Saturday, August 26, 2006
Tuesday, August 15, 2006
Emerging market currencies face sell-off
Emerging markets have fared well this year, due to a combination of increased investor appetite for risk and strong fundamentals. Many emerging countries have also witnessed a rapid appreciation in their currencies, as foreigners pored money into direct and portfolio investments. As rates have risen in the developed world, however, many investors have begun to reevaluate the economics of such investments. In fact, the risk-return profile is changing to the extent that it may prove more efficient to invest money in lower-yielding, but safer American and European debt securities. The Financial Times reports:
“The market is only pricing in a 36 per cent chance of a rate rise in September…, so there is room for dollar upside, which would squeeze emerging markets.”
Source Forex blog
“The market is only pricing in a 36 per cent chance of a rate rise in September…, so there is room for dollar upside, which would squeeze emerging markets.”
Source Forex blog
Monday, August 14, 2006
Commentary: USD driven by rate differentials
Over the past 6 months, the Euro and Pound Sterling have risen steadily in value against the USD. Labor and market reforms are forcing European companies to become more competitive. Hence, the economies of Britain and the EU are finally beginning to show signs of life. While economic fundamentals have certainly contributed to currency appreciation, they must take a back seat to interest rate differentials in any analysis of currency markets. Economists reason that interest rate differentials represent a leading indicator for foreigner’s willingness to continue financing the US current account deficit. That is, if US capital markets can continue to offer foreigners attractive returns, then they will continue to park their savings in the US.
In details from FOREX BLOG
In details from FOREX BLOG
Friday, August 11, 2006
Wednesday, August 09, 2006
Don't Bank On SPR - Forbes.com
WASHINGTON, D.C. -
Don't look to the Strategic Petroleum Reserve to ease surging oil prices after the shutdown of BP's pipeline in Prudhoe Bay: If history is any guide, any release from the SPR will be too little, too late. Or it might not come at all.
The 700-million-barrel stockpile sitting in salt caves along the Gulf Coast has been used only three times since it was created in the wake of the 1973 Arab oil embargo. And it is unclear whether it has ever successfully mitigated an oil price shock.
Not surprisingly, markets greeted with a yawn assurances by energy czar Samuel Bodman on Monday that he would come to the rescue in the event of an oil shortage. After closing at a near record in nominal terms of $76.98 the day before, prices edged off just slightly but remained above $76, as officials suggested that Prudhoe Bay's reserves might be offline until February.
There is no reason the SPR couldn't have a major impact during a price shock. Its drawdown capacity of 4 million barrels of oil per day is roughly equal to the amount Iran adds daily to the world oil supply. With the stockpile releasing at full tilt, the government would be able to replace over a third of oil imports and add about 5.9% to the world's daily oil supply for roughly 163 days before the reserve ran dry, according to a study last year by economists Jerry Taylor and Peter Van Doren of the libertarian Cato Institute.
The problem is the government's shoddy management of the reserves. It has tended to buy oil as prices are rising and then hoard it in a time of crisis.
"It's a policy of buying high and selling never," says Taylor.
Don't Bank On SPR - Forbes.com
Don't look to the Strategic Petroleum Reserve to ease surging oil prices after the shutdown of BP's pipeline in Prudhoe Bay: If history is any guide, any release from the SPR will be too little, too late. Or it might not come at all.
The 700-million-barrel stockpile sitting in salt caves along the Gulf Coast has been used only three times since it was created in the wake of the 1973 Arab oil embargo. And it is unclear whether it has ever successfully mitigated an oil price shock.
Not surprisingly, markets greeted with a yawn assurances by energy czar Samuel Bodman on Monday that he would come to the rescue in the event of an oil shortage. After closing at a near record in nominal terms of $76.98 the day before, prices edged off just slightly but remained above $76, as officials suggested that Prudhoe Bay's reserves might be offline until February.
There is no reason the SPR couldn't have a major impact during a price shock. Its drawdown capacity of 4 million barrels of oil per day is roughly equal to the amount Iran adds daily to the world oil supply. With the stockpile releasing at full tilt, the government would be able to replace over a third of oil imports and add about 5.9% to the world's daily oil supply for roughly 163 days before the reserve ran dry, according to a study last year by economists Jerry Taylor and Peter Van Doren of the libertarian Cato Institute.
The problem is the government's shoddy management of the reserves. It has tended to buy oil as prices are rising and then hoard it in a time of crisis.
"It's a policy of buying high and selling never," says Taylor.
Don't Bank On SPR - Forbes.com
Tuesday, August 08, 2006
Fed Takes A Breath - Forbes.com
The U.S. Federal Reserve held its key interest rate unchanged at 5.25% at its Open Market Committee meeting today, but left the door open for possible future increases.
Stocks moved lower on the news, as concern that the Fed may continue raising rates in the future seemed to trump the non-action this time around. The Dow was down 24 points, and the Nasdaq was off 7 points in late afternoon trading, reversing moderate gains earlier in the day.
In its accompanying statement, the central bank said that while inflation readings have been elevated in recent months, pressures "seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand."
But while acknowledging continued risks of higher core inflation, which excludes volatile food and energy costs, the Fed repeated the mantra from its June meeting, asserting that "any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth."
Article in detail from Forbes.com
Stocks moved lower on the news, as concern that the Fed may continue raising rates in the future seemed to trump the non-action this time around. The Dow was down 24 points, and the Nasdaq was off 7 points in late afternoon trading, reversing moderate gains earlier in the day.
In its accompanying statement, the central bank said that while inflation readings have been elevated in recent months, pressures "seem likely to moderate over time, reflecting contained inflation expectations and the cumulative effects of monetary policy actions and other factors restraining aggregate demand."
But while acknowledging continued risks of higher core inflation, which excludes volatile food and energy costs, the Fed repeated the mantra from its June meeting, asserting that "any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth."
Article in detail from Forbes.com
Wednesday, August 02, 2006
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