The Aussie Dollar Flounders as Tapering Becomes a Serious Focus

“Australia’s dollar traded 0.6 percent from the lowest level since 2011 before U.S. data forecast to show improvements in consumer confidence and manufacturing amid speculation theFederal Reserve may slow stimulus.

The Aussie’s one-month volatility versus the greenback was near the highest since June. The currency rebounded against the yen, snapping a four-day slide, as technical indicators signaled recent losses were excessive. Chairman Ben S. Bernanke said last week the Fed may slow quantitative easing if there are signs of sustained economic growth. Demand for the Australia and New Zealand currencies was limited on prospects slowing Chinese output will curb the South Pacific nations’ exports.

“It would be interesting to see whether the expectations will continue for the Fed to wind down QE,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “There’s a bit of uncertainty about China. Chinese data this week could increase the chance of the RBA cutting sooner rather than later. I wouldn’t rule out Aussie falling further,” Chan said, referring to the Reserve Bank of Australia.

The Australian dollar was little changed at 96.40 U.S. cents as of 3:10 p.m. in Sydney from 96.34 yesterday. It reached 95.82 on June 1, the lowest since October 2011. The currency’s one-month implied volatility was at 11.160 percent from 11.255 percent yesterday, when it reached 11.375, the highest since June 26…..”

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“Global technology companies such as Samsung Electronics Co. (005930), Apple Inc. (AAPL)and Sony Corp. (6758) are poised to see surging sales in India as the country’s anemic tech manufacturing sector can’t fulfill booming demand for TVs and smartphones.

The world’s fastest-growing market for consumer electronics has few homegrown makers of flat-panel TVs and no producers of mobile phones or the semiconductors and displays used in the devices. Last year, the nation of 1.2 billion people spent $14.2 billion importing screens and smartphones, accounting for 90 percent of demand, government data show.

India’s technology manufacturers haven’t kept pace with itssoftware industry, which last year contributed 4.7 percent of the country’s $1.8 trillion gross domestic product. While the government is trying to support local output with subsidies, only foreign companies have the technology needed to benefit from incentives, according to India’s Department of Electronics andInformation Technology.

“India got carried away with the success of software,” said Suresh Khanna, secretary general of India’s Consumer Electronics and Appliances Manufacturers Association. “We never developed newer, smarter technologies and largely ignored hardware.”

Assuming India’s economy grows at a 6.5 percent annual rate, the foreigners may be fighting for share of a market totaling 27 million flat-screen TVs by 2017, up from about 7.2 million this year, Khanna said in an interview.

Just a quarter of the TVs sold in India are assembled locally, by companies including Samsung and LG (066570) Electronics Inc., and none of the core components are manufactured in the country, Khanna said. No smartphones are made in India, he said.

Chinese Smartphones….”

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“Taiwan will let insurers invest in infrastructure projects and create a NT$1 billion ($33 million) fund to channel money to companies as President Ma Ying-jeou bids to boost growth and revive his flagging popularity.

The island also plans to revise capital-gains tax rules, give cash incentives to trade in old cars for new ones, simplify visa procedures for Chinese visitors and set aside NT$400 million to subsidize energy-saving home appliances including gas stoves and heaters, Premier Jiang Yi-huah said in Taipei today.

Ma, whose disapproval rating of 70 percent this month is at its highest since he took office in May 2008, joins policy makers from Australia to South Korea in moving to aid their economies as the global recovery falters. The island’s statistics bureau last week cut its forecast for gross domestic product growth this year to 2.4 percent from 3.59 percent.

“President Ma is under pressure to deliver some solutions after economic growth slowed in the first quarter,” said Yang Tai-Shuenn, a political scientist at Chinese Culture University in Taipei. “But I don’t think this would help lift his approval rating or bring real benefits to the economy.”

The Taiwan dollar rose 0.2 percent to NT$29.914 as of 3 p.m. local time. The benchmark Taiexstock index fell 0.2 percent at the close today.

Proposed revisions to capital-gains tax rules include removing the condition that investors will be taxed when the stock index closes at 8,500 points or higher, and reducing the tax rate on investors with NT$1 billion or more in trading volume to 0.1 percent from 2.25 percent. The measures are awaiting legislative approval, and may be passed in the current session without further delays, Jiang said.

Economic Agenda…”

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“Chinese Premier Li Keqiang told German business leaders his country is confronted by “huge challenges” as it seeks 7 percent annual growth this decade, down from more than 10 percent in the previous 10 years.

China needs growth of about 7 percent to double per capita gross domestic product by 2020 from the level in 2010, Li said yesterday in Berlin after meeting with Chancellor Angela Merkelduring his first trip abroad as premier. Expansion is cooling from the pace that propelled the nation to become the world’s second-biggest economy.

Li, who succeeded Wen Jiabao as premier in March, is signaling the limits of leaders’ tolerance for slower growth asEurope’s debt crisis curbs shipments abroad, manufacturing weakens and a government anti-extravagance campaign restrains restaurant and retail sales. The comments came days after President Xi Jinping said China won’t sacrifice the environment to ensure short-term expansion and policy makers outlined plans for a bigger role for the private sector.

“I don’t think it’s a change of policy stance, but I do feel that in the past several months we’ve started to hear more and more signals from the central government that they want to tolerate lower growth,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong.

Yesterday’s comments at a Germany-China business forum compare with Li’s remarks at a March 17 press conference that China must average 7.5 percent growth through 2020. State-media transcripts that day said Li gave a 7 percent figure.

Some Confusion….”

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“The dollar rose against most of its major peers before U.S. data today that economists say will show consumer confidence improved and home prices gained.

The Dollar Index climbed amid prospects improving U.S. fundamentals will prompt the Federal Reserve to taper its monthly bond purchases of $85 billion. The yen snapped a three-day advance versus the euro as Asian stocks rose and after the Bank of Japan estimated a key component of funds in the nation’s economy reached a record amid unprecedented stimulus.

“This is an unsustainable pace of Fed purchases, and we have to accept that’s not good monetary policy, so I think tapering does start in the fourth quarter this year,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. (WBC) in Sydney, referring to a reduction in U.S. monetary stimulus. “On a medium-term basis, the dollar is a buy.”

The greenback jumped 1 percent to 101.97 yen as of 6:37 a.m. in London from yesterday and added 0.1 percent to $1.2923 per euro. The yen slid 0.9 percent to 131.78 per euro.

The Dollar Index, which Intercontinental Exchange Inc. uses to track the greenback against currencies of six major U.S. trading partners, added 0.1 percent to 83.799. Markets in the U.S. and U.K. were closed yesterday for public holidays….”

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