Daily Afternoon Report 04/12/2012 | Forex Trading Analysis

  The US dollar was broadly lower against the other major currencies as investor confidence was boosted by hopes that Greece’s plan to buy back debt will succeed. EURUSD found support after Greece launched a scheme to buy back its debt from private investors, as part of an agreement to unlock a new bailout package worth EUR44 billion. European Union finance ministers were holding talks in Brussels on Tuesday, to discuss banking supervision in the euro zone.

  The GBP remained supported after data showed that construction sector activity in the U.K. unexpectedly declined to a three month low in November.

  The yen strengthened after Monday’s weak U.S. manufacturing data and ongoing concerns over the U.S. fiscal cliff enhanced the safe haven appeal of the currency.

 Click Here! The Australian dollar turned higher earlier after the Reserve Bank of Australia cut its benchmark interest rate to 3% from 3.25% in a widely anticipated decision. RBA Governor Glenn Stevens said the Australian dollar remains “higher than might have been expected” given lower export prices and a weaker global outlook.

Live Chart GBP and JPY

EUR GBP Live

USD and CHF live Chart

European Forex Technicals: EUR Nearing Key Resistance Levels

Forex spot:       EUR/USD    USD/JPY    GBP/USD    USD/CHF 
 
Spot 0537 GMT     1.2583     79.42      1.5522     0.9549 
3 Day Trend       Range      Range      Bullish    Range 
Weekly Trend      Bearish    Range      Range      Bullish 
200 day ma        1.3200     79.64      1.5829     0.9190 
3rd Resistance    1.2672     79.92      1.5785     0.9657 
2nd Resistance    1.2626     79.74      1.5740     0.9595 
1st Resistance    1.2611     79.50      1.5599     0.9570 
Pivot*            1.2547     79.51      1.5537     0.9571 
1st Support       1.2552     79.30      1.5455     0.9522 
2nd Support       1.2515     79.17      1.5405     0.9514 
3rd Support       1.2435     78.99      1.5322     0.9475 
 

Intraday EUR/USD: Resistance at 1.2626 is the last line of defence protecting Monday's prominent peak at 1.2672. EUR bulls need to force a break through Wednesday's 1.2611 high and then 1.2626 in order to open the week's 1.2672 high once more. While 1.2626 caps, EUR weakness will look to put pressure on intra-day pivotal support at 1.2515, and only a move below 1.2515 would expose the 1.2435/44 lows.
Weekly chart EUR/USD trend: Bearish.

Intraday USD/JPY: Remains within the established range between Tuesday's low at 79.17 and Monday's peak at 79.92. However, Wednesday's peak at 79.74 has become a confirmed USD bull failure, suggesting a return to the 79.17 low is on the cards. A downwave equality target at 78.99 would be generated on a break below 79.17.
Weekly chart USD/JPY trend: Range.

Intraday GBP/USD: A move lower to Monday's low at 1.5455 is threatened, as resistance at the important June 7 reaction high at 1.5599 remains resolute. The setback off Wednesday's high at 1.5595 has scope to extend to 1.5405, although only a move below 1.5405 would put GBP bears in control. A push above 1.5595/99 would create additional upside scope to 1.5740 and 1.5785.
Weekly chart GBP/USD trend: Range.

Intraday USD/CHF: Support at 0.9514 is the last line of defence protecting Monday's prominent low at 0.9475. However, Wednesday's low at 0.9522 and support at 0.9514 remain within striking distance, and are likely to come under fresh pressure. A recovery above 0.9570 and 0.9595 is required to lift the tone, opening 0.9657.
Weekly chart USD/CHF trend: Bullish.

 
Forex spot:       EUR/GBP    EUR/JPY    EUR/CHF    AUD/USD 
 
Spot 0537 GMT     0.8106      99.93     1.2014     0.9959 
3 Day Trend       Range      Range      Bearish    Range 
Weekly Trend      Bearish    Bearish    Bearish    Range 
200 day ma        0.8337     105.12     1.2114     1.0252 
3rd Resistance    0.8230     100.90     1.2030     1.0200 
2nd Resistance    0.8157     100.33     1.2023     1.0146 
1st Resistance    0.8106     100.10     1.2018     1.0011 
Pivot*            0.8076      99.73     1.2010     0.9955 
1st Support       0.8050      99.29     1.2006     0.9928 
2nd Support       0.8012      98.71     1.2000     0.9889 
3rd Support       0.7972      98.55     1.1990     0.9850 
 

Intraday EUR/GBP: Remains within a bear flag continuation pattern, to come within touching distance of this week's 0.8157 peak. A push above Wednesday's high at 0.8106 is required to pave the way for further gains, but the 0.8157 peak is not expected to be broken at this stage. Support at 0.8050 protects Tuesday's important low at 0.8012.
Weekly chart EUR/GBP trend: Bearish.

Intraday EUR/JPY: There is scope for further corrective EUR gains towards 100.33, as the recovery from Tuesday's 98.86 low has room to extend. However, Monday's commanding peak at 100.90 is not expected to be broken at this stage. A setback below Wednesday's low at 99.29 is required to bring the focus back onto the week's low at 98.71, and then 98.55.
Weekly chart EUR/JPY trend: Bearish.

Intraday EUR/CHF: The corrective rally targets 1.2018, and potentially 1.2023, within a broader EUR bearish tone. A return to support at 1.2006 remains the main threat though, which defends 1.2000 and the April 5 spike low at 1.1990. Orderly corrective gains will be restricted by 1.2023, and only a move above 1.2023 would create risk of spikes to 1.2030 and 1.2076.
Weekly chart EUR/CHF trend: Bearish.

Intraday AUD/USD: A trading range has been established between 0.9821 and Monday's 1.0011 high. Consolidation of the short-term rally from the June 1 reaction low at 0.9581 is underway, and a break below 0.9928 would create additional downside risk to 0.9889 and 0.9850. Only a fresh wave of AUD bull pressure would manage to force an upside break through 1.0011, opening 1.0146 and then 1.0200.
Weekly chart AUD/USD trend: Range.

* The pivot is the sum of the high, low and close divided by 3.

For more technical analysis see: Dow Jones Newswires, N/DJTA; Bloomberg, NI DJTA; and Reuters key word search "INSI-DJN"

By Francis Bray; Dow Jones Newswires; +44 (0)207 842 9249; francis.bray@dowjones.com

Francis Bray is Dow Jones' chief technical analyst for Europe, and has worked as a technical analyst and trader for 20 years in London, Barcelona and Guernsey.

Data provided by CQG International Ltd.

This is a financial news and information service. It is provided in general terms and does not take account of or address any individual user's position. To the extent that this article includes suggestions as to various possible investment strategies which users might consider, it does so in only general terms without reference to the personal factors which should determine any user's investment decisions. Nothing contained in this service constitutes personalized investment advice. Dow Jones does not warrant the accuracy, completeness or timeliness of the information in this article, and any errors shall not be made the basis for any claim against Dow Jones. The author does not invest in the instruments or markets cited in this article. This article does not constitute or form part of any invitation or inducement to buy or sell any security.

-0- 

TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackEurope@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments 

2012.06.11 18:50:16 Interbank Foreign Exchange Rates At 14:50 EST / 1850 GMT

                           Latest       Previous   %Chg    Daily    Daily   %Chg 
Dollar Rates                               Close            High      Low  12/31 
 
 
USD/JPY Japan            79.40-44       79.60-65  -0.26    79.72    79.36  +3.26 
EUR/USD Euro            1.2493-96      1.2638-42  -1.15   1.2668   1.2484  -3.59 
GBP/USD U.K.            1.5494-96      1.5509-15  -0.11   1.5581   1.5492  -0.30 
USD/CHF Switzerland     0.9611-16      0.9501-11  +1.13   0.9619   0.9481  +2.57 
USD/CAD Canada          1.0312-14      1.0219-29  +0.87   1.0312   1.0202  +1.01 
AUD/USD Australia       0.9887-88      0.9984-89  -0.99   1.0007   0.9888  -3.15 
NZD/USD New Zealand     0.7710-12      0.7766-74  -0.76   0.7785   0.7710  -0.84 
 
Euro Rates 
 
EUR/JPY Japan            99.20-24      100.55-69  -1.39   100.90    99.20  -0.34 
EUR/GBP U.K.            0.8062-65      0.8146-50  -1.04   0.8157   0.8054  -4.64 
EUR/CHF Switzerland     1.2008-12      1.2010-20  -0.04   1.2018   1.2006  -1.33 
EUR/CAD Canada          1.2884-88      1.2914-31  -0.28   1.2948   1.2845  -2.62 
EUR/AUD Australia       1.2637-40      1.2653-69  -0.18   1.2681   1.2588  -0.45 
EUR/DKK Denmark         7.4311-46     7.4295-353  +0.01   7.4432   7.4196  -0.03 
EUR/NOK Norway         7.5381-436     7.5724-908  -0.54   7.5898   7.5294  -2.64 
EUR/SEK Sweden        8.8929-9006    8.8881-9019  +0.02   8.9125   8.8590  -0.22 
EUR/CZK Czech Rep.     25.563-620     25.264-384  +1.06   25.608   25.302  -0.01 
EUR/HUF Hungary         296.38-98      293.98-05  +0.77   296.86   293.64  -5.84 
EUR/PLN Poland         4.3384-460     4.2755-885  +1.41   4.3455   4.2574  -2.80 
 
Yen Rates 
 
AUD/JPY Australia        78.50-54       79.44-56  -1.23    79.69    78.50  +0.38 
GBP/JPY U.K.            123.02-10      123.45-57  -0.37   124.06   123.04  +2.94 
CAD/JPY Canada         76.98-7.04       77.82-94  -1.11    78.09    77.02  +2.23 
NZD/JPY New Zealand      61.22-27       61.83-92  -1.02    61.97    61.22  +2.39 
 
Other Dollar Rates 
 
USD/CZK Czech Rep.     20.460-504      19.984-20  +2.26   20.486   20.000  +3.70 
USD/HUF Hungary         237.22-66      232.61-03  +1.94   237.53   232.30  -2.34 
USD/DKK Denmark         5.9477-96     5.8785-812  +1.17   5.9536   5.8678  +3.68 
USD/NOK Norway          6.0334-68      5.9902-06  +0.65   6.0401   5.9850  +0.98 
USD/PLZ Poland          3.4725-80     3.3830-925  +2.58   3.4777   3.3668  +0.82 
USD/RUB Russia         32.742-816      31.846-03  +0.41   32.809   31.930  +1.96 
USD/SEK Sweden         7.1177-228     7.0329-417  +1.18   7.1251   7.0134  +3.49 
USD/ZAR S. Africa      8.4557-708     8.3100-488  +1.61   8.4734   8.2634  +4.65 
 
USD/CNY China           6.3575-96      6.3739-60  -0.26   6.3741   6.3464  +0.63 
USD/HKD Hong Kong       7.7603-10      7.7576-82  +0.04   7.7606   7.7576  -0.08 
USD/MYR Malaysia       3.1675-740    3.0754-2020  +1.02   3.1865   3.1646  -0.21 
USD/INR India          55.600-700      55.418-33  +0.41   55.810   55.090  +4.95 
USD/IDR Indonesia        9398-414       9157-525  +0.70     9445     9385  +4.13 
USD/PHP Philippines  42.827-3.068     43.128-368  -0.69   43.229   43.000  -2.06 
USD/SGD Singapore       1.2843-46      1.2740-48  +0.79   1.2844   1.2730  -0.93 
USD/KRW S. Korea     1170.39-2.80  1134.59-82.10  +1.14  1170.99  1165.90  +0.95 
USD/TWD Taiwan         29.889-950     29.889-970  -0.03   29.949   29.900  -1.14 
USD/THB Thailand        31.609-60      30.568-02  +1.39   31.671   31.586  +0.11 
USD/VND Vietnam        20945-1015     20557-1206  +0.47    20960    21000  -0.27 
 
USD/BRR Brazil         2.0437-502     2.0031-432  +1.18   2.0453   2.0192  +9.72 
USD/MXN Mexico         14.0554-86    13.8279-820  +1.46  14.0685  13.8154  +0.80 
USD/ARS Argentina      4.4831-904    4.3559-4826  +1.53   4.4861   4.4730  +4.13 
 
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.

UPDATE: ECB Urges Adoption of Long-Term View in Accounting Practices

By Kathleen Madigan 
 

Economists expect little joy to be found in this week's flurry of reports. The weak readings will give Federal Reserve policy makers much to consider when they meet next week, on June 19 and 20.

Wednesday's retail sales report is expect to show shoppers pulled back in May. The median forecast is that total sales dropped 0.3% in May. Excluding autos, store sales likely slipped 0.1%, in part because of falling prices at gasoline stations.

Forecasters also think the industrial sector downshifted in May, though that followed a large 1.1% jump in April. Industrial production, out Friday, is expected to show a small 0.1% gain last month, and capacity use is expected to remain at 79.2%.

Two early looks at June are also on tap this week. The Empire State survey from the Federal Reserve Bank of New York, scheduled for Friday, is expected to show weakness in June, after a strong showing in May. The business conditions index is projected to slow to 10.7 this month from 17.09 in May.
The preliminary June reading of consumer sentiment, also out Friday, is forecast to drop to 77.0 from the end-May reading of 79.3.

Economists also think falling oil prices brought down top-line inflation in May.
The producer price index, scheduled for Wednesday, is projected to have fallen 0.8% in May, while the core index, which excludes food and energy, is expected to have increased 0.2%.
The median forecast for the consumer price index, due Thursday, is for a 0.3% drop in May, with the core index up 0.2%.

 DATE     TIME  RELEASE              PERIOD  CONSENSUS  PREVIOUS 
          (ET) 
Tuesday   0730  NFIB Small Business    May      94.5       94.5 
          0830  Import Prices          May      -1.1%      -0.5% 
          1400  Federal Budget         May      -$125.0B   -$57.6B* 
Wednesday 0830  Producer Prices        May      -0.8%      -0.2% 
                 -excl food & energy   May      +0.2%      +0.2% 
          0830  Retail Sales           May      -0.3%      +0.1% 
                 -excl autos           May      -0.1%      +0.1% 
          1000  Business Inventories   Apr      +0.3%      +0.3% 
Thursday  0830  Jobless Claims        Jun 9     375K       377K 
          0830  Consumer Prices        May      -0.3%      Unch 
                 -excl food & energy   May      +0.2%      +0.2% 
          0830  Current Acct Balance   1Q       -$134.0B   -$124.1B 
Friday    0830  NY Fed Empire St Svy   Jun      10.7       17.09 
          0915  Industrial Production  May      +0.1%      +1.1% 
          0915  Capacity Utilization   May      79.2%      79.2% 
          0955  Reuters/UMich Consumer 
                  Sentiment (prelim)   Jun      77.0       79.3** 
 
 *May 2011 reading 
 **end-May reading 

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. 

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.)

(TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.)

Japan Opposition Party to Endorse Tax Hike

TOKYO --The opposition Liberal Democratic Party will accept the government's proposed two-step consumption tax increase, aligning itself with the ruling Democratic Party of Japan on the heart of Prime Minister Yoshihiko Noda's package of tax and social security reforms, the Nikkei reported in its Friday morning edition.

On Thursday, LDP policy committee leaders settled on a party line on the tax issue ahead of three-way talks on revising the proposed reform legislation. The party will agree to raise the consumption tax in two stages: first from 5% to 8% in April 2014, then to 10% in October 2015.

The three biggest parties in the Diet--the DPJ, the LDP and the opposition New Komeito--will begin negotiations Friday, aiming to reach a deal by June 15 and vote on the bills in the lower house by June 21, when the legislative session ends.

They will tackle taxes and social security separately, starting with the latter, an issue on which the DPJ and LDP stand further apart. The LDP wants the DPJ to drop some of its defining social security proposals, such as creating a guaranteed minimum pension and eliminating the separate health insurance bracket for the elderly. Should they fail to reach a compromise there, an agreement on the tax hike may fall through.

On the tax hike, the LDP will call for a provision giving the final say to the sitting government six months before the first stage of the tax increase. At the same time, it seeks to drop economic growth targets linked to the tax hike, arguing they would tie the hands of future governments.

To cushion the impact on low-income Japanese, the government and the DPJ are considering an initial round of cash payments, followed in the longer term by refundable tax credits. The LDP is cool to both proposals and will try to push for more targeted, temporary measures.

Despite their rhetoric, both parties had already seen eye to eye on raising the tax to 10%. The LDP has concluded that agreeing to the basic structure of the DPJ's proposed tax hike offers the fastest way to that end. New Komeito, meanwhile, is more likely to accept the parts of the plan that the other two parties agree on.
06-07-12 1920ET

(END) Dow Jones Newswires
June 07, 2012 19:45 ET (23:45 GMT)

UK's Osborne Signals Idea of EU Membership Vote

George Osborne, the U.K. chancellor of the exchequer, became the first senior minister to signal the possibility of a referendum on membership in the European Union, U.K. daily The Times reported Friday.
In doing so, the chancellor surprised Downing Street and set himself on a collision course with his Liberal Democrat coalition partners, the Times said.
Mr. Osborne said a plan to rescue the single currency was likely to mean handing more powers to Brussels, The Times said. This would automatically trigger a referendum under a new law introduced by the coalition, The Times said.
"I think what the public are concerned about, the British people would be concerned about, would be if there was any transfer of power," Mr Osborne said, according to the Times. "A reshaped relationship with Europe would imply, would involve, a transfer of sovereignty or powers from the U.K. to Brussels."
His remark appeared to overstep the agreed coalition position, The Times said. The newspaper noted that Prime Minister David Cameron was more cautious on a visit to Berlin for talks with Angela Merkel, the German chancellor, saying that you need a referendum if you "change the rules of the game".
Newspaper Web site: http://thetimes.co.uk

Daily Forex Brief London: Thursday 7th June 2012

Global policy-makers get the message

Rattled by May's market madness, global policy-makers have finally started to show that they get the message, although their words will need to be followed by strong action before too long. Although the ECB was not decisive enough for our liking given the gravity of the situation in Europe (see below), at least Mario Draghi promised to act if the growth outlook worsened. Fed Vice-Chairman Janet Yellen conceded last night that the American economy was 'vulnerable to setbacks' and might require additional stimulus: Fed Chairman Bernanke will likely reinforce this point when he testifies to the Joint Economic Committee later today (see below). China in particular has implemented significant extra stimulus over recent weeks in response to their worsening growth performance; India has vowed to raise infrastructure spending to boost their ailing economy; and the RBA has lowered rates by 75bp over the past six weeks. Also, the BOE could decide to expand their asset purchases program when they meet this morning (see below). In response, the major American and European bourses were up more than 2% yesterday, Brent is back above USD 100 a barrel, and both the yen and the dollar have given back some of their recent gains. The euro suddenly looks a little perkier, notwithstanding ongoing concerns over both Greece and Spain.

Daily Forex Brief London: Wednesday 6th June 2012

Spain relents

After weeks of denying the inevitable, Spain's leaders have at last finally accepted that they need European assistance to recapitalise their broken banks. How these banks get access to the capital they so desperately require is the subject of much disagreement between Spain and European policy officials. Fearful of the austerity conditions that would be imposed on them if they apply for a bailout to the EFSF, the Spanish government instead is imploring Germany to allow their banks to get funding directly, a position that has some support in both Brussels and Paris. However, neither the EFSF nor the ESM are allowed to make direct capital injections, and Germany remains inextricably opposed to this course in any event. According to Sueddeutsche Zeitung, one option being considered is permitting the EFSF to lend money to Spain's FROB (the bank rescue fund), under the proviso that problem banks are either closed or merged. This would get around Spain's fear of signing up to additional austerity and reforms. From the perspective of Germany and the rest of northern Europe, recapitalising Spain's banks in this way would definitely be much cheaper than a full bailout of Spain, notwithstanding their reservations. Budget Minister Montoro yesterday claimed that the sum required to recapitalise Spain's banks was relatively modest, at around EUR 40bn. We are not there yet, but it is in both Spain's and Germany's interest, not to mention the rest of Europe, to find a way to recapitalise Spain's banks quickly.

Daily Forex Brief London: Tuesday 5th June 2012

G7 call triggers short-covering

Risk assets and currencies have been placated since the start of the new week by news that G7 finance ministers and central bank governors will hold a conference call later today to discuss how they should respond to Europe's worsening sovereign debt and banking crisis. Frankly, given the incredibly fragile sentiment evident over recent weeks, the G7 needs to come up with something fairly convincing to soothe the nerves of traders and investors alike. The Fed, the BOJ and the BOE may well declare their preparedness to implement further QE, while the ECB should consider both reducing rates and announcing more LTRO. More urgent however is attempting to stem the tide of those pernicious bank runs that have accelerated in southern Europe over the past few weeks. Short of implementing a Europe-wide deposit guarantee scheme, this will require a huge injection of capital into ailing banks, especially those in Spain. However, without Germany's imprimatur, it remains unclear just where the money will come from. Although the fact that global policy-makers are weighing up their options is encouraging, they cannot afford to prevaricate for much longer. Time is in short supply.

Daily Forex Brief London: Monday 4th June 2012

Where do we go from here?

It's a reasonable question and one which many were asking themselves on Friday in the wake of the disappointing US jobs data. There was also an expectation of some statement from EU and/or G7 leaders over the weekend to offer reassurance to markets. As it was, there was nothing of substance, with the result that Asian equities were down over 2% today, with the fall in Chinese stocks the biggest for two months. The latest PMI data for the services industry showed a further modest slowdown in China. So looking around the world economy, there are currently few signs of decent momentum, either in the emerging or developed world. Still, if the German newspaper Welt-am-Sonntag it to be believed, EU leaders are drawing up a crisis plan to be ready by the end of the month. This reportedly contains many of the measures (integrated budget policy, banking union, and political union) at which many member states, notably Germany, have balked at in the past. But the truth is that we are at the point where bold measures will have to be taken if the euro is to stand a chance of staying intact. Incremental, compromised and late initiatives have failed spectacularly.

Daily Forex Brief London: Friday 1st June 2012

Hold onto your hats

It's gearing up to be a busy Friday. We've already had manufacturing PMI data in China coming in softer than expected, falling to 50.4 (from 53.3). In Europe, markets are understandably nervous, the euro once again having traded at a new low for the year as Asia (at 1.2324), whilst Spain has denied speculation that it is talking to the IMF about possible aid. Meanwhile, there were some fairly critical words for European leaders from the head of the ECB yesterday, saying that it was not the ECB's job to "fill the vacuum left by the lack of action by national governments". The results from the Irish referendum on the fiscal compact are also expected today and whilst a 'yes' vote is pretty much assured, history is scattered with surprise referendum decisions in Europe. Not for the first time, markets will be looking to the US to provide some good news, with the April employment report released this afternoon. Hopes are for a modest recovery from the 115k increase seen in April, the 150k expected gain would take payrolls back to the average of the past 6 months. Meanwhile, yields on German 2 year bonds have touched negative territory this morning, an illustration of the ever more dis-jointed markets we are seeing.