FOREX-Dollar soft on recovery question, euro pauses

July 6, 2010 By Leave a Comment

TOKYO, July 5 (Reuters) – The dollar held steady near a two-month low on Monday and the euro paused after last week’s boost from unwinding of short and leveraged positions, with traders and analysts seeing scope for it to squeeze a bit higher.

With attention turning to a slowdown in the United States and away from the euro zone’s banking and government debt woes, analysts said the next upside target for the euro was a May reaction high at $1.2673 EUR=.

Leveraged trades funded in the euro, be it long dollar, commodity currencies or emerging markets, were being cut, while at the same time the euro selling seen in April and May looked to be exhausted for now.

“I’m not seeing money flooding back into euro on a broad basis. You really have to describe it as exhaustion,” said Greg Gibbs, FX strategist at Royal Bank of Scotland in Sydney.

The question for markets at this point, with concern that the U.S. recovery was losing steam, was what should they buy.

“The fear of maybe not necessarily double-dip but certainly a very long period of low employment growth and very low rates is definitely playing into the markets’ view,” Gibbs said.

The euro EUR= eased 0.2 percent to $1.2540, with support seen around its 55-day moving average, currently near $1.2530. Last week, the euro gained 1.5 percent against the dollar, reversing a loss from the previous week and gaining greater distance from June’s four-year low at $1.1876 on trading platform EBS.

The euro faces resistance near $1.2595, the bottom of the cloud on daily Ichimoku charts, and then near $1.2620, a 38.2 percent retracement of its drop from its March high near $1.3820 down to its four-year low.

The euro’s rise late last week had stalled at $1.2613, just short of that retracement level.

Jonathan Cavenagh, currency strategist at Westpac in Sydney, said leveraged trades funded in euro were being cut and the low level of yield on the U.S. 10-year Treasuries suggested the euro should be trading higher.

U.S. yields have fallen sharply after a slew of soft U.S. economic numbers suggested recovery would be tepid. The 10-year note yield US10YT=RR has fallen below the psychological 3 percent mark, trading at 2.98 percent.

Friday’s monthly jobs report showed the economy shed 125,000 jobs in June, while private payrolls rose less than expected. Overall employment fell for the first time this year as thousands of temporary census jobs ended.

The data followed a raft of weak reports that suggested consumer spending, housing and factory activity were moderating. [ID:nN01165161]

The dollar lost ground last week before the data and on Friday the dollar index .DXY hit its lowest level in nearly two months at 84.132.

By Monday, it had steadied at 84.495, up 0.1 percent from late U.S. trading on Friday, with short-term support seen around 83.20, roughly a 38.2 percent retracement of the index’s move from a low of 74.17 in November to a high near 88.71 in June. Trade was quiet, with U.S. markets closed for a holiday.

The dollar edged up 0.2 percent against the yen to 87.92 yen, pulling further away from a seven-month low of 86.96 yen set last week, with some talk of dollar buying by Japanese importers.

But it lost 1.8 percent against the yen last week as U.S. yields fell, and traders said there was talk of options triggers below 85 yen. The dollar hasn’t fallen below 85 yen since November last year when it hit a 14-year low at 84.82 yen.

Data from the Currency Futures Trading Commission showed net long yen positions jumped in the week to June 29. The value of the dollar’s net long position slipped to about $9.5 billion in the week ended June 29 from $12.2 billion in the prior week. (Additional reporting by Anirban Nag and Reuters FX analyst Krishna Kumar in Sydney, Rika Otsuka and Masayuki Kitano in Tokyo; Editing by Chris Gallagher)
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FOREX-Dollar soft on recovery question, euro pauses

July 6, 2010 By Leave a Comment

TOKYO, July 5 (Reuters) – The dollar held at its lowest in nearly two months on Monday and the euro paused after last week’s boost from unwinding of short and leveraged positions, with traders and analysts seeing scope for it to squeeze a bit higher.

With attention turning to a slowdown in the United States and away from the euro zone’s banking and government debt woes, analysts said the next upside target for the euro was a May reaction high at $1.2673 EUR=.

Leveraged trades funded in the euro, be it long dollar, commodity currencies or emerging markets, were being cut, while at the same time the euro selling seen in April and May looked to be exhausted for now.

“I’m not seeing money flooding back into euro on a broad basis. You really have to describe it as exhaustion,” said Greg Gibbs, FX strategist at Royal Bank of Scotland in Sydney.

The question for markets at this point, with concern that the U.S. recovery was losing steam, was what should they buy.

“The fear of maybe not necessarily double-dip but certainly a very long period of low employment growth and very low rates is definitely playing into the markets’ view,” Gibbs said.

The euro EUR= eased 0.2 percent to $1.2542, with near term support seen around its 55-day moving, currently at $1.2531. Last week, the euro gained 1.5 percent against the dollar, reversing a loss from the previous week and gaining greater distance from June’s four-year low at $1.1876.

Traders also said talk of repatriation by European banks helped lift the euro.

Jonathan Cavenagh, currency strategist at Westpac in Sydney, said leveraged trades funded in euro were being cut and the low level of yield on the U.S. 10-year Treasuries suggested the euro should be trading higher.

U.S. yields have fallen sharply after a slew of soft U.S. economic numbers suggested recovery would be tepid. The 10-year note yield US10YT=RR has fallen below the psychological 3 percent mark, trading at 2.98 percent.

Friday’s monthly jobs report showed the economy shed 125,000 jobs in June, while private payrolls rose less than expected. Overall employment fell for the first time this year as thousands of temporary census jobs ended.

The data followed a raft of weak reports which suggested consumer spending, housing and factory activity were moderating. For more details, click [nN01165161].

The dollar lost ground last week before the data and on Friday the dollar index .DXY hit its lowest level in nearly two months at 84.132.

By Monday, it had steadied at 84.499, with short-term support seen at around 83.20, roughly a 38.2 percent retracement of the index’s move from a low of 74.17 in November to a high of 88.71 in June. Trade was quiet, with U.S. markets closed for a holiday.

The dollar edged up against the yen, pulling further away from a 7-month low of 86.96 yen set last week, with some talk of dollar buying by Japanese importers.

But it lost 1.8 percent against the yen last week as U.S. yields fell, and traders said there was talk of options triggers below 85 yen. The dollar hasn’t fallen below 85 yen since November last year when it hit a 14-year low at 84.82 yen.

Data from the Currency Futures Trading Commission showed net long yen positions jumped in the week to June 29. The value of the dollar’s net long position slipped to about $9.5 billion in the week ended June 29, from $12.2 billion in the prior week.

The Australian dollar AUD=D4 and the New Zealand dollar NZD=D4 edged up slightly against the greenback.

But they still looked vulnerable after losing almost 4 percent last week, with sentiment hurt by weekend news that China’s non-manufacturing PMI had eased below 60 in June, following manufacturing surveys also showing expansion slowing. (Additional reporting by Anirban Nag in Sydney and Rika Otsuka in Tokyo; Editing by Joseph Radford)

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Jobs key to U.S. housing recovery -study

June 15, 2010 By Leave a Comment

June 14 (Reuters) – The U.S. labor market will hold the key to a recovery in the hard-hit housing sector, according to a Harvard University report released on Monday.

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Record high foreclosures and a high jobless rate both pose significant challenges to the housing market, but some recovery in labor markets and record low mortgage rates could partly overcome other pressures, said the study from the Joint Center for Housing Studies at Harvard.

“If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound,” Eric Belsky, executive director of the center, said in a statement.

“Right now, economists expect the unemployment rate to stay high, but if employment growth surprises on the upside or downside, housing numbers could too.”

The researchers noted that homeowners would feel poorer with real household wealth declining on a per household basis to $486,600 from $503,500 over the past 10 years, in “the lost decade.” Foreclosures have reduced some mortgage debt but the level of debt relative to equity still started 2010 at a record 163 percent, the report said.

Despite falling home prices, loan modifications, and softening rents, the share of borrowers with severe housing cost burdens climbed, it said. (Reporting by Al Yoon; Editing by Leslie Adler)

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U.S. jobless claims fell 10,000 last week

June 4, 2010 By Leave a Comment

June 3 (Reuters) – The number of U.S. workers filing new applications for unemployment insurance fell as expected last week, government data showed on Thursday, but the number of people still receiving benefits unexpectedly rose to its highest level in nearly two months.

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Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 453,000 in the week ended May 29, the Labor Department said.

Analysts polled by Reuters had expected claims to fall to 450,000 from the previously reported 460,000, which was slightly revised up to 463,000 in Thursday’s report.

The four-week moving average of new claims, considered a better measure of underlying labor market trends, rose 1,750 to 459,000.

A Labor Department official said there were no special factors affecting the report. The claims data has no impact on the government’s closely watched employment report for May due on Friday as it falls outside the survey period.

Nonfarm payrolls probably increased 513,000 last month, buoyed by hiring for the decennial census, after a 290,000 increase in April, according to a Reuters survey. That would mark five straight months of job gains.

Although the economy has now grown for three straight quarters following the worst downturn since the 1930s and the recovery is broadening, stubbornly high unemployment is eroding President Barack Obama’s popularity.

It threatens to damage the Democrats at the midterm congressional elections in November.

While other indicators support views the labor market recovery is firming, claims for jobless benefits remain above levels usually associated with sustainable employment growth.

The number of people still receiving benefits after an initial week of aid unexpectedly rose 31,000 to 4.67 million in the week ended May 22, the highest since early April, the Labor Department said. The level was above market expectations for 4.60 million.

The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, was unchanged at 3.6 percent for a seventh straight week. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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UPDATE 1-Time to consider rate hikes nearing-Fed’s Lockhart

June 4, 2010 By Leave a Comment

June 3 (Reuters) – The U.S. economy is almost strong enough to allow the Federal Reserve to begin thinking about raising interest rates, Atlanta Fed President Dennis Lockhart said on Thursday.

While he noted unemployment would likely remain elevated for some time, Lockhart said the U.S. central bank should not wait too long before beginning to tighten the reins.

“The time is approaching when it will be appropriate to consider recalibrating interest rate policy. I do not believe that time has yet arrived,” Lockhart told .

“As the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed to promote recovery and will become inconsistent with maintaining price stability.”

In response to the most severe financial crisis in generations, the Fed not only slashed interest rates effectively to zero but also undertook a host of emergency measures such as buying up Treasury and mortgage bonds.

Lockhart’s comments mark a significant change in tone for the regional Fed president, who has been among the most dovish on the central bank’s policy in recent months. They suggest firmer growth in the United States is catching the attention of Fed policymakers, despite the renewed risks to the outlook from the turmoil surrounding European debt markets.

“Consumer activity over the last few months has exceeded the expectations of analysts,” said Lockhart, who is not a voting member this year on the Fed’s policy-setting Federal Open Market Committee. “Business investment in equipment and software has been surprisingly strong.”

Indeed, U.S. gross domestic product has been rising since last summer, expanding 3.0 percent in the first quarter on an annualized basis.

Still, he warned the recovery would be uneven. In particular, weak employment growth would likely prevent rapid rises in incomes, restraining consumers’ ability to spend.

In this context, Lockhart said inflation was not a major concern, pointing to a recent slowdown in consumer prices and broad stability in inflation expectations.

He said turbulence in Europe added to uncertainty in financial markets, but did not appear very concerned about the possibility of a spillover into the United States.

Lockhart sees the unemployment rate, which currently is hovering just below 10 percent, receding only gradually. But that does not mean official borrowing costs can stay near zero indefinitely.

“I’m very concerned about unemployment, and certainly employment trends should be a critical consideration in setting policy,” he said. “But I accept that good policy, even in circumstances of unacceptable levels of unemployment, may incorporate higher interest rates.”

This view moves him closer to Thomas Hoenig, president of the Kansas City Fed, who has been saying for months that the Fed’s vow to keep interest rates low for an “extended period” might be counterproductive.

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CEO report indicates solid industry recovery

March 23, 2010 By Leave a Comment

A poll of Australian chief executives shows growth in the country’s manufacturing, construction and services sectors is expected to be reasonably solid, but uneven in 2010.

The result is contained in the latest CEO survey, Industry in Recovery Mode in 2010, conducted by the Australian Industry Group and Deloitte.

An improvement was expected across all three industries, with particular strength in the services and manufacturing sectors.

The survey also found improving consumer confidence in incomes growth and employment prospects, as well as rising household wealth and exposure to strong growth in China, would drive growth this year.

But the fading effects of the Federal Government’s stimulus and the impact of higher interest rates were likely to hit the construction sector particularly hard.

On average, manufacturers were anticipating a 5.6 per cent increase in the nominal value of sales in 2010 to about $415 billion.

Sales in the services sector were set to rise 6.6 per cent and construction sales were forecast to grow by 2.5 per cent.

Employment in the manufacturing industry was expected to rise 2.9 per cent, service sector employment was due to increase by 2.3 per cent, and the construction sector was set for employment growth of just 0.5 per cent.

Those employers surveyed said the possible re-emergence of skills shortages was a real worry, as the economy returns to growth.

The chief executive of the Australian Industry Group, Heather Ridout says the economy looks set to consolidate this year, but the rebound won’t be as strong as those that occurred after previous downturns.

“Despite the stronger sales and employment expectations, investment trends across these sectors remain soft and conservative,” she said.

“The challenges for policy and for business will be to strengthen the recovery while addressing the ongoing requirement to build on the foundations of longer-term growth.”

The manufacturing partner for Deloitte, Damon Cantwell says 2010 would provide businesses with a range of opportunities to make up ground.

“While 2009 was characterised as a year founded on survival, 2010 offers real opportunities for growth,” he said.

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Employment expected to remain steady

March 12, 2010 By Leave a Comment

Most economists are expecting unemployment in Australia to remain steady at 5.3 per cent.

The Bureau of Statistics figures for February are released on Thursday morning at 11:30am (AEDT).

A survey of 25 economists by Bloomberg shows the average forecast is for 15,000 extra jobs to have been created last month.

That would be a slow-down in employment growth, after the creation of nearly 53,000 jobs in January, when the unemployment rate declined from 5.5 to 5.3 per cent.

Spiros Papadopoulos, a senior economist with the National Australia Bank, says that scale of job-creation cannot be repeated every month.

“Having had such strong employment growth over the past five months, and we’re talking about growth in the order of almost 200,000 jobs since August of last year, we expect that the figures will show that there was just some stabilisation in the level of employment in February,” he said.

Mr Papadopoulos says employment growth has been outpacing economic growth for several months.

“Given how much employment growth we’ve had, and given the pace of growth in the overall economy at the moment, we just can’t continue to see employment growth of 40-50,000 a month for the next five or six months,” he said.

“At some point it has to slow, and we believe that February is the most likely timing, given the very big 52,000 increase that we had in January.”

Economists will also be looking at the change in total hours worked, which fell one per cent in January, despite the increase in jobs.

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