“Australia’s dollar traded 0.3 percent from a five-week high after central bank Deputy Governor Philip Lowe defended a higher exchange rate and savings level, saying they helped stabilize the economy.

The so-called Aussie rose against the yen after minutes of the Reserve Bank of Australia’s March 5 meeting said there are signs the economy is responding to low interest rates. New Zealand’s currency slid against most major peers after Finance Minister Bill English said the currency is overvalued and he expects interest rates to stay lower for longer.

“The deputy governor is sounding the victory bell on inflation in the mining boom,” said Andrew Salter, a currency strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “We managed to come through the boom without an excessively high level of inflation. It’s hard to see a long- term short position in the Australian dollar bearing any fruit,” he said referring to bets that an asset will decline.

The Australian currency fetched $1.0386 as of 4:50 p.m. in Sydney from $1.0402 yesterday. It touched $1.0415 on March 15, the highest since Feb. 5. The Aussie added 0.3 percent to 99.28 yen. New Zealand’s kiwi weakened 0.2 percent to 82.55 U.S. cents. It gained 0.3 percent to 78.91 yen.

The RBA’s Lowe said a stronger currency and higher savings rate have helped contain inflation and allowed lower interest rates even as the mining industry boomed.

“These factors have helped Australia to digest a huge investment boom without generating substantial imbalances in the economy,” he said today in Sydney.

RBA Policy

“The market will certainly interpret the comments in a positive light,” said ANZ’s Salter. “They will encourage the market to continue pricing in a normalization of policy in Australia.” ANZ expects the RBA to hold benchmark borrowing costs unchanged in April.

Interest-rate swaps data compiled by Bloomberg show traders see a 18 percent chance the RBA will cut the benchmark rate at the next meeting on April 2….”

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“The pound jumped to its strongest level in more than a month against the euro after the imposition of a levy on bank deposits in Cyprus threatened to throw Europe back into crisis, fueling demand for U.K. assets as a haven.

Sterling climbed by the most in five weeks against the currency shared by 17 European nations. Cypriot President Nicos Anastasiades bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in the island nation. U.K. government bonds gained, pushing down 10-year yields to the lowest this year. House prices rose for a third consecutive month in March, Rightmove Plc said.

“This is basically a euro story and something that explains the move in sterling,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. “Euro- sterling is a choice between a rock and a hard place.”

The pound advanced 1 percent to 85.69 pence against the euro at 11:38 a.m. London time, after jumping by as much as 1.4 percent to 85.31 pence, the strongest level since Feb. 11. Sterling was little changed at $1.5119.

The U.K. currency has gained 1.6 percent in the past week, the best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes amid speculation the Bank of England will boost its asset-purchase program to revive the economy. The central bank last increased the target in July, boosting it 50 billion pounds to 375 billion pounds.

The euro fell 0.8 percent and the dollar was little changed, in the period, while sterling has weakened 6.9 percent against the greenback.

Futures Bets…”

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Q: The symbol below is obviously a joke, but i never quite understood how the Euro could have more value than the dollar given all the non addressed banking issues, higher unemployment, and deep recession scenarios. Strange no?

“The euro slumped the most in 14 months against the dollar after an unprecedented levy on bank deposits in Cyprus threatened to throw Europe back into crisis.

The 17-nation currency dropped to a two-week low versus the yen after Cypriot President Nicos Anastasiades bowed to demands by regional finance ministers to raise 5.8 billion euros ($7.48 billion) by taking a piece of every bank account in Cyprus. The yen strengthened against all 16 of its major counterparts after Anastasiades delayed a vote on the measure in parliament until today. The New Zealand dollar and Mexican peso weakened as investors sold higher-yielding currencies.

“The measure makes people nervous that this may happen to other countries in the future and there could be a flight of capital out of the region,” said Mansoor Mohi-uddin, head of currency strategy at UBS AG in Singapore. “This adds to our bearish view on the euro, and we expect the currency’s downtrend to begin again.”

The euro slid 0.9 percent to $1.2962 at 6:11 a.m. in New York after dropping as much as 1.5 percent, the biggest decline since Jan. 13, 2012. The common currency declined 1.1 percent to 123.21 yen after sliding to 121.15, the weakest level since March 5. The yen gained 0.2 percent to 95.05 per dollar.

Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere and threatened to disrupt a market calm that settled over the 17-member currency bloc since the European Central Bank’s pledge in September to backstop troubled nations’ debt.

‘Credit Negative’….”

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“The Australian and New Zealand dollars fell, halting two days of gains, after an unprecedented levy on Cypriot banks raised concern a new round in Europe’s debt crisis will damp demand for higher-yielding assets.

Australia’s currency touched a one-week low against the yen and local bonds rallied after Cypriot President Nicos Anastasiades bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus. Losses in the so-called Aussie were limited before the Reserve Bank of Australia releases minutes of its latest meeting tomorrow.

“Aussie, kiwi opened this week’s trade quite a bit lower,” said Peter Dragicevich, a Sydney-based currency economist atCommonwealth Bank of Australia (CBA), the nation’s largest lender. “Whilst there are no direct linkages between Australia, New Zealand and Cyprus, the currencies are reacting to changes in market sentiment. There could be some fears in the market that if another sovereign required a bailout, they may tax the deposits of that particular country as well.”

The Australian currency fell 0.5 percent to $1.0358 as of 4:19 p.m. in Sydney from March 15, when it touched $1.0415, the highest since Feb. 5. It dropped 1.1 percent to 98.06 yen, after earlier touching 97.06, the lowest since March 7.

The New Zealand dollar weakened 0.4 percent to 82.37 U.S. cents. The currency, nicknamed the kiwi, touched 77.01 yen, the lowest since March 5, before trading at 77.96, down 1.1 percent from last week.

Australia’s three-year bond yield fell 18 basis points, or 0.18 percentage point, to 2.94 percent. The 10-year yield declined 16 basis points to 3.47 percent. New Zealand’s 10-year rate slid nine basis points to 3.71 percent.

Cyprus Turmoil….”

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Say what you will, but stimulus and QE result in devaluation….

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“The Canadian dollar reached the strongest level in three weeks against its U.S. counterpart before a U.S. report forecast to show inflation is contained.

The currency was poised for its first five-day gain in six weeks before Labor Department data that is projected to show American inflation rose 1.9 percent in the past year, giving the Federal Reserve scope to maintain asset purchases that devalue the U.S. dollar. Since the Canadian dollar touched its lowest point in eight months versus the greenback on March 1 it has strengthened after data March 8 showed both the U.S. and Canada created more jobs than estimated in February….

…The loonie, as the Canadian dollar is known for the image of the aquatic bird on the C$1 coin, rose 0.2 percent to C$1.0202 per U.S. dollar at 7:59 a.m. in Toronto, reaching the strongest level since Feb. 22. One loonie buys 98.02 U.S. cents.”

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“Australia’s dollar headed for the strongest weekly gain in six months before minutes on March 19 from the Reserve Bank’s latest meeting, when policy makers refrained from cutting interest rates.

The so-called Aussie traded within 0.3 percent of the highest level in more than five weeks versus the greenback as traders scaled back rate-cut bets following a report yesterday showing the biggest job gains in almost 13 years. New Zealand’s currency, nicknamed the kiwi, headed for a weekly loss as the nation’s central bank reiterated its focus on exchange rates.”

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“The pound dropped to the lowest against the dollar in more than 2 1/2 years and government bonds advanced as a report showed U.K. industrial production unexpectedly declined in January.

Sterling weakened for a second day versus the euro after data showed output fell 1.2 percent from December, according to the Office for National Statistics. The median forecast in a Bloomberg News survey of 29 economists was for a 0.1 percent increase. Manufacturing also unexpectedly contracted, slipping 1.5 percent in January. Gilts gained after the Royal Institution of Chartered Surveyors said house prices decreased for a second month in February.

“Momentum is clearly against the pound and, if anything, that serves as an excuse to carry on the market takes it,” said Derek Halpenny, European head of global-markets research at Bank of Tokyo-Mitsubishi UFJ in London. “The weak data backup renewed quantitative easing and it’s a clear recipe for further pound weakness.”

The pound fell 0.4 percent to $1.4861 at 11:01 a.m. London time after sliding to $1.4832, the lowest level since June 2010. Sterling weakened 0.1 percent to 87.53 pence per euro.

Bank of Tokyo-Mitsubishi forecasts the pound will slide toward $1.40 within 12 months. It could “easily” reach that level within in a couple of months, Halpenny said.

The benchmark 10-year gilt yield decreased six basis points, or 0.06 percentage point, to 1.96 percent. The 1.75 percent bond due in September 2022 rose 0.5, or 5 pounds per 1,000-pound face amount, to 98.215….”

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“Foreign-exchange strategists are convinced that Italy’s new government will maintain austerity measures that preserved the currency union during the region’s sovereign crisis even as the euro tumbles from a 14-month high.

Analysts raised their second-quarter forecasts for the 17- nation currency to $1.32 from $1.28 at the end of December as Italy’s Feb. 24-25 election ended without a clear winner, according to the median of more than 60 estimates in a Bloomberg News survey. That 3.1 percent increase is the second-biggest among the Group of 10 currencies after the Swedish krona.

While traders pushed the euro down to $1.3018 today from this year’s high $1.3711 on Feb. 1 as anti-austerity parties led by three-time premier Silvio Berlusconi and former comedian Beppe Grillo won blocking minorities in the Senate, strategists are looking to the debt markets. Italy’s borrowing costs have fallen from a three-month high on Feb. 27 as European Central Bank President Mario Draghi said his untapped bond-buying program, known as Outright Monetary Transactions, remains in place as an “effective” backstop…..”

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“The Australian and New Zealand dollars reached the highest levels in more than four years versus the yen amid speculation the Bank of Japan (8301) will expand monetary easing, boosting the allure of higher-yielding assets.

The so-called Aussie rose against most of its major peers as investors pared bets on interest-rate cuts by the Reserve Bank of Australia. The nation’s bonds dropped, sending the 10- year yield to the highest since May. The New Zealand dollar declined against the greenback amid concern a drought in the nation will hurt its economy. Haruhiko Kuroda, the nominee to become the Bank of Japan’s next governor, yesterday signaled readiness for a quick expansion in monetary stimulus.

“The suggestion that Kuroda may ease policy before the April 4 meeting has given the yen a push lower” against crosses including the Aussie and kiwi currencies, said Michael Turner, a fixed-income strategist in Sydney at Royal Bank of Canada. “Expectations for rate cuts in Australia are falling, and as long as the data keeps printing OK, that’ll keep yields grinding higher.”

The Australian dollar rose 0.2 percent to 99.14 yen at 5 p.m. in Sydney, after earlier touching 99.58, the highest since August 2008. The currency was unchanged at $1.0281.

New Zealand’s dollar reached 79.90 yen, the highest since July 2008, before trading at 79.53, 0.3 percent below yesterday’s close. The so-called kiwi declined 0.4 percent to 82.47 U.S. cents.

BOJ Nominees

Kuroda said yesterday that the bank would consider buying derivatives as part of its easing efforts. Kikuo Iwata, a nominee for deputy governor, said today in upper house confirmation hearings the central bank can end deflation solely through buying government debt. Japan’s central bank will next meet for two days ending April 4….”

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“The euro weakened, commodities retreated and U.S. equity futures fell. The yen strengthened after an opposition lawmaker said the Democratic Party of Japan would oppose the nomination of Kikuo Iwata for deputy governor of the central bank, damping bets for greater monetary stimulus.

The 17-nation shared euro slid 0.3 percent to $1.3010 at 9:33 a.m. London time. Standard & Poor’s 500 Index futures slipped 0.1 percent, while the Stoxx Europe 600 Index (SXXP) rose 0.3 percent. Soybeans dropped on signs that demand for the U.S. crop may be waning, and the Hungarian forint retreated 0.7 percent versus the euro, falling to a nine-month low, as inflation slowed. The yen climbed against all of its 16 major peers, rising most against the rand….”

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“BofA Merrill Lynch strategist David Woo is out with a report this week on the changing nature of the U.S. dollar’s relationship with oil prices and what it means for the future of the American economy.

The main conclusions of the piece are that a stronger dollar will help remove volatility from the business cycle in the U.S., make more people want to invest in U.S. assets, and further enhance U.S. economy’s competitiveness vis-a-vis China and Europe.

All of this is thanks to the American energy boom.

Woo says that the biggest surprise of 2013 so far has been the noticeable decoupling of a longstanding negative correlation between the U.S. dollar and world stock prices – “one of the most enduring features of financial markets over the past decade” – as illustrated in the chart below.

BofA Merrill Lynch Global Research

U.S. dollar versus MSCI world stocks (click to enlarge)

According to the report, a big component of this inverse correlation between the U.S. dollar and global growth over the last decade has been the rise in Chinese energy consumption….”

Full article and charts

“Norway’s $713 billion sovereign wealth fund is turning away from the world’s biggest currencies and their debt-laden governments as policy makers undermine their exchange rates through unprecedented stimulus measures.

The Government Pension Fund Global, the world’s largest wealth fund, cut its holdings in French and U.K. government bonds by almost half last year as it raised its share of government bonds in emerging-market currencies to 10 percent of its fixed-income holdings by adding investments in Turkey, Russia and Taiwan.

“It’s what we perceive as a risk-reducing investment strategy,” Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said in a March 8 interview in Oslo. Cutting dollar, yen, euro and pound investments is a “prudent” move, he said. “These four major currencies all have structural issues, with regards to government debt, to private sector debt, to unconventional monetary policy, and to growth and the demographic profile of the countries.”

At issue is how central bankers across the globe will eventually unwind the uncharted stimulus measures enacted to prop up global growth since the onset of the financial crisis in 2008. Debt levels have soared for governments across much of the developed world. In Europe, political leaders are trying to save the region from a fiscal crisis now in its fourth year.

Monetary Easing….”

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“The dollar approached the strongest since August 2009 versus the yen as signs the American economy is gaining momentum boosted demand for the U.S. currency.

The Dollar Index (DXY) traded within 0.2 percent of the highest in seven months before reports this week that economists said will show retail sales improved in February and consumer prices increased. Hungary’s forint slid to a nine-month low versus the euro on concern central bank President Gyorgy Matolcsy is concentrating power in a bid to reshape monetary policy making. South Korea’s won weakened after the North threatened to target the South’s incoming defense minister.

“There are still some headwinds in the U.S. economy coming from its fiscal outlook but the recent data suggested the economic recovery is probably robust enough to accommodate the fiscal setback,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “That should be positive for the dollar.”

The dollar rose 0.1 percent to 96.08 yen at 7:50 a.m. in New York after climbing to 96.55 on March 8, the highest level since Aug. 11, 2009. The U.S. currency gained 0.1 percent to $1.2999 per euro. The yen was little changed at 124.89 per euro after sliding to 125.92 on March 8, the weakest since Feb. 14.

Rabobank predicts the dollar will strengthen to $1.28 per euro in three months, compared with its previous forecast of $1.30, Foley said.

Retail Sales….”

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“Australia’s dollar dropped against most major peers after Chinese factory output had its slowest start to a year since 2009, damping the outlook for the South Pacific nation’s commodity exports.

The so-called Aussie declined for a second day against its U.S. counterpart before a report on U.S. retail sales forecast to show continued improvement in the world’s biggest economy, following better-than-expected payrolls data. New Zealand’s dollar, known as the kiwi, traded near the lowest in more than two months against the greenback.

“The combination of weaker Chinese industrial production and a strong U.S. jobs number was never going to be good for the Aussie,” said Hans Kunnen, the Sydney-based chief economist at St. George Bank Ltd. “Aussie and kiwi will remain under pressure in the short term.”

The Australian dollar fell 0.2 percent to $1.0221 as of 5:04 p.m. in Sydney, extending a 0.3 percent decline at the end of last week. The New Zealand dollar slid 0.3 percent to 82.00 U.S. cents from March 8, when it touched 81.88 cents, the lowest since Dec. 28.

Chinese industrial production increased 9.9 percent in the first two months of 2013 from a year earlier, the statistics bureau said March 9. That trailed the 10.6 percent median estimate in a Bloomberg News survey of economists. China is the largest trading partner of both Australia and New Zealand…..”

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[youtube://http://www.youtube.com/watch?v=bNYplo-Nwlw 450 300]

Just remember that how you get from point a to point b is very important and can not be measured by a chart…..

“For a long time, the dollar was highly negatively correlated with “risk,” meaning that when stocks and other risky assets did well, the dollar was usually falling.

That’s because during the crisis years, when people were in panic mode, they would rush to hold safe-haven dollars, dumping everything else. And then when they were panicking less, they would step out of dollars, and buy other stuff.

But the chart above means the crisis is coming to an end, or has come to an end. There’s no longer this phenomenon where the dollar represents something you hold when you’re panicking about everything else. You can buy stocks, and also feel eager to hold dollars.

In addition to the crisis mentality, the dollar just looks a lot better than other currencies. There’s a feeling that Europe is going back into the gutter and the ECB has to do more. Japan is (as everyone knows) doing a lot more easing. Britain is crumbling again. So pretty much the US is the only place where we’re talking about the central bank doing an exit.

This is an important trend that smart folks are picking up on….”

Full article and chart

“LONDON (Reuters) – A unexpectedly sharp rise in hiring by U.S. employers in February sent world shares and the dollar higher on Friday while U.S. Treasuries fell as investors bet on a solid recovery in the world’s largest economy.

U.S. stock index futures pointed to Wall Street gaining on the data with the S&P 500 <.spx> on track for a sixth straight daily gain and the Dow <.dji> set to scale fresh peaks.

Nonfarm payrolls surged by 236,000 jobs last month, the U.S. Labor Department said, easily beating forecasts for a gain of 160,000 and driving the jobless rate down to a four-year low of 7.7 percent.

“This was a strong number and one of those rare cases where we were firing on all cylinders,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.

“Having said that, this will likely not mean much for Fed policy as they will need to see more than one month of strong numbers and if it is sustained.”

The dollar climbed as high as 96.54 yen after the data, a fresh 3-1/2-year high, and added about 0.6 percent against the euro, sending the single currency down to $1.3030…..”

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“The Swiss central bank spent 10 times as much in 2012 as it did the year before to defend the currency cap it implemented to shield the economy.

The Swiss National Bank (SNBN) bought 188 billion francs ($199 billion) in foreign currencies from a wide range of counterparties in Switzerland and abroad, the Zurich-based central bank said in its Accountability Report today. It has amassed record foreign currency reserves in its fight to protect the ceiling, and a large portion of those reserves are held in highly rated government bonds. In 2011, it spent 17.8 billion on foreign currencies.

“The SNB took care to avoid its investments having any impact on the markets and currency developments of other countries,” the central bank said in the report.

The SNB’s decision to impose a cap on the franc of 1.20 versus the euro in September 2011 has helped shield Switzerland from a downturn. The euro area, its biggest trading partner, is trying to emerge from recession.

The SNB’s foreign currency reserves fell in February to 427.5 billion francs, data published by the central bank today showed. That sum is equal to almost three quarters of Switzerland’s annual gross domestic product.

In response to a question about how much the SNB might have to spend this year to make the cap stick, SNB President Thomas Jordan, speaking to reporters in Zurich, said today that “concerning the future I can’t tell you anything.”

Debt Crisis….”

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“Chinese regulators expanded a program allowing institutions to raise yuan offshore for investment in the mainland, a step that moves the nation closer to a freely traded currency and may bolster confidence in the stock market.

Financial institutions registered in Hong Kong and the Hong Kong units of Chinese banks and insurers will be allowed to join units of Chinese brokerages and fund-management firms in theRenminbi Qualified Foreign Institutional Investors program, according to a statement posted on the China Securities Regulatory Commission’s website yesterday. The regulator also expanded the range of products participants can invest in beyond exchange-traded stock funds and bonds.

Standard Chartered Plc (STAN) said today it would be “very interested” in participating in the program. The expansion comes as legislators meet this week at the annual National People’s Congress in Beijing, during which a new generation of Communist Party leaders headed by Xi Jinping assumes oversight of the world’s second-largest economy. The party pledged in November to make the exchange rate more market-based and promote freer movement of capital in and out of the country for investment purposes.

“This announcement will be welcomed with open arms by the many major foreign financials with any kind of significant presence in Hong Kong,” Z-Ben Advisors, a Shanghai-based fund researcher, said in a report today. “We anticipate at least 20 will be lining up to apply for an RQFII license in the coming months.” …”

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