“Russia, the largest emerging economy to raise rates in 2012, took a step toward the first round of monetary easing in a year after the economy slowed and inflation stabilized.

Bank Rossii cut the cost to swap foreign currency into rubles by a quarter point to 6.5 percent, the Moscow-based central bank said in a statement on its website today. The regulator raised the deposit rate to 4.5 percent from 4.25 percent, effective tomorrow, and left its main lending rates unchanged, calling the moves “neutral” for monetary policy….”

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Initially China had some good factory supply data which set the tone in early Asian trade. Markets and currencies rallied across the board. Later on China missed on  import/export data and markets along with risk currencies like the Aussie dollar fell.

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“Australia’s dollar was set for a five-day advance before Chinese data next week that may show the world’s second-largest economy is picking up.

The so-called Aussie was near a two-month high after a private report showed the nation’s construction industry contracted at a slower pace. Demand for the currency was also supported after data showed Australia’s trade deficit widened by less than economists predicted as exports withstood a slower global economy and capital goods purchases increased.

“Chinese economic data are improving after concern about a slowdown,” said Teppei Ino, a Tokyo-based analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group by market value. “That’s providing some support for the Australian and New Zealanddollars.”

Australia’s currency traded at $1.0478 as of 5:07 p.m. in Sydney. Yesterday it rose 0.3 percent to $1.0486 in New York after touching $1.0516, the highest since Sept. 21. The New Zealand dollar, nicknamed the kiwi, bought 83.19 U.S. cents from 83.27. The Aussie has risen 0.5 percent this week, while the kiwi has advanced 1.4 percent.”

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“Gold dropped for a third day to trade near a one-month low as a stronger dollar damped demand for commodities, overshadowing the highest-ever holdings in exchange-traded products backed by bullion.

A few dozen Republicans joined a bipartisan call to break an impasse between PresidentBarack Obama and House Speaker John Boehner to avoid spending cuts and tax increases in January, known as the fiscal cliff. The U.S. Dollar Index, which tracks the greenback against six major partners, gained as much as 0.2 percent today. European Central Bank policy makers today refrained from cutting interest rates further.

“A stronger dollar added some pressure to the precious complex,” said Andrey Kryuchenkov, an analyst at VTB Capital in London.

Gold for February delivery declined 0.2 percent to $1,691 an ounce by 7:48 a.m. on the Comex in New York. The metal dropped to $1,686 yesterday, the least expensive since Nov. 6. Spot gold slid 0.2 percent to $1,690.39 an ounce in London.

ECB policy makers meeting in Frankfurt held the benchmark rate at a record low of 0.75 percent, as forecast by 56 of 61 economists in a Bloomberg News survey. ECB President Mario Draghi will unveil the latest economic forecasts, including a first projection for 2014, later today.”

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“Australia’s exchange rate is “uncomfortably high” and business confidence subdued, breaking with past experience during interest-rate reductions, Reserve Bank Deputy Governor Philip Lowe said.

“Countries that are in relatively good shape and have not seen large-scale expansion of the central bank balance sheet are experiencing stronger currencies than those that are in relatively poor shape,” Lowe said in a speech yesterday in Sydney. “In response to this, interest rates are lower than they otherwise would be to offset some of the effects of an uncomfortably high exchange rate.”

Lowe highlighted a split between Australian households, where data have “picked up somewhat” in response to 1.75 percentage points of rate cuts in the past 14 months, and businesses, where confidence and conditions have not. “This difference will obviously bear close watching over the period ahead,” he said.”

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“Australia’s unemployment rate unexpectedly dropped in November as a labor market driven by mining-industry hiring weathers a weaker global economy, sending the local currency higher.

The jobless rate fell to 5.2 percent from 5.4 percent in October, the statistics bureau said in Sydney today. That compares with the median estimate for unemployment of 5.5 percent in a Bloomberg News survey of 27 economists. The number of people employed advanced by 13,900, compared with the consensus forecast for no change.

The data underscore the strength of the world’s 12th- largest economy, which expanded at an annual pace of 3.1 percent last quarter driven by resource investment. Reserve Bank of Australia Governor Glenn Stevens lowered interest rates by a quarter percentage point this week, bringing to 1.75 points the cuts since Nov. 1 last year as he seeks to revive industries outside mining, where investment is expected to peak next year.”

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“The euro traded 0.1 percent from a six-week high versus the dollar before European Union finance ministers meet in Brussels today amid optimism the region can find solutions for its debt crisis.

The euro held a three-day gain against the yen after Greece offered to spend as much as 10 billion euros ($13 billion) to buy back government securities and as Spain said it expects funds for bank recapitalization next week. The dollar remained lower as U.S. lawmakers continue negotiations on how to avert the so-called fiscal cliff of spending cuts and tax increases. Demand for Australia’s currency was limited on speculation the central bank will lower interest rates today.”

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South Korea said it agreed with China to allow banks in both countries to borrow funds from an existing swap arrangement to encourage trade settlement in local currencies.

A 64 trillion won ($59 billion) swap line will be made available for loans to allow companies in both countries to settle deals in the won and yuan, according to a statement today from theFinance Ministry and the Bank of Korea. The system is scheduled to start later this month, it said.

The agreement is part of a push among emerging countries to internationalize local currencies after the global financial crisis, according to the South Korea statement. Both China and South Korea acknowledge that the use of the won and yuan is “very low” even as trade between the two countries is increasing, it said.

“We expect several benefits, such as reduced foreign- exchange risk and transaction costs for companies,” according to the statement. Alleviating “external vulnerabilities due to decreased dependence on the major reserve currencies” is also a reason for pursuing the deal, it said.”

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“Goldman is out with its #1 trade idea for 2013.

They’re advising clients to short the Aussie Dollar (AUD) against the Norwegian Kroner (NOK).

AUDNOK is currently at 5.8797. The firm’s target is 5.00.

Why this trade?

We summarize in bullets. Even if you’re not interested in currencies, there’s some interesting economics here that might help get you thinking of how a big global, macro trade is designed.”

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“European stocks reached a 17-month high and commodities gained after Chinese manufacturing data added to signs of economic recovery. The dollar slid to a six- week low versus the euro as U.S. debt talks remained deadlocked.

The Stoxx Europe 600 Index (SPX) added 0.7 percent and futures on the S&P 500 Index rose 0.4 percent as of 7:19 a.m. in New York. The Standard & Poor’s GSCI Index of raw materials increased 0.3 percent, led by natural gas and wheat. The Dollar Index (DXY) sank to a one-month low while the euro reached $1.3049, the most since Oct. 23. The yield on the 10-year Greek bond fell below 15 percent for the first time since July 2011, while Turkey’s ISE National 100 Index (XU100) of stocks climbed to a record.”

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“Australia’s dollar declined against most of its major peers amid speculation the nation’s central bank will lower interest rates next week to shield the economy from a slowdown in mining.

The so-called Aussie was near a three-week low versus its New Zealand counterpart as traders added to bets the Reserve Bank of Australia will reduce interest rates after a report yesterday showed a lower mining investment projection. Australian bonds rose, with the 10-year yield touching the least in 10 days. Demand for the New Zealand dollar was limited after data showed building permits unexpectedly fell.

“It wouldn’t be overly surprising if the RBA cuts rates next week, given yesterday’s capital expenditure data, which was downgraded,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia. (CBA) “We don’t think an actual cut next week will put too much downward pressure on Aussie — a lot of the cuts are already factored into the market.” ”

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“The yen slid to the weakest in seven months versus the euro after data showed Japan’s consumer prices stagnated in October, fanning speculation the central bank will increase stimulus to spur inflation.

The Japanese currency fell versus all of its 16 major peers and was set for its biggest monthly decline versus the 17-nation euro since June as Japan’s opposition leader called for measures to boost inflation. The euro rose with stocks after German lawmakers approved Greece’s latest rescue package. The dollar slid to a five-week low versus the shared currency as U.S. Democrats and Republicans wrangled over the spending cuts and tax increases of the so-called fiscal cliff.”

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The two currencies hit two month highs as investors took down bets in commodities…

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“The Dollar Index (SPX) fell for the first time in three days as comments from U.S. lawmakers fueled optimism the so-called fiscal cliff will be avoided.

The yen rose to a one-week high against the dollar as technical indicators signaled its recent decline may have been excessive. The euro pared losses against the greenback as stocks rebounded and amid speculation investors will accept Greece repurchasing its own bonds at below market prices. Brazil’s real fell against all its major counterparts on speculation the central bank will keep interest rates at record lows.”

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“The Australian dollar remained lower following a decline yesterday amid speculation a report tomorrow will show a slowdown in capital expenditure growth, damping the outlook for the economy and the currency.

The so-called Aussie dropped for a third day versus the yen as investors boosted bets theReserve Bank of Australia will cut rates at its next meeting on Dec. 4. Demand for New Zealand’s dollar was tempered after the country’s central bank Governor Graeme Wheeler said the local currency’s gains have hurt manufacturing and as Asian stocks retreated. The South Pacific currencies were supported after China’s commerce minister said he sees his nation’s trade improving in the second half of 2013.

“If non-mining capital investment doesn’t show signs of picking up in 2013, that suggests that policy needs to be easier and that would be consistent with a rate cut next month” from the RBA, said Andrew Salter, a currency strategist in Sydney at Australia & New Zealand Banking Group Ltd. (ANZ) “It might weigh on the currency in the very short-term.” ”

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“The Australian dollar touched its highest level in two months as euro-area finance ministers reached agreements on Greece’s debt burden and its funding gap.

The so-called Aussie advanced versus most of its 16 major counterparts as officials cut the indebted nation’s interest rates and gave it more time to pay back rescue loans. New Zealand’s currency, known as the kiwi, snapped a decline from yesterday as a fifth day of gains in Asian stocks outweighed a report today that showed the nation’s annual trade deficit widened to the most in more than three years.”

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“The big news in the central banking world is the Bank of England announcement that current Bank of Canada chief Mark Carney would take over in the spring.

This is considered a great pick, as Mark Carney is incredibly well respected, and has successfully guided Canada through a challenging period without a big banking bust.

So what does this mean for currency markets?

SocGen’s Sebastien Galy sent out a one-liner explaining the impact on currencies:

It had to happen eventually. Not good for CAD, given now a loss of credibility, but that is temporary. One may take it as a reason to buy GBP, with someone who understands markets and financial stability.”

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“The yen climbed versus most of its 16 major peers as technical indicators signaled its recent drop may have been too rapid and as a contraction in euro-area manufacturing and services damped global growth prospects.

Japan’s currency pared a weekly decline that comes as opposition leader Shinzo Abe, who is favored to become the country’s next prime minister after elections on Dec. 16, increased pressure on the Bank of Japan (8301) to add to stimulus measures that tend to weaken the yen. The euro approached its highest level in three weeks on prospects finance ministers will agree on an aid package for Greece next week, even after a report showed Europe’s common currency area slipped back into recession.”

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“The Australia and New Zealand currencies dropped after European finance ministers failed to agree on a debt-reduction plan for Greece, damping demand for higher-yielding assets.

The so-called Aussie and kiwi dollars slid after a decline in Japanese imports dimmed the outlook for the South Pacific nations’ shipments. New Zealand’s currency dropped versus most major peers after Auckland-based Fonterra Cooperative Group Ltd. said whole-milk powder prices fell to a seven-week low.”

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“The euro fell against the dollar, snapping a two-day gain, after European finance ministers failed to agree on a debt-reduction package for Greece during more than 11 hours of talks in Brussels.

The shared currency declined versus 13 of its 16 major counterparts after Luxembourg’s Finance Minister Luc Frieden said euro-area finance ministers will resume discussions next week. The yen weakened beyond 82 per dollar for the first time since April after Japan’s exports dropped for a fifth month. New Zealand’s dollar depreciated after whole-milk powder prices slid, cutting revenue from a key export.”

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“The yen rallied from near its weakest level in almost seven months against the dollar after Bank of Japan (8301) Governor Masaaki Shirakawa said the opposition party’s proposals to weaken the currency are unrealistic.

The Japanese currency rose versus most of its 16 major counterparts as the BOJ refrained from adding to stimulus measures. Shinzo Abe, favored to topple Japan’s prime minister in Dec. 16 elections, has advocated unlimited easing. The euro weakened against the pound after Moody’s Investors Service cut France’s top rating, renewing concern that Europe’s debt crisis will deepen.

“Shirakawa is being cautious, pouring some cold water on some of the ideas that have been put out by the opposition,” said Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “It’s a reason to pare short positions on the yen.” A short position is a bet that an asset will fall in price.

The yen climbed 0.2 percent to 81.28 per dollar at 11 a.m. London time. It touched 81.59 yesterday, the weakest level since April 25. Japan’s currency rose 0.2 percent to 104.10 per euro. Europe’s currency was little changed at $1.2807.

The pound appreciated 0.2 percent to 80.43 pence per euro, after depreciating to 80.65 pence on Nov. 15, the weakest since Oct. 31.

The yen will strengthen toward 79 per dollar within the next six weeks, amid demand for the safest assets, Halpenny forecast.”

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