Yuan slips after state bank selling blocks advance

June 23, 2010 By Leave a Comment

SHANGHAI, June 22 (Reuters) – The Chinese yuan slipped on Tuesday as big state-owned banks heavily bought dollars, a move that suggests the central bank has adopted a new strategy to control the pace of yuan gains.

The yuan jumped initially after the People’s Bank of China set the mid-point start to trade at a surprisingly strong 6.7980 CNY=SAEC, little changed from Monday’s close and catching market players off guard who had thought it would try to nudge the currency lower after the previous day’s surge.

The heavy dollar buying quickly drove the yuan well off a low of 6.7900 — the lowest since the 2005 revaluation — and up as high as 6.8229 on the day, a drop of 0.37 percent. The yuan last traded at 6.8189 CNY=CFXS.

On Monday, the currency posted its biggest one-day rise since the revaluation, rising nearly half a percent and almost touching the upper it of its daily trading band on either side of the mid-point.

Some traders believe the buying by state-owned banks was on behalf of the PBOC to avoid direct market intervention, as it had often done in the post-revaluation appreciation phase and de facto dollar peg of the past two years.

By letting state-owned banks buy dollars, the PBOC is effectively limiting the market’s ability to short dollar/yuan — especially because banks are not allowed to hold short positions overnight in the spot currency market.

“It appears a new strategy,” said a senior dealer at a European bank in Shanghai. “The central bank needn’t intervene in the market, but it can still keep the pace of yuan appreciation under control via a control of supply and demand.”

Because the state-owned banks were scooping up dollars at a wide variety of levels, it suggested that they were not trying to defend the yuan at a certain level, traders said.

But since the peg to the dollar was ditched over the weekend, the PBOC appears to be trying to foster much more two-way trade within the daily trading band, seeking to get banks and companies used greater volatility and hedging currency risks.

During the 2005-2008 managed float against a trade-weighted currency basket and subsequent peg to the dollar, the PBOC often squashed intraday volatility via direct intervention, guidance through the mid-point and dollar purchases by state-owned banks.

Now it appears to be backing away from direct intervention unless the extremes of the daily trading band are tested.

The PBOC has made clear that it would not allow the yuan to appreciate sharply in its statements over the weekend announcing the latest reforms of the yuan, ruling out a one-off revaluation. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Full coverage [ID:nCHINATAKE] PDF on yuan: r.reuters.com/pys23m Yuan microsite: china.thomsonreuters.com/yuan/ Yuan graphics: r.reuters.com/byq23m Insider TV

-- Yuan to rise before G20 link.reuters.com/jes92m

-- Yuan shows confidence link.reuters.com/hyc33m

-- Some see delay tactic link.reuters.com/xad33m ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

BASKET

Despite the announced intention of controlling the pace of yuan appreciation against the dollar, the PBOC showed it was backing its words with deeds by allowing the yuan to rise against European currencies on Tuesday.

The PBOC set the yuan’s mid-point higher against the euro EURCNY=SAEC, at 8.3816, and against sterling GBPCNY=SAEC after the currencies weakened overnight. That set the tone for the yuan to trade higher against the euro EURCNY=CFXS at 8.3764 at midday on Tuesday from a close of 8.4325 the previous day.

The yuan can rise up to 3 percent against currencies besides the dollar.

“The question is how far the yuan can go,” said a senior dealer at a North American bank in Shanghai. “We believe the central bank must have some limits, which may gradually become clear over time after the G20 summit.”

Offshore dollar/yuan forwards rose back up after initial falls that had implied more yuan appreciation, buoyed by the dollar/yuan mid-point setting.

Some players in the NDF market have turned cautious about shorting dollar/yuan, worried that this week’s yuan move was done primarily to appease critics before the G20 summit late this week, and later moves may be more subdued.

Three-month dollar-yuan non-deliverable forwards (NDFs) CNY3MNDFOR= were quoted at 6.7380, implying a yuan rise of 0.89 percent after they fell to a low of 6.7080 in early trade.

One-year NDFs CNY1YNDFOR= rose back to 6.6300 after hitting an initial low of 6.5970, trimming implied appreciation to 2.53 percent from 3.05 percent the previous day. (Editing by Eric Burroughs & Jan Dahinten)

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‘Peak debt’ approaching as house prices outstrip incomes

March 26, 2010 By Leave a Comment

The growth in household debt and house prices in Australia is unsustainable and the nation must at some stage hit “peak debt’, according to a senior partner in one of the world’s biggest management consultancies.

“In the past ten years our household debt has grown much faster and to a much higher level than it is in places like the the UK and the US where we tend to look at them and say, ‘my goodness, look at that incredibly high level of household debt’,” Michael Rennie, managing partner of McKinsey and Co for Australia and New Zealand, told ABC Radio’s PM program.

“You have to ask yourself, ‘when does it become a problem?’”

Asked about predictions that house prices would double this decade, he said:

“They’re saying they are going to double in the next ten years because of supply and demand: that there’s a lack of supply, and demand is going to increase because of the increase in population in the cities, etcetera.

“But you have to ask yourself, if you look at the research that’s been done over the past couple of years by APRA and others on the percentage of households paying more than 30 per cent [of gross household income on mortgage repayments] which is the comfort level for their mortgages, and incomes aren’t going to double, you’ve got to say somewhere along the line that is all not going to add up.

“We hit peak debt at some point. We hit a level that is well above people’s sustainability.”

A global study by McKinsey and Co is also predicting that the world faces at least five more years of constrained growth as economies “deleverage”, or unwind excessive levels of debt.

Although China will partially insulate Australia, we will not be immune, and it will hit exports.

“About 21 per cent of our goods exports and about 27 per cent of our services exports in the past five years have gone to countries that are going to go through this deleveraging in the next five years,” Michael Rennie says.

His comments come as new estimates from the ABS show a surge in Australia’s population.

More than 450,000 people were added to the population, which grew by 2.1 per cent last year to almost 23 million.

Economists say the rapid population growth will underpin growth in GDP and bolster house prices.

But Michael Rennie argues that, even with the population growth, it is impossible for house prices to keep outstripping incomes.

The growth in population will also add to overall demand and could encourage the RBA to lift interest rates.

“We can imagine this scenario where there is tightening monetary policy ….meaning that people are going to pay more for their mortgages; interest rates are going to go up,” he explained.

“At the same time, you have a supply and demand issue with housing which means the price of houses is going to go up.

“A the same time, incomes are not going to go up at the same level and, at some time, all those three are going to come together and it is not going to be sustainable.”

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RBA warns of housing, worker inflation risk

March 11, 2010 By Leave a Comment

The Reserve Bank has said one of Australia’s greatest challenges in the years ahead will be to boost the supply of new houses and skilled workers, so the economy can grow without sparking inflation.

In a speech to an urban development conference in Sydney, the Reserve Bank’s assistant governor, Philip Lowe said Australia has entered the current period of expansion with considerably less spare capacity than was originally thought to be the case.

“Elsewhere, the challenge is to get private demand to grow on a sustainable basis, so that it can catch up with the supply potential of the economy,” Dr Lowe said.

“In contrast, for Australia, the main main task is to expand the supply side of the economy so that demand can grow solidly without causing inflation to rise.”

Dr Lowe says if the mix of housing being built does not change to suit the growing population, a greater share of GDP may need to be devoted to housing.

He says the need for more housing also raises the issue of a potential worker shortage.

“If housing construction is very strong, at the same time the resources sector is expanding, there will obviously be competing demands for a range of skilled workers and specialised services,” Dr Lowe said.

“Managing these competing demands and ensuring the adequate supply of workers with appropriate skills is a significant challenge for us.”

Dr Lowe added that Australian house prices could rise even further and drive a greater crisis in affordability, unless the supply of new homes is addressed.

He says bottlenecks in the construction of new homes are curbing supply and increasing price pressures.

“Further adjustments in housing prices and rents are likely to occur to balance the supply and demand,” he said.

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Centre to revive closed fertilizer units

March 6, 2010 By Leave a Comment

New Delhi, Mar 5 (ANI): The Union Government on Friday informed the Rajya Sabha that it would explore the feasibility of revival of closed public sector fertilizer units of Hindustan Fertilizer Corporation Ltd. (HFCL) and Fertilizer Corporation of India Ltd (FCIL).

Replying to a question, Union Minister of State for Chemicals and Fertilisers Srikant Kumar Jena said the government is also looking for availability of natural gas, to meet the emerging demand production gap of urea in the country.

“An Empowered Committee of Secretaries (ECOS) has been constituted with the mandate to evaluate all investment options for revival of the closed units of FCIL/HFCL and to make suitable recommendations for consideration of the Government,” Jena said.

“The ECOS has considered various possible investment options for revival of each of the closed units and have finalized its recommendations regarding the suitable options. The recommendations of ECOS are under consideration of the Government,” he added.

The revival of closed plants is likely to reduce the supply and demand gap regarding availability of urea in the country.

As regards prices of urea to the farmers, Jena said urea is made available to farmers at same maximum retail price irrespective of imported or indigenously produced. (ANI)

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NTPC reports 5.56% net profit; plans Rs. 17,700 capital expenditure in 2009-10

April 9, 2009 By 1 Comment

According to the Wednesday announcement from National Thermal Power Corporation (NTPC), the company’s year-on-year net profit figures for the fiscal ending March 2009 rose 5.56 percent, after deducting Rs. 1,400 crore for the employees’ wage revision in 2008-09.

Putting for the precise figures at the annual press briefing on Wednesday, NTPC Chairman and Managing Director, R. S. Sharma, told reporters: “NTPC’s profit after tax for 2008-09 is Rs. 7,827.4 crore against Rs. 7,414.80 crore in the previous fiscal. We made a provision of Rs. 1,400 crore for the wage revision announced recently otherwise our profit after tax would have crossed the Rs. 8,000-crore-mark!”

The state-owned utility, which supplied 29 per cent or 206.94 billion units of the total electricity generated during 2008-09, has reportedly planned a capital expenditure of Rs. 17,700 crore in 2009-10. The company also intends raising a Rs. 8,500 crore loan from a public sector bank, as well as importing 12.5 million tonnes of coal to improve the domestic supply and demand equation.

Outlining the NTPC borrowings during the current fiscal, Sharma put the figures at Rs 11,330 crore, which the company would be spending for upgrading its capacity by 3,300 MW. In fact, during the ongoing Five-Year Plan period – from 2007 to 2012 – NTPC is looking at a capacity addition of nearly 22,430 MW.

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ROUNDUP: Bolivian president defends, chews coca leaf at UN drug meet

March 12, 2009 By Leave a Comment

Vienna – Bolivian President Evo Morales on Wednesday chewed a coca leaf at a United Nations drug conference in Vienna, underscoring his view that the plant should not be on the UN list of narcotic substances.

Morales was speaking at a conference of the UN Commission on Narcotic Drugs, which is expected to adopt an action plan Thursday to tackle the global drug problem in the coming decade, against the backdrop of limited progress over the last 10 years.

“It’s not a drug, it’s a medicine,” the president said, holding up a coca leaf, which he put into his mouth minutes later.

The leaves should be removed from the international list of narcotic substances, while forms of cocaine should be included instead, Morales told reporters.

Under the UN Single Convention on Narcotic Drugs, coca leaf chewing should have been banned by 1989 in all countries.

While Bolivia would continue to limit coca plant farming, Morales also said that the traditional plant “represents the culture of peoples in the Andean region” and has been used for 5,000 years, to treat ailments such as altitude sickness.

Bolivia’s president, who comes from an indigenous family, drew comparisons between himself and Barack Obama, the first black president of the United States, expressing hope that Obama would help decriminalize the coca leaf and would help end the zero-production policy.

The action plan to be adopted in Vienna calls on countries to find a better balance between measures to curb supply and demand, for example by strengthening health care services.

UN goals adopted in 1998 to significantly reduce drug supply and demand by 2008 “have been attained only to a limited extent,” the draft of the action plan said.

Taking a larger view of history, the head of the UN Office on Drugs and Crimes (UNODC) noted Wednesday that there had been large improvements since 1909, when he first international conference to control drugs met in Shanghai.

Since then opium production has fallen by 75 per cent, UNODC Executive Director Antonio Maria Costa said.

On Tuesday, the European Commission issued a report that painted a bleak picture of global drug policy, saying it had “no more than a marginal positive influence” in the past decade, as drug prices fell and opium production grew.

One of the sticking points regarding the action plan is whether to include measures for so-called harm reduction, such as providing substitution drugs or needles to addicts. While non-governmental groups support the concept, most UN members are opposed, diplomats said. (dpa)

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UN members meet to discuss global drug policies

March 11, 2009 By Leave a Comment

UN members meet to discuss global drug policies Vienna – A United Nations meeting to discuss policies for tackling the global drug problem in the coming decade began Wednesday in Vienna against the backdrop of limited progress over the last 10 yeras.

The high-level meeting of the United Nations Commission on Narcotic Drugs is set to adopt an action plan Thursday that calls on countries to find a better balance between measures to curb supply and demand, for example by strengthening health care services.

UN goals adopted in 1998 to significantly reduce drug supply and demand by 2008 “have been attained only to a limited extent,” the draft of the action plan said.

Among the delegates at the conference was Bolivian President Evo Morales, who was expected to outline his country’s policy of allowing farming of coca leaves, while fighting cocaine producers and traffickers.

On Tuesday, the European Commission issued a report that painted a bleak picture of global drug policy, saying it had “no more than a marginal positive influence” in the past decade.

Despite increased anti-drug efforts, drug prices have fallen by up to 30 per cent in Western countries since 1998, while opium production in Afghanistan has increased sharply since 2006, the report said. (dpa)

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