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Dollar May Extend Decline Against Euro Before Payroll Report
By Ye Xie
Aug. 1 (Bloomberg) -- The dollar may extend its decline against the euro before a U.S. government report forecast to show employers cut payrolls in July for a seventh month.
The currency dropped yesterday as the U.S. economy grew less than forecast in the second quarter and initial jobless claims rose last week to a five-year high. The dollar pared its losses as crude oil prices fell, deepening the decline last month to 11 percent.
NOTE: TOM FITZPATRICK IS A WELL RESPECTED PERSONALITY IN THE TRADE CURRENCY INDUSTRY.
``The deterioration of the labor market is accelerating,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York. ``I don't think we've seen the highs in the euro-dollar yet.''
The dollar traded at $1.5601 per euro at 6:24 a.m. in Tokyo, after dropping 0.2 percent yesterday. It reached a record low of $1.6038 on July 15. The dollar was at 107.84 yen, following a 0.2 percent decline. The euro was little changed at 168.26 yen.
South Africa's rand rose as much as 1.2 percent yesterday to 7.3014 against the dollar, the highest since February, after a report showed the country's trade deficit unexpectedly narrowed in June. The rand increased 6 percent in July, for the best performance among the world's major currencies.
Crude oil fell 2.2 percent to $124.05 a barrel on the New York Mercantile Exchange yesterday. The euro-dollar exchange rate and oil have had a correlation of 0.9 in the past year, according to Bloomberg calculations based on their value changes. A reading of 1 would mean they moved in lockstep.
`Quite Heavy'
NOTE: ERATIC CHANGES IN PRICING OF CRUDE OIL GIVES ERATIC EFFECTS.
``Oil looks quite heavy, and commodities seem to be in a longer-term downward trend,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``It lent some support to the dollar.''
Some companies also bought the dollar at month-end to balance their books, according to Osborne.
Futures contracts on the Chicago Board of Trade showed yesterday a 30 percent chance that the Fed will raise its 2 percent target rate for overnight loans between banks by at least a quarter-percentage point by Sept. 16, down from 38 percent odds on July 30. Most traders expect policy makers to hold borrowing costs unchanged when they next meet Aug. 5.
U.S. gross domestic product increased at an annual rate of 1.9 percent in the second quarter, the Commerce Department reported yesterday. The median forecast of 79 economists surveyed by Bloomberg News was for an advance of 2.3 percent. The report also showed that a recession may have begun in the final three months of 2007, as GDP was revised to indicate a contraction in that period.
Jobless Claims
Initial jobless claims rose to 448,000 in the week ended July 26, from a revised 404,000 the prior week, the Labor Department said yesterday. The total number of initial filings last week was the highest since April 2003.
The U.S. currency touched a one-month high against the euro on July 30 after an ADP Employer Services report showed companies unexpectedly added jobs last month.
``The dollar's rally was built on a shaky foundation,'' said Stephen Malyon, co-head of currency strategy at Scotia Capital Inc. in Toronto. ``There's more downside risk to growth.''
U.S. non-farm payrolls dropped by 75,000 last month, following a decline of 62,000 in June, according to the median forecast of 79 economists surveyed by Bloomberg News. The Labor Department's report, which includes government hiring, is scheduled to be released at 8:30 a.m. in Washington.
Dollar in July
The greenback strengthened 1 percent against the euro and 1.6 percent versus the yen in July on speculation the U.S. growth slowdown is spreading to other developed nations. Reports last week showed German business confidence declined and European manufacturing and services contracted.
``The dollar bounce is nothing short of stunning,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. ``Economies elsewhere are showing fresh signs of deterioration.''
Turkey's lira advanced to a six-month high yesterday after the Constitutional Court's decision on July 30 to reject a call by prosecutors to ban the ruling party, which is seeking to introduce Islamic law. The lira climbed as much as 2.4 percent to 1.1555 per dollar, its strongest since Jan. 15. It gained 5.4 percent versus the dollar in July.
To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net
Last Updated: July 31, 2008 17:28 EDT
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Thursday, July 31, 2008
Friday, July 18, 2008
YEN FALLS MOST VERSUS DOLLAR IN MORE THAN MONTH ON OIL, STOCKS
STOCKSRATES & BONDSCURRENCIESMUTUAL FUNDSETFsCOMMODITIESECONOMIC CALENDAR
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Yen Falls Most Versus Dollar in More Than Month on Oil, Stocks
By Bo Nielsen and Ye Xie
July 17 (Bloomberg) -- The yen dropped the most against the dollar in more than a month as a plunge in crude oil pushed stocks higher, encouraging investors to sell the currency to buy higher-yielding assets outside Japan.
The currency also fell versus the euro, South Africa's rand and Sweden's krona as JPMorgan Chase & Co.'s better-than- expected earnings eased concern credit market losses will cut into bank earnings. The dollar pared its decline against the euro as the price of crude oil decreased for a third day.
NOTE: OIL PRICE INCREASE GREATLY AFFECTS CURRENCY.
``People are flocking into the carry trade, and that has the dollar appreciating versus the yen,'' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. ``It looks like a correction is under way in oil.''
The yen fell 1.2 percent to 106.42 per dollar at 4:25 p.m. in New York, from 105.13 yesterday, when it touched 103.77, the strongest since May 27. It dropped 1.4 percent to 168.71 per euro, from 166.39 yesterday. The dollar dropped 0.2 percent to $1.5861 versus the euro, from $1.5827. It touched an all-time low of $1.6038 two days ago.
The price of crude oil for August delivery fell $5.15 to $129.45 a barrel, dropping $15 dollars in three days. The euro- exchange rate and oil have moved in the same direction 90 percent of the time in the past year, according to Bloomberg calculations based on the correlation of their value changes.
Weaker Yen
The yen dropped 2.1 percent to 14.097 against the rand and 2 percent to 17.838 versus Sweden's krona. In the carry trade, investors get funds in a country with low borrowing costs and buy assets where returns are higher. The Bank of Japan held its target lending rate at 0.5 percent this week, the lowest among major economies. The benchmark rates are 12 percent in South Africa and 4.5 percent in Sweden.
The Standard & Poor's 500 Index increased 1.1 percent on the drop in oil and JPMorgan's earnings. The S&P index lost 3.8 percent in the seven trading days ended July 15 and the dollar touched an all-time low versus the euro that day on bets a U.S. government plan to shore up Fannie Mae and Freddie Mac will fail to restore confidence in the two largest buyers of home loans.
``We were extremely bearish,'' said Alan Kabbani, senior currency trader at Wachovia Corp. in Charlotte, North Carolina. ``Now the market is taking some of that bearishness out and becoming a little more confident about the economy and the financial sector.''
JPMorgan Profit
Profit at JPMorgan, the largest U.S. bank by market value, fell 52 percent, less than analysts estimated, on mortgage- related writedowns and costs from the takeover of Bear Stearns Cos. Second-quarter net income of 54 cents a share compared with expectations for 44 cents in a survey of analysts by Bloomberg.
``While earnings are better than expected, it doesn't remove the fact that the dollar is under pressure and the problems with the financial sector are still present,'' said John McCarthy, director of currency trading at ING Financial Markets LLC in New York.
Merrill Lynch & Co., the third-biggest U.S. securities firm, reported its fourth straight quarterly loss as the firm compounded its credit-market writedowns. Global banks and securities firms have reported losses and writedowns of more than $420 billion related to subprime mortgages.
NOTE: MERRILL LYNCH & CO IS ONE OF THE MOST RESPECTED SECURITIES FIRMS.
The greenback weakened versus the euro on a sign of contraction in U.S. regional manufacturing. The Federal Reserve Bank of Philadelphia's general economic index was at minus 16.3 this month, compared with minus 17.1 in June, the bank reported today. Readings less than zero signal a decline. The median forecast of 56 economists surveyed by Bloomberg News was for a reading of minus 15.
Housing Report
Builders started work in June on the fewest single-family U.S. homes since 1991, the Commerce Department said. A change in New York City building codes spurred total starts, including condominiums and apartment buildings, to a four-month high.
Fed Chairman Ben S. Bernanke told the House Financial Services Committee yesterday that growth and inflation risks are increasing and the housing market is the ``central element'' of the crisis.
Yen sales by Japanese individual investors on the Tokyo Financial Exchange climbed to the highest level since August yesterday as gains in the currency made higher-yielding assets abroad cheaper.
Net short positions on the yen against seven major currencies, including the U.S. and Australian dollars, rose to 362,619 contracts among so-called mom-and-pop traders yesterday, the highest since Aug. 14, data showed. The contracts are denominated in 10,000 units of the foreign currency.
China will rely on the yuan's gains to combat inflation as slowing economic growth may prevent the central bank from raising borrowing costs, Goldman Sachs Group Inc. analysts wrote in a research note today.
The yuan has advanced more than 7 percent against the dollar this year, making it the best performer among Asia's most-active currencies. It fell 0.3 percent to 6.8289 today.
To contact the reporters on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net.
Last Updated: July 17, 2008 16:28 EDT
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Yen Falls Most Versus Dollar in More Than Month on Oil, Stocks
By Bo Nielsen and Ye Xie
July 17 (Bloomberg) -- The yen dropped the most against the dollar in more than a month as a plunge in crude oil pushed stocks higher, encouraging investors to sell the currency to buy higher-yielding assets outside Japan.
The currency also fell versus the euro, South Africa's rand and Sweden's krona as JPMorgan Chase & Co.'s better-than- expected earnings eased concern credit market losses will cut into bank earnings. The dollar pared its decline against the euro as the price of crude oil decreased for a third day.
NOTE: OIL PRICE INCREASE GREATLY AFFECTS CURRENCY.
``People are flocking into the carry trade, and that has the dollar appreciating versus the yen,'' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. ``It looks like a correction is under way in oil.''
The yen fell 1.2 percent to 106.42 per dollar at 4:25 p.m. in New York, from 105.13 yesterday, when it touched 103.77, the strongest since May 27. It dropped 1.4 percent to 168.71 per euro, from 166.39 yesterday. The dollar dropped 0.2 percent to $1.5861 versus the euro, from $1.5827. It touched an all-time low of $1.6038 two days ago.
The price of crude oil for August delivery fell $5.15 to $129.45 a barrel, dropping $15 dollars in three days. The euro- exchange rate and oil have moved in the same direction 90 percent of the time in the past year, according to Bloomberg calculations based on the correlation of their value changes.
Weaker Yen
The yen dropped 2.1 percent to 14.097 against the rand and 2 percent to 17.838 versus Sweden's krona. In the carry trade, investors get funds in a country with low borrowing costs and buy assets where returns are higher. The Bank of Japan held its target lending rate at 0.5 percent this week, the lowest among major economies. The benchmark rates are 12 percent in South Africa and 4.5 percent in Sweden.
The Standard & Poor's 500 Index increased 1.1 percent on the drop in oil and JPMorgan's earnings. The S&P index lost 3.8 percent in the seven trading days ended July 15 and the dollar touched an all-time low versus the euro that day on bets a U.S. government plan to shore up Fannie Mae and Freddie Mac will fail to restore confidence in the two largest buyers of home loans.
``We were extremely bearish,'' said Alan Kabbani, senior currency trader at Wachovia Corp. in Charlotte, North Carolina. ``Now the market is taking some of that bearishness out and becoming a little more confident about the economy and the financial sector.''
JPMorgan Profit
Profit at JPMorgan, the largest U.S. bank by market value, fell 52 percent, less than analysts estimated, on mortgage- related writedowns and costs from the takeover of Bear Stearns Cos. Second-quarter net income of 54 cents a share compared with expectations for 44 cents in a survey of analysts by Bloomberg.
``While earnings are better than expected, it doesn't remove the fact that the dollar is under pressure and the problems with the financial sector are still present,'' said John McCarthy, director of currency trading at ING Financial Markets LLC in New York.
Merrill Lynch & Co., the third-biggest U.S. securities firm, reported its fourth straight quarterly loss as the firm compounded its credit-market writedowns. Global banks and securities firms have reported losses and writedowns of more than $420 billion related to subprime mortgages.
NOTE: MERRILL LYNCH & CO IS ONE OF THE MOST RESPECTED SECURITIES FIRMS.
The greenback weakened versus the euro on a sign of contraction in U.S. regional manufacturing. The Federal Reserve Bank of Philadelphia's general economic index was at minus 16.3 this month, compared with minus 17.1 in June, the bank reported today. Readings less than zero signal a decline. The median forecast of 56 economists surveyed by Bloomberg News was for a reading of minus 15.
Housing Report
Builders started work in June on the fewest single-family U.S. homes since 1991, the Commerce Department said. A change in New York City building codes spurred total starts, including condominiums and apartment buildings, to a four-month high.
Fed Chairman Ben S. Bernanke told the House Financial Services Committee yesterday that growth and inflation risks are increasing and the housing market is the ``central element'' of the crisis.
Yen sales by Japanese individual investors on the Tokyo Financial Exchange climbed to the highest level since August yesterday as gains in the currency made higher-yielding assets abroad cheaper.
Net short positions on the yen against seven major currencies, including the U.S. and Australian dollars, rose to 362,619 contracts among so-called mom-and-pop traders yesterday, the highest since Aug. 14, data showed. The contracts are denominated in 10,000 units of the foreign currency.
China will rely on the yuan's gains to combat inflation as slowing economic growth may prevent the central bank from raising borrowing costs, Goldman Sachs Group Inc. analysts wrote in a research note today.
The yuan has advanced more than 7 percent against the dollar this year, making it the best performer among Asia's most-active currencies. It fell 0.3 percent to 6.8289 today.
To contact the reporters on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net.
Last Updated: July 17, 2008 16:28 EDT
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Thursday, July 17, 2008
FOREIGN CURRENCY TRADING IS AS RISKY AS IT GETS
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Foreign currency trading is as risky as it gets
Beware new products being pitched as way to counter dollar weakness
By JENNIFER WATERS
MarketWatch
July 17, 2008 5:27 p.m.
The steep drop in the value of the dollar has many individual investors flirting with dipping into foreign currency trading in order to defend themselves against the greenback's weakness.
They should forget about it. The risks are far too great for individual investors to try trading foreign currencies directly, financial experts warn. Indeed, it is a job best left to the big-name professionals who can offer indirect -- and safer -- ways to get in on the ebb and flow of the dollar.
NOTE: DOLLAR DEPRECIATION HAS CAUSED SEVERAL REACTIONS IN CURRENCY TRADING.
"Joe from Dubuque would be insane to play this game," said Dan Seiver, a finance professor at San Diego State University. "It's unlikely most individuals would have any idea what's going on all over the world 24 hours a day and it has the potential for an enormous amount of loss."
Investors and savers are likely to run into temptation, though, as financial institutions are pitching a myriad of new products and funds that make it easier to dabble in currencies.
EverBank World Markets, for example, offers traditional banking accounts and CDs in foreign currencies. An investor could buy $10,000 worth of, say, Aussie dollars and gain on the better interest rates in Australia.
Consider what's happened this year: The Aussie dollar is up 9% through the first six months. Investors who bought $10,000 worth of Aussie dollars in January when they were going for 87 cents to the U.S. dollar saw that rise to 95.5 cents, boosting the principal to 11,494.25 Aussie dollars. Add in half of the annual 5.24% interest rate and there's another 301.72 Aussie dollars for a total of 11,795.97.
Convert that account back to U.S. dollars today and that $10,000 investment has grown to $11,265.15 -- an 11% kick.
"Buying a currency is like buying a stock of a country," said Chuck Butler, president of EverBank World Markets. "Make sure to do research.... All the same types of things you do to buy stocks."
Volatile arena
While holding savings accounts or CDs in foreign currencies opens you to risk, trading currencies themselves is a real hot potato. Currency trading, which can be heavily leveraged, requires constant surveillance because of its sharp volatility.
What makes foreign exchange markets so scary is the huge leverage on these accounts, many at 30-to-1, with the brokerage firm fronting the bulk of the money. At that rate a $100,000 investment could give an investor access to $3 million worth of euros or yen.
That kind of leverage magnifies gains but can also result in steep losses.
"Currency markets are inefficient," said James Mitchell, director of the London-based fixed-income portfolio management for Russell Investments. "Investors must tread carefully because of their volatility."
Still, international diversification offers protection against a falling dollar. "If you're invested in equity markets it makes some sense to be globally diversified," Mitchell said.
Seiver recommends these three methods of hedging your bets in you think the dollar will continue to weaken: opening accounts in difference currencies, where allowed; investing in international mutual funds that hold only foreign shares (versus global funds that include U.S. holdings); or buying specialized mutual funds or exchange-traded funds that move inversely to the dollar. He holds the Pro Funds Falling U.S. Dollar Fund.
"It's the best way to indirectly have a play on the weak dollar," he said
Write to Jennifer Waters at jennifer.waters@dowjones.com
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Foreign currency trading is as risky as it gets
Beware new products being pitched as way to counter dollar weakness
By JENNIFER WATERS
MarketWatch
July 17, 2008 5:27 p.m.
The steep drop in the value of the dollar has many individual investors flirting with dipping into foreign currency trading in order to defend themselves against the greenback's weakness.
They should forget about it. The risks are far too great for individual investors to try trading foreign currencies directly, financial experts warn. Indeed, it is a job best left to the big-name professionals who can offer indirect -- and safer -- ways to get in on the ebb and flow of the dollar.
NOTE: DOLLAR DEPRECIATION HAS CAUSED SEVERAL REACTIONS IN CURRENCY TRADING.
"Joe from Dubuque would be insane to play this game," said Dan Seiver, a finance professor at San Diego State University. "It's unlikely most individuals would have any idea what's going on all over the world 24 hours a day and it has the potential for an enormous amount of loss."
Investors and savers are likely to run into temptation, though, as financial institutions are pitching a myriad of new products and funds that make it easier to dabble in currencies.
EverBank World Markets, for example, offers traditional banking accounts and CDs in foreign currencies. An investor could buy $10,000 worth of, say, Aussie dollars and gain on the better interest rates in Australia.
Consider what's happened this year: The Aussie dollar is up 9% through the first six months. Investors who bought $10,000 worth of Aussie dollars in January when they were going for 87 cents to the U.S. dollar saw that rise to 95.5 cents, boosting the principal to 11,494.25 Aussie dollars. Add in half of the annual 5.24% interest rate and there's another 301.72 Aussie dollars for a total of 11,795.97.
Convert that account back to U.S. dollars today and that $10,000 investment has grown to $11,265.15 -- an 11% kick.
"Buying a currency is like buying a stock of a country," said Chuck Butler, president of EverBank World Markets. "Make sure to do research.... All the same types of things you do to buy stocks."
Volatile arena
While holding savings accounts or CDs in foreign currencies opens you to risk, trading currencies themselves is a real hot potato. Currency trading, which can be heavily leveraged, requires constant surveillance because of its sharp volatility.
What makes foreign exchange markets so scary is the huge leverage on these accounts, many at 30-to-1, with the brokerage firm fronting the bulk of the money. At that rate a $100,000 investment could give an investor access to $3 million worth of euros or yen.
That kind of leverage magnifies gains but can also result in steep losses.
"Currency markets are inefficient," said James Mitchell, director of the London-based fixed-income portfolio management for Russell Investments. "Investors must tread carefully because of their volatility."
Still, international diversification offers protection against a falling dollar. "If you're invested in equity markets it makes some sense to be globally diversified," Mitchell said.
Seiver recommends these three methods of hedging your bets in you think the dollar will continue to weaken: opening accounts in difference currencies, where allowed; investing in international mutual funds that hold only foreign shares (versus global funds that include U.S. holdings); or buying specialized mutual funds or exchange-traded funds that move inversely to the dollar. He holds the Pro Funds Falling U.S. Dollar Fund.
"It's the best way to indirectly have a play on the weak dollar," he said
Write to Jennifer Waters at jennifer.waters@dowjones.com
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