December 17, 2009

(BN) Top Stories: Currencies


Top Stories: Currencies
2009-12-17 09:15:59.737 GMT

Dec. 17 (Bloomberg) -- The following are the day's top stories on

Dollar Rises to 3-Month High Versus Euro on U.S. Outlook, Greece
The dollar climbed against 15 of its 16 major counterparts as
signs the U.S. recovery is gaining momentum boosted demand for the
greenback. The euro sank to a three-month low after Greece's downgrade
reignited credit concerns in the currency's 16-nation region. The
greenback rose before reports forecast to show U.S. initial jobless
claims slowed and a gauge of the outlook for the world's largest
economy improved for an eighth month. The Federal Reserve said
yesterday the U.S. economy is strengthening, while Standard & Poor's
cut Greece's rating one level on its rising debt burden. The Australian
dollar sank to a 10-week low as Asian stocks fell, curbing demand for
higher-yielding assets. ``An improvement of the labor market enhances
confidence in the U.S. economy,'' said Akio Yoshino, chief economist in
Tokyo at Societe Generale Asset Management
(Japan) Co., a unit of France's third-largest bank. ``The dollar will
fare well.'' The dollar rose to $1.4369 per euro, the highest since
Sept. 8, before trading at $1.4406 as of 7:35 a.m. in London from
$1.4531 in New York yesterday. The U.S.
currency was at 89.70 yen from 89.78 yen after earlier hitting 90.26,
the strongest level since Dec. 7. The euro sank to
129.17 yen from 130.46 yen.

U.S. Treasury Delays Sale of Citigroup Stake as Shares Priced at
Citigroup Inc., the last of the four largest U.S. banks to seek
funds to exit a taxpayer bailout, raised $17 billion by selling stock
for a price so low that the U.S. delayed plans to shrink its one-third
stake in the lender. Citigroup sold 5.4 billion shares at $3.15 apiece,
less than the $3.25 the government paid when it acquired its stake in
September. The New York-based bank said the Treasury won't sell any of
its shares for at least 90 days. Investors demanded a bigger discount
from Citigroup than Bank of America Corp. or Wells Fargo & Co., which
together raised more than $31 billion this month to exit the Troubled
Asset Relief Program. Wells Fargo, which trumped Citigroup's bid to buy
Wachovia Corp. last year, leapfrogged its rival by completing a $12.25
billion share sale Dec. 15. JPMorgan Chase & Co. repaid $25 billion in
June. ``The market cast its vote and they're low down on the ballot,''
said Douglas Ciocca, a managing director at Renaissance Financial
Corp. in Leawood, Kansas. ``Citigroup needs to show steps to reinstall
the quality of the brand.''

Fed Repeats Pledge to Keep Rates `Exceptionally Low' for Extended Period
Federal Reserve officials declared financial markets healthy
enough to remove most emergency aid without going as far on their
support for the U.S. economy. The Fed, after concluding a two-day
meeting yesterday, said most of its lending programs would expire as
scheduled Feb. 1 because of ``improvements in the functioning of
financial markets.''
Policy makers said the labor market is stabilizing yet kept a pledge
to keep interest rates ``exceptionally low'' for an ``extended
period.'' The statement reinforced economists'
forecasts that the Fed will wait from six months to a year before
raising borrowing costs. By confirming plans to end its aid to bond
dealers, short-term debt markets and money-market mutual funds, the Fed
signaled it sees a waning in the ``unusual and exigent'' conditions
that prompted creation of the programs in 2008. ``The nastiness of the
storm has dissipated,'' said Paul Ballew, a former Fed economist who's
now a senior vice president at Nationwide Mutual Insurance Co.
in Columbus, Ohio. ``Concern about the financial market has passed,
but they're looking at weak labor markets and sluggishness in the real

Auction-Rate Investors Get Rematch After First Five Fraud Suits
Auction-rate securities investors who sued banks including
Citigroup Inc. and UBS AG to recoup billions of dollars in losses went
0 for 5 as their first cases were thrown out. Now some are gearing up
for a rematch over part of the $149 billion in securities that remain
outstanding. In three of the class actions, judges allowed the
investors to refile their complaints after finding the initial suits
failed to prove they lost money or satisfy a 1995 federal
securities-fraud law designed to discourage frivolous stock-loss suits.
Citigroup, UBS and Raymond James Financial Inc. have again asked that
the cases be tossed out. ``The private litigation has run into a brick
wall,'' said James Cox, a law professor at Duke University in Durham,
North Carolina. The legal bar for bringing such lawsuits has been too
high for auction-rate investors to surmount, he said. Those investors
may need a change in federal law if the 1995 act proves too big an
obstacle for genuine claims, said Elizabeth Warren, who chairs the
congressional oversight panel monitoring the Troubled Asset Relief
Program. She suggested the idea for a Consumer Financial Protection

Leading Index in U.S. Probably Rose, Signaling Sustained Economic Growth
The index of U.S. leading indicators probably rose for an eighth
consecutive month in November, indicating economic growth will extend
through the first half of 2010, economists said before a report today.
The Conference Board's gauge of the outlook for the next three to six
months rose 0.7 percent after a 0.3 percent October gain, according to
the median forecast of
61 economists surveyed by Bloomberg News. Fewer Americans filed for
jobless benefits last week, and Philadelphia-area manufacturing
expanded for a fifth month, other reports may show. Rising stocks and
fewer job losses are supporting consumer spending, which makes up 70
percent of the economy.
The Federal Reserve said yesterday it intends to keep its benchmark
interest rate near zero for an ``extended period,''
to spur growth as unemployment at 10 percent poses a risk to the
recovery. ``There has been a pretty broad-based improvement in economic
conditions,'' said David Resler, chief economist at Nomura Securities
International Inc. in New York. Resler's forecast matched the median.

LCH.Clearnet Begins Backing Interest-Rate Swaps for Banks, Their
LCH.Clearnet Ltd., Europe's largest clearinghouse, began
guaranteeing trades today between banks and their clients in the $342
trillion interest-rate swaps market. The London-based clearinghouse's
SwapClear Client Clearing Service is the first to back trades between
banks and hedge funds, asset managers and pension funds. SwapClear has
been guaranteeing interest-rate swaps between banks since 1999 and
accounts for more than half that market. About $146 trillion in
notional interest swaps between banks and clients that isn't cleared
could be processed by its new service, LCH.Clearnet said in an emailed
statement. Regulators in the U.S. and Europe are pushing the financial
industry to improve the over-the-counter derivatives market structure
after last year's bankruptcy of Lehman Brothers Holdings Inc., one of
the largest OTC dealers, froze trading and cost investors hundreds of
millions of dollars. Clearing interest swaps may generate $190 million
in annual revenue by 2013, according to Morgan Stanley. ``It's a very
significant market event to get clearing extended out to a wider
audience,'' Chris Willcox, global head of rates trading at JPMorgan
Chase & Co. in London, said in a telephone interview. ``At the core of
the offering is the robust and tested default management process, which
has been through the flames and proven itself to be successful,''
Willcox said.

Peru Poised to Win More Debt Upgrades, Credit Suisse, Societe Generale
Peru is poised to receive more credit-rating increases after
Moody's Investors Service moved it to investment grade because the
country is posting above- average growth while keeping its budget
deficit under control, said Credit Suisse Group AG and Societe Generale
SA. Moody's raised Peru's foreign debt rating one level to Baa3, the
lowest investment-grade level, from Ba1 late yesterday, more than a
year after Standard & Poor's and Fitch Ratings made identical moves.
Moody's said Peru was able to prevent the global recession from sending
the local economy into a ``hard landing'' by bolstering government
spending. ``It sets up a trajectory for more upgrades,'' Igor Arsenin,
an emerging-market strategist at Credit Suisse in New York, said in a
telephone interview. ``The fundamentals look clean when compared with
other investment-grade countries. It reminds everybody of the positive
momentum in Peru.'' The Andean nation's credit-default swaps trade
almost on a par with Israel and Poland, countries that are rated at
least four levels higher by Moody's. It costs 1.21 percentage points to
protect Peru's debt against default for five years, compared with 1.20
points for Israel and Poland, according to CMA Datavision. Peru's cost
was 1.92 points six months ago.

Greece's Credit Rating Lowered One Level by S&P on Mounting Debt Concern
Greece's credit rating was cut by Standard & Poor's and the
company threatened to take further action unless Prime Minister George
Papandreou tackles the European Union's largest budget deficit. The
rating was lowered by one level to BBB+ from A-, S&P said in a
statement late yesterday. Fitch Ratings on Dec. 8 cut Greek debt to
BBB+. Papandreou two days ago pledged ``radical'' measures to fix
Greece's budget. ``The ratings could be further lowered if the
government is unable to gain sufficient political support to implement
a credible medium-term fiscal consolidation program,'' S&P credit
analyst Marko Mrsnik in London said. Papandreou's government, which
came to power in October promising higher spending and wages, is trying
to persuade investors it will step up efforts to cut its deficit from
12.7 percent of output to below the European Union's 3 percent limit by
2013. Finance Minister George Papaconstantinou said in an interview
yesterday that the country will cut its 2010 budget deficit by 4
percentage points, more than previously targeted.

ECB Said to Start Consulting Banks, Investors on Collateral
European Central Bank officials are moving closer to forcing banks
to provide more information about the collateral they give the ECB in
return for loans. ECB policy makers may today approve the start of a
consultation process with banks, investors and market participants
asking them to suggest how residential mortgage- backed securities can
be made more transparent, according to two people involved in the
The Governing Council meets today in Frankfurt. The ECB is trying to
better monitor the quality of the assets it's holding in return for the
funds it's pumped into the European banking system during the crisis.
European banks have created about 1.1 trillion euros ($1.6 trillion) of
asset-backed securities since June 2007, which they can use as
collateral for ECB loans. The ECB's push ``will increase transparency
for investors and better information will attract new investors,'' said
Dipesh Mehta, a London-based securitization analyst at Barclays
Capital. ``U.S. investors already find the European transactions hard
to look at without loan by loan data.''

EADS, Airbus A380 Insider-Trading Ruling May Come This Week, Jouyet Says
France's biggest civil insider trading investigation in two
decades may come to a close as the market regulator will release a
decision on its probe into sales of European Aeronautic Defence & Space
Co. shares. The insider-trading probe by France's Autorite des Marches
Financiers focuses on executives who sold shares before a report on
production delays on the Airbus A380, the world's biggest passenger
plane, sent EADS down a record 26 percent on June 14, 2006. The
decision ``will come before the end of the week,'' AMF President
Jean-Pierre Jouyet said in an interview yesterday. It was ``a very
difficult inquiry.'' The plunge prompted the AMF to expand an
investigation, opened in May 2006 after investors Lagardere SCA and
Daimler AG cut their stakes, to review insider sales in
2005 for possible trades based on privileged knowledge of production
issues. The investigation was trimmed to 17 current and former
executives in 2008 from a list of more than 1,100 employees.

Asia Faces `Tsunami' of Capital Inflows on China, U.S. Rates, Nomura
Asia is under threat of asset bubbles next year as China's
rebounding economy and low U.S. interest rates drive a ``tsunami'' of
capital into the region, Nomura Holdings Inc.
said. Asia has attracted $241 billion in the six months to September
of 2009, reversing outflows of $262 billion in the period from July
2008 to March 2009, Nomura said. Unless regional governments allow
their currencies to appreciate, further inflows may fuel price bubbles
and a protectionist backlash, the brokerage said in its 2010 Global
Economic Outlook report received today. Surging stock and property
prices prompted Hong Kong's central bank to warn today of ``sharp
corrections'' should fund flows reverse. China's central bank released
a survey yesterday that showed that two-thirds of Chinese view property
prices are unacceptably expensive. ``Our base case is for shallow
recoveries in the G3 economies, with the Fed not raising rates until
early 2011,''
Nomura said, referring to the U.S., Europe and Japan. ``This alone
could fuel strong capital inflows to Asia, but with the region being
the stellar growth performer in the world, 2010 inflows could be more
like a tsunami.''

Asian Currencies Decline, Led by Won, Peso, as U.S. Recovery Boosts
Asian currencies fell, led by the South Korean won and the
Philippine peso, as signs the U.S. economic recovery is gaining
traction prompted investors to rein in bets against the greenback. The
Bloomberg-JPMorgan Asia Dollar Index fell for a third day and the won
slumped the most this month after the Federal Reserve said the economy
is improving and most of its special liquidity facilities will expire
on Feb. 1. Investors are ``definitely'' bringing forward expectations
for a U.S.
interest-rate increase, said Gerrard Katz, head of currency trading at
Standard Chartered Plc in Hong Kong. ``The data coming out of the U.S.
has been reasonably good,'' he said.
``That's causing a lot of short-dollar covering.'' The Asia Dollar
Index, which tracks the region's 10 most- used currencies excluding the
yen, was down 0.2 percent as of 4:25 p.m. in Hong Kong, headed for its
lowest close since Nov. 5, according to data compiled by Bloomberg. The
won fell 1.1 percent to 1,177.85 per dollar, the peso dropped 0.8
percent to
46.612 and the Malaysian ringgit declined 0.3 percent to 3.4350.

For the complete stories summarized here, and for more of the day's
top news, see TOP <Go>.

-0- Dec/17/2009 9:15 GMT


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