The Dollar Extended

The dollar extended its winning streak against the Japanese yen to four days and gained on the British pound and other major currencies as U.S. equities declined Friday, taking the wind out of the sails of investors who had been piling into riskier assets. The dollar also rose for a third straight day against the euro, which had touched a 14-month high earlier this week. The greenback's gains stemmed from traders reversing bets that the dollar would continue falling, said analysts at Action Economics. The U.S. Dollar Index (DXY), a measure of the U.S. unit against a trade-weighted basket of currencies, rose to 75.488, up from 75.047 in North American activity late Thursday. "The rally in risk assets looks like it is stalling and people are thinking it's an overstretched market," said Brian Dolan, currency strategist at Forex.com. "We all just have to take a step back every now and then." The dollar rose to the highest in a month against the Japanese currency, recently fetching 92.10 yen, up from 91.36 yen on Thursday. The euro traded at $1.5004, compared to $1.5023. The pound dropped about 1.9% against the dollar, pulling back after an unexpected drop in gross domestic product in the United Kingdom raised concerns about the possibility of further quantitative-easing measures. Both currency and stock markets shrugged off a Friday report showing resales of U.S. houses jumped 9.4% in September to a seasonally adjusted annual rate of 5.57 million, the highest in more than two years and more than analysts' predicted. "As we close in on the end of the period in which one can successfully close on their home in time to qualify for the first-time home buyers' credit, a tick higher for the month is not surprising at all and entirely within reasonable expectation levels," said Dan Greenhaus, chief economic strategist at Miller Tabak, in emailed comments. U.S. stocks also extended a decline after the data, signaling to currency traders a reduction in risk appetite -- something that's tended to support the dollar for many months. The Standard & Poor's 500 Index (SPX), down 1.4% in afternoon action, is poised to end the week nearly flat despite many companies reported earnings that beat expectations. For its part, the greenback is poised to close the week lower for a third time, with the Dollar Index falling to the lowest level since August 2008. The euro has also had a good week, rising past the psychologically important $1.50 level to the highest in 14 months. Bucking that trend, the dollar is poised to gain for a third week on the yen after reaching the highest level since mid-September. Pressure on the pound Byond the big three currencies, the pound plunged after data showed the U.K. recession had unexpectedly extended into a sixth straight quarter. Data showed that the U.K.'s GDP dropped 0.4% in the third quarter, compared to expectations that it would rise 0.1%. Sterling's weakness reflected expectations that the Bank of England may have to continue with its asset-purchasing program and that interest rates will remain low for a longer period. "With just under two weeks to go until that decision, today's dismal GDP reading will certainly tip the market consensus odds from a pause in quantitative easing to an increase in quantitative easing, and this is likely to weigh on the pound considerably," said Stephen Gallo, head of market analysis at Schneider Foreign Exchange. There had been speculation ahead of the GDP data that the central bank could soon start to withdraw some of its monetary stimulus. "With the Bank of England set to publish its inflation report and re-assess quantitative easing in November, an extension of the asset purchase facility is on the cards," said Charles Davis, senior economist at the Centre for Economics and Business Research. Davis added he expects asset purchases to reach 250 billion pounds, up from the current level of 175 billion pounds, and for U.K. interest rates to remain at 0.5% through 2010 and into 2011. The pound traded at $1.6309, down for the first week in three. At the same time, it was sharply lower against other major currencies including the euro.

Argentine Bonds Were Mixed Friday As Markets Digested News

Argentine bonds were mixed Friday as markets digested news that the government plans to offer a new swap deal to the holders of defaulted debt. The benchmark peso-denominated bond fell 1.92% in price terms to ARS102 ($26.70), bringing the yield to 11.99%. The dollar-denominated Boden 2012 rose 0.47% in price terms to ARS318.50, to yield 12.13%. On Thursday, Economy Minister Amado Boudou said legislation will be sent to Congress on Monday that would exchange up to $20 billion in defaulted bonds. The bill would suspend a law that forbids the renegotiation of defaulted debt. To exchange the bonds, the government is planning to reopen a debt swap that was completed in 2005, though the terms of the new offer are expected to be worse. Investors will have to accept a discount of at least 65% of face value to participate in the new transaction, Boudou said, adding that the government would like to see at least 60% of the outstanding defaulted debt included in the reopening. Stocks fared poorly on Friday, in line with losses on Wall Street, which slumped due to declining commodities. Argentina's Merval Index slipped 0.58% to close at 2,295.88 points. The peso climbed to 3.8200 to the dollar from 3.8225 on Thursday. The Central Bank stepped into currency markets heavily throughout the week to prop up the greenback. The government bought dollars to sate strong demand for pesos as the dollar declines against most of the world's currencies and investors sought local currency to buy Argentine government debt.

Leaders from Germany's Center-Right Parties

Leaders from Germany's center-right parties on Saturday announced a raft of policies that will guide their new coalition government. Including some EUR24 billion in tax cuts and plans to extend the lifespan of Germany's nuclear power plants, the policies foresee a significant shift from the outgoing grand coalition Chancellor Angela Merkel's Christian Democrats shared with the center-left Social Democrats. The parties also agreed to extend the lifespan of nuclear power plans and move the responsibility for banking supervision to Germany's Deutsche Bundesbank central bank. Some key points of the agreement: TAXES: -Parties agreed on EUR24 billion in income tax cuts starting in 2011. -The coalition agreed on a simplification of tax brackets and to confront so-called cold progression, in which taxpayers end up in higher tax brackets even though their real, inflation-adjusted incomes aren't growing through pay raises. -Parties agreed to amend the business taxation system from Jan. 1, 2010, by easing companies' ability to deduct interest expenses and losses from their corporate tax bill. -Parties will explore ways to strengthen holdings in Germany; reforming rules for deducting losses and cross-border taxation of company profits among options to be explored. -Inheritance taxation will be changed by lowering the tax burden for siblings and their children and by amending rules to make the passing-on of businesses more "crisis-proof." -The allowance paid for children will be raised by EUR20 per child and the tax-free family allowance will be increased to EUR7,008 next year. BUDGET: -Tax revenues are to be used to help keep non-wage labor costs stable, by paying around EUR16 billion to the federal labor agency and around EUR4 billion to the public health-care system next year. -Parties agreed on eight "golden rules" for budget policy with the aim of limiting new debt and spending. The rules include more power for the cabinet when setting up the draft budget, implementing Germany's constitutional debt cap rule from 2011, committing to keep the rise in government spending below the rate of gross domestic product growth, and banning any extra spending on top of existing budget and financial plans. FINANCIAL MARKETS: -The Deutsche Bundesbank central bank will be put in charge of banking supervision, at the expense of financial services watchdog BaFin, which is currently sharing the oversight with the Bundesbank. -Parties will give priority to respecting the European Union's Stability and Growth Pact and respecting the independence of the European Central Bank and Bundesbank. -Parties aim to set stricter capital requirement rules for banks and establish regulation of all financial market products, actors and markets. -The coalition will call for changes in compensation for financial sector workers by linking compensation more strongly to the long-term success, and forcing pay cuts in a difficult economic situation. -Parties want to prevent the moral hazard of systemically crucial institutions by launching suitable legal instruments for a restructuring and winding-down procedure in order to either liquidate a systemic company of the financial sector that got into trouble in a market-sensitive way, or to stabilize it before it gets into insolvency. -The country's private equity is to be boosted by creating a "common attractive venture capital market" and abolishing "unnecessary hurdles" to the German REITs market. -Parties will examine whether to launch a unified and standardized securitization law to set a transparent standard. -Coalition will promote efforts to set up a European rating agency. ENERGY: -Parties agreed to extend the lifespan of Germany's 17 nuclear power plants, effectively abandoning a nuclear phase-out scheduled for 2021. The government will negotiate conditions of the extension with utilities, particularly on how windfall profits from keeping plans open can be spent. -Calling nuclear energy a "bridge technology," the parties preserved a ban on building new nuclear power plants in Germany and said nuclear power will remain in use until "renewable energy can reliably replace it." -Parties will aim to reduce carbon dioxide emissions to 40% below 1990 levels by 2020. -Within the next year, parties want to draw up new goals for the percentage of power to be drawn from renewable sources and those from traditional outlets. -Setting up a single electricity transmission grid network operator, or Deutsche Netz AG. LABOR MARKET: -The parties oppose a general minimum wage and will review existing minimum wages in specific sectors. They also advocate a legal ban on "immoral" wages, defined as one-third below average wages in a given sector. TRANSPORTATION: -The parties plan a step-by-step privatization of rail operator Deutsche Bahn AG "once capital market conditions support this." The also plan promoted greater independence for and increased competition among operators on the nation's railways. The current grand coalition government called off the planned partial privatization of Deutsche Bahn last autumn due to bad market conditions. HEALTH INSURANCE: -Injecting around EUR4 billion budget into the public health-care system next year and boosting competition in the system. -Setting up a commission that will work on a reform of the health fund, which pools fixed-rate health-insurance payments from employers and workers. For now, the fixed insurance premiums, currently set at 14.9% of workers' gross pay, will stay in place. But in future, insurers will have more leeway to set their own premium levels. -Keeping extra payments from individuals at 1% of income that insurers can demand if the insurers' costs resulting from medical treatment exceed their intake from the health fund.

Greenback ended on Thursday

Greenback ended on Thursday near the lows of the year across the board, with the exception of the Yen. Stocks fell in Asia and in Europe but in Wall Street equities rose posting important gains. The surge in stocks weakened the Dollar that moved away from intra-day highs and ended near the lows of the year.

Corporate earnings and an increase in the Leading Indicators helped stocks surge during the American session weakening the Dollar. EUR/USD fell to 1.4945 during the Asian session but from there started to rise at a slow pace and erased previous losses. The pair finished a few pips below 14-month high at 1.5025.

The ecPulse.com analysis team affirms: “The U.S stocks closed in a green zone due to strong optimism spread within the stock market as a result of cheerful and better-than forecasts earnings reported from huge and known U.S corporations such as Traveler's Cos. to Mc Donald's Corp, boosting hopes accordingly that the crisis is actually close to an end, whereas the DJIA managed to breach the 10,000 barrier to the upside.”

GBP/USD managed to recover after falling to 1.6485 (intra-day low). The pair approached to the resistance zone at 1.6640. USD/CHF peaked at 1.0125 during the European session but failed to hold and regained the downside. The pair fell almost a hundred pips from the highs of the day finding support at 1.0040, a few pips above yesterday lows.

Similar situation applies to currencies tied to commodities. Dollar rose sharply the first half of the day but then failed to hold and pullback below the opening level. AUD/USD tested levels below 0.9200 but finished the day at 0.9270. NZD/USD fell momentarily below 0.7500 but then recovered rising to 0.7600.

For the first time of the week the Dollar did not fall to fresh low for the year across the board.

The Yen continued to lose ground across the board, falling to a one-month low against the Dollar and Cable and to a 2-month low to the Euro.

Friday,Asian Shares Grew Higher

Asian shares were higher Friday after better-than-expected earnings boosted Wall Street, with Australian stocks in the lead. South Korea's Hynix Semiconductor though failed to get much of a lift from its third quarter report. Australia's S&P/ASX 200 was up 1.0%, with Japan's Nikkei 225 up 0.4% and Korea's Kospi Composite up 0.3%. New Zealand's NZX-50 was 0.3% higher. Dow Jones Industrial Average futures were up 20 points in screen trade. "Obviously there were some good results overseas," said Patersons senior private client adviser Chris Blair. "U.S. companies still need stronger revenue to back up the share price momentum, but the bulls are winning at this stage." Leading the charge in Sydney were Westpac, up 2.0% and BHP Billiton, up 0.8%. Retail conglomerate Wesfarmers jumped 5.3% after news that first quarter food & liquor sales rose 7.3% on the year, with total sales up 6.1%. But Woodside Petroleum fell 1.5% after third quarter production dropped 5.0% on year and sales declined 40%. It also suffered a significant setback to its efforts to secure gas supply for the expansion of its Pluto project, with two potential suppliers opting to funnel gas to a Chevron project instead. Shipping stocks were leading in Japan with the Topix marine transport subindex up 1.6%, helped by a higher Baltic dry index. "Earnings-related catalysts may lead the market today as well as exporters as worries over the strong yen are receding for now," said Yoshinori Nagano, senior strategist at Daiwa Asset Management. Mitsui O.S.K. rose 2.3% and Kawasaki Kisen gained 2.1%. Korean stocks were pulled higher by car makers, with Hyundai Motor rising 2.9%, while Kia Motors added 2.9% before its third quarter results later Friday. Hynix was only 0.5% higher after news the world's second-largest producer of computer memory chips by revenue swung to a net profit of KRW246.3 billion, versus a net loss of KRW1.67 trillion a year ago. The result was lower than expected - a Dow Jones Newswires poll of analysts had forecast a net profit of KRW352.9 billion. Still, "demand for dynamic random access memory chips will likely remain solid and corporate demand for PCs is expected to revive next year partly due to the (push) to replace old ones with (computers to take) Windows 7," said Lee Sun-tae at Meritz Securities. In New Zealand, trading volumes were described as healthy, though analysts said there were few cues. "It's a dull, drab market," Craigs Investment Partners broker James Porteous said. Leading the gainers was jewelry retailer Michael Hill International, rising 3.0%. PGG Wrightson fell 2.9% ahead of a capital raising, despite associate Pyne Gould late Thursday completing the second leg of a NZ$267 million capital raising. Better risk appetite was the theme in the foreign exchange market, with the euro briefly hitting its highest level since August 13 against the U.S. dollar, touching $1.5051. It was more recently at $1.5037, from $1.5031 late in New York. The single currency rose initially to Y137.61 against the yen - its best level since August 13 - before coming back to Y137.55, from Y137.20 in New York, with the U.S. dollar at Y91.50, from Y91.28. Dollar weakness extended to other currencies, with the British pound hitting $1.6676, its highest level since September 14, and Y152.56 against the yen, its best point since September 11. "In the mid- and long-term, the dollar's falling trend will likely remain intact," said Yuji Saito, Societe Generale's FX group head. Lead Japanese government bond futures were lower, at 138.36 points, down 0.02. Spot gold rose 40 cents from New York, to $1,060.20 a troy ounce. "Gold prices will continue to be influenced heavily by U.S. dollar movements, in our opinion," HSBC analyst James Steel said. HSBC currency strategists were targeting the euro to soon reach $1.5160, with gold as a result to remain well bid. LME three-month copper was $25 higher from the London kerb, at $6,610 a metric ton. Triland analysts said a pattern of copper rallying, then backtracking on profit-taking showed "a clear tension with participants not feeling comfortable with such a rally." Nymex front-month crude oil futures were up two cents at $81.21 a barrel on Globex.

Australian imports fell

A price index of Australian imports fell 3.0% in the third quarter of 2009 from the second quarter, the Australian Bureau of Statistics said Friday. The decrease in the import price index was mainly driven by the appreciation of the Australian dollar against all major trading currencies, as well as lower prices paid for general and industrial machinery and equipment, the bureau said. These were partly offset by rises in prices for petroleum, petroleum products, and related materials The price index for exports fell 9.6% in the third quarter from the second. The decrease in the export price index was mainly due to falls in prices received for coal, coke and briquettes, and for metal ores and metal scrap, the bureau said. The appreciation of the Australian dollar also contributed to the fall. The falls were partly offset by higher prices for nonferrous metals, petroleum and petroleum products. The export price index fell by 20.7% over the year to the third quarter, the largest annual decrease since the data were first reported in the third quarter of 1974, the bureau said.

Weakening Columbian Peso

The Colombian peso Thursday weakened ahead of the Central Bank's monetary meeting, to be held on Friday, as investors expect the board will take steps to limit the peso appreciation. The Colombian peso weakened to 1,916.60 pesos to the dollar, from COP1,895.6 on Wednesday. "Foreigners were the main sellers as they expect the bank may decide to put limitations on the entry of foreign capitals in the country to limit the demand for pesos," Julian Cardenas, a market analyst with local brokerage Corredores Asociados, said. Last week, Finance Minister Oscar Ivan Zuluaga said the Central Bank's seven-member board, where he sits, will discuss the possibility of taking measures to limit the peso appreciation. "With those comments and the market reaction they triggered, Zuluaga has left no choice to the bank but to start buying dollars," Cardenas said. The benchmark IGBC stock index fell 0.7%, to 11,008.88 points. Shares of state-controlled power company Isagen SA (ISAGEN.BO) fell 0.7%, to COP2,095, while the shares of state-controlled oil company Ecopetrol SA (ECOPETROL.BO) fell 1.3%, to COP2,635. On the debt market, meanwhile, the yield on the benchmark 2020 Colombian peso-denominated bond rose to 8.619% from 8.596% on Wednesday.

Ski Season Approaches

As the 2009/2010 ski season approaches, research from the Post Office has shown that the overall cost of skiing has fallen in France and the US.
Due to continued economic uncertainty, a weak pound, and the rise of airline fuel surcharges, the number of Britons taking skiing holidays has significantly fallen. In the season 2008/09 numbers fell to just over one million people, a 13% decrease on the previous season.
As a result of this some ski resorts, notably in France and the US, have cut the overall cost of their products and services in order to attract skiers to their resorts.
According to the Post Office Ski Resort Report 2009, which compared the projected costs of a six-day lift pass and ski equipment hire alongside essentials such as meals and alcohol, it found that combined costs will fall in certain resorts in France and the US by 11%.
Other countries, however, have increased their prices considerably – with Norway upping costs by 26% and Finland and Germany by 23%. The most expensive countries to ski in are Canada, Switzerland and the US, whilst the cheapest are Romania, Bulgaria, Slovakia, Slovenia, Italy and France.
France remains a good choice for many skiers, with a lift pass in the French resort of Courchevel costing £129.95, while a pass in the neighbouring Swiss resort of Verbier will cost nearly twice that, at £205.99.
A spokesperson for Alpine Elements, a company that specialises in high altitude ski holidays throughout the French Alps, said: “It’s good to see Courchevel trying to curb the effects of the economic downturn by enticing skiers with cheaper prices. The slopes are still there and the snow is still thick.”
Alpine Elements offer a variety of ski holidays to Courchevel and various other resorts throughout the French Alps. They also offer discounts for group ski holidays, ski lessons for beginners and skiing insurance cover.

$1.6 billion (£1bn) Net Income through Google

Google has reported a 7% rise in third quarter revenues, reporting a record $1.6 billion (£1bn) net income, compared to just $1.3bn for the same period in 2008.
Revenue for the quarter was $4.38bn, which was ahead of analysts’ expectations of around $1.3bn.
A large amount of revenue comes from inside the US, where Google is headquartered; however, UK revenue also contributed a healthy amount, with a percentage share of 13% for the quarter.
Eric Schmidt, Google CEO, said: “Google had a strong quarter – we saw 7% year-over-year revenue growth despite the tough economic conditions.
“While there is a lot of uncertainty about the pace of economic recovery, we believe the worst of the recession is behind us and now feel confident about investing heavily in our future.”
One of the big winners for Google in the three months to 30 September 2009 was its revenue through its partner sites, which through AdSense, raised $1.8bn, or 30% of total revenues, and Google-owned sites, which generated revenues of $3.96bn, or 67% of total revenues. These represent increases of 7% and 8% respectively compared to 2008.
Earlier this week, the search engine announced that Arthur Levinson has resigned from his position on Google’s Board of Directors with immediate effect. Levinson is also on the board of Apple, and reports suggest this is the reason for the announcement as the two companies have become increasingly competitive in recent years. Google CEO Schmidt, quit his role on the Apple board two months ago, citing similar reasons.
Google employs nearly 20,000 full-time workers across its worldwide base, and is highly regarded as the number one search engine globally.
Its shares rose by 20 points on the Nasdaq stock exchange today.

25% increase to the congestion charge along with London Travel Fares

The Mayor of London, Boris Johnson, has announced that London travel fares will rise in 2010, along with a 25% increase to the congestion charge.
Oyster card pay-as-you-go bus journeys are to rise from £1 to £1.20, the Oyster pay-as-you-go Zone 1 tube fare will increase from £1.60 to £1.80 and the price of a seven-day bus pass will jump from £13.80 to £16.60.
Overall, bus fares are to go up by 12.7% and Tube fares will rise by 3.9%. The Mayor said he had protected free and concessionary fares for London’s elderly, young people and those on low incomes – meaning that 40% of bus passengers will continue to travel free or at a substantial concessionary rate.
He also set out changes to the operation of London’s Congestion Charge Scheme, including plans to make it easier to pay and avoid penalty charge notices through the introduction of payment on account in 2010. However the standard charge of £8 will rise by 25% to £10.
Making clear that his approach to fares and investment would bring stability to TfL’s financial position, Mr Johnson said: “Nobody wants to make an announcement like this, especially when Londoners are feeling the effects of the recession. It is not a decision that I have taken lightly. Indeed, I have been persuaded of the need for fare rises only after ensuring that every efficiency possible, at least £5 billion in total, is being made at TfL.”
It is understood that the higher fares will raise an extra £125?million a year, and the increase in the congestion charge a further £15 million – but TfL will lose £50?million when the western extension is scrapped.
The cuts to services and changes to TfL priorities will save £1.36?billion over the next three years, however it is looking to achieve £5?billion of savings overall.
The price rises on public transport will take effect in January.