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Custody Holdings and The Dollar

December 18, 2009
As is well appreciated, the Federal Reserve competes with private sector banks in providing custody services to foreign central banks. The data is reported on a weekly basis, every Thursday. Yesterday the Fed reported that custody holdings rose by about $5 bln. That brings the Q4 increase to about $93.5 bln and the year-to-date figure to $432 bln.…
Custody Holdings and The Dollar Custody Holdings and The Dollar Reviewed by magonomics on December 18, 2009 Rating: 5
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CNBC: King Dollar & Growth CNBC: King Dollar & Growth Reviewed by magonomics on December 18, 2009 Rating: 5
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What is Moving the Dollar? New Driver Around the Corner ?

December 17, 2009
There have been many developments in the past couple of weeks, including Dubai and Greek woes, generally stronger than expected US economic data, and further confirmation of the unwinding of the Fed's liquidity provisions that could help account for the dollar's broad based strength. It is up, since the Dec 1, almost 3.75% against the euro…
What is Moving the Dollar? New Driver Around the Corner ? What is Moving the Dollar? New Driver Around the Corner ? Reviewed by magonomics on December 17, 2009 Rating: 5
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Basel Committee Clarifies, Contradicts Japan

December 17, 2009
Japanese media had intimated that there would be a long--decade or more--transition period to new capital requirement rules. This apparently was a factor behind the surge in Japanese banks shares yesterday, before consolidating today, for example. However, the BIS' Basle Committee on Banking Supervision indicated earlier today that the new cap…
Basel Committee Clarifies, Contradicts Japan Basel Committee Clarifies, Contradicts Japan Reviewed by magonomics on December 17, 2009 Rating: 5
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Greece and the Euro Zone

December 17, 2009
The heightened concerns about the fiscal situation in Greece and by extension the other weak credits in the euro-zone may be a source of pressure on the euro, but more than likely it is simply encouraging foreign exchange participants to do what they wanted to do in any event and reduce market exposure, which means buy back short dollars, ahead of…
Greece and the Euro Zone Greece and the Euro Zone Reviewed by magonomics on December 17, 2009 Rating: 5
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Dollar Rally

December 17, 2009
Some observers are linking the dollar's rally to yesterday's FOMC statement. We do not see much new in the statement. There was a minor modification of its description of growth, but the policy guidance remained the same. Conditions were such that interest rates could remain extraordinarily low for an extended period. One U.S. investment b…
Dollar Rally Dollar Rally Reviewed by magonomics on December 17, 2009 Rating: 5
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Chile--OECD Membership, Rates Steady, CLP Outlook

December 16, 2009
Yesterday was an important day for Chile. After two years of campaigning and making reforms Chile was invited to join the OECD. It is the first South American country to join and second behind Mexico in Latam. Chile becomes the 31st member of the OECD. Measures Chile adopted to pave the ground for membership included reforming the management of Co…
Chile--OECD Membership, Rates Steady, CLP Outlook Chile--OECD Membership, Rates Steady, CLP Outlook Reviewed by magonomics on December 16, 2009 Rating: 5
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FX Ignores Larger than Expected Rise in Nov US IP

December 15, 2009
Industrial output rose 0.8% in November, the most in 3 months but the dollar largely seems unaffected. The dollar had strengthened sharply against most of the major currencies earlier but had begun seeing those gains pared and that has continued after the industrial output data.
Manufacturing output rose an impressive 1.1% after a 0.2% decline in …
FX Ignores Larger than Expected Rise in Nov US IP FX Ignores Larger than Expected Rise in Nov US IP Reviewed by magonomics on December 15, 2009 Rating: 5
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Preview of FOMC

December 15, 2009
The Federal Reserve's last meeting of the year begins today and concludes tomorrow. We do not anticipate much change in the FOMC statement and even less of a change in the Fed funds target (or the discount rate, which at FT columnist suggests is part of a risk scenario that should be taken seriously).
Recent FOMC statements have come in three …
Preview of FOMC Preview of FOMC Reviewed by magonomics on December 15, 2009 Rating: 5
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Papandreou Long on Rhetoric, Short on Details

December 14, 2009
So far it does not appear that Greek Prime Minister Papandreou has provided much insight into how he will reduce Greece's heavy debt burden. Public debt is about 113% of GDP this year and set to rise toward 120% next year.
The most important take away point is that key decisions will be made over the next three months and the pain will be dist…
Papandreou Long on Rhetoric, Short on Details Papandreou Long on Rhetoric, Short on Details Reviewed by magonomics on December 14, 2009 Rating: 5
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Markets are Skeptical of Greece, but Short-End Attractive

December 14, 2009
The markets await the speech by Greek Prime Minister Papandreou that will detail how he intends to address the fiscal woes that have created a bit of a crisis in Greece. The 2-year note yield has risen 175 bp over the past month, and 15 bp today to yield 3.05%, this is more than twice the German 2-year yield (1.23%) and half again as high as Irela…
Markets are Skeptical of Greece, but Short-End Attractive Markets are Skeptical of Greece, but Short-End Attractive Reviewed by magonomics on December 14, 2009 Rating: 5
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Independent Pressure on the Turkish Lira

December 11, 2009
As the dollar rallies on constructive economic news, emerging market currencies are being hit by a wave of profit-taking. However there is independent pressure on the Turkish lira. The Constitutional Court just banned the main pro-Kurdish political party for links to militants and 37 members have been banned from politics for five years. The immed…
Independent Pressure on the Turkish Lira Independent Pressure on the Turkish Lira Reviewed by magonomics on December 11, 2009 Rating: 5
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Returning to the Scene of an Accident

December 11, 2009
The market overreacted to the recent U.S. jobs report and while expectations of Fed policy have returned to status quo ante, the dollar has not. We suspect the dollar is therefore vulnerable to a renewed near-term setback. The yen is obviously exceptional and the dollar has already surrendered its job-induced gains. We would also discount sterling…
Returning to the Scene of an Accident Returning to the Scene of an Accident Reviewed by magonomics on December 11, 2009 Rating: 5
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Yen Carry Trade by Unlikely Candidates

December 10, 2009
Speculators appear to be playing the yen from the long side. (Read more about the yen carry trade here.) The Commitment of Traders data showed near-historically extreme net long position prior to the middle of last week when the yen was sold off hard. Even if some of the speculative longs were cut, they likely remain net long yen.
Over the last co…
Yen Carry Trade by Unlikely Candidates Yen Carry Trade by Unlikely Candidates Reviewed by magonomics on December 10, 2009 Rating: 5
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Watch Tomorrow's Report on US Business Inventories

December 10, 2009
The US reports the October business inventory data tomorrow. Economists are likely waiting for the report before revising Q4 GDP forecasts. Previously the consensus was coming in around 3% GDP for Q4 and the risk is that estimates are revised higher.
A little more than half of the business inventory raw data is known. Wholesale inventories released…
Watch Tomorrow's Report on US Business Inventories Watch Tomorrow's Report on US Business Inventories Reviewed by magonomics on December 10, 2009 Rating: 5
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Turkey's Central Bank Intends to Roll Over Debt Holdings

December 10, 2009
Turkey's central bank holds about TRY8 bln in domestic debt that expires next year and indicated it will buy about TRY8 bln of government paper to replace it. It will begin buying TRY100 mln in twice a week auctions beginning on Dec 23 and continuing through June. It will buy TRY5 bln through this process. It will be focused on the 1-5 year pa…
Turkey's Central Bank Intends to Roll Over Debt Holdings Turkey's Central Bank Intends to Roll Over Debt Holdings Reviewed by magonomics on December 10, 2009 Rating: 5
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The Future of the Carry Trade

December 04, 2009
The Japanese yen has been suffered the most in the wake of news that fewer Americans lost their jobs in November. There has been a debate in the market over what would happen when the dollar carry trade was exited. One camp thought the the end of the dollar carry trade would be marked by renewed crisis and the unwind of the risk trade. The other c…
The Future of the Carry Trade The Future of the Carry Trade Reviewed by magonomics on December 04, 2009 Rating: 5
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Fed Funds and The Dollar

December 04, 2009
The much stronger than expected US jobs data has triggered a large sell-off in the US debt market and is sparking sharp losses in European bonds as well. Of particular interest is the dramatic sell-off in the Fed funds futures as the market reassesses the trajectory of Fed policy in light of evidence of light at the end of the tunnel of long and d…
Fed Funds and The Dollar Fed Funds and The Dollar Reviewed by magonomics on December 04, 2009 Rating: 5
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December and the Dollar

December 04, 2009
Cognitive dissonance is when one holds contradictory beliefs simultaneously. This is the condition investors are in when they believe in regular patterns in the markets and the efficient market theory.
‘Tis the Season The largely unregulated foreign exchange market has an average daily turnover last officially estimated (BIS 2007) at $3.2 trillion.…
December and the Dollar December and the Dollar Reviewed by magonomics on December 04, 2009 Rating: 5
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Strong Canada Jobs Data Says Nothing About US

December 04, 2009
Canada reported much stronger jobs data than the market expected, sending the Canadian dollar broadly higher. However, the strong showing in Canada should not be seen as a hint or signal of what to expect from the US.
Canada grew 79.1k jobs in November, of which 38.6k were full time jobs. The consensus had look for a modest 15k rise after a 43.2k …
Strong Canada Jobs Data Says Nothing About US Strong Canada Jobs Data Says Nothing About US Reviewed by magonomics on December 04, 2009 Rating: 5
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Japanese Treasury Holdings

December 03, 2009
In the past we recommended that Japan consider using its massive reserve holdings to support the domestic economy. In particular we suggested selling 1/4 of their reserves and to finance domestic consumption. In early 2008, in response to our op-ed piece in the Financial Times, the IMF quickly argued that it did not think that Japan needed fiscal …
Japanese Treasury Holdings Japanese Treasury Holdings Reviewed by magonomics on December 03, 2009 Rating: 5
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Mexican Peso New Highs for 2009

December 03, 2009
An upward revision in the central bank of Mexico's inflation forecasts announced yesterday propelled the peso to new highs for the year on ideas that the new forecasts are a signal of a rate hike early next year. We suspect the market, which the non-commercials (speculators) in the futures market held as of last week a net 89k long contracts, …
Mexican Peso New Highs for 2009 Mexican Peso New Highs for 2009 Reviewed by magonomics on December 03, 2009 Rating: 5
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Daimler Joins the Move to US

December 02, 2009
We have noted that the combination of the chronically weak dollar, strong productivity gains, and the threat of protectionism will likely encourage foreign companies to boost their productive capacity in the United States. A couple of Japanese auto producers have already made recent moves in this direction. Today, Germany's Daimler said it wil…
Daimler Joins the Move to US Daimler Joins the Move to US Reviewed by magonomics on December 02, 2009 Rating: 5
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Data and Policy Mix Frustrate Attempts to Stabilize BRL

December 02, 2009
Brazil has reported FIPE inflation and Oct industrial production figures today. The former did not rise as much as expected and the latter was a stronger than expected. FIPE calculation of CPI rose 0.29% in Nov. The consensus was for a rise of 0.32%-0.34%. In Oct, it rose 0.25%. The important point here is that Brazilian inflation appears to be ba…
Data and Policy Mix Frustrate Attempts to Stabilize BRL Data and Policy Mix Frustrate Attempts to Stabilize BRL Reviewed by magonomics on December 02, 2009 Rating: 5
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Gulf Leaders Summit--Small Step toward Monetary Union

December 01, 2009
Yesterday we noted reasons to be skeptical of a single currency for several Latam currencies under Venezuela's leadership. We can be only slightly more optimistic about the near-term possibilities of a monetary union in the Gulf.
A Gulf leaders summit began today. Two political issues were on the opening agenda: support for Saudi Arabia over t…
Gulf Leaders Summit--Small Step toward Monetary Union Gulf Leaders Summit--Small Step toward Monetary Union Reviewed by magonomics on December 01, 2009 Rating: 5
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Behind Better than Expected German Jobs Data

December 01, 2009
Germany reported today that November unemployment fell 7k instead of rising 5-10k as the market expected. This is the fifth consecutive month that the number of unemployed has fallen in Germany. It offers a stark contrast to the US jobs picture, where another net 125k are expected to have lost their jobs last month. But does it ?
There are two dri…
Behind Better than Expected German Jobs Data Behind Better than Expected German Jobs Data Reviewed by magonomics on December 01, 2009 Rating: 5
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More Thinking About the Japan and the Yen

December 01, 2009
The Bank of Japan announced a new liquidity facility today of roughly JPY10 trillion in three month loans to commercial banks. The BOJ came under pressure from the DPJ government and BOJ Governor Shirakawa can be forgiven if he does not see much of a difference between the pressure brought to bear by the previous LDP government and the new DPJ adm…
More Thinking About the Japan and the Yen More Thinking About the Japan and the Yen Reviewed by magonomics on December 01, 2009 Rating: 5
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Significance of EC Shuffle

November 30, 2009
Over shadowed by the emergence of Dubai's financial crisis, the European Commission was re-shuffled. France and Finland were given the highly coveted portfolios of internal markets (which is to include financial services regulation) and the economic and financial affairs respectively Michel Barnier and Olli Rehn. Spain's Joaquin Almunia wa…
Significance of EC Shuffle Significance of EC Shuffle Reviewed by magonomics on November 30, 2009 Rating: 5
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The Implications of Dubai's Financial Crisis

November 30, 2009
A storm broke out last week, emanating from the part of the world that is widely seen as a major beneficiary of the rise in oil prices. Yet Dubai’s story is not about oil. Indeed it is precisely the absence of oil and natural gas (less than 6% of GDP) that prompted this emirate go down the path of tourism, hospitality, and commercial real estate d…
The Implications of Dubai's Financial Crisis The Implications of Dubai's Financial Crisis Reviewed by magonomics on November 30, 2009 Rating: 5
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Check-in Brazil ADRS vs Local Shares

November 25, 2009
One of the noteworthy developments here in Q4 has been the renewed interest in capital controls by countries trying to manage the flood of portfolio capital. Brazil's 2% tax on purchases of Brazilian stocks and bonds is among the most significant examples.
Check-in Brazil ADRS vs Local Shares Check-in Brazil ADRS vs Local Shares Reviewed by magonomics on November 25, 2009 Rating: 5
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ECB and BOE Continue to Provide Dollar Liquidity ECB and BOE Continue to Provide Dollar Liquidity Reviewed by magonomics on November 25, 2009 Rating: 5
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Why The Dollar is Broadly Lower

November 25, 2009
The combination of the apparent resolution of the West LB situation and the FOMC minutes have conspired to send the US dollar broadly lower today. The FOMC minutes in particular have been seized upon. On one hand, it is unusual for the FOMC to give so much space to a discussion about the dollar. This is, however consistent with what appears to be …
Why The Dollar is Broadly Lower Why The Dollar is Broadly Lower Reviewed by magonomics on November 25, 2009 Rating: 5
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Banking Center Updates

November 24, 2009
Developments in the banking sector have somewhat overshadowed German economic news today. Yet German GDP data may stand in contrast to US GDP due this morning. It’s not that German Q3 GDP was stellar. Q3 GDP was unchanged from the preliminary data at 0.7% q/q (and -4.8% y/y) and a breakdown of the data showed consumption continued to fall (down 0.…
Banking Center Updates Banking Center Updates Reviewed by magonomics on November 24, 2009 Rating: 5
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Greece Tensions Growing More Acute

November 24, 2009
The pressures on Greece continue to increase and this is reflected in the credit default swaps and the interest rate spread over Germany. Indeed, that is a key development in the euro zone over the past month, Greece yields have risen above Ireland, which had been the highest yield in EMU this year. Ten year Greek yields are just below 5%, while I…
Greece Tensions Growing More Acute Greece Tensions Growing More Acute Reviewed by magonomics on November 24, 2009 Rating: 5
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ZAR Best Performing Currency

November 23, 2009
The South African rand is the strongest currency today, gaining 1.87% against the sagging greenback. Several factors are helping lift the rand.
Many are linking the rally in gold to new record highs with the rand's strength. Year to date the correlation between dollar-rand and gold is -18.8%. The euro has been more correlated with gold year to…
ZAR Best Performing Currency ZAR Best Performing Currency Reviewed by magonomics on November 23, 2009 Rating: 5
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T-Bills

November 23, 2009
With U.S. T-bill yields hovering near zero, today's weekly bill auctions may attract more general market attention than usual. Here is what is going on: due to the approaching debt ceiling, the US debt managers have reduced T-bill sales. At the same time, the demand for short-term paper is great.
T-Bills T-Bills Reviewed by magonomics on November 23, 2009 Rating: 5
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Speculative Positioning

November 23, 2009
The latest commitment of traders, reported late Friday for the week through Nov 17th showed that speculators (non-commercials) had pared back their bets. Given that interest rate differentials remain decidedly dollar negative, sentiment poor and some ideas that the U.S. may be forced to extend either its credit easing or its fiscal stimulus longer…
Speculative Positioning Speculative Positioning Reviewed by magonomics on November 23, 2009 Rating: 5
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Watch $1.4880 in the Euro for Dollar Direction

November 20, 2009
There is much talk in the markets about a double-no-touch structure between $1.48 and $1.51. However, more immediately we think the $1.4880 area is a key pivot. A move above $1.4880 would take neutralize the downside pressure on the euro and point to a retest on the $1.4960-$1.5000 that has capped upticks over the past few sessions.
Watch $1.4880 in the Euro for Dollar Direction Watch $1.4880 in the Euro for Dollar Direction Reviewed by magonomics on November 20, 2009 Rating: 5
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Bernanke's Comments...What it All Means

November 17, 2009
Leaving aside the market's immediate reaction, Fed Chairman Bernanke's comments about the dollar are very revealing, not just for his thinking, but it likely reflected senior officials in the Obama Administration as well. In the last FOMC statement that the Fed highlighted three considerations behind its view that its Fed funds target can …
Bernanke's Comments...What it All Means Bernanke's Comments...What it All Means Reviewed by magonomics on November 17, 2009 Rating: 5
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Another Push on The Dollar

November 16, 2009
In the post-Bernanke market, the dollar has fallen to new lows for the session against all of the majors. what did Bernanke say that was so dollar negative? Nothing. The market was not convinced that he will make his concern or monitoring of the dollar with action. Indeed, Bernanke played this down the inflationary significance of the dollar's…
Another Push on The Dollar Another Push on The Dollar Reviewed by magonomics on November 16, 2009 Rating: 5
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More on Bernanke

November 16, 2009
If officials do not like foreign exchange volatility, Fed Chairman Bernanke may not be pleased with the market response. The mention of the dollar, which traditionally is a topic the Fed defers to the Treasury Dept, prompted interbank and option dealers to cover short dollar positions, even though no new ground was covered or specifics cited. Howe…
More on Bernanke More on Bernanke Reviewed by magonomics on November 16, 2009 Rating: 5
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Bernanke Sends Dollar Higher

November 16, 2009
We have noted that in recent weeks, the Fed officials have not been shy about commenting about the dollar, even when unsolicited by reporters. The first comments from Bernanke point to this as well. Bernanke says that the Fed is keeping an eye on the dollar--though apparently not sufficiently to mention it in the recent FOMC statement. He also say…
Bernanke Sends Dollar Higher Bernanke Sends Dollar Higher Reviewed by magonomics on November 16, 2009 Rating: 5
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Credibility Issues Weigh on Greek Bonds

November 16, 2009
Greek bonds continue to be worst performer among European bonds. The 10-year bond yield is up another 10 bp today after a move of roughly the same magnitude at the end of last week.
When the new government under PM Papandreou (elected early Oct) claimed that the deficit it was inheriting was twice what the previous government had projected, there …
Credibility Issues Weigh on Greek Bonds Credibility Issues Weigh on Greek Bonds Reviewed by magonomics on November 16, 2009 Rating: 5
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What to Expect from Bernanke Today

November 16, 2009
Federal Reserve Chairman Bernanke will speak about the economy in NYC at lunch today. There are a few points that the market will be closely watching.
1. He is likely to reiterate the general thrust of the recent FOMC statements. The economy is recovering, but it remains fragile and price pressures remain well contained. The Fed is in no hurry to …
What to Expect from Bernanke Today What to Expect from Bernanke Today Reviewed by magonomics on November 16, 2009 Rating: 5
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Japan Stock Market

November 16, 2009
Next month will be the 20th anniversary of the peak in the Japanese stock market. Chinese officials attribute Japanese capitulation to the relentless US demands for currency appreciation as a contributing factor to the poor performance over the past two decades and do not want to be caught in the same trap. Consider that in early 2005, notable eco…
Japan Stock Market Japan Stock Market Reviewed by magonomics on November 16, 2009 Rating: 5
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APEC

November 16, 2009
There was no important break through at the weekend APEC meeting. The ministers promised to resist protectionism and adopt structural reforms as necessary to unwind the global imbalances, but without detailing specific changes or making new commitments, one must assume little has changed. If anything the reluctance of officials to seek yuan apprec…
APEC APEC Reviewed by magonomics on November 16, 2009 Rating: 5
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Data Favoring Another Israel Rate Hike

November 16, 2009
The central bank of Israel hiked rates in August to become the first to begin to normalize monetary policy during the recovery. It held rates steady in Sept and Oct, but speculation is increasing that it will hike rates again when it meets on Nov 23.
Data Favoring Another Israel Rate Hike Data Favoring Another Israel Rate Hike Reviewed by magonomics on November 16, 2009 Rating: 5
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IPOs may Steal Limelight from Fixed Income Next Week

November 13, 2009
The US Treasury successfully completed its record quarterly refunding this week and Corporate America, not deterred by the mid-week holiday, appear to have raised $20 bln in new bond offerings. Nearly $10 bln of corporate bonds was sold on Monday Nov 9th, the busiest day in about a month. Typically, the post-Thanksgiving period sees a significant …
IPOs may Steal Limelight from Fixed Income Next Week IPOs may Steal Limelight from Fixed Income Next Week Reviewed by magonomics on November 13, 2009 Rating: 5
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Reviewing the Dollar’s Outlook

November 13, 2009
The U.S. dollar appears to be stabilizing. We continue to believe that the main forces that have undermined it are largely cyclical rather than structural in nature. Several months ago we identified three indicators that would help investors time the dollar’s bottom: short-term interest rate differentials, the status of the general risk-on/risk of…
Reviewing the Dollar’s Outlook Reviewing the Dollar’s Outlook Reviewed by magonomics on November 13, 2009 Rating: 5
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Import Prices Trend Higer

November 13, 2009
US import prices rose 0.7% in October. The market was expecting an increase closer to 1%. However, the underlying trend is clear. Import prices have risen in all but two months thus far in 2009. The fact that imported prices are still off 5.7% from a year ago is reflecting the base effect of the collapse of import prices in the Aug-Dec period. Imp…
Import Prices Trend Higer Import Prices Trend Higer Reviewed by magonomics on November 13, 2009 Rating: 5
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Developing Europe Still Contracting

November 13, 2009
Of the major industrialized, only Japan and Canada have not reported Q3 GDP estimates. Japan reports on Monday is expected to have expanded at almost the same pace as the US. On the quarter the US expanded by almost 0.9%, while the Japanese economy may have expanded by around 0.7%. With the Big Three in the euro zone reporting, the preliminary est…
Developing Europe Still Contracting Developing Europe Still Contracting Reviewed by magonomics on November 13, 2009 Rating: 5
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China

November 13, 2009
Speculation that China may move on its currency this weekend will likely prove for naught. Nevertheless yuan non-delivered forwards continue to rise today and indicative pricing for the 12-month NDF is for a 3.6% appreciation, the most in several weeks. Many observers, including the media risk exaggerating that Nov 11 report by the central bank th…
China China Reviewed by magonomics on November 13, 2009 Rating: 5
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Red Letter Day: Repeal of Glass-Steagall 10-years Old

November 12, 2009
Ten years ago today US President Clinton delivered the coup de grace to the Glass Steagall Act, which had in any event been diminished by 1000 cuts by officials in the prior couple of decades.
Many observers attribute a good part of the US financial crisis to the repeal of the Glass-Steagall prohibitions preventing a cross fertilization of investm…
Red Letter Day: Repeal of Glass-Steagall 10-years Old Red Letter Day: Repeal of Glass-Steagall 10-years Old Reviewed by magonomics on November 12, 2009 Rating: 5
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Changes in MSCI Emerging Market Indices-Effective Month End

November 12, 2009
As part of its semi-annual review, MSCI has announced changes in global emerging market benchmark indices, with China and Brazil stocks among the main beneficiaries. MSCI estimates that more than $3 trillion are benchmarked against indices globally. The changes will be be effective at the end of the month.
Changes in MSCI Emerging Market Indices-Effective Month End Changes in MSCI Emerging Market Indices-Effective Month End Reviewed by magonomics on November 12, 2009 Rating: 5
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Asian FX Rates

November 12, 2009
There may be much back-slapping over the fact that Asian-Pacific finance ministers have endorsed market-oriented exchange rates, consistent with the op-ed piece in today's Wall Street Journal by the US Treasury Secretary and the finance ministers from Indonesia and Singapore. But actions will speak louder than words and there is much precedent…
Asian FX Rates Asian FX Rates Reviewed by magonomics on November 12, 2009 Rating: 5
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What Euro Options are Telling Us about Spot

November 11, 2009
The options market can often shed light on spot market activity. Indicative pricing in the options market suggests that while the euro is nearing the highs for the year, many participants seem unusually nervous. Often the options market moves in tandem with spot. So in a rising market, the demand for calls is greater. However, this is not the case…
What Euro Options are Telling Us about Spot What Euro Options are Telling Us about Spot Reviewed by magonomics on November 11, 2009 Rating: 5
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Global Recovery Lifts Poland and Israel

November 11, 2009
While the Asian recovery story is front and center today, with the slew of Chinese data, including the nearly doubling of its monthly trade surplus, and Japanese machinery orders showing more than twice the expected rise, following favorable trade news on Tuesday, trade data from Poland and Israel provides additional evidence of the synchronized g…
Global Recovery Lifts Poland and Israel Global Recovery Lifts Poland and Israel Reviewed by magonomics on November 11, 2009 Rating: 5
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Taiwan News

November 11, 2009
Taiwan's decision to ban foreign investors from parking funds in time deposits is having little market effect. There did not seem to be unusual movement. While the stock market was up 1%, it seemed largely in line with most of the regional equity markets and not a flight from the time deposits. Bonds were firm as well, but again, nothing unusu…
Taiwan News Taiwan News Reviewed by magonomics on November 11, 2009 Rating: 5
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The Bearish Case for Sterling

November 10, 2009
Sterling has been resilient today in the face of the Fitch warnings of the UK's rating vulnerability and the deterioration on the trade front. Supporting it has been reports suggesting that Norway's petroleum fund is looking favorable at some UK property investments and M&A related activity. There are of course some large investment ho…
The Bearish Case for Sterling The Bearish Case for Sterling Reviewed by magonomics on November 10, 2009 Rating: 5
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Taiwan Takes A Step in Brazil's Direction

November 10, 2009
Taiwan's Financial Supervisory Commission announced that effective immediately foreign investors were banned from parking funds in time deposits. Moreover foreign investors cannot extend their existing time deposits when they mature. The ostensible reason for the ban is to curb currency speculation, according to officials. As of the end of Oct…
Taiwan Takes A Step in Brazil's Direction Taiwan Takes A Step in Brazil's Direction Reviewed by magonomics on November 10, 2009 Rating: 5
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US Refunding

November 10, 2009
It is difficult to envision today's $25 bln 10-year Treasury note sale to be as well received as yesterday's 3-year offering. Indirect bidders, which includes but is not limited to foreign central banks took down 68.5% compared with an average of 45.3% over the past ten auctions. The bid-cover, which is a metric of demand, was 3.33. Demand…
US Refunding US Refunding Reviewed by magonomics on November 10, 2009 Rating: 5
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Inflation Expectations or What?

November 09, 2009
There is much talk today about what appears to be rising inflation expectations in the U.S. There are several market indicators that are capturing people's attention today.
First the yield curve, measured by the difference between the 2 year yield and the 10-year yields stands near 262 bp, having risen now 21 bp over the past month. Second, th…
Inflation Expectations or What? Inflation Expectations or What? Reviewed by magonomics on November 09, 2009 Rating: 5
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Look To Buy Euro Vs. CZK

November 09, 2009
The euro has slumped around 4% against the Czech koruna since November 2nd. The news stream from Czech Republic has not been that supportive, giving the impression that koruna is being lifted by generalized factors.
Look To Buy Euro Vs. CZK Look To Buy Euro Vs. CZK Reviewed by magonomics on November 09, 2009 Rating: 5
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China Data on Tap

November 09, 2009
A flurry of Chinese data will be reported in the next 12-24 hours. The general picture that will be depicted by the data is of an economy that continues to recover from the global financial and economic shock of last year. There are three elements that will command the market's attention: inflation data, exports and new yuan loans.
China Data on Tap China Data on Tap Reviewed by magonomics on November 09, 2009 Rating: 5
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Japanese Foreign Reserves Rise

November 09, 2009
Japan's foreign reserves stood above $1 trillion in October for the 12th consecutive month. Reserves rose a little more than $4 bln over the course of the month. This largely reflected valuation adjustments. The euro rose roughly a cent against the dollar, and this is partially offset by the decline in asset (bonds) prices. Also in terms of va…
Japanese Foreign Reserves Rise Japanese Foreign Reserves Rise Reviewed by magonomics on November 09, 2009 Rating: 5
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Breaking Up is Hard To Do

November 06, 2009
The financial crisis is usually dated as of mid 2007, but officials did not appear to coordinate an international response until Lehman’s failure sent shock waves through the global financial system a little more than a year later. And even then it seemed like officials acted in concert, like slashing interest rates rather than pursuing a coordina…
Breaking Up is Hard To Do Breaking Up is Hard To Do Reviewed by magonomics on November 06, 2009 Rating: 5
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Liquidity Ample--Music Playing, Risk On

November 05, 2009
This week's rash of central bank meetings have concluded. And the take away message is that the major central banks have not begun to remove the extraordinary liquidity provisions. And even in Australia, which hiked rates for the second time, seem to be signalling a gradual approach.
Liquidity Ample--Music Playing, Risk On Liquidity Ample--Music Playing, Risk On Reviewed by magonomics on November 05, 2009 Rating: 5
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New Initiative from Brazil?

November 05, 2009
Media reports are playing up local press stories that Brazil officials are evaluating additional measures to slow capital inflows which are driving the Brazilian real higher. The 2% tax may have led to some greater volatility in the currency, but net-net the currency remains firm. Other ideas being considered include the government selling a BRL d…
New Initiative from Brazil? New Initiative from Brazil? Reviewed by magonomics on November 05, 2009 Rating: 5
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More Thoughts on Brazil's 2% Transaction Tax

November 04, 2009
Investors continue to grapple with the 2% front-end tax BRL purchases for bond and equity investments. One might expect that the efficiency of the market is such that arbitrage will keep the ADR in line with what one would pay for the local shares. This does not seem to be the case, making the ADR a potentially viable alternative to the local shar…
More Thoughts on Brazil's 2% Transaction Tax More Thoughts on Brazil's 2% Transaction Tax Reviewed by magonomics on November 04, 2009 Rating: 5
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European Bond Update

November 04, 2009
There are three main stories to be aware of in the European bond market today.
First, Fitch cut its Irish bond rating of AA+ to AA-, citing widening fiscal shortfall and the rising cost of the financial support programs. S&P and Moody's had reduced Ireland's sovereign rating earlier this year, but the Fitch move puts its rating one not…
European Bond Update European Bond Update Reviewed by magonomics on November 04, 2009 Rating: 5
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New EC Forecasts--a bit more optimistic than the IMF

November 03, 2009
The European Commission released new forecasts earlier today that generally upgrade its outlook, the first time in two years. On Thursday the ECB staff will provide updated forecasts as well.
The EC now expects the euro zone economy to expand by 0.7% next year. Previously it though the region's economy would contract by 0.1%. The IMF is less s…
New EC Forecasts--a bit more optimistic than the IMF New EC Forecasts--a bit more optimistic than the IMF Reviewed by magonomics on November 03, 2009 Rating: 5
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Q4 US Borrowing Slashed

November 02, 2009
Late yesterday the US Treasury announced a dramatic cut in its anticipated borrowing requirements for this quarter. The net borrowing is expected to now be near $276 bln. This is down by almost half (43%) from the previous estimate of $486 bln.
Q4 US Borrowing Slashed Q4 US Borrowing Slashed Reviewed by magonomics on November 02, 2009 Rating: 5
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RBA Kicks Off Central Bank Meetings

November 02, 2009
The Reserve Bank of Australia is widely expected to hike rates early Tuesday. This would be the second move in the cycle. A Bloomberg survey found 18 of 22 expect a 25 bp hike while the remaining four expect a 50 bp move. We are inclined to be part of the majority here, believing that fragility of the global recovery and strength of the Australian…
RBA Kicks Off Central Bank Meetings RBA Kicks Off Central Bank Meetings Reviewed by magonomics on November 02, 2009 Rating: 5
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Iceland Scales Back Capital Controls

November 02, 2009
Effective today, Iceland lifted restrictions on capital outflows. New investors can now exchange their holdings for foreign currencies, provided the transactions are duly registered.
Iceland Scales Back Capital Controls Iceland Scales Back Capital Controls Reviewed by magonomics on November 02, 2009 Rating: 5
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Monetary Policy in Focus, but Fiscal Policy may Prove More Formidable Monetary Policy in Focus, but Fiscal Policy may Prove More Formidable Reviewed by magonomics on October 30, 2009 Rating: 5
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USD Stabilizing Against the Mexican Peso

October 30, 2009
Earlier this week the US dollar rallied strongly against the Mexican peso, nearing MXN13.37 and was even near MXN13.36 yesterday before staging an outside down day (traded on both sides on Wed range and then the dollar finished below the Wed low). However, the pressure on the greenback appears to be abating just below the MXN13.00 level. That said…
USD Stabilizing Against the Mexican Peso USD Stabilizing Against the Mexican Peso Reviewed by magonomics on October 30, 2009 Rating: 5
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Canada August GDP Disappoints

October 30, 2009
Canada reported that August GDP contracted by 0.1%, whereas the consensus expected a 0.1% increase. Small change for sure, but the sign is wrong. And it likely prevents the Canadian dollar from recovering from the recent slide that has brought it to a 4 week low against the otherwise sagging US dollar. Although the US reported a 3.5% expansion in …
Canada August GDP Disappoints Canada August GDP Disappoints Reviewed by magonomics on October 30, 2009 Rating: 5
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Fox News: Will Dollar Remain World's Reserve Currency Fox News: Will Dollar Remain World's Reserve Currency Reviewed by magonomics on October 29, 2009 Rating: 5
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More Thoughts on Brazil

October 29, 2009
Brazil's 2% IOF tax comes as a wave of profit-taking weighs emerging markets in general. The MSCI EM index is off nearly 8% since Oct 20, while the Brazilian Bovespa entered "correction" territory yesterday with a cumulative decline of a little more than 11% in the same period. In the last 5 days, net-net the Brazil real has slipped …
More Thoughts on Brazil More Thoughts on Brazil Reviewed by magonomics on October 29, 2009 Rating: 5
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IMF Regional Report

October 29, 2009
The IMF's regional report noted that the recoveries in India, China and Australia are proceeding at such a pace that the output gaps are beginning to close. As we have often highlighted, central and Eastern Europe are significant laggards. This is underscored today by Russia's central bank 50 bp cut in its key refi rate to 9.5%. It is the …
IMF Regional Report IMF Regional Report Reviewed by magonomics on October 29, 2009 Rating: 5
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New Fed Paper on Crisis and the Dollar--Interesting New Fed Paper on Crisis and the Dollar--Interesting Reviewed by magonomics on October 28, 2009 Rating: 5
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More Thoughts on Deciding What to do with the Brazil Real

October 28, 2009
Investors continue to grapple with the best way to work around Brazil's new 2% front-end tax on foreign inflows. Understanding that in order to minimize impact, many investors would contemplate holding BRL balances received as proceeds of a sale, a dividend or coupon payment to use to make purchases of other Brazilian assets at some future tim…
More Thoughts on Deciding What to do with the Brazil Real More Thoughts on Deciding What to do with the Brazil Real Reviewed by magonomics on October 28, 2009 Rating: 5
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Reduction in Risk Continues to Support US Dollar

October 28, 2009
The Japanese yen is benefiting the most from the current bout of reducing risk trades. Month-end demand by Japanese corporates may also be helping the yen recovery from roughly week lows against the dollar and two month lows against the euro. Dollar support is seen near JPY90.60 today and then JPY90.20/30. Japan's Sept retail sales were strong…
Reduction in Risk Continues to Support US Dollar Reduction in Risk Continues to Support US Dollar Reviewed by magonomics on October 28, 2009 Rating: 5
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Chance US First Time Homeowner Tax Break is Extended

October 27, 2009
We have generally emphasized monetary factors, such as the low relative and absolute US interest rates and a global financial system awash with dollars in understanding the dollar's weakness. At the same time we recognize the concern over the trajectory of fiscal policy.
Two recent signals from Washington may be undermining confidence in the co…
Chance US First Time Homeowner Tax Break is Extended Chance US First Time Homeowner Tax Break is Extended Reviewed by magonomics on October 27, 2009 Rating: 5
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UK CBI Distributive Trades Keeps Sterling Bid

October 27, 2009
Sterling continues to recover from the trouncing its received at the end of last week on disappointment with a negative Q3 GDP reading. Talk today is of consistent Middle East demand against both the dollar and euro. The $1.6450 area has been approached, but good offers thought to lie in the $1.6470-$1.6500 band may encourage some intra-day positi…
UK CBI Distributive Trades Keeps Sterling Bid UK CBI Distributive Trades Keeps Sterling Bid Reviewed by magonomics on October 27, 2009 Rating: 5
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Firmer US Dollar Tone in Play

October 27, 2009
Although yesterday's dollar gains have not been extended, the underlying tone remains relatively firm. There are two fundamental currents that are aiding what appears to be largely a technically inspired move. First, there has been a modest firming of short-term US interest rates in recent days. And some observers are linking this to speculati…
Firmer US Dollar Tone in Play Firmer US Dollar Tone in Play Reviewed by magonomics on October 27, 2009 Rating: 5
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Euro Reverses

October 26, 2009
The euro had made new highs for the year earlier today in response to calls to diversify Chinese reserves and after trading broadly sideways in Europe has broken down in North America. With the hitting of stops, the euro has been pushed through Friday's lows, near $1.4986. A close below there would be what technicians call a key reversal. The …
Euro Reverses Euro Reverses Reviewed by magonomics on October 26, 2009 Rating: 5
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US Survey Results: Sentiment Improves, but...

October 26, 2009
The Dallas Fed factory index rose to -3.3 in October from -6.4 in Sept. The index bottomed in Feb at -565 and has risen steadily since. The best news came from the six-month ahead activity index which rose to 16.7 from 13.9. Most of the other components though suggest moderating activity. Output, new orders, shipments, employment and unfilled orde…
US Survey Results: Sentiment Improves, but... US Survey Results: Sentiment Improves, but... Reviewed by magonomics on October 26, 2009 Rating: 5
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China Inflation Fears Rising

October 26, 2009
In recent week's there has been a steady increase in "wagers" that the Chinese yuan will resume its appreciation in the coming months. There appear to be two main drivers. First, decline in exports is moderating. The 15% year-over-year decline in September is the smallest of the year. Second, last week the State Council (cabinet) sig…
China Inflation Fears Rising China Inflation Fears Rising Reviewed by magonomics on October 26, 2009 Rating: 5
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US Treasury Supply Continues

October 26, 2009
The US Treasury will auction a record $123 bln of notes and bonds this week, adding to the $1.1 trillion net sales already this year. It is interesting to review who is buying all this paper.
US Treasury Supply Continues US Treasury Supply Continues Reviewed by magonomics on October 26, 2009 Rating: 5
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Asia--the Contested Terrain

October 23, 2009
The East Asian Summit will be held this weekend in Thailand. Japan's (new) Prime Minister Hatoyama seems to be leading the call for an expanded trade bloc. Partly this is seen as a way to take some initiative and balance off not only the US, but China as well. China, as one would expect, has greeted Japan's proposals cautiously. China, Ind…
Asia--the Contested Terrain Asia--the Contested Terrain Reviewed by magonomics on October 23, 2009 Rating: 5
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A Review of the Trade Weighted Dollar

October 23, 2009
Companies and investors often have exposure to individual currencies, such as the euro, Japanese yen, British pound and the Brazilian real. The bilateral movement of a foreign currency against one’s base currency can be substantial and have significant financial impact. However, from a broader economic perspective, and especially to understand the…
A Review of the Trade Weighted Dollar A Review of the Trade Weighted Dollar Reviewed by magonomics on October 23, 2009 Rating: 5
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Worth Reading: Is Happiness Still That New Car Smell? Worth Reading: Is Happiness Still That New Car Smell? Reviewed by Marc Chandler on October 22, 2009 Rating: 5
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Brazilian Bonds and Stocks

October 20, 2009
Late yesterday Brazil announced it would impose a 2% tax on foreign purchases of Brazilian bond and stock transactions. This is particularly aggressive in that the new tax replaces a 1.5% tax that was scrapped last year during the crisis and only was applicable to fixed income purchases. The new tax goes into effect today. The tax may weigh on the…
Brazilian Bonds and Stocks Brazilian Bonds and Stocks Reviewed by Marc Chandler on October 20, 2009 Rating: 5
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Currency Adjustments

October 20, 2009
Currency adjustments help ease global imbalances, but perhaps not so much through prices, but underlying economic activity. Press reports suggest that Honda may be considering moving production for its popular FIT hatchback form Tokyo to the U.S. to offset the strength of the yen. Currently, Honda produces 8 of 10 cars it sells in the U.S, accordi…
Currency Adjustments Currency Adjustments Reviewed by Marc Chandler on October 20, 2009 Rating: 5
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What is Driving Norway

October 19, 2009
Norway is widely expected to be the next major country to hike rates. The Norges Bank meetings on Oct 27 and the following day is likely to lift the deposit rate 25 bp to 1.5%. As one of the early hikers, the krone has benefitted. In addition, relatively poorer news from Sweden has seen the krone appreciate almost 9% since Sept 23 against the kron…
What is Driving Norway What is Driving Norway Reviewed by Marc Chandler on October 19, 2009 Rating: 5
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Treasuries and the Dollar

October 19, 2009
At the end of Sept, the IMF COFER data showed euro and yen reserve holdings rose faster than dollar holdings, even though dollar holdings rose as well. We are reluctant to read a new trend into one quarter's report. In addition, the TIC data shows foreign investors continue to increase their Treasury holdings.
Treasuries and the Dollar Treasuries and the Dollar Reviewed by Marc Chandler on October 19, 2009 Rating: 5
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Dollar Concern Remains Low

October 16, 2009
Comments from the German Economics Minister Guttenberg has played down the significance of dollar weakness on German exports and identified a benefit of a weak dollar in that it keeps oil prices down for Europe. Given sentiment, this is a close to a green light to sell dollars as one could hope for ahead of the weekend and the euro immediately pok…
Dollar Concern Remains Low Dollar Concern Remains Low Reviewed by Marc Chandler on October 16, 2009 Rating: 5
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TIC Data Color

October 16, 2009
The TIC data for Aug was in line with expectations. Long-term flows rose to $28.6 bln from $15.3 bln in July. Although there is much talk about demand for short-term US securities, net purchases of long-term assets has risen from about $8 bln in Q4 08 to $49 bln in Q1 09 and $82 bln in Q2. The July and Aug pace is about $45 bln, threatening to bre…
TIC Data Color TIC Data Color Reviewed by Marc Chandler on October 16, 2009 Rating: 5
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The Bump and Grind of Demographics

October 16, 2009
Forces of change seem to come in one of two varieties: bumps and grinds. Bumps are generally an event contained in a short term that produces profound effects. Think about 9/11 or an earthquake. Grinds are slow, almost imperceptible events, which produce significant change over longer time periods. Think climate change or the peak oil story.
The Bump and Grind of Demographics The Bump and Grind of Demographics Reviewed by Marc Chandler on October 16, 2009 Rating: 5
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Difference of Opinion BOJ and MOF

October 14, 2009
The Bank of Japan upgraded its assessment of the economy today, but Finance Minister Fujii opined that he thought that economic conditions were more severe than the BOJ appreciated. There was another are of disagreement. The BOJ suggested that the corporate bond and CP market were less dependent on the central bank. Fujii seemed much more sympathe…
Difference of Opinion BOJ and MOF Difference of Opinion BOJ and MOF Reviewed by Marc Chandler on October 14, 2009 Rating: 5
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Import Prices Show Little Problem with Weak Dollar

October 14, 2009
The channel through which a weak currency fuels inflation is through imported prices. The US reported that import prices rose 0.1% in September, but are 12% lower on a year-over-year basis. This was slightly lower than consensus expectations. Excluding energy, core import prices rose 0.6% and are off 4.1% from last Sept.
Import Prices Show Little Problem with Weak Dollar Import Prices Show Little Problem with Weak Dollar Reviewed by Marc Chandler on October 14, 2009 Rating: 5
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Trajectory of Policy Mix Bullish for NOK

October 14, 2009
The trajectory of the policy mix in Norway will continue to underpin the krone and may lead to some under-performance of the local bond market and underpin the equity market, which is one of the best performers in developed Europe. Although the Norwegian economy is expanding sufficiently to prompt the central bank to have considered hiking rates l…
Trajectory of Policy Mix Bullish for NOK Trajectory of Policy Mix Bullish for NOK Reviewed by Marc Chandler on October 14, 2009 Rating: 5
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Not Much Canada Can Do About Soaring Loonie

October 13, 2009
The Canadian dollar hit a low near 77 cents in early March and with today's advance, briefly moved above 97 cents. Since the March low the Canadian dollar has appreciated by more than 25%, which is nearly 3 times the yen's advance and 50% more than the euro's advance in the same period.
Not Much Canada Can Do About Soaring Loonie Not Much Canada Can Do About Soaring Loonie Reviewed by Marc Chandler on October 13, 2009 Rating: 5
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American Investors Playing Role in Dollar Slide

October 13, 2009
With the US deficit large and rising, the appetite of foreign investors for US securities is keenly monitored. Often the TIC data is viewed in its aggregate form, which is really on a net basis, net that is of what American investors are going. By looking at what Americans themselves are doing illustrates another source of pressure on the greenbac…
American Investors Playing Role in Dollar Slide American Investors Playing Role in Dollar Slide Reviewed by Marc Chandler on October 13, 2009 Rating: 5
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Unemployment and Rate Hikes

October 13, 2009
Since 1954, the Federal Reserve has only begun raising rates after unemployment peaks. Recent comments by Fed officials reinforces this expectations. Most recently, St. Louis Fed's Bullard that he would like to see job growth and unemployment easing before hiking rates. The perennial hawk Lacker from the Richmond Fed was one of the few that su…
Unemployment and Rate Hikes Unemployment and Rate Hikes Reviewed by Marc Chandler on October 13, 2009 Rating: 5
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Déjà vu All over Again

October 09, 2009
The Economist Magazine ran a story and leader noting that the U.S. dollar’s dominance is waning. There are numerous press articles about oil being denominated in something other than dollars and, more broadly, there is much discussion about the diversification of central bank reserves. That was in the first quarter of 1995.
Déjà vu All over Again Déjà vu All over Again Reviewed by Marc Chandler on October 09, 2009 Rating: 5
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Fed Funds Futures Adjust

October 09, 2009
The seemingly more hawkish stance taken by several Fed officials including Bernanke has helped spur the bout of dollar short covering. There is a sharp adjustment in interest rate expectations which is evident in the Fed funds futures strip. The market sees a little chance of a hike in Q1 but a higher target is fully discounted by the middle of …
Fed Funds Futures Adjust Fed Funds Futures Adjust Reviewed by Marc Chandler on October 09, 2009 Rating: 5
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Sweden Disappoints

October 08, 2009
Sweden's industrial order and production data disappointed the market. August industrial production was expected to have risen almost 1%, but increased Sweden reported a 2.9% decline, which is the largest drop in the cycle. And, adding insult to injury, the July decline was revised to -0.6% from -0.5%. The year-over-year rate edged lower to -2…
Sweden Disappoints Sweden Disappoints Reviewed by Marc Chandler on October 08, 2009 Rating: 5
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Consolidative FX Session

October 07, 2009
The dollar has enjoyed a firmer bias today, but is largely in a consoldiative mode. Two main considerations lie behind the price action today. First, as we noted no one we talked with or seen quoted actually believes the press claim of a secret meeting to denominate the oil in a basket of currencies and gold. Although the report allowed participan…
Consolidative FX Session Consolidative FX Session Reviewed by Marc Chandler on October 07, 2009 Rating: 5
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Polish Cabinet Reshuffle, Opportunity to Add to Long Zloty

October 07, 2009
News that the Polish Prime Minister Tusk is using the alleged corruption scandal to re-jig his cabinet to attempt to rebuild support for his ruling Civic Platform Party has weighed on the zloty as a wave of profit-taking on its strong three day advance is seen. Public support for the Civic Party has declined according to polls since the the scan…
Polish Cabinet Reshuffle, Opportunity to Add to Long Zloty Polish Cabinet Reshuffle, Opportunity to Add to Long Zloty Reviewed by Marc Chandler on October 07, 2009 Rating: 5
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Struggling with a Strong Yen

October 07, 2009
Japan's new government continues to wrestle with the strength of the yen. Although previously as a finance minister Fujii seemed more sympathetic to intervention, he now wants to break from the past. While he has back tracked from his previous apparent endorsement of a strong yen, he is still setting the bar for intervention high. News wire…
Struggling with a Strong Yen Struggling with a Strong Yen Reviewed by Marc Chandler on October 07, 2009 Rating: 5
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East Europe Update: Zloty Extends Gain, Rouble Rallies

October 06, 2009
The rally in oil prices has given the Russian rouble a spur and reports suggest that the central bank intervened, estimates suggest $500- $700 mln worth of roubles were sold. The rouble traded at its best level for the year against the dollar. While much of the intervention is thought to have been conducted against the dollar, there is talk that…
East Europe Update: Zloty Extends Gain, Rouble Rallies East Europe Update: Zloty Extends Gain, Rouble Rallies Reviewed by magonomics on October 06, 2009 Rating: 5
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US Corporate Cash and the Dollar

October 05, 2009
It is widely appreciated that US corporate bond sales have been very strong this year. It begs the question what are they doing with all that cash they have been raising. There are two general answers.
US Corporate Cash and the Dollar US Corporate Cash and the Dollar Reviewed by magonomics on October 05, 2009 Rating: 5
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Will the Euro See $1.60 and the Dollar JPY80 ?

October 05, 2009
Sentiment toward the dollar is clearly negative. Some observers cite structural factors; other cyclical. But how negative is market sentiment?
The first place to look may be surveys. News wire surveys put the consensus for the euro in Q4 09 and Q1 10 around $1.45. This is close to the forward rate of about $1.46 for both periods. Howev…
Will the Euro See $1.60 and the Dollar JPY80 ? Will the Euro See $1.60 and the Dollar JPY80 ? Reviewed by magonomics on October 05, 2009 Rating: 5
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Treasury Supply Weighs on Dollar Sentiment

October 05, 2009
The US Treasury sells $78 bln in notes and bonds this week and $60 bln in bills. The continued deluge of supply weighs on dollar sentiment, especially given indications from the G7 that the pain threshold to stop the dollar's decline has not been reached. The auctions begin with $7 bln 10-year inflation protected security and the bills toda…
Treasury Supply Weighs on Dollar Sentiment Treasury Supply Weighs on Dollar Sentiment Reviewed by magonomics on October 05, 2009 Rating: 5
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Make Me: The State of U.S. Manufacturing

October 02, 2009
The United States has been hollowed out. It no longer manufactures goods. Once the factory of the world, the U.S. now manufactures debt. The high wage manufacturing jobs have been out-sourced to low wage economies. The demise of U.S. manufacturing is at the core of the decline of America, its chronic trade deficits and growing international in…
Make Me: The State of U.S. Manufacturing Make Me: The State of U.S. Manufacturing Reviewed by Marc Chandler on October 02, 2009 Rating: 5
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Euro Run Back to $1.4850

October 02, 2009
The euro broke below $1.45 support briefly in the knee jerk response to the disappointing US jobs data. However, more critical support near $1.4470 held and the euro has made new highs for the session. While the close will be important, the price action suggests the nearly 2 week and 3.5 cent correction may be over. Good buying was reported from s…
Euro Run Back to $1.4850 Euro Run Back to $1.4850 Reviewed by Marc Chandler on October 02, 2009 Rating: 5
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Zloty To Reverse

October 02, 2009
News that the zloty dividend had to a large extent been hedged by Dutch-based Eureko has helped the Polish currency recover from the 10-week lows against the euro reached earlier today near 4.30. The resolution of the PZU-Eureko dispute is seen as removing a negative. In addition, an economic advisor to Poland's president and a candidate for…
Zloty To Reverse Zloty To Reverse Reviewed by Marc Chandler on October 02, 2009 Rating: 5
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COFER --Q2 Reserves

September 30, 2009
The most authoritative source of reserve data, the IMF's COFER data was just released for the second quarter. Central banks are rebuilding their reserves. Reserves peaked in Q2 08 at about $6.96 trillion. In Q1 09 they had fallen to $6.49 trillion and in Q2 they rose to $6.80 trillion.
COFER --Q2 Reserves COFER --Q2 Reserves Reviewed by magonomics on September 30, 2009 Rating: 5
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China, Russia, Middle East and Treasuries

September 29, 2009
Perhaps one of the most noteworthy developments at the recent G20 meeting is what wasn't said. There was no major call for a new international monetary regime or a new international reserve asset, like the Chinese and others pushed for at the previous G20 meeting. Similarly there were no calls from US or European officials for a renewed yuan a…
China, Russia, Middle East and Treasuries China, Russia, Middle East and Treasuries Reviewed by magonomics on September 29, 2009 Rating: 5
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Irish Referendum Oct 2: Yes, This Time

September 29, 2009
Ireland goes back to the polls Friday to approve the Lisbon Treaty after rejecting it in June 2008. Irish voters have been subject to a full court press, with even the EU, under the guise of simply informing voters, has seen to be weighing in heavily. All the lobbying and reassurances appear to be yielding the desired outcome. Polls out in recent …
Irish Referendum Oct 2: Yes, This Time Irish Referendum Oct 2: Yes, This Time Reviewed by magonomics on September 29, 2009 Rating: 5
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The United States and Norway

September 28, 2009
It is a study of contrasts. About midway through the 24-hour trading day on Wednesday, 23 September, the Norwegian central bank announced that although it had considered raising its key rates, it decided not to. A few hours later, the Federal Reserve announced that not only would rates be left on hold, it anticipates the economic conditions that w…
The United States and Norway The United States and Norway Reviewed by magonomics on September 28, 2009 Rating: 5
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Mundell: Fix Euro-Dollar Exchange Rate--Fat Chance

September 24, 2009
Nobel prize winning economist Robert Mundell has renewed his call for fixing the euro-dollar exchange rate. Although he has advocated this before, this time he has added it to the Chinese call to increase the role of the SDRs. He argues that by fixing the euro-dollar exchange rate, the new economic zone would represent 45%-48% of the world economy…
Mundell: Fix Euro-Dollar Exchange Rate--Fat Chance Mundell: Fix Euro-Dollar Exchange Rate--Fat Chance Reviewed by magonomics on September 24, 2009 Rating: 5
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Canadian Reserves Are Illustrative of a Number of Points

September 24, 2009
Canada reports its international reserves on a weekly basis. It just reported its reserves as of Sept 13. They stood at $57.9 bln, up about $635 mln in the past week, which appear largely to be a reflection of valuation. The swings in currency valuation often are overlooked when talking about changes in reserves. Another interesting point is that …
Canadian Reserves Are Illustrative of a Number of Points Canadian Reserves Are Illustrative of a Number of Points Reviewed by magonomics on September 24, 2009 Rating: 5
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Aussie Coming Under Pressure

September 24, 2009
The Australian dollar was faring better than most currencies against the US dollar today, but has come under some pressure after European markets closed. In addition to weaker commodity stories, one of the weights on the Australian dollar may be in a story in the Australian press suggesting that contrary to what Chinese officials have said, the bi…
Aussie Coming Under Pressure Aussie Coming Under Pressure Reviewed by magonomics on September 24, 2009 Rating: 5
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Fed As Expected--Dollar Falls as Event Risk Passes

September 23, 2009
The greenback was treading water today awaiting the FOMC statement. The FOMC statement did not contain any surprises and the dollar has sold off in its aftermath. If anything the FOMC statement was a somewhat more dovish than some might have seeming to be more concerned about deflation. It did upgrade its assessment to the economy, which is not…
Fed As Expected--Dollar Falls as Event Risk Passes Fed As Expected--Dollar Falls as Event Risk Passes Reviewed by magonomics on September 23, 2009 Rating: 5
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Foreign Policy Association: US and Global Economic Outlook Foreign Policy Association: US and Global Economic Outlook Reviewed by magonomics on September 23, 2009 Rating: 5
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Preview FOMC: Two Key Issues

September 21, 2009
The FOMC meets Tues and Wed this week. With no expectation of a change in the Fed funds target, the key focus is on the assessment and guidance the Federal Reserve provides.
Preview FOMC: Two Key Issues Preview FOMC: Two Key Issues Reviewed by magonomics on September 21, 2009 Rating: 5
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Of Structures and Cycles

September 18, 2009
As the third quarter draws to a close, the U.S. dollar is under pressure, falling to the lowest level in a year against a wide swathe of major and emerging market currencies alike. After putting in a strong performance from the middle of 2008 through the first quarter of 2009, the greenback has surrendered a significant proportion of those gains.

S…
Of Structures and Cycles Of Structures and Cycles Reviewed by magonomics on September 18, 2009 Rating: 5
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US Household Net Worth Snaps 6 Quarter Slump

September 18, 2009
US household net worth rose by $2 trillion in Q2, which is more than the annual GDP of Canada or any of the BRICs, but one (China) or the combined GDP of 6 euro zone members (Portugal, Finland, Ireland, Belgium, Greece and Austria). At $53.1 trillion, US household net worth is still a little more than $11 trillion off the peak recorded in Q3 07.
US Household Net Worth Snaps 6 Quarter Slump US Household Net Worth Snaps 6 Quarter Slump Reviewed by magonomics on September 18, 2009 Rating: 5
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Sanctity of Contracts?

September 16, 2009
A year ago or so there was much consternation about the encroachments into the sanctity of contracts in the United States, especially if judges could modify private mortgage contracts. Then again in the bankruptcy of GM and Chrysler the sanctity of contracts, and in particular the rights of senior debt holders, was arguably undermined.
Sanctity of Contracts? Sanctity of Contracts? Reviewed by magonomics on September 16, 2009 Rating: 5
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China

September 16, 2009
Part and parcel with its overall slide, the US dollar has fallen to its lowest level against the Chinese yuan since late May. Even within the narrow ranges that have prevailed this year, there is scope for additional albeit minor dollar losses against the yuan. Still, there is no sign that Chinese officials are going to let the yuan resume its f…
China China Reviewed by magonomics on September 16, 2009 Rating: 5
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