Crude Oil - Economic Data Lowers Demand for Crude

The price of Crude Oil was significantly lower yesterday as poor U.S. housing data and a strong Dollar weighed on the commodities market. Traders took the information as a pullback to economic growth and a sustained economic recovery, thereby reducing demand for the commodity. Oil fell below a significant support line of $66 and finished the day down at $65.85 from $68.36. Yesterday's 3.6% drop in price was the second day in a row for a pullback in Crude prices. The valuation seems to be taking hints from reported economic data. If this is the case, traders will be wise to follow today's U.S. Core Durable Goods Orders and New Home Sales numbers. We could see Crude Oil trading at $65 by the end of today.

USD - Dollar Rebounds on Return to Risk Aversion

The Dollar came roaring back yesterday against its rivals as poor housing data and falling equity markets sapped traders appetite for risk. Existing home sales numbers were released to an unspectacular reception with the numbers failing to reach their expected targets. Only 5.10M existing homes were sold as compared with economists forecasts of 5.36M. This sent traders running from higher-yielding currencies and into long Dollar positions. Yesterday's trading was notably volatile, with the EUR/USD climbing in early European trading hours to a daily high of 1.4789, only to end the day at 1.4650 from 1.4721. Driving the early appreciation for the EUR was a lower number of U.S. Unemployment Claims. These gains were later eroded after less than spectacular housing data was released. Against the Yen the Dollar was down as traders looked for the less risky currency. The pair closed at 90.82 from 91.30.Looking ahead to today's trading, we can expect further volatility of the Dollar. The Group of Twenty (G20) meets for a second day today. Comments made by the global heads of finance can move the market fast so traders should be aware of their impact. U.S. New Home Sales data is due at 2:00pm GMT time. If the New Home Sales is anything like the Existing Homes Sales data from yesterday, the EUR/USD could continue its decline for the second day in a row to finish the week near the 1.4550 mark.

Fundamental Outlook

The euro weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4525 level and was capped around the $1.4645 level. European Central Bank officials spoke about the economy today with member Constancio noting “There is still great uncertainty regarding the depth and sustainability of a global recovery, which has led some analysts to say it might be slower than is desirable.

Forex Analysis - The USD Remains Pressured on U.S Interest Rate Prospects

The U.S. currency may be headed for a quarterly decline against 14 of 16 major counterparts before report this week forecast to show American employers cut fewer jobs, boosting demand for higher-yielding assets. Although the greenback posted small gains against major rivals Tuesday, edging higher on the Japanese currency, the currency may reverse its earlier gains on speculation a Federal Reserve official will reiterate today that record-low Interest Rates will be unchanged for an extended period.

Forex News Trading

Traders on the Foreign Exchange market, Forex market for short, can potentially make thousands of dollars based on the volatility and fluctuations of a country’s currency. To better themselves and have a leading advantage over other traders, some Forex traders and investors participate in a practice known as news trading. The risks are very high, but the potential gains can be worth thousands of dollars and many traders and investors use this technique.
The technique of news trading is quite simple. It is the trading of foreign currency immediately before or after an important economic news announcement. After such announcements, there is a high possibility that market prices will fluctuate, either for the better or worse, depending on the announcement. For example, if the U. S. Federal Reserve announces another increase of the interest rate, many traders might invest in the U.S. dollar as it is expected that its value will appreciate. The main advantage of news trading is the potential for a country’s currency to make huge gains or losses in very little time. Within minutes of an economic announcement, a country’s currency can gain or lose one hundred points almost instantly. The potential of huge profits attracts Foreign Exchange traders and investors, however there are various risks associated with news trading.
Like any investment, there is always a risk, and news trading on the Forex market is no different. Though the potential profits are huge, the losses are also equally as large. The dangers of news trading come from the fact that a trade must be made quickly or else you are going to lose. If you are caught on the bad side of a trade, your money will be gone quicker than you can blink your eye. You will lose money so fast that there won’t even be time for you to manually close your trades, leaving you with nothing. Stop-loss orders are also potentially dangerous as there is a high probability of slippage because of the sudden price fluctuation.
Though some investors and traders might get lucky trading news, there is only a small probability that you will make a profit. Even if you are an expert news trader, you should still be very, very cautious when participating in this practice. Successful news trading depends solely on how you get your news. The most successful news traders are the ones with the fastest news feeds and those that are able to quickly place their trades immediately after an announcement has been made. Even using other forms of news trading, such as placing orders above or below the market price is still a guessing game, and those traders in the market who base their trades on guesses, won’t have much money after a short time.

Canadian Dollar Declines on National Bank Statement

Canada has been one of the fastest economies to recover from the recession that impacted the world last year, but the Bank of Canada is stressing on the fact that strong currency may delay the economic rebound in the country, affecting traders’ sentiment towards the loonie.
According to Bank of Canada officials, interest rates will be maintained at a record low in Canada until 2010, suggesting that even if the country is recovering from the biggest crisis in decades, economic conditions are not so improved to the point interest rates can be hiked, shunning investors from loonie-priced assets.
USD/CAD traded at 1.0753 as of 21:22 GMT from a previous rate of 1.0677 yesterday.
If you want to comment on the Canadian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Australian Dollar Climbs on Banks’ Resilience

The Australian dollar climbed today versus most of the 16 main traded currencies as the national central bank affirmed that the largest financial institutions in the country showed themselves resilient from the crisis and are helping the country to recover from the worst recession in decades.
The Reserve Bank of Australia provided support for the Aussie to climb against virtually all main traded currencies today as it declared that banks in the country are weathering the country’s economic difficulties, spurring demand for the Australian currency which has been one of the biggest winners this year so far in trading markets. Other reports also improved attractiveness for the Aussie, as new home sales jumped to the highest level in four years, creating a perfect pattern for traders to search high-yielding opportunities in the South Pacific region, as New Zealand is also recovering faster than other wealthy nations from the global slump.
The optimism towards Australia can be explained by several reasons according to JR Crooks, director of research at Black Swan Capital:
With the potential for China to recover and pump the globe with growth, Australia benefits as they supply much of the natural resources et al. that China uses to produce goods.
Australia also was not so much affected by the credit crunch last year, fact which is providing a better outlook towards the South Pacific than other economic regions:
Australia hasn’t had to tackle the banking/financial fiasco to anywhere near the same degree as have the U.S., Europe, U.K. and others.
The forecast for the Aussie remains bullish, as long as the world economy continues to revive.
AUD/USD rose at 0.8741 as of 11:51 GMT after being traded at 0.8653 hours earlier.
If you want to comment on the Australian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Faltering Oil Affects Canadian Dollar Performance

The Canadian dollar along as other high-yielding currencies, witnessed a fall today in trading markets as the crude oil price, one of the main nation’s exports, declined sharply, affecting the loonie’s performance in foreign-exchanges markets towards the end of this Thursday.
Stocks and commodities play a significant role in the Canadian dollar performance, and today, as risk aversion rebound slightly, a down market in equities impacted negatively the loonie, which fell versus most of the 16 main traded currencies towards the end of this Thursday as the crude oil traded near $66 dollar a barrel in New York.
USD/CAD traded at 1.0895 as of 22:49 GMT from a previous rate of 1.0751 yesterday.
If you want to comment on the Canadian dollar’s recent action or have any questions regarding this currency, please, feel free to reply below.

Pound Touches Record Low on G-20 Meeting

The British currency was once again affected by the international economic scenario reaching the lowest rate versus the euro in six-months, as the G-20 announced that banking institutions will be better regulated in order to avoid future credit crunches, reflecting negatively in the already weakened British financial system.
The pound is losing versus virtually all of the 16 main traded currencies towards the end of this week as the Group of 20 is likely to present a new set of regulations for financial institutions, as an attempt to predict future credit crunches like the one which led the world economy to the biggest slump since the Second World War. The pound traded below $1.60 for the first time since June, and lost versus the euro as well, fueling speculations that it may trade at one-to-one against the Eurozone currency in the mid-term future.
The Banking system in the British Isles has been one of the most fragile as the credit crunch shook the world last year, with several institutions having to be rescued by the U.K. government. The new regulations presented by the G-20 are likely to restrict, to some extent, bank profits, which is certainly negatively for the U.K.’s agonizing financial system, setting the already weak sentiment towards the pound, to even lower levels.
GBP/USD traded at 1.5995 as of 11:53 GMT from a previous rate of 1.6090 yesterday. EUR/GBP touched 0.9177 from 0.9112.
If you want to comment on the Great Britain pound’s recent action or have any questions regarding this currency, please, feel free to reply below.

Brazilian Real Declines Again on Slow Economic Recover

The Brazilian Real had an extreme volatile week, declining again towards the end of this week’s session after hitting the highest rate in 2009 versus the greenback days earlier.
A rather bearish tone in commodities and equities markets towards the end of this week’s session affected negatively the performance of the emergent-market Brazilian currency, as traders opted for safety considering statements made in the G-20 meeting and a drop in U.S. durable good orders.
USD/BRL traded at 1.8003 as of 18:19 GMT from an opening rate of 1.7870 this Friday.
If you want to comment on the Brazilian real’s recent action or have any questions regarding this currency, please, feel free to reply below.

THE EARNING POTENTIAL OF A FOREX TRADER?

When You Read This Article, Of The Potential Earnings Of A Forex Trader You Might Want To Take A Couple Of Minuets To Digest The Findings.One Example I Will Give You Is That Of Warren Buffet,WHO? You Ask.Warren Buffet Is The Second Richest Man In The World After Bill Gates.Warren Buffet Started Of In The Stock Market Trading In Shares And Made Billions.Now You Must Be Asking Your Self What Has This Got To Do With The Earnings Of A Forex Trader.Well I Will Tell You. In SEPT 2003 Warren Buffet Placed A Trade On The EURO DOLLAR/UNITED STATES DOLLAR For Short EUR/USD Pair For 1 BILLION DOLLARS US, That The US Dollar Will Weaken Against The Euro Dollar,Now Some Big Forex Traders Who Know That When Warren Buffet Places A Trade Some Thing Will Happen.Would You Believe Me If I said Those People Who Did Follow Warren Buffet When He Placed That Trade On A Standard Lot Of $1500 Dollars From SEPT 2003 To MARCH 2004Made $26,000 Dollars Per Lot.This Is Just The Beginning,If You Had Bought 10 Lots x That By 10 You Do The Maths.Anyway Warren Buffet Made 12 Billion US Dollars This is the EARNING POTENTIAL OF A FOREX TRADER The next 2 titles(FOREXMENTOR) AND (THE ULTIMATE TRADERS PACKAGE) Are 2 Of The Best Forex Courses That Can Give You The Knowledge To Become A Professional Forex Trader.

ACM – New Account Types and Trading Conditions

The Swiss broker has widened its account offering to encompass its rising number of both retail and institutional clients. Drawing from an ever-growing liquidity network, institutional clients will now enjoy tighter spreads such as 0.9 pips on the EURUSD. Retail clients will continue to benefit from ACM’s reliable execution system complemented by 4 customizable, no-fee platforms.
Clients may now choose from 6 different account types:
Mini, Standard, Premium, Professional, Institutional and Institutional+
Each account type offers tailored conditions allowing traders of any size to successfully plan and implement efficient trading strategies.
“This new account typology complemented with our execution conditions undoubtedly places ACM on top as far as large accounts or Institutional clients are concerned” stated Nick Bang, co-founder and managing director of ACM.
From its inception, ACM has grown to meet the needs of its expanding client base – founded in Geneva, the company now maintains offices in Zürich, New York, Dubai and Montevideo. The Swiss firm offers efficient and affordable FX trading with no dealing-desk intervention.

Saxo Bank opens Amsterdam office

Saxo Bank, the online trading and investment specialist, launches its new Dutch office today. The Dutch office is the fourth new office for Saxo Bank in Europe and the Middle East this year.
Saxo Bank, the online trading and investment specialist, today announced the opening of a new office in Amsterdam to serve the growing and sophisticated Dutch private and institutional investment market.
Saxo Bank will offer private and institutional investors in the Netherlands a complete online trading, portfolio and Wealth Management package. While Forex is a key global differentiator for Saxo – the bank is the largest provider of online FX trading worldwide – it also offers investors stocks, bonds, ETFs and a range of other investment options. The bank will also actively pursue new partner business in the Netherlands, the so-called White Label Partnerships for licensed financial institutions that want a customised version of Saxo Bank’s online platform branded under the partner’s name.
“In today‘s markets, investors are either forced to go it alone, or hand over complete control to their bank or asset manager. Our personal approach combined with world renowned technology and access to global markets is a unique offering” states Peter Comstock, who will co-head Saxo Bank Netherlands along with P.J. Datema.
“The Netherlands has a sizeable institutional and private investment landscape that we will focus extensively on,” Comstock added. “However, in the institutional market, trades are often made manually. We see this as a significant opportunity to offer institutions the chance to trade directly, efficiently and transparently.

Saxo Bank’s co-founders and CEOs, Kim Fournais and Lars Seier Christensen, said in a joint statement: “Opening the Amsterdam office is a significant milestone in cementing Saxo Bank’s position as the leading online trading and investment specialist in Europe. We believe it is increasingly important for clients to be informed and educated on the latest investment products and Comstock’s extensive private client experience, combined with Datema’s 18 years institutional and Forex experience, will allow Saxo to reach a wide community of Dutch investors. Our Amsterdam office will enable us to provide on-the-ground service to a wide community of Dutch investors as part of our well-rounded offering combining our award-winning online trading platform with strong investment expertise and advice.”
Earlier this year Saxo Bank opened new offices in Milan, Prague and Dubai

US Dollar Forecast to Lose Further on Sentiment Extremes

EURUSD – Euro Forecast Remains Bullish on Sentiment ExtremesGBPUSD – British Pound Forecast to Lose FurtherUSDJPY – Japanese Yen Predicted to Rally vs US DollarUSDCHF – Swiss Franc Trading Bias Strongly Bullish on SentimentUSDCAD – Canadian Dollar Forecast to Gain Further
While the SSI is available once a week on DailyFX.com, you can receive SSI readings twice a day in DailyFX Plus Forex Intraday Trading SignalsForex trading crowds remain very aggressively long US Dollars against most major counterparts, giving us contrarian signal to sell into US Dollar weakness. Indeed, an incredible 84% of traders are long the US currency versus the Swiss Franc, while a similarly substantial 74% have bought the Greenback against the Japanese Yen. Market sentiment very clearly remains at extremes, and we see few signs that the US Dollar will reverse through upcoming trade. Indeed, we will wait for signs of trading crowd capitulation before calling for a US dollar reversal.

British Pound Decline May Be Indicative of Long-Term UK Macro Outlook

The British pound was easily the weakest of the majors last week as the currency fell more than 3 percent against the euro, Swiss franc, and Canadian dollar. Likewise, the British pound slumped 2.4 percent against the US dollar and 1.7 percent versus the Japanese yen. While some indicators from the nation have shown signs of improvement, such as the RICS house price index, fiscal data has done nothing but deteriorate, adding pressure on the British pound. In fact, public sector net borrowing in the UK jumped a whopping 16.1 billion pounds during August as income tax receipts fell 13 percent from a year ago. Even worse, the deficit reached 127 billion pounds in August from a year ago, and the steady rise suggests that the shortfall may breach Chancellor of the Exchequer Alistair Darling’s full-year forecasts for a deficit of 175 billion pounds.

Weaker Economic Data Drives Canadian, Australian and New Zealand Dollars Lower

The US dollar has rebounded strongly against the Canadian dollar following very disappointing inflation and trade data. The strength of the Canadian dollar has pushed industrial product prices down by 1.1 percent last month and the current account surplus to the lowest level since September 2003.
At this point, we think that USDCAD will take another stab at parity and try to test our resistance level of 1.0150. This move could easily be triggered by the Canadian GDP numbers tomorrow, which are expected to be weak. As for Australia, capital expenditure in the third quarter was much weaker than expected. We also expect tonight’s current account numbers to be soft. New Zealand business confidence and money supply both deteriorated from the previous month, which added pressure to the currency today.

Australia Won't Raise Interest Rates Until Next Year, Says Westpac

Australia’s Westpac leading Index added 1.1% in July, rising to the highest level in seven months. The index fell -1.8% from a year ago, the smallest decline since October 2008. The metric seeks to forecast how the economy will perform over the coming three to nine months. Westpac chief economist Bill Evans said the upswing in the index over recent months points to “a significant improvement in [Australian economic] growth prospects in 2010.” However, Evans noted that the bank does not expect future growth will be “sufficiently robust” to warrant to raise interest rates before next February, reinforcing the cautious tone of the minutes from September’s RBA monetary policy meeting.

Swiss Franc Trading Hinges on Yield Outlook, Risk Sentiment

The standby counter-question to anyone seeking to forecast the direction of the Swiss Franc in recent months has been “against what?” In trade-weighted terms, the currency has been confined to a narrow range since March, when the Swiss National Bank intervened into the markets to drive down the exchange rate and pledged to keep a lid on further appreciation as a bulwark against deflation (a stronger currency boosts purchasing power, effectively reducing prices). Markets in the Euro Zone account for close to 60% of Swiss export demand, so in practical terms, reining in the Franc in trade-weighted terms has essentially meant controlling the EURCHF rate (which the SNB has openly discussed). Elsewhere, the Swissie has slipped against the commodity currencies and the Pound but has managed to advance against the US Dollar and the Yen. This is a reflection of the interest rate environment. The Australian and New Zealand Dollars, where 3-month Libor rates have stayed steadily above those of the Franc, have outperformed. The Pound and the Canadian Dollar have seen fewer gains because, while still in their favor, the yield gap has narrowed considerably since the beginning of the year. Finally, the Yen sold off as a rapidly shrinking rate spread erased any advantage the otherwise markedly cheaper Japanese unit had over the Franc, while the US Dollar fared worst of all as its 3-month Libor tumbled to sink below that which is paid on the Swiss currency.
What does this mean for the week ahead? If carry flows are the primary catalyst behind recent price action, currency traders ought to have their eye on the trajectory of risk sentiment, meaning global stock and commodity prices. We have long argued that the markets have done too, much too fast since risky assets began to rally in March with global equities trading at levels unseen since 2003 relative to earnings. The world economy grew nearly 3% in real terms that year, whereas virtually every credible forecast calls for the first post-WWII contraction in real growth in 2009, pointing to lackluster revenues and overextended asset prices. Further, trading volumes have steadily declined for the bulk of the equity rally (the past 5 out of 6 months). While some of this may be chalked up to a seasonal slowdown that is typical for the summer, it may also be hinting at waning conviction behind the up move and a forthcoming reversal as traders return from holiday and volumes pick up into the Fall. While timing this reversal has proven elusive, we can say that when it does occur, the accompanying liquidation in carry trade positions will likely push the Franc higher against the Antipodeans and (to a lesser extent) the Pound and the Canadian Dollar. Meanwhile, a surge in demand for safety will likely boost the US Dollar as well as the Japanese Yen, eroding the Franc’s recent gains against those currencies.
Turning to the economic calendar, the August trade balance report will be of interest: exports look set to decline considering last week’s dismal industrial production data, but the appetite for imported goods is proving difficult to gauge. Indeed, domestic demand may have recovered a bit considering the recent moderation in retail sales figures, but the trend in receipts is undeniably pointing lower while unemployment rises and consumer confidence continues to set record lows. The release of updated economic forecasts from the government’s State Secretariat for Economic Affairs (SECO) will be notable in terms of how it compares to last week’s upward revisions to the growth and inflation outlook of the SNB.

Opening Comment: EUR/NZD LONG Taken @2.0520; Stop 2.0270

The New Zealand Dollar has taken front and center stage on Tuesday with the single currency racing higher on the back of some solid current account data and news that local dairy giant Fonterra has raised its payout forecast to farmers. Also seen bolstering the antipodean to fresh 2009 highs has been the NZIER’s upwardly revised economic growth forecasts for the first time in over a year. Currencies in general are back on the bid with any USD rallies from Monday being negated thus far on the session. Global equity and commodity prices have also rebounded on Tuesday and it remains to be seen whether or not we will even see a more significant corrective pullback in these markets that many had been looking for. Sterling also remains relatively weak with the currency getting hit hard of late against the Euro, Aussie and Kiwi. The more downbeat assessment from the BoE and general shift in sentiment towards the economy of late has been seen as the primary driver for the weakness. Meanwhile UK PM Brown has come out saying that continued stimulus is vital for the global recovery, while also downplaying any talk of a quick exit strategy. Elsewhere, the currency head at UBS has been on the wires overnight saying that the G7 should deal with the falling USD and initiate some form of a coordinated intervention to prop the beleaguered currency. Looking ahead, the economic calendar in Europe is extremely light with the only key releases coming from Switzerland in the form of Swiss SECO economic forecasts at 5:45GMT, followed by the trade balance at 6:15GMT.

British Pound Decline May Be Indicative of Long-Term UK Macro Outlook

The British pound was easily the weakest of the majors last week as the currency fell more than 3 percent against the euro, Swiss franc, and Canadian dollar. Likewise, the British pound slumped 2.4 percent against the US dollar and 1.7 percent versus the Japanese yen. While some indicators from the nation have shown signs of improvement, such as the RICS house price index, fiscal data has done nothing but deteriorate, adding pressure on the British pound. In fact, public sector net borrowing in the UK jumped a whopping 16.1 billion pounds during August as income tax receipts fell 13 percent from a year ago. Even worse, the deficit reached 127 billion pounds in August from a year ago, and the steady rise suggests that the shortfall may breach Chancellor of the Exchequer Alistair Darling’s full-year forecasts for a deficit of 175 billion pounds.

UK House Prices Fell Least in a Year in September, Says Rightmove

UK House Prices fell -1.5% in the year to September, registering the smallest decline in over a year according to Righmove Plc, an online listing of for-sale properties. Righmove commercial director Miles Shipside said, “Confidence is up, stock is down and the number of people searching is high.” The rebound says little about the health of the economy, however, with low supply being the dominant force behind higher home values according to a report from the Royal Institution of Chartered Surveyors (RICS) released last week. Consumer confidence has tracked the rebound in the FTSE 100 benchmark UK equity index with a correlation of over 90% since March, making this part of the equation highly vulnerable to any reversal of the recent rally in risky assets. For our part, we have long argued that the markets have done too much, too fast over the past six months, with global equities trading at levels unseen since 2003 relative to earnings. The world economy grew nearly 3% in real terms that year, whereas virtually every credible forecast calls for the first post-WWII contraction in real growth in 2009, pointing to lackluster revenues and overextended asset prices. Further, trading volumes have steadily declined for the bulk of the equity rally (the past 5 out of 6 months). While some of this may be chalked up to a seasonal slowdown that is typical for the summer, it may also be hinting at waning conviction behind the up move and a forthcoming reversal as traders return from holiday and volumes pick up into the Fall.

Euro Mostly Stronger, Yet EUR/USD Decline Continues

The euro held its own, for the most part, on Monday as the currency only slipped against the US dollar as it continued to pull back from 1.4750. There was no economic data on hand, but the currency will face event risk on Thursday as the German IFO survey on the business climate is projected to rise to a one-year high of 92.0 from 90.5, led by rising expectations and mild increases in sentiment on currency conditions. Indeed, a steady rally in European equities though July and September to the highest levels since October 2008 along with indications of burgeoning economic growth in Germany is likely to underpin the case for a rise in business sentiment. Surprisingly strong results could lead the euro to gain following the news on a very short-term basis, but disappointing data would likely have a greater impact, and could trigger sharp declines in the currency.

US Dollar Overdue for a Technical Bounce, But Fundamental Reversal…

Fundamental Outlook for US Dollar: Neutral

Speculation for rate hikes deferred as fundamentals temper exuberant risk appetite- The steady charge in risk appetite keeps the dollar on the short side of carry interests- Sentiment can often run askew of fundamentals; but what do technicals say about the dollar?
The dollar was able to relieve the pressure of suffering its worst trend on recent record by clawing out the first bullish close in eleven consecutive trading days; but that does not mean the burdened currency is necessarily primed for a true reversal. While this currency is arguably oversold on a fundamental basis; the same drivers that ushered it to its yearly low last week are still in play. The pace of the economic recovery, growing financial concerns and a Fed struggling to keep pace are all prominent concerns when gauging the long-term health of the dollar; but all of that is overshadowed by the immediate and market-wide preoccupation of risk appetite.Last week, a Bloomberg survey of investors found the market was the most bearish on the dollar in 18 months. Where does this speculative grade come from? The economy is still dealing with an economic recovery and government deficits are a genuine concern; but most of the world’s largest economies are suffering with the same dilemma. The real weight on the dollar is the steady revival of risk appetite over the past six months. Following the necessary period of consolidation after the worst of the financial crisis, capital started to slowly work its way back into the speculative arena. Initially, interest was from early adopters; but the draw of capital gains was strong enough to start the flow from deeper pools of wealth in “risk free” areas. Where do these funds go? It certainly finds its way to US equities and other relatively-risky assets; but when it comes to the yield bearing instruments, the American products can’t compete. The benchmark, 3-month Libor rate dropped to a new record low (0.28948 percent) this past week and subsequently was depreciated to a discount against its Japanese (0.34875 percent) and Swiss (0.29667 percent) counterparts. Does the dollar realistically make the ideal funding currency? No. The Fed will certainly turn to a hawkish policy stance well before the other two, it has the potential to take a more consistent hawkish path, deficits are a problem amongst all three and the foundation for a true recovery is most stable in the US. As soon as US rates recover, risk-seeking capital will once again flow into the world’s financial center.In the meantime, we may see a shift in sentiment that could benefit the dollar’s safe haven status. The broader markets have rallied consistently for months – despite a fundamental picture that has changed pace little since the initial reversal. Naturally, a wave of profit taking is highly probable. And, considering the advance to this point has been heavily dependent on steady capital gains, a correction could be sharp and aggressive. There are many different potential catalysts for such a turn; but in the end, the shift in optimism will likely develop naturally. Nonetheless, we should keep an eye on a few specific developments. Reports suggest that lending to consumers has dropped at its fastest pace since the Great Depression; yet leverage has returned to levels last seen since before the 2007 meltdown. This is an imbalance that will lead to problems later down the line if not corrected. Also, the Federal Reserve and White House have both voiced concern over the commercial real estate debt market. The former is looking into major banks’ exposure to this asset class; but the term ‘stress test’ is not being used.Though it is vital to keep abreast of the health of risk appetite; we shouldn’t ignore the influences of data and growth forecasts. The economic docket is light next week; but durable goods orders and housing data (existing sales, new home sales) can supply short-term volatility. It is the FOMC that tops the list – not with a possible change in the benchmark, but commentary that can move up the time table for a hike. Data aside, the US/China trade spat hints at a growing concern with protectionism which may come under scrutiny at the September 24/25 G20 Meeting. Exit strategies, financial regulation, banking compensation are all on the topic list; but not currencies. – JK

Adviser opposes KESC `s Request

KARACHI: Adviser to Sindh Chief Minister, Sharmila Farooqi has appealed to the Federal government to not consider KESC s request for tariff increase as the load-shedding stricken citizens of Karachi cannot pay higher prices for electricity due to the already inflated prices of daily use items. Talking to a trader s delegation at her office on Wednesday she said that prolonged power load-shedding by KESC has resulted in the closure of several factories and reducing trade activities which rendered a large number of people jobless. She contended that when KESC is responsible for the unemployment of people, then how can it expect people to afford to pay higher and inflated bills of the utility? Sharmila said most of the population is living under poverty level and is unable to pay higher tariffs. She pointed out that Karachi is the economic hub of Pakistan but prolonged load-shedding has badly affected trade activities here and has increased the woes of its citizens. She questioned why the private management of KESC cannot fulfill its promise of making investments to improve its power generation capacity so that people could get rid of power outages. She was of the view that KESC should be re-nationalised if its private administration fails to improve power production. Farooqi said unannounced and prolonged load-shedding during the month of Ramazan, particularly during Sehri, Iftari and Taravih timings is an unlawful act. This attitude of KESC is compelling law abiding citizens to resort to protests and agitation against the utility.

Enforcement of Business Contract

ISLAMABAD: The enforcement of business contracts in Pakistan require 976 days for implementation which remained the stumbling block in the way for improving business in the country, the World Bank s report on Doing Business 2010 launched on Wednesday. Talking to The News from the bank s headquarters Washington DC on Wednesday World Bank s Private Sector Development Analyst Dana Omran said Pakistan s ranking stood at 86th position out of 183 economies of the world. In South Asia Pakistan stood at the top as it was ahead of India in doing reforms, she said while replying to question of this correspondent. Out of total ten indicators Pakistan s ranking improved in terms of starting business while its performance deteriorated in seven indicators and it remained unchanged in terms of two indicators. She said Pakistan s ranking improved by 17 notches in terms of starting business procedures from last year as it stood at 63rd position in 2010 report. Pakistan s ranking in terms of dealing with construction permits nosedived to 105th position, employing workers at 146th; registering property 119 th; getting credit 61st ; protecting investors 27th ; paying taxes 143rd ; trading across borders 78th ; enforcing contracts 158th and closing business at 56th in 2010 report. Answering a query about the indicator in which Pakistan s performance steep decline, she said that it took 976 days to enforce contracts in Pakistan, which is definitely consuming more time as well as money for enforcement of contacts in comparison with other regional states.The transferring of property took almost 50 days in Pakistan which is less than other regional states as they took over 100 days for moving ahead on this front. The Doing Business Report states dealing with construction permit, the procedure documents required 12 in Pakistan and consumed 223 days for accomplishing the task. The difficulties that employers face in hiring and firing workers related indicator showed that difficulty of hiring workers related index (0 to 100) Pakistan s ranking stood at 78th position, rigidity of hours at 20th position and redundancy cost at 90th position. The credit information index measures the scope, access and quality of credit information available through public registries or private bureaus. It ranges from 0-6, with higher values indicating that more credit information is available from a public registry or private bureau. Pakistan s ranking in terms of strength of legal right index stood at 6th position, depth of credit information index at 4th position. The costs and procedures involved in importing and exporting a standardized shipment of goods are detailed under the indicator of trading across borders. Every official procedure involved is recorded, starting from the final contractual agreement between the two parties, and ending with the delivery of the goods. The cost for exporting from Pakistan per container stood at $611 while for imports it stood at $680 per container.

Financial Assistance

ISLAMABAD : Prime Minister Syed Yusuf Raza Gilani on Sunday said the United States should channelise disbursement of its financial assistance to Pakistan through the existing mechanism of the government of Pakistan. He underlined the fact that disbursement through NGOs involves out of proportion administrative expenses, sometimes to the extant of 35 - 40% and hence, actual amount spent on the welfare of the public gets drastically reduced. The Prime Minister was talking to the US Deputy Secretary of State for Resources and Management, Jacob J. Lew who accompanied by the Acting Administrator of USAID, Alouso L. Fulgham called on him here at the PM House on Sunday evening. Prime Minister Gilani suggested that the US Deputy Secretary of State should have detailed meetings with the Minister and the Secretary of Finance to work out mutually agreed modalities on the procedure of financial assistance. He pointed out that the Benazir Income Support Programme, Higher Education Commission, the existing basic education and the basic health units in Pakistan should be considered for the US assistance for education, health and poverty alleviation sectors.The Prime Minister termed the energy sector as the top priority of his government and called on the US government to help Pakistan in specific energy projects by mobilising investment for the power sector requirements. The US Deputy Secretary of State while congratulating the Government of Pakistan for successful operation against the militants in Swat and Malakand and for its on-going efforts for rehabilitation of the dislocated persons, assured his government s full support in this regard. He said that the US government in co-ordination with the government of Pakistan would identify the projects for assistance in the reconstruction phase of the affected areas. The US Deputy Secretary of State said that the main objective of his visit to Pakistan was to gain first hand knowledge about the latest economic situation and to discuss with Pakistan authorities the viable and appropriate projects in power sector and the provision of infrastructure in the Reconstruction Opportunities Zones (ROZ) areas. Minister for Commerce Makhdoom Amin Fahim, Adviser on National Reconstruction Bureau, Senator Sughra Imam, Finance Secretary Salman Siddique, Foreign Secretary Salman Bashir and the US Ambassador Ms Anne W. Patterson were also present during the meeting.