| Date: October 19, 2010 | Source: AlertNet |
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Loading ... China has moved tab in the currency war, even if it was with a modest rise in interest rates (0.25 points to 5.56%) . The increase represents an attempt by the Chinese authorities to control inflation and reorder their own economic growth. The move could weaken the dollar against the yuan and China decide to allow the most favorable exchange rate between the dollar and the euro.
The Chinese central bank has raised rates for the first time in nearly three years, a move that has surprised the market, at least in the fact of having done so quickly, since, as noted by Marian Fernandez, head of strategy Inversis Bank "the tendency was suspected that it would produce, after having recorded the monetary aggregates and real estate prices over the schedule." After the surprise move could be some data on GDP and inflation will be announced this week that higher than expected.
The rate hike has been taken by surprise to the markets, which have reacted to the floor. The bags, oil and gold fell after the announcement by the Chinese central bank. At the same time, the dollar rose and acted as a refuge by the tightening of monetary policy of the Asian giant.
"Externally (is) a message clear to the international authorities on the relative stability of the yuan, "says a recent Citigroup report, adding that can accentuate the rise of the yuan. However, Citi also clarifies that the rate increase is too small to rise to great changes and disturbances. Among other things, debt sales are "light" and the situation remains "unchanged in the European country risk." Meanwhile, Marian Fernandez is skeptical about the yuan as the currency is tapped, "out of a free float."
By contrast, Alexis Ortega, managing partner of Finagentes says that "the yuan should be strengthened. This is a continuation of an ongoing process of "depreciation of the dollar, especially against the yuan." Thus, the Chinese authorities "accept" a weaker dollar against the yuan, but "decide" the exchange rate dollar / euro European currency, according to Ortega, it should not fall below $ 1.35.
"The medium-term passes a falling dollar and a cast of his fall between major currencies (euro, yuan, yen)," said Ortega. "The euro will have to bear the cost." With less intervention of the authorities, "the market more flexible is the euro". In addition, China has been buying European debt, according to the expert Finagentes, which would explain the improvement of the bonds of some countries such as Ireland, despite having suffered downgrades.
In this sense, the euro currency has been the most vulnerable among the major world currencies. In the current scenario of currency war, the EU has remained on the sidelines. As a result, the euro has appreciated against other currencies, causing a detrimental effect on exports from the Old Continent.
From recent months, China keeps its currency artificially low, encouraging exports and hurting the trade balance of countries like the U.S. and Japan have launched a counter protectionist passing through the devaluation of their currencies. Pressures on China resulted in small revaluation of its currency this summer, something judged as insufficient by the United States.
Control of inflation and growth reordering
But the rise in rates has an obvious interpretation in internal key. Although the Chinese authorities had declared their confidence in controlling inflation, the next data, which will be known on Thursday, may yield a figure higher than expected. In August, China's annual inflation was 3.5% and analysts expect an increase to 3.6% in September.
Meanwhile, China's GDP grew by 10.3% in the second quarter. Data for the third quarter, also published this week, may show signs of overheating of the economy that contribute to a rise in prices.
In this sense, the measure of the Chinese authorities would seek to "avoid asset bubbles," says Marian Fernandez. It would also be "adjusting their growth," so far focused on external demand, with a very positive trade balance result of a relatively low yuan. In this sense, the rise in interest rates is also aimed at domestic demand and should encourage the return of investors to the country.
| Date: October 7, 2010 | Source: Europa Press |
Go ahead and rate this post Loading ... The Governing Council of the European Central Bank (ECB) has decided to keep interest rates in the euro zone at 1%, the lowest level in the history of the institution, in order to support the economic recovery of the Eurozone.
In fact, the euro zone economy grew by 1% in the second quarter compared to the previous three months, while annual GDP growth was 1.9%.
Meanwhile, prices in the euro area in September recorded an increase of two tenths from the previous month and stood at 1.8%.
| Date: June 28, 2010 | Source: Europa Press |
Go ahead and rate this post Loading ... Greece is preparing to return to financial markets the next July to try to get around 4,000 million euros, which would be its first operation since last May resort to the help of the European Union (EU) and the International Monetary Fund (IMF) said on Monday according to Financial Times.
The Greek agency responsible for debt management, Petros Christodoulou said that the intention is to issue in July-bills with maturities of three, six and twelve months.
The EU and the IMF had approved the refinancing of short-term debt in both July and October this year, as set out the terms of the loan of 110,000 million euros agreed with the Government of the Hellenic country.
However, investors warn that the decision of Greece is risky, because a poor auction could affect the general hard on the situation of the country. Therefore consider that the big test will be the interest rate have to pay to attract buyers, pointing out that some unsustainably high premiums could worry investors and undermine confidence.
"If the auction goes badly for Greece could affect other countries like Portugal and Spain, which could end up having to use payday loans as Greece," says an expert.
The Hellenic Executive believes that market confidence will improve before bond auctions 13 and July 20, because the pension system reform, the centerpiece of its plan of fiscal consolidation in three years, is expected to be approved next week in the Greek Parliament.
Nevertheless, government sources Hellenic accept that they have to pay a high premium in the auction, as it will take time to convince investors that fiscal consolidation is underway. In addition, they stress that this short-term debt does not have great weight in the overall scheme and emphasize that there is "sufficient time" before returning to the markets by a significant amount.
| Date: June 4, 2009 | Source: Europa Press |
Go ahead and rate this post Loading ... The Governing Council of the European Central Bank (ECB) decided on Thursday to keep interest rates in the euro zone at 1%, after last May made a cut of 25 basis points that left the price of money the lowest level history.
The decision to keep rates stable could mean the end to the easing of monetary policy of the institution, after starting to detect 'green shoots' in the EU economy, which has presented mild signs of recovery in recent weeks.
The ECB has cut rates by 325 basis points since last October 8, which has brought the rate from 4.25% to 1% today, and it appears that, from now on, you begin to use unconventional measures to combat the recession.
The ECB President Jean Claude Trichet, offered at 14.30 a press conference to explain the decision that has generated much excitement, since it is expected to provide details and additional information about buying bonds announced during the last meeting, an amount close to 60,000 million euros.
In addition to the multi-asset purchases, which aims to boost the financial system, another issue of the day is inflation, as announced last week the EU statistical office, Eurostat, the Consumer Price Index ( CPI) stood at community 0% in May for the first time in its history.
In fact, analysts at Citigroup say that "a lot" of the conference will focus on the details of the bond purchase program and also we will get inflation. Furthermore, bet that "probably" the institution will not change his address and rule out the possibility of triggering a deflationary spiral.
On the bond-buying program, Citi expects to know more about it in that press conference and predicts that the acquisition is made in one or two months "in the primary or secondary." The list of bonds choose to purchase "will probably be very similar" to that used as collateral in refinancing operations of the ECB.
As for the update of economic forecasts of the institution, the U.S. bank experts believe that the ECB will review "substantially down" their estimates of growth of gross domestic product (GDP) in 2009, but expects only "slight changes" in forecasts for 2010.
'GREEN SHOOTS' IN THE GLOBAL ECONOMY
The ECB's decision to maintain a stable price of money coincides with the appearance of slight signs of improvement in macroeconomic references worldwide in recent weeks, especially in regard to the U.S..
In fact, the Bundesbank president and board member of the ECB, Axel Weber, said in his recent speeches that the institution deck a stage of mild economic recovery in the eurozone and the presence of some signs of improvement, but warned exaggerate the dangers of these signs for their effects on trust.
In fact, the latest figures point to an improving macro consumption in the eurozone. This morning, Eurostat published figures of retail sales in April, an increase of 0.2% per month compared to a contraction of 0.1% in March, which shows a slight improvement in the data.
From the U.S. have increased these symptoms in recent weeks and the president of the U.S. Federal Reserve (Fed) Chairman Ben Bernanke predicted yesterday that the recession will end later this year and recalled that in recent weeks have improved macroeconomic several references as consumer confidence and business, selling new and used homes and even the U.S. GDP, which contracted by 5.7% in the first quarter of the year, four tenths below the previous forecast.
| Date: May 4, 2009 | Source: Sources |
Go ahead and rate this post Loading ... The Governing Council of the European Central Bank (ECB) decided a new reduction of a quarter point interest rates at its meeting next Thursday, which will increase the rate at record low 1%, marking the limit relief of the monetary policy of the institution headed by Jean Claude Trichet, according to experts consulted by Europa Press.
In this sense, the U.S. bank Citigroup believes that the ECB will end rate cuts at its meeting next Thursday at 1% and, from there, will perform a gradual easing through unconventional measures as interest rates are stable at least until the first quarter of 2010.
"Most of the Governing Council seems reluctant to reduce the main refinancing rate below 1%," analysts said the bank, which suggest that any new action to ease monetary tensions will take place through "measures unconventional. "
In this sense, Citi suggests that these measures will probably aim to expand their open market operations and perhaps to provide medium-term projections about interest rates, while not expected to mimic the issuing institution to the Federal Reserve or the Bank of England and acquire assets, at least in the next two months, since this tool would be used only if all else fails.
The same view is Bank of America , as forecast to cut a quarter point to be decided in May last will and notes that the deposit rate will be set to the current level of 0.25%, reducing the corridor on the marginal lending rate in an attempt not to discourage loan between private parties.
Also, Bank of America analysts expect the launch of a new refinancing operation to twelve months and the announcement of a series of unconventional measures to complement the ECB's monetary policy.
Meanwhile, Morgan Stanley joins forecasts and predicts that the rate cut is 25 basis points on Thursday and that interest rates will remain stable and at 1% for the remainder of 2009.
The unanimity of the experts regarding the expected cut a quarter point has been reinforced repeatedly by the president of the Bundesbank and a member of the governing council of the European Central Bank (ECB), Axel Weber, who reiterated that the European issuing institution still has "a small window of opportunity" to reduce interest rates from 1.25% if necessary, but warned that placing the funds rate in the eurozone to below 1% would imply a risk of causing a paralysis of Private interbank market.
"I am critical of a reduction in the main refinancing rate below 1% it would imply that the entities would hardly paid for lending and this carries the risk of causing the paralysis of private interbank market," said Weber, who noted that some rates too low would cause "additional distortions" in the markets for short-term financing.
| Date: April 29, 2009 | Source: Sources |
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The Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) decided today to keep its key rate at a target range of between 0% and 0.25% and reiterated that economic conditions have guarantee that rates will continue levels "exceptionally low" for an extended period, while noting that the March data suggest a slower pace of economic contraction.
"The data received indicate that the economic downturn continues, although it seems that at a slower pace," the FOMC said in a statement, which acknowledges that "while the outlook has improved modestly since the last meeting, economic activity is likely to remain weak for an extended period. "
In this regard, the Fed said that household spending has shown signs of stabilizing, but remains pressured by rising unemployment, tightening credit conditions and lower household wealth.
Thus, the FOMC notes that the measures taken to stabilize financial markets and institutions, together with fiscal and monetary stimulus and the "market forces" will contribute to the gradual recovery of sustained economic growth in a context of price stability .
In this sense, the institution headed by Ben S. Bernanke expects inflation will remain low and warns that it could even be below the level appropriate for economic growth and price stability over time.
On the other hand, the Fed reiterated its willingness to buy $ 1.25 trillion of agency mortgage-backed securities sponsored by the Government, as Fannie Mae and Freddie Mac, as well as 200,000 billion in agency debt by the end of 2009. In addition, the Fed will purchase up to 300,000 million dollars in Treasury bonds to fall.
The U.S. economy experienced a 6.1% annualized contraction in the first three months of 2009, above the 5.1% decline expected by the consensus of analysts, although slightly below the 6.3% decline recorded in the last quarter of 2008, according to preliminary data released by the Commerce Department.
It was the worst in U.S. GDP data in more than half a century if one takes into account the contraction of the economy in the last two quarters. Also, adding the drop of 0.5% in the third quarter of 2008, is the first time since 1975 that the U.S. economy chains three consecutive quarterly declines in economic activity.
| Date: April 2, 2009 | Source: Sources |
Go ahead and rate this post Loading ... The Governing Council of the European Central Bank (ECB) decided today to cut interest rates in the euro zone by a quarter percentage point to 1.25%, representing the lowest level in the history of the institution. However, the decline was lower than expected by financial markets, which had granted a reduction of half a percentage point.
In any case, today left this year suggests that the entity will lower interest rates further to the euro zone.
Trichet said the 1.25% "is the lowest level" that is going to bring interest rates in coming months and will be further cuts.
Financial markets had expected a rate cut lead in half a percentage point, but if Trichet avoided explaining his decision might disappoint some market participants.
The ECB decision pushed up the euro, which in a few minutes earned more than half a cent to over $ 1.34.
With today's decision, the ECB continues its monetary policy easing that began last Oct. 8, after the February break has led interest rates from 4.25% in early October to the 1.25% today.
This new rate cut aims to combat the recession in the euro area economy, according to the International Monetary Fund (IMF) could suffer a contraction of 3.2% this year, while the Organisation for Economic Cooperation and Development ( OECD) predicts a decrease of 4.1%.
By contrast, annual inflation in the Eurozone will be reduced six tenths in March, bringing the annual rate will be at 0.6% versus 1.2% in February, according to forecasts by the statistical office European Union (EU), Eurostat.
Thus, the economic confidence of consumers and businesses in the euro zone fell in March by 0.7% to stand at 64.6 points, its lowest level since records began in January 1985.
Lower than expected crop
The ECB in Frankfurt today that it lowered the marginal lending facility, which lends money to banks, also by 25 basis points to 2.25%, In addition, the ECB cut the same way the deposit facility, that pays the money, to 0.25%, effective in all cases from April 8.
Many analysts had expected the European monetary authority would lower the rate a half point lead for its refinancing operations but would cut the deposit facility to a lesser extent to avoid position at 0% and the rates in the money market also fall to 0%.
In the end, the ECB has opted for a smaller reduction in the rate at which lead leaves room for further cuts this year.
The meeting of the ECB Governing Council agrees with the G-20 summit in London whose Heads of State and Government will try to find solutions to the severe recession in many economies.
Industrial orders in January fell 34.1% in the euro area countries, in relation to the same month in 2008, according to Eurostat, the EU statistics office.
The economic and financial crisis has reached the European labor market with a sharp increase in unemployment, most notably in Spain, which in February had an unemployment rate of 15.5%, at the head of the European Union (EU). The euro area recorded in February unemployment rate of 8.5%.
