidency has become a bit clearer as he's currently taking over the lead. The Obama re-election as US President means that Bernanke would stay as visible head for the FED, and markets are interpreting this is good news for bonds and gold, as the FED will continue the easing programs, and inflation will keep afloat.

Daily Morning Report 30/10/2012

The dollar traded mixed against most major currencies on Tuesday as Sandy kept foreign-exchange trading subdued. Hurricane Sandy, now reclassified as a super storm, could have an impact on U.S economy. Preliminary estimates are that damage will range between US$10b and US$20b.

Spanish retail sales fell 10.9% in September from the same month a year ago, much worse than market expectations for a decline of 6.2%, which dampened appetite for risk and gave the dollar some support

German inflation data gave the euro and other higher-yielding currencies support.
The German Federal Statistics Bureau said consumer price inflation accelerated at an annualized rate of 2.0% in October, in line with expectations and unchanged from September.

Japan’s average household spending marked the first decline in eight months in September as lower tuitions and rents offset the effects of subsidy-backed car purchases, data from the Ministry of Internal Affairs and Communication Tuesday showed. Japan’s industrial production fell more than economists forecast, highlighting the risk of an economic contraction as the central bank decides whether to ease for the second time in two months.

Later today, ECB President Mario Draghi is due to deliver opening remarks at the Second Conference of the Macro-Prudential Research Network of the European System of Central Banks, in Frankfurt.

MARKET TALK: Sell Bunds/Buy Tsys Good Hedge on Greece -Scotia

The best way to ride out of the Greek elections is not to short stocks, but to sell German bunds and buy Treasury bonds, says Charles Comiskey, head of Treasury trading at Bank of Nova Scotia. He argues that bunds would be losers as Germany might need to channel more money to safeguard the monetary union, and the rising fiscal burden is what has fueled worry that bunds could lose their safe-haven status. That concern was underlined after Pimco's Bill Gross indicated on Tuesday he dislikes bunds. A comfort, though: The 10-yr bund auction Wednesday didn't show investors fled in droves. The underperformance of bunds vs Treasurys has narrowed the yield gap sharply. Recently, the benchmark 10-yr Treasury note trades about 15bps above that of 10-yr bund, down from 37bps just a week ago and a recent peak of 50bps in April.

2012.06.12 07:50:18 Interbank Foreign Exchange Rates At 03:50 EST / 0750 GMT

                         Latest       Previous   %Chg    Daily    Daily   %Chg 
Dollar Rates                               Close            High      Low  12/31 
 
 
USD/JPY Japan            79.62-64       79.43-46  +0.24    79.69    79.18  +3.53 
EUR/USD Euro            1.2494-96      1.2481-83  +0.10   1.2521   1.2452  -3.59 
GBP/USD U.K.            1.5501-04      1.5484-89  +0.11   1.5522   1.5464  -0.25 
USD/CHF Switzerland     0.9610-12      0.9620-24  -0.11   0.9644   0.9592  +2.54 
USD/CAD Canada          1.0303-08      1.0313-18  -0.10   1.0324   1.0292  +0.94 
AUD/USD Australia       0.9895-97      0.9862-66  +0.32   0.9917   0.9852  -3.06 
NZD/USD New Zealand     0.7714-16      0.7688-93  +0.32   0.7732   0.7672  -0.79 
 
Euro Rates 
 
EUR/JPY Japan            99.49-52       99.14-19  +0.35    99.78    98.74  -0.05 
EUR/GBP U.K.            0.8059-61      0.8059-62  -0.01   0.8080   0.8053  -4.69 
EUR/CHF Switzerland     1.2007-12      1.2008-12   0.00   1.2012   1.2008  -1.33 
EUR/CAD Canada          1.2874-80      1.2871-79  +0.01   1.2891   1.2856  -2.68 
EUR/AUD Australia       1.2624-28      1.2649-58  -0.22   1.2653   1.2610  -0.55 
EUR/DKK Denmark         7.4321-34      7.4310-49   0.00   7.4361   7.4262  -0.04 
EUR/NOK Norway         7.5383-418     7.5439-506  -0.10   7.5489   7.5262  -2.65 
EUR/SEK Sweden          8.8500-42    8.8933-9003  -0.50   8.8982   8.8494  -0.72 
EUR/CZK Czech Rep.      25.628-46     25.584-643  +0.09   25.646   25.538  +0.16 
EUR/HUF Hungary         296.09-36      297.30-97  -0.47   297.68   295.84  -5.99 
EUR/PLN Poland         4.3169-222     4.3470-543  -0.71   4.3558   4.3152  -3.31 
 
Yen Rates 
 
AUD/JPY Australia        78.79-82       78.33-42  +0.55    79.03    78.10  +0.75 
GBP/JPY U.K.            123.43-50      122.98-03  +0.36   123.69   122.59  +3.28 
CAD/JPY Canada           77.24-30       76.98-07  +0.33    77.43    76.77  +2.57 
NZD/JPY New Zealand      61.42-47       61.06-13  +0.58    61.61    60.82  +2.74 
 
Other Dollar Rates 
 
USD/CZK Czech Rep.      20.509-24     20.497-543  -0.02   20.566   20.404  +3.87 
USD/HUF Hungary       236.97-7.18      238.19-70  -0.57   238.85   236.28  -2.49 
USD/DKK Denmark         5.9480-88      5.9537-59  -0.11   5.9692   5.9360  +3.68 
USD/NOK Norway          6.0330-56      6.0440-86  -0.20   6.0511   6.0210  +0.97 
USD/PLZ Poland          3.4549-90      3.4827-82  -0.82   3.4943   3.4484  +0.29 
USD/RUB Russia          32.824-48     32.677-743  +0.39   32.899   32.624  +2.13 
USD/SEK Sweden          7.0827-58      7.1252-98  -0.61   7.1333   7.0710  +2.97 
USD/ZAR S. Africa      8.4080-102     8.4641-758  -0.72   8.4728   8.3784  +3.98 
 
USD/CNY China          6.3699-720      6.3623-44  +0.12   6.3775   6.3706  +0.82 
USD/HKD Hong Kong       7.7578-84      7.7601-09  -0.03   7.7603   7.7582  -0.11 
USD/MYR Malaysia       3.1793-858     3.1663-728  +0.41   3.1847   3.1726  +0.16 
USD/INR India        55.988-6.003     55.610-700  +0.61   56.070   55.673  +5.60 
USD/IDR Indonesia         9443-93         9405-5  +0.67     9443     9430  +4.82 
USD/PHP Philippines  42.871-3.112   42.919-3.020  +0.05   42.883   43.080  -1.96 
USD/SGD Singapore       1.2837-44      1.2860-67  -0.18   1.2868   1.2822  -0.96 
USD/KRW S. Korea    1168.39-70.80   1170.39-2.80  -0.17  1173.39  1168.30  +0.78 
USD/TWD Taiwan      29.899-30.000     29.899-960  +0.07   29.949   29.950  -1.04 
USD/THB Thailand       31.605-726      31.628-88  +0.02   31.699   31.626  +0.21 
USD/VND Vietnam        20822-1473     20945-1015  +0.80    20822    21473  +0.52 
 
USD/BRR Brazil          2.0621-86      2.0607-72  +0.07   2.0637   2.0578 +10.70 
USD/MXN Mexico        14.0779-860    14.0891-979  -0.08  14.1151  14.0410  +0.97 
USD/ARS Argentina      4.4831-904     4.4859-932  -0.06   4.4897   4.4878  +4.13 
 
Source: ICAP Plc. 

Interbank Foreign Exchange Rates

                           Latest       Previous   %Chg    Daily    Daily   %Chg 
Dollar Rates                               Close            High      Low  12/31 
 
 
USD/JPY Japan            79.49-52       79.43-46  +0.08    79.60    79.18  +3.37 
EUR/USD Euro            1.2494-96      1.2481-83  +0.10   1.2507   1.2452  -3.59 
GBP/USD U.K.            1.5487-92      1.5484-89  +0.02   1.5500   1.5464  -0.34 
USD/CHF Switzerland     0.9612-14      0.9620-24  -0.09   0.9644   0.9604  +2.57 
USD/CAD Canada         1.0297-302      1.0313-18  -0.16   1.0324   1.0296  +0.88 
AUD/USD Australia      0.9898-902      0.9862-66  +0.36   0.9914   0.9852  -3.02 
NZD/USD New Zealand     0.7720-26      0.7688-93  +0.43   0.7726   0.7672  -0.68 
 
Euro Rates 
 
EUR/JPY Japan            99.30-34       99.14-19  +0.16    99.54    98.74  -0.24 
EUR/GBP U.K.            0.8065-68      0.8059-62  +0.07   0.8069   0.8053  -4.61 
EUR/CHF Switzerland     1.2008-12      1.2008-12   0.00   1.2012   1.2010  -1.33 
EUR/CAD Canada          1.2867-74      1.2871-79  -0.04   1.2881   1.2856  -2.73 
EUR/AUD Australia       1.2618-24      1.2649-58  -0.26   1.2653   1.2614  -0.59 
EUR/DKK Denmark         7.4307-44      7.4310-49  -0.01   7.4361   7.4262  -0.04 
EUR/NOK Norway         7.5274-310     7.5439-506  -0.24   7.5489   7.5262  -2.79 
EUR/SEK Sweden         8.8577-648    8.8933-9003  -0.40   8.8982   8.8494  -0.62 
EUR/CZK Czech Rep.      25.609-40     25.584-643  +0.04   25.646   25.592  +0.11 
EUR/HUF Hungary         297.34-86      297.30-97  -0.01   297.68   297.14  -5.55 
EUR/PLN Poland          4.3402-52     4.3470-543  -0.18   4.3558   4.3358  -2.79 
 
Yen Rates 
 
AUD/JPY Australia        78.69-74       78.33-42  +0.43    78.90    78.10  +0.63 
GBP/JPY U.K.            123.11-19      122.98-03  +0.10   123.36   122.59  +3.02 
CAD/JPY Canada           77.16-23       76.98-07  +0.23    77.27    76.77  +2.47 
NZD/JPY New Zealand      61.37-44       61.06-13  +0.51    61.49    60.82  +2.66 
 
Other Dollar Rates 
 
USD/CZK Czech Rep.     20.495-520     20.497-543  -0.06   20.566   20.494  +3.83 
USD/HUF Hungary       237.98-8.38      238.19-70  -0.11   238.85   238.10  -2.04 
USD/DKK Denmark         5.9472-98      5.9537-59  -0.11   5.9692   5.9434  +3.68 
USD/NOK Norway          6.0247-72      6.0440-86  -0.34   6.0511   6.0210  +0.83 
USD/PLZ Poland          3.4738-76      3.4827-82  -0.28   3.4943   3.4718  +0.83 
USD/RUB Russia          32.739-90     32.677-743  +0.17   32.896   32.624  +1.91 
USD/SEK Sweden         7.0894-946      7.1252-98  -0.50   7.1333   7.0810  +3.08 
USD/ZAR S. Africa      8.4208-330     8.4641-758  -0.51   8.4728   8.4200  +4.20 
 
USD/CNY China           6.3715-36      6.3623-44  +0.14   6.3775   6.3732  +0.85 
USD/HKD Hong Kong       7.7587-94      7.7601-09  -0.02   7.7603   7.7586  -0.10 
USD/MYR Malaysia        3.1801-66     3.1663-728  +0.44   3.1847   3.1726  +0.19 
USD/INR India        55.995-6.005     55.610-700  +0.62   56.050   55.673  +5.61 
USD/IDR Indonesia         9421-81         9405-5  +0.49     9421     9430  +4.63 
USD/PHP Philippines  42.851-3.092   42.919-3.020  +0.00   42.879   43.080  -2.00 
USD/SGD Singapore       1.2835-38      1.2860-67  -0.21   1.2868   1.2822  -0.99 
USD/KRW S. Korea    1169.19-71.60   1170.39-2.80  -0.10  1173.39  1168.30  +0.84 
USD/TWD Taiwan          29.919-80     29.899-960  +0.07   29.949   29.950  -1.04 
USD/THB Thailand        31.633-96      31.628-88  +0.02   31.699   31.626  +0.21 
USD/VND Vietnam        20822-1473     20945-1015  +0.80    20822    21473  +0.52 
 
USD/BRR Brazil          2.0567-98      2.0607-72  -0.28   2.0637   2.0588 +10.32 
USD/MXN Mexico        14.0696-842    14.0891-979  -0.12  14.1151  14.0578  +0.94 
USD/ARS Argentina       4.4817-90     4.4859-932  -0.09   4.4897   4.4886  +4.10 
 
Source: ICAP Plc. 
 

ECB's Coene: Spain Banking Aid Decision Will Prevent Contagion

By Frances Robinson

BRUSSELS--The decision to provide assistance to Spain's banks will prevent further contagion in the euro zone, a member of the European Central Bank governing council said Monday.

Over the weekend, Spain said it would accept up to 100 billion euros ($125 billion) in guarantees for its troubled banks and is expected to make a formal request for the money this week, although independent assessments of the amounts required will only come towards the end of June.

"What's positive is we've got a mechanism in place that will allow us to isolate the Spanish problem," Luc Coene told reporters. "This risk is now being limited, it's under control, we've got the necessary resources to do that."

Statements about the bailout by Spain and the European Union have left several open questions, including the exact amount of aid the country will need and how the funds will be disbursed.

And while Coene said details needed to be finalized about how the money will flow from the permanent bailout fund--the European Stability Mechanism--to Spain's banks, he advocated taking the best approach according to circumstances.

He also said the funding decision wouldn't affect the European Central Bank's exceptional policy measures, such as the securities markets program of bond-buying, which was designed to improve monetary policy transmission.

"There is no connection between the two things," he said.
Asked if the structure of senior creditors within the ESM could cause problems, Coene replied he "didn't think so."

"ESM debt is senior, but that is not in itself enough to have a credit event," he said, adding that the final details have yet to be confirmed.

"This has nothing to do with ratings, or non-compliance with conditions," he said.
Initial market reaction to the deal shouldn't be over-interpreted as "it's not unusual for markets to fluctuate," he added.

Spanish government bond prices fell Monday, after an initial relief rally as concerns mounted that the deal will load more debt on to the Spanish state and threaten to subordinate bondholders behind official creditors.
Write to Frances Robinson at frances.robinson@dowjones.com

BOE's Posen: Bank of England Should Buy Small Business Loans

  By Jason Douglas 
 

LONDON--The Bank of England should purchase bundles of small business loans in an effort to boost the supply of credit and end an "investors' strike" that is holding back the economy, BOE rate-setter Adam Posen said Monday.

In a reprise of an earlier appeal, Posen said major central banks around the world should engage in a fresh round of stimulus and target their efforts at parts of their economies most in need of official help.
In the U.S., that is the residential mortgage market. In the U.K., it is lending to small businesses, Mr. Posen said, according to a text of his speech.

"The critical gap to be addressed is in lending to small and medium enterprises, and new businesses," he said.
Mr. Posen said risk-aversion among investors is preventing the extra cash pumped into the U.K. economy by the BOE through its asset purchase program from sparking a revival in investment--an investors' strike that monetary policy should seek to bring to an end.

His proposal calls for the BOE to buy small business loans, thereby spurring banks to lend more to small firms in the knowledge the central bank stands ready to snap up those loans.

Mr. Posen first made his proposal in September last year but the idea met resistance from BOE Governor Mervyn King, who argues that only elected lawmakers can risk taxpayers' money on risky loans. The BOE's GBP325 billion asset purchase program has focused almost exclusively on U.K. government bonds, or gilts.
Mr. Posen, who steps down from the Monetary Policy Committee in August to head the Petersen Institute in Washington, a think tank, said those concerns should be assuaged if the government vowed to indemnify the central bank against any losses.

Asian Shares, Euro Climb on Spanish Bank Bailout

Asian markets rallied early Monday and the euro jumped higher on Spain's bank bailout, while sentiment was also boosted with Chinese economic data that was less bad than some had feared.

Investors welcomed the weekend news that Spain secured a EUR100 billion ($125 billion) loan to bolster its banking system, which makes the country the fourth and largest euro-zone economy to be rescued by its euro-zone partners.

Along with the forthcoming Greek elections, concerns relating to the health of Spain's banking system have been one of the dominant themes coming out of Europe in recent weeks, and the bailout provided an immediate boost to market sentiment.

"It's tempting to say that with the Spanish aid deal, the worst of the crisis is now behind us," said CLSA equity strategist Nicholas Smith in Tokyo.

Stocks rallied early in the day. Japan's Nikkei climbed 2% and Hong Kong's Hang Seng Index gained 2.1% while South Korea's Kospi was 1.6% higher. Singapore's Strait Times Index rose 1.4% and the China Shanghai Composite was up 0.3%.

In recent sessions, stocks have managed to stage what appears to be a sustained rally, pulling themselves off from the floor. The Nikkei and the Hang Seng Index are 4% and 3.8% respectively above their year-to-date lows. But traders could become cautious again ahead of the Greek election later this week, and markets still have a long way to go before they return to the peaks: the Nikkei remains 15.8% off its year-to-date high, while the Hang Seng is 12.5% lower.

The euro bounced back on the Spanish developments, climbing to $1.2634, compared to $1.2517 late on Friday in New York, and compounding the 0.7% gain it made last week.

The other main development over the weekend was China's economic data for May, which still pointed to a weakening economy, but was not as bad as some expected. China made a surprise cut to interest rates ahead of the data, which was taken as a signal by the market that May's figures were going to be very bad, and was partly to blame for a sell-off on Friday.

The most notable figure was inflation, with growth in the consumer price index much lower than expected, at 3%. This was taken as a positive because it potentially gives Beijing more space for further policy easing.
The improved risk sentiment was reflected in the performance of Asian currencies. The dollar gained to 79.60 yen early in Asia compared to 79.47 yen on Friday. The Australian dollar edged closer to parity with the dollar, at $0.9980, although a holiday in Australia on Monday is expected to keep the trading volume of the currency low.
China data also helped the price of oil, after China's crude imports reached a record high in May, which is probably due to stockpiling and anticipation of increased output after a round of refinery maintenance. Oil was up 2.3% early on Monday, at $85.99 a barrel.

Hong Kong-listed Chinese banks rose on Monday, recovering after heavy selling on Friday as investors became concerned that deregulation could damage the sector's net interest margins. The gains however underperformed the broader market rally: Industrial and Commercial Bank of China regained 1.2% after losing 4.9% on Friday, while China Construction Bank added 0.8%, after a 4% drop at the end of last week.

China Unicom rose 4.6% in Hong Kong, following news that its parent will buy a 4.6% stake in Unicom from Spanish telecoms company Telefonica SA for around EUR1.13 billion.

Also in Hong Kong, Chinese developer Greentown China soared 36.5% after placing new shares and convertible bonds to Wharf. The Hong Kong developer will become Greentown's second-largest shareholder, which analysts believe could provide greater clarity on the company's long-term cash flow management. Wharf however, fell 2.7%.
-Write to Daniel Inman at Daniel.Inman@wsj.com

Interbank Foreign Exchange Rates

                           Latest       Previous   %Chg    Daily    Daily   %Chg 
Dollar Rates                               Close            High      Low  12/31 
 
 
USD/JPY Japan            79.61-64       79.60-65   0.00    79.72    79.40  +3.52 
EUR/USD Euro            1.2633-36      1.2638-42  -0.04   1.2668   1.2620  -2.51 
GBP/USD U.K.            1.5551-56      1.5509-15  +0.27   1.5560   1.5506  +0.08 
USD/CHF Switzerland     0.9508-12      0.9501-11  +0.04   0.9518   0.9481  +1.47 
USD/CAD Canada          1.0209-14      1.0219-29  -0.12   1.0229   1.0206  +0.02 
AUD/USD Australia       0.9974-78      0.9984-89  -0.10   1.0007   0.9968  -2.28 
NZD/USD New Zealand     0.7762-68      0.7766-74  -0.06   0.7785   0.7754  -0.14 
 
Euro Rates 
 
EUR/JPY Japan           100.60-64      100.55-69  +0.00   100.90   100.34  +1.07 
EUR/GBP U.K.            0.8122-25      0.8146-50  -0.31   0.8157   0.8118  -3.94 
EUR/CHF Switzerland     1.2014-18      1.2010-20  +0.01   1.2018   1.2008  -1.28 
EUR/CAD Canada         1.2898-906      1.2914-31  -0.16   1.2948   1.2894  -2.49 
EUR/AUD Australia       1.2661-68      1.2653-69  +0.03   1.2681   1.2642  -0.25 
EUR/DKK Denmark         7.4316-34     7.4295-353  +0.00   7.4367   7.4306  -0.04 
EUR/NOK Norway          7.5819-92     7.5724-908  +0.05   7.5898   7.5742  -2.07 
EUR/SEK Sweden          8.8820-86    8.8881-9019  -0.11   8.9104   8.8802  -0.35 
EUR/CZK Czech Rep.      25.316-57     25.264-384  +0.05   25.358   25.317  -1.01 
EUR/HUF Hungary       293.72-4.56    293.98-4.82  -0.09   294.18   293.94  -6.65 
EUR/PLN Poland         4.2597-706     4.2755-885  -0.39   4.2775   4.2628  -4.53 
 
Yen Rates 
 
AUD/JPY Australia        79.42-48       79.44-56  -0.06    79.69    79.16  +1.57 
GBP/JPY U.K.            123.80-89      123.45-57  +0.27   124.03   123.34  +3.60 
CAD/JPY Canada         77.94-8.01       77.82-94  +0.13    78.09    77.68  +3.51 
NZD/JPY New Zealand      61.79-87       61.83-92  -0.07    61.97    61.58  +3.38 
 
Other Dollar Rates 
 
USD/CZK Czech Rep.      20.038-68      19.984-20  +0.12   20.069   20.000  +1.53 
USD/HUF Hungary       232.49-3.12    232.61-3.22  -0.05   233.06   232.38  -4.25 
USD/DKK Denmark         5.8822-28     5.8785-812  +0.05   5.8902   5.8678  +2.53 
USD/NOK Norway          6.0012-60      5.9902-06  +0.13   6.0082   5.9850  +0.45 
USD/PLZ Poland          3.3715-96     3.3830-925  -0.36   3.3850   3.3746  -2.07 
USD/RUB Russia         32.124-356      31.846-03  -1.24   32.489   32.188  +0.28 
USD/SEK Sweden          7.0302-44     7.0329-417  -0.07   7.0553   7.0286  +2.21 
USD/ZAR S. Africa      8.3063-138     8.3100-488  -0.23   8.3277   8.3100  +2.75 
 
USD/CNY China           6.3673-94      6.3739-60  -0.10   6.3741   6.3686  +0.78 
USD/HKD Hong Kong       7.7574-80      7.7576-82   0.00   7.7584   7.7576  -0.12 
USD/MYR Malaysia      3.0767-2034    3.0754-2020  +0.04   3.0811   3.1952  -1.18 
USD/INR India           55.250-60      55.418-33  -0.31   55.273   55.090  +4.21 
USD/IDR Indonesia         9425-50       9157-525  +1.03     9432     9385  +4.48 
USD/PHP Philippines    43.121-362     43.128-368   0.00   43.155   43.356  -1.37 
USD/SGD Singapore       1.2766-68      1.2740-48  +0.18   1.2778   1.2730  -1.53 
USD/KRW S. Korea    1135.09-82.50  1134.59-82.10  +0.04  1168.89  1165.90  -0.16 
USD/TWD Taiwan         29.869-930     29.889-970  -0.10   29.949   29.900  -1.21 
USD/THB Thailand     30.582-1.850   30.568-1.834  +0.05   30.619   31.768  -1.21 
USD/VND Vietnam        20930-1000     20557-1206   0.00    20970    21000  -0.74 
 
USD/BRR Brazil         2.0191-222     2.0031-432  -0.12   2.0253   2.0222  +8.31 
USD/MXN Mexico         13.8310-46    13.8279-820  -0.16  13.8789  13.8310  -0.81 
USD/ARS Argentina     4.3581-4848    4.3559-4826  +0.05   4.3627   4.4730  +2.61 
 
Source: ICAP Plc. 

CHARTING FOREX: Dollar Biased Down Vs FX Majors Except Yen This Week

 By Jerry Tan 
 

SINGAPORE--Following is technical analysis of seven major currency pairs for this week:

 
        USD/JPY 
 
1st support - 79.11 (minor) 
1st resistance - 80.14 (minor) 
2nd support - 78.61 (minor) 
2nd resistance - 80.61 (minor) 
 

USD/JPY (last 79.63) is likely to trade in a higher range this week as the daily MACD and stochastic indicators are bullish. Resistance is at the May 22 high of 80.14, currently near the 100-day moving average; a breach would expose the upside to the 80.56-80.61 band, defined by the May 16 high and the May 2 high and currently near the 55-day moving average; and then to the April 27 high of 81.43 and the 81.71-81.77 band, defined by the April 25 high and the April 20 high. Support is at Friday's low of 79.11; breach would expose the downside to Wednesday's low of 78.61, currently near the 200-day moving average, and then to the June 1 low of 77.65 and the Feb. 14 low of 77.36. An extension of the fall would target the Feb. 6 low of 76.49, and then the Feb. 1 reaction low of 76.02. USD/JPY negative medium-term outlook is tempered as the weekly stochastic measure is turning bullish at the oversold level. However, the five-week moving average is still below the 15-week moving average and falling. A drop below 77.65 would open the way down to 76.02, and then to the Oct. 31 record low of 75.31 in the weeks ahead.

 
        EUR/USD 
 
1st support - 1.2435 (minor) 
1st resistance - 1.2825 (minor) 
2nd support - 1.2375 (minor) 
2nd resistance - 1.2935 (minor) 
 

EUR/USD (last 1.2641) is likely to trade in a higher range this week as the daily MACD and stochastic indicators are bullish. Resistance is at the May 21 high of 1.2825; a breach would expose the upside to the 55-day moving average, coming in now at 1.2935, and then to 1.2994, the previous base set on April 16. An extension of the rise would target the 100-day moving average, coming in now at 1.3054, and then the 200-day moving average, coming in now at 1.3231. Support is at Friday's low of 1.2435; a breach would target the June 4 low of 1.2375, and then 1.2288, the 23-month low hit on June 1. An extension of the fall would target the June 29, 2010 low of 1.2151. EUR/USD negative medium-term outlook is tempered as the weekly stochastic measure has turned bullish at the oversold level. However, the five-week moving average is still below the 15-week moving average and falling. A drop below 1.2288 would open the way down to the psychological 1.2000 line, and then to the June 7, 2010 low of 1.1875 in the weeks ahead.

 
       AUD/USD 
 
1st support - 0.9817 (minor) 
1st resistance - 1.0126 (minor) 
2nd support - 0.9706 (minor) 
2nd resistance - 1.0143 (minor) 
 

AUD/USD (last 0.9983) is likely to trade with risks skewed to the upside this week as long as the pair stays above Friday's low of 0.9817. The daily MACD and stochastic indicators are bullish, but the latter is at the overbought level. Resistance is at the 55-day moving average, coming in now at 1.0126, and then at the May 10 high of 1.0143; a breach would target the May 7 high of 1.0219, roughly matching the previous base set on April 11; and then the 200-day moving average, coming in now at 1.0261. An extension of the rise would target the 100-day moving average, coming in now at 1.0358. But a fall below 0.9817 would temper the near-term positive outlook, targeting Tuesday's low of 0.9706, and then the June 4 low of 0.9623. An extension of the fall would target 0.9579, the eight-month low hit on June 1. AUD/USD negative medium-term outlook is tempered as the weekly stochastic measure has turned bullish at the oversold level. However, the five-week moving average is still below the 15-week moving average and falling. A drop below 0.9579 would open the way down to the Oct. 4 swing low of 0.9386, and then to the Aug. 25, 2010 low of 0.8769 in the weeks ahead.

 
       NZD/USD 
 
1st support - 0.7614 (minor) 
1st resistance - 0.7797 (minor) 
2nd support - 0.7516 (minor) 
2nd resistance - 0.7902 (minor) 
 

NZD/USD (last 0.7767) is likely to trade with risks skewed to the upside this week as long as the pair stays above Friday's low of 0.7614. The daily MACD and stochastic indicators are bullish, but the latter is at the overbought level. Resistance is at the May 15 high of 0.7797; a breach would expose the upside to the May 10 minor reaction high of 0.7902, and then to the 55-day moving average, coming in now at 0.7925. An extension of the rise would target the 200-day moving average, coming in now at 0.7963, and then 0.8054, the previous base set on March 22. But a fall below 0.7614 would temper the near-term positive outlook, targeting Tuesday's low of 0.7516, and then the June 4 low of 0.7492. An extension of the fall would target 0.7451, the six-month low hit on June 1. NZD/USD negative medium-term outlook is tempered as the weekly stochastic measure has turned bullish at the oversold level. However, the five-week moving average is still below the 15-week moving average and falling. A drop below 0.7451 would open the way down to the Nov. 25 swing low of 0.7367, and then to the March 17, 2011 swing low of 0.7113 and the psychological 0.7000 line in the weeks ahead.

 
        GBP/USD 
 
1st support - 1.5401 (minor) 
1st resistance - 1.5600 (minor) 
2nd support - 1.5320 (minor) 
2nd resistance - 1.5717 (minor) 
 

GBP/USD (last 1.5555) is likely to trade in a higher range this week as the daily MACD and stochastic indicators are bullish. Resistance is at Thursday's high of 1.5600; a breach would expose the upside to the May 28 high of 1.5717, and then to the 200-day moving average, coming in now at 1.5759. An extension of the rise would target the May 22 minor reaction high of 1.5848, currently near the 100-day moving average. Support is at Friday's low of 1.5401; a breach would target Tuesday's low of 1.5320, and then 1.5265, the 4.5-month low hit on June 1. An extension of the fall would target the Jan. 12 swing low of 1.5233, and then the psychological 1.5000 line and the July 12, 2010 low of 1.4946. GBP/USD negative medium-term outlook is tempered as the weekly stochastic measure is turning bullish at the oversold level. However, the five-week moving average is still below the 15-week moving average and falling. A drop below the 1.5233 support would open the way down to the psychological 1.5000 line, and then to the May 20, 2010 swing low of 1.4230 in the weeks ahead.

 
        USD/CHF 
 
1st support - 0.9363 (minor) 
1st resistance - 0.9657 (minor) 
2nd support - 0.9292 (minor) 
2nd resistance - 0.9677 (minor) 
 

USD/CHF (last 0.9506) is likely to trade in a lower range this week as the daily MACD and stochastic indicators are bearish. Support is at the May 21 reaction low of 0.9363; a breach would expose the downside to the 55-day moving average, coming in now at 0.9292, and then to the 100-day moving average, coming in now at 0.9223. An extension of the fall would target the 200-day moving average, coming in now at 0.9176. Resistance is at Friday's high of 0.9657; a breach would target Tuesday's high of 0.9677, and then the 0.9771-0.9785 band, defined by the 15-month high hit on June 1 and the Jan. 11, 2011 high. A rise above 0.9785 would expose the upside to the psychological 1.0000 line, and then to 1.0066, the Dec. 1, 2010 high. USD/CHF positive medium-term outlook is tempered as the weekly stochastic measure has turned bearish at the overbought level. However, the five-week moving average is still above the 15-week moving average and rising. A rise above 0.9785 would open the way up to 1.0066, and then to the July 27, 2010 high of 1.0640 in the weeks ahead.

 
        USD/CAD 
 
1st support - 1.0149 (minor) 
1st resistance - 1.0354 (minor) 
2nd support - 1.0098 (minor) 
2nd resistance - 1.0425 (minor) 
 

USD/CAD (last 1.0207) is likely to trade in a lower range this week as the daily MACD and stochastic indicators are bearish. Support is at the May 22 low of 1.0149; a breach would target the 200-day moving average, coming in now at 1.0098, and then the 55-day moving average, coming in now at 1.0054. An extension of the fall would target the 100-day moving average, coming in now at 1.0011, and then the May 15 low of 0.9986. Resistance is at Friday's high of 1.0354; a breach would target Tuesday's high of 1.0425, and then 1.0446, the six-month high hit on June 4. An extension of the rise would target the Nov. 25 high of 1.0523. USD/CAD positive medium-term outlook is tempered as the weekly stochastic measure has turned bearish at the overbought level. However, the five-week moving average is still above the 15-week moving average and rising. A rise above the 1.0523 resistance would open the way up to the 1.0657-1.0677 band, defined by the Oct. 4 high, 2011 high and the July 6, 2010 high; and then to the May 25, 2010 high of 1.0851 in the weeks ahead.

Interbank Foreign Exchange Rates

Dollar Rates                               Close            High      Low  12/31 
 
 
USD/JPY Japan            79.68-70       79.60-65  +0.08    79.70    79.40  +3.61 
EUR/USD Euro            1.2639-42      1.2638-42  +0.00   1.2668   1.2620  -2.47 
GBP/USD U.K.            1.5554-58      1.5509-15  +0.28   1.5557   1.5506  +0.09 
USD/CHF Switzerland     0.9503-08      0.9501-11  -0.01   0.9518   0.9481  +1.42 
USD/CAD Canada          1.0205-10      1.0219-29  -0.16   1.0229   1.0206  -0.02 
AUD/USD Australia       0.9983-88      0.9984-89  -0.01   1.0007   0.9968  -2.18 
NZD/USD New Zealand     0.7774-80      0.7766-74  +0.09   0.7785   0.7754  +0.01 
 
Euro Rates 
 
EUR/JPY Japan           100.71-76      100.55-69  +0.12   100.90   100.34  +1.18 
EUR/GBP U.K.            0.8125-28      0.8146-50  -0.27   0.8157   0.8124  -3.90 
EUR/CHF Switzerland     1.2012-16      1.2010-20  -0.01   1.2018   1.2008  -1.30 
EUR/CAD Canada          1.2900-08      1.2914-31  -0.14   1.2948   1.2898  -2.48 
EUR/AUD Australia       1.2655-64      1.2653-69  -0.01   1.2681   1.2642  -0.28 
EUR/DKK Denmark         7.4302-48     7.4295-353  +0.00   7.4367   7.4306  -0.04 
EUR/NOK Norway         7.5774-852     7.5724-908   0.00   7.5898   7.5742  -2.12 
EUR/SEK Sweden        8.8948-9028    8.8881-9019  +0.04   8.9104   8.8936  -0.20 
EUR/CZK Czech Rep.     25.285-361     25.264-384  -0.01   25.358   25.317  -1.06 
EUR/HUF Hungary         294.07-50      293.98-05  -0.04   294.18   293.94  -6.60 
EUR/PLN Poland         4.2672-746     4.2755-885  -0.26   4.2775   4.2732  -4.40 
 
Yen Rates 
 
AUD/JPY Australia        79.56-60       79.44-56  +0.10    79.69    79.16  +1.74 
GBP/JPY U.K.          123.93-4.00      123.45-57  +0.37   123.93   123.34  +3.70 
CAD/JPY Canada           78.04-10       77.82-94  +0.25    78.04    77.68  +3.63 
NZD/JPY New Zealand    61.94-2.00       61.83-92  +0.16    61.97    61.58  +3.62 
 
Other Dollar Rates 
 
USD/CZK Czech Rep.      20.003-60      19.984-20  +0.01   20.069   20.000  +1.42 
USD/HUF Hungary         232.66-96      232.61-03  -0.05   233.06   232.38  -4.25 
USD/DKK Denmark        5.8784-810     5.8785-812   0.00   5.8902   5.8678  +2.48 
USD/NOK Norway          5.9947-98      5.9902-06  +0.02   6.0060   5.9850  +0.35 
USD/PLZ Poland         3.3759-812     3.3830-925  -0.27   3.3850   3.3774  -1.99 
USD/RUB Russia         32.093-380      31.846-03  -1.25   32.489   32.188  +0.27 
USD/SEK Sweden         7.0369-420     7.0329-417  +0.03   7.0553   7.0286  +2.32 
USD/ZAR S. Africa      8.3095-184     8.3100-488  -0.19   8.3252   8.3104  +2.80 
 
USD/CNY China           6.3671-92      6.3739-60  -0.11   6.3741   6.3688  +0.78 
USD/HKD Hong Kong       7.7574-80      7.7576-82   0.00   7.7584   7.7576  -0.12 
USD/MYR Malaysia      3.0751-2018    3.0754-2020  -0.01   3.0811   3.1952  -1.23 
USD/INR India           55.418-33      55.418-33   0.00   55.648   54.900  +4.53 
USD/IDR Indonesia          9412-3       9157-525  +0.76     9412     9385  +4.20 
USD/PHP Philippines    43.121-362     43.128-368   0.00   43.155   43.356  -1.37 
USD/SGD Singapore       1.2747-54      1.2740-48  +0.05   1.2775   1.2730  -1.65 
USD/KRW S. Korea     1166.59-7.10  1134.59-82.10  +0.73  1166.89  1165.90  +0.54 
USD/TWD Taiwan         29.849-910     29.889-970  -0.17   29.949   29.900  -1.27 
USD/THB Thailand     30.566-1.834   30.568-1.834   0.00   30.619   31.768  -1.26 
USD/VND Vietnam        20930-1000     20557-1206   0.00    20970    21000  -0.74 
 
USD/BRR Brazil          2.0227-58     2.0031-432  +0.05   2.0253   2.0250  +8.50 
USD/MXN Mexico        13.8383-412    13.8279-820  -0.11  13.8789  13.8410  -0.76 
USD/ARS Argentina     4.3555-4822    4.3559-4826  -0.01   4.3627   4.4730  +2.55 
 

Stronger Dollar May Be Good For Exporters. Really.

The global slowdown is finally hitting U.S. exports.
The Commerce Department reported Friday that exports fell 0.8% in April, the first drop in five months. Shipments to the euro zone plunged 9.8%. A larger fall in imports narrowed the total U.S. trade deficit to $50.06 billion, but the gap is higher than its first-quarter average.

When exports get crimped, a common reaction from politicians and manufacturing groups is to call for a cheaper dollar. A weaker currency makes a country's products cheaper on global markets--a reason why China micromanages the value of the yuan.

A weak currency, however, is not in the cards for the U.S. The dollar is expected to continue to strengthen as investors seek safety amid no solution to the euro-zone crisis and worries about the global slowdown.
But a strong dollar can be a positive to U.S. companies because it will force them to remain competitive in the long run, argues Michael Drury, chief economist of McVean Trading & Investments.

Mr. Drury calls a cheap currency "a sugar high" that gives a temporary price advantage but doesn't correct the underlying problems that are eroding the currency's value in the first place.

"Meanwhile, [a] stronger currency forces the stronger competitor to up their game--while at the same time providing them with the lower borrowing costs to do so," Mr. Drury argues.

The easier financing enables successful nations to become stronger by "allowing them to acquire the best practices and brightest employees of the weaker nations at a discount," explains Mr. Drury.

A nation like the U.S. that is facing long-run debt problems and an aging population should be taking the long view of its economic health. In an era of cheap financing, the economy can make investments to enhance productivity and global reach. That spending will allow for higher income streams in the future.
"Competitive devaluation is not good long-term economic policy--but it is often seen as good politics," Mr. Drury says.

Indeed, it is very easy for politicians to blame the currency markets for a country's competitive shortfall.
But instead of pointing fingers, the U.S. needs to invest in education, technology and infrastructure and to reform regulatory oversight that will give its exporting sectors the long-term edge in global markets.

(Kathleen Madigan, a special writer, is the primary author of the Big Picture column. She covered the economy for almost two decades at BusinessWeek and worked in the economics departments at several Wall Street firms. She can be reached at kathleen.madigan@dowjones.com.)

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