Dollar staged a strong rebound as Bernanke disappointed markets by refrained from giving any hints on QE3 in his testimony to Congress. Bernanke acknowledged that recovered continued by “pace of expansion has been uneven and modest by historical standards”. Employment growth is “likely to require stronger growth in final demand and production” and thus, Bernanke doesn’t expect “further substantial declines” in unemployment rate this year. Higher energy prices are expected to push up inflation temporary and reduce “consumers’ purchasing power.” But he emphasized that overall pace of increases in prices and wage growth will remain “subdued”. The Q4 GDP data released earlier today was revised up to 3% annualized. The factors are somewhat reducing the chance of any expansion in Fed’s quantitative easing program in near term. Also released … Read entire article »

The ECB has allotted 529.5B euro of 3-year LTRO to 800 banks. Together with the first auction, the central bank has injected 1trillion of 3-year funds into the system. This amount equals to 131% total European bank bond maturities in 2012 and 72% for 2012 and 2013 combined. The average allotment is 0.66B euro, compared with 1B euro in December 2011 and 0.40B euro in June 2009. The total number of bidders is huge, suggesting participation of a lot of small banks. The ECB would probably view the result as positive as it’s expected that the funds will be passed to the real economy. It’s very likely that this will be the last round of LTRO unless market conditions deteriorate dramatically. It’s the ECB’s view that fiscal consolidation and structural reforms … Read entire article »

Euro remains bounded in range after ECB said that another EUR 529.5b will be lent to 800 financial institutions in its second three-year LTRO operation. That’s slightly larger than market’s expectation of EUR 400b-500b but not far. Also, that compared to December’s allotment of EUR 489b to 523 banks. While the total amount was more or less similar to expectation, the number of banks surprised the markets. It’s taken as a signal that a lot more smaller financial institutions tapped into the funding and it’s possible that more funding could be passed on to the real economy. In other news from Europe, Ireland said it would hold a referendum on imposing the fiscal treaty that was agreed by 25 of 27 European Union states except UK and Czech. Prime … Read entire article »

By: Barbara Zigah The Euro edged higher in Asian trading, accompanied by other commodity-linked currencies as investors have pinned their collective hopes on today’s LTRO offering from the European Central Bank. Like the previous offering which saw participation of nearly €500 billion, Eurozone banks are being offered 3-year loans from the ECB at exceptionally low interest rates. A recent consensus of economists polled suggests that participation this time is expected to at least equal the previous offering though earlier estimates suggested it could be double that or more. As reported at 11:47 a.m. (JST) in Tokyo, the Euro was trading at $1.3476 against the U.S. Dollar, a gain of 0.1% in overnight trading and a 0.5% increase from Tuesday trading. It remains close to the 2½ month high which was struck … Read entire article »

Euro remains cautiously firm against dollar as markets are awaiting ECB to announce the result of the second ultra-long three year LTRO allotment, which should be released at around 1015 GMT. In the first three year LTRO, 523 banks tapped EUR 489b of funds from ECB at interest rate of 1%. Markets are expecting around EUR 400-500b funds to be tapped this time. Around EUR 150b would be rolled over from other existing facilities maturing this week. Hence, the total increase in liquidity could be around EUR 250-350b. around 10% of ECB’s current balance sheet. The interpretation of the result is a bit complicated. On the one hand, markets would like to see more funds allotted and thus, more funds would be channeled into risk markets. On the other hand, … Read entire article »

Euro remains steadily in range today. Italy sold EUR 3.75b in a new 10-year bond today with yield at 5.5%, notably down from 6.08% yield at last auction of similar maturity back in January. Bid to cover ratio was relatively unchanged at 1.4 times. Italy also sold EUR 2.5b in 5-year bonds today with yield at 4.19%, down from January’s 5.39%. Markets are cautiously awaiting tomorrow’s second ECB three year LTRO. In December, ECB loaned EUR 489b to 523 banks at interest rate of 1% in the first three year LTRO. Markets are expecting similar size this time. Despite the new bailout fund, Greece’s outlook has not turned any better. SP’s downgraded the country’s credit rating to ‘selective default’, following Fitch Rating’s downgrade to C … Read entire article »

By: Barbara Zigah The Japanese Yen slipped further from the 9-month trough struck yesterday as end of the month buying by Tokyo-based exporters helped propel it through a correction. Nonetheless, currency analysts say that the Yen is likely to remain soft given the recent events which include surprise easing measures by the Bank of Japan, a record trade deficit and a depletion of the current account surplus. As reported at 12:08 p.m. (JST) in Tokyo, the Yen was trading against the U.S. Dollar at 80.24 Japanese Yen, a decline of 0.4% from the 81.66 Yen peak struck on Monday. In the Eurozone, the Euro rally appears on the verge of petering out as investors wait for the ECB to release its next LTRO. News that SP downgraded Greek debt to “selective default” … Read entire article »

Euro’s profit-taking retreat yesterday was rather brief. EUR/USD continues to stay firmly above 1.34 level so far today. Despite the new bailout fund, Greece’s outlook has not turned any better. SP’s downgraded the country’s credit rating to ‘selective default’, following Fitch Rating’s downgrade to C and Moody’s warning of a reduction to the lowest rating. Yet, European officials continued to defend Greek by said that the cut has ‘no impact in the Greek banking sector as its liquidity effect has been address by the Bank of Greece and consequently by the EFSF’. Germany’s lower house approved the second Greek bailout package at 496-90 votes and 5 abstentions. However, a number supports came from the opposition … Read entire article »

Euro weakens mildly today as reaction to G20 meeting over the weekend but loss is so far limited. It looks like the common currency has made a temporary top in most pairs and some consolidations would likely be seen ahead of this week’s second LTRO operation from ECB. Dollar manages to recover against most major currencies as risk appetite recede, with major European indices in red. The Japanese yen also recovers mildly as crude oil is facing some resistance from 100 psychological level. Eurozone M3 money supply rose much more than expected by 2.5% yoy in January. More importantly, in monthly term, M3 grew 0.7% mom, or EUR 68.4b, making a U turn after three consecutive months of contraction. Main driver for the pick up in M3 growth was overnight … Read entire article »

By: Barbara Zigah In Asian trading, the Japanese Yen continues to be under pressure, sliding on Monday to a 9-month trough against the U.S. Dollar. This follows the surprising easing measures conducted by the Bank of Japan recently in an effort to regain the upper hand on the appreciating currency which is hampering the country’s economic and infrastructural restoration following the March 2011 earthquake and tsunami. As reported at 12:02 p.m. (JST) in Tokyo the U.S. Dollar was trading at 81.661 Japanese Yen; thus far this most, a more than 7% gain accelerated by buying after breaking above major resistance on Friday when the USD/JPY pair struck 80.94 Yen. Some analysts believe that the break through the Ichimoku cloud suggests that the U.S. Dollar’s decline might be now coming to a … Read entire article »