economicfinance

Buy the US dollar, today's biggest bargain!

2008-11-12T23:16:00.000-08:00

Shifting some foreign currency into the US dollar now should be a logical thing to do. The US dollar has tanked and this represents a major buying opportunity. But circumstances will have to change for this obvious truth to be recognized and that will be too late for the majority of investors.

Step back to the late January 1st, 1999 and the launch of the euro. Then many commentators expected the euro to strengthen against the dollar. It did not.

Then came the US stock market crash in 2000 and the dollar strengthened still further as investors cashed out. It was not until the US stock market bottom in 2003 with the invasion of Iraq that the US dollar began its remorseless weakening against the euro with the euro moving from 90 US cents to $1.36.

Spot the new market top! And what will shift the US dollar from its current depreciation to appreciation? Another stock market crash! Do we not see the US economy weakening before our eyes with a massive housing crash in progress? How will profits hold up? What does that mean for stock prices?

US imports falling

What happens in a recession or slowdown is that the volume of imports to the US falls, and west coast ports have just reported a fall in container volumes, so it is happening, not a forecast.

Now lower imports mean that less dollars are spent abroad so the trade deficit declines, and a smaller trade deficit takes the pressure off the US dollar.

But at the same time a domestic recession is the equivalent of a massive tightening of liquidity, and tighter monetary conditions benefit the value of the US dollar, even if they are bad for the domestic economy. Of course, the Fed can cut interest rates to try to counter this effect, but this will be too small to stop the overwhelming impact of a major recession on the dollar.

At the same time, there will be a stock market crash due to the economic slowdown and its impact on profits. This will further suck liquidity out of the US system and again strengthen the US dollar as investment shifts from stocks to cash and bonds.

History lessons

It is an odd thing in financial analysis that an event as recent as the 2000 Nasdaq crash and its impact on the US dollar is forgotten. But such is the fast paced world we live in.

Or just consult the financial charts if you think this is nonsense. The euro-dollar position is very clearly at a turning point. However, just as financial markets presently fail to recognize that the US economy is slowing down and will probably slow down to a recession, which is pretty obvious, they also fail to recognize that the euro bull run is almost over.

It could be next week, next month or in the autumn, but buying the US dollar now is probably the soundest investment choice you could make, particularly if it took you out of equities and real estate which will not perform well during a US recession, almost everywhere.

Should we be worried about the falling dollar?

2008-11-12T23:09:00.000-08:00

The dollar touched an all-time low against the euro on Monday, extending its biggest three-month decline in three years. The slide comes as investors worry about the outlook for the U.S. economy.

Just what’s behind the Great Dollar Decline? What does all this mean for U.S. consumers? And what happens if the dollar keeps sliding?

The U.S. dollar was recently at a low to the euro. Will you please explain the effect of declining relative currency value on inflation, jobs, national debt and economic security? Do other countries manipulate the value of their own or other countries currencies and, if so, why and how?
— Jerry R., Puyallup, WA

In the best of circumstances, the floating value of the global currencies helps grease the wheels of commerce and balance economic growth. The key word here is “relative.” Changes in the dollar against other countries’ currencies can be good or bad for different parts of the economy. But the impact can be mild or serious depending on how far apart currencies drift or how quickly things change.

In one sense, the value of the dollar is determined by a massive, multi-trillion-dollar, minute-by-minute popularity contest made up of various players in the financial markets — from people who trade currency directly to those who buy or invest in anything priced in dollars. (Central bankers like Ben Bernanke and his Fed colleagues can weigh in — just like Simon, Paula and Randy "on American Idol" — but the audience gets the final vote.)

As the currency of the world’s largest and most powerful economy, the dollar rises and falls based on the strength of that economy — and the confidence investors have in its future. With other economies in Europe and Asia growing more rapidly and the outlook for the U.S economy slowing, the dollar has been weakening.

U.S. interest rates can have a direct impact on the dollar’s value. If interest rates fall, investors who buy Treasury bonds priced in dollars get a lower return. So the dollar is worth less to them. The recent drop in interest rates here is part of the reason for the dollar’s fall.

Other countries with large central banks use interest-rate policy to “manipulate” the value of their currencies, too. If the European Central Bank wants to tame the Euro, it can flood the currency markets with more of them — or buy dollars. Some countries prefer to simply “peg” their currency to the dollar — essentially riding on the back of U.S. monetary policy (for better or worse.)

A weak currency comes with a very important trade benefit, however; it makes everything based on that currency much cheaper in the global marketplace. Whether you’re buying a condo in Florida, or a share of IBM stock, or a ticket to Disneyland, everything is on sale here if you’re paying in, say, Euros. That tends to help American companies sell more of their products, which boosts the U.S. economy. That, in turn, should create more jobs. In theory, all that expanded economic activity helps strengthen the dollar — which is why floating currencies tend to have a self-regulating effect.

The flip side is that a Hamburger in Hamburg will cost you $50. And if Americans buy more stuff from other countries than we sell to them, the weaker dollar raises the net cost for a typical American’s shopping basket. Paying more each year for the same basket of goods is the textbook definition of inflation. So a weak dollar could push U.S. inflation higher. (That’s one reason higher rates can help tame inflation.)

Eventually, all those dollars we’ve sent overseas to buy cheap clothes and big screen TVs have to come home; they’re not doing any good sitting in foreign banks or other countries’ treasuries. If too many of those dollars come home at once, and there aren’t enough things to buy with them, the value of each dollar declines.

For now, countries with extra dollars have been happy to lend them back to us — buying up hundreds of billions worth of government IOUs (aka Treasury debt). And since we’re not willing to raise taxes or cut government spending to balance the federal budget, we’re churning out plenty of Treasury debt. It’s one of our most popular exports.

All this is fine until those overseas buyers lose interest in our Treasury debt. If you can get a higher return on a Eurobond, why buy a bond from Uncle Sam? To keep those investors buying, the Treasury pays higher interest rates. And that raises the cost of all forms of borrowing for Americans.

Selling all this debt to foreign investors and governments doesn’t necessarily pose a direct threat to national security: It’s not like they can demand their money back all at once. (The Treasury’s IOU specifically says they have to wait until the bond matures.) True, if everyone sold their bonds all at once, that would sharply weaken the dollar. But that kind of massive selloff would be like a rush to the jailhouse door: If a government started dumping U.S. bonds abruptly, the value of the rest their unsold holdings would plummet.

What is securitization? Like asset-backed securitization. It appears a lot when news talk about subprime loans, too.
— Isabella, Boston, Mass.

A security — generally speaking — is the name given to a piece of paper that represents financial value and can be bought or sold. Two common forms are “equity” securities, or stocks (which represent a share of ownership in a company), and debt securities, or bonds (which are, in effect, a piece of an interest-paying loan).

But the well-paid wizards of modern finance have cooked up many more. The biggest growth has been in a category known as “derivatives” — so-called because they’re “derived” from other securities like stocks or bonds. You can buy a futures contract, for example, that promises you a stock, bond or commodity at a future date for a price set when it’s issued. An option gives you the buy or sell before a certain date at a certain price.

With ever more powerful computers, Wall Street rocket scientists have expanded their quest for new paper to trade (and commissions to book) by creating more complex securities. You can buy and sell pieces of paper based on the future direction of interest rates, or stock indices, or the consumer price index.

By doing so, you‘re spreading risk. If I hold a lot of bonds, and I’m worried that a big drop in interest rates will hurt their value, I can “hedge” that loss by also holding interest rate futures that will pay me if rates go down. If interest rates go up, the person who sold me those futures makes money (but I make money on my bonds).

Over the past few decades, Wall Street has figured out how to buy and sell of all manner of risk. The current mortgage mess resulted from the belief — now understood to be mistaken — that by spreading around the risk of a mortgage defaulting, more people with shaky credit could be accommodated by the system. By bundling good loans with bad, and paying higher interest rates to investors who bought paper that was last in line if some borrowers didn’t pay, the pool of people who qualified for loans was rapidly expanded.

The problem is that — unlike a stock or bond that trades every day — many of the securities from these mortgage pools went straight to investor portfolios and sat there. The value of these securities was determined by computer models, not real buyers and sellers. And with defaults rising, the market for these pieces of paper has virtually shut down: Real buyers and sellers have no way of knowing what they’re worth. That’s why investors and lenders are now a lot more tight-fisted when it comes to making new loans.

Sterling climbs vs euro, market cheers shock BoE move

2008-11-06T23:16:00.000-08:00

* Pound jumps vs euro, steady vs dollar after BoE rate shock

* Decisive 150 bps cut welcomed; ECB cuts by smaller 50 bps * Pound at $1.5920 , euro at 80.55 pence

LONDON, Nov 6 (Reuters) - Sterling rose against the euro and recovered losses against the dollar on Thursday as markets welcomed the Bank of England's shock 150 basis point interest rate cut as a bold move to shore up the economy.

The BoE slashed its benchmark rate to 3.0 percent, its lowest in over half a century [nL6576008]. This ultimately triggered a sterling rally against the euro as the UK central bank's move was more aggressive than a widely-expected half percentage-point rate cut by the European Central Bank.

Against the dollar, sterling trimmed initial losses following the BoE decision as investors rewarded the UK central bank for its decisive action to steer the economy clear of a deep and prolonged slowdown, rather than focusing on its diminishing yield advantage.

"The Monetary Policy Committee have got ahead of the curve with a pretty decisive move. Within today's environment that's viewed as positive: it's good for the UK economy, good for confidence, and good for sterling," Paul Robinson, chief sterling strategist at Barclays Capital said.

In contrast, he said the ECB's 50 basis point cut to 3.25 percent -- which leaves euro zone rates higher than UK rates for the first time since the euro currency was launched in 1999 -- was "probably a disappointment".

By 1515 GMT, the euro had fallen 0.8 percent to 80.55 pence. The UK currency recouped early losses suffered ahead of the BoE rate decision, when the single European currency threatened to take out last month's record high of 81.95 pence.

Sterling was essentially flat on the day against the dollar at $1.5920, recovering from a fall of well over a cent to a session low of $1.5722 immediately after the rate cut was announced.

In a statement accompanying the cut, the BoE said that the global banking system had experienced its most serious disruption for almost a century, and that there had been a very marked deterioration in the outlook for economic activity. On inflation, it said there was a substantial risk of undershooting the 2 percent target. [nBOETEXT].

The central bank faces a slumping housing market, steep declines in manufacturing and services sector activity and increased unemployment in an economy that contracted by 0.5 percent in the third quarter.

Economic weakness, highlighted by a record 14.9 percent year-on-year fall in the October UK Halifax House Price Index [nL6214102], has convinced investors that the BoE may follow up Thursday's move with additional cuts through year-end.

Sonia interest rate futures have priced in an additional 25 basis point cut to 2.75 percent by December and many analysts believe rates will fall to 2 percent or lower early next year.

Market participants now await the release of next week's quarterly inflation report for clues on how low interest rates will go.

"Clearly the scale of the cut announced by the Bank today was partly the result of their new forecasts for inflation and growth, due to be published in just under a week's time," Deutsche Bank economist George Buckley said. (Reporting by Naomi Tajitsu, Jessica Mortimer and Nicholas Vinocur, editing by Toby Chopra)

Ghana to benefit from World Bank increased loan

2008-11-06T23:14:00.000-08:00

By Emmanuel K. Dogbevi

Ghana is among countries listed to benefit from a World Bank loan increase.

The 10 countries in Africa and Asia to benefit from the World Bank’s intended increase in loans include Bangladesh and Cambodia.

Reports say, the increase in loans is intended to make up for the fall in private fund flows to these countries.

The World Bank would increase loans to these countries from $13.5 billion in 2007 to $27 billion, and it is intended to help the countries soak up the current global financial crisis.

The current credit crunch which began in the US and swept across Europe is expected to result in a global recession the level and extent of which is unknown.

There is anxiety among economists globally that the effects of the financial crisis could have devastating effects on the world in the face of food and energy crisis which have already endangered the lives of over 100 million people of the world pushing them into deeper poverty.

The World Bank hopes that by doubling its long-term loans of 15 to 20 years at an interest rate almost at the rate of the London Inter-bank Offered Rate (LIBOR) to these countries it would help them to cope with the global financial crisis.

Source: ghananewstoday.com

Forecast 2009: Your Home

2008-11-06T23:11:00.000-08:00

he prediction: Prices will fall further before year-end.

Forget the old saw that all real estate is local. What's pummeling housing prices in your nabe is the same thing that's hurting them around the country: the credit crisis.

More from CNNMoney.com:

• Money Magazine Forecast 2009

• Forecast 2009: The Economy

• Forecast 2009: Your Job

You know the drill - banks' troubles have made it harder for many home buyers to get mortgages, and those who do qualify have to pay more. A borrower with good credit and a 20% down payment recently got charged an interest rate of 6.7%, on average, according to HSH Associates.

It's true that this rate is not historically high (rates often surpassed 9% in the early 1990s). But it's more than the 6.2% that the same borrower would have paid at the beginning of 2008.

The fact that mortgage rates have remained stubbornly elevated despite the government takeover of Fannie Mae and Freddie Mac leads some experts to believe that those rates are not headed down anytime soon.

Then look at the fact that 18.6 million homes in this country are now sitting vacant, more than at any other time since the Census Bureau began tracking that figure in the 1960s. And that 2.8% of U.S. mortgage loans are now at least three months in arrears, up from 1.4% a year ago. That rate is projected to peak in early 2009.

Ouch!

Home prices in the nations 10 biggest metro areas are projected to keep falling in 2009, with Miami and Los Angeles suffering most.

Metro area	2009 median home price	2009 change
Dallas	$155,645	-1.0%
Houston	147,549	-1.8
Atlanta	50,092	-2.5
Chicago	239,359	-5.3
Philadelphia	201,151	-9.8
Boston	295,918	-12.5
New York	393,210	-13.7
Washington	261,411	-17.1
Los Angeles	269,614	-17.2
Miami	214,551	-18.8
Notes: Prices are projections for the end of 2009. Change is from the end of 2008.

Source: Moody's Economy.com

But if a recession lasts for three-quarters of the year, as some economists are predicting, the number of foreclosures could remain high longer. Add it all up and you have another lousy year for real estate.

Home prices are down 20% nationwide since their peak in July 2006, according to the S&P/Case-Shiller home price index. Economist Nouriel Roubini of New York University, who accurately predicted the housing slide and credit crisis, expects another 20% decline in home prices next year. Patrick Newport of economic forecasting firm Global Insight projects a 15% drop.

The damage will likely hit even areas that have so far escaped many problems, such as New York City. "We don't see the market turning until late 2009," says Newport.

The Wild Card:

How much home values fall early in the year

If they go so low that investors can start renting out homes for enough to cover their mortgage payments, we could see a wave of people snapping up bargain houses in 2009 - which could push prices higher by the time the next 12 months draw to a close.

Lawrence Yun, chief economist of the perpetually optimistic National Association of Realtors, says he expects prices to rise 2.8% in 2009.

The Action Plan If You're Selling:

Wait it out

In 2010, real estate should be stronger, with fewer homes clogging the market. So if you can wait until then to sell, do it. "I would," says Barbara Brin, a real estate agent in Minneapolis. And if even realtors are saying that...

Make your place shine

In many markets, sellers will face the toughest competition not from fellow homeowners but from banks and builders. Both will be willing to cut prices dramatically to sell a foreclosed or new home.

To convince buyers that your house is worth paying up for, make sure that it's in move-in condition (foreclosures almost certainly won't be). Point out unusual qualities like wide-plank floors or stained glass that cookie-cutter new construction lacks.

Price it below market

Go to Zillow.com to see how much nearby homes fetched recently. Once you've figured out what a buyer might pay, price your house 5% below that.

Sound painful? A recent study by a New Jersey appraiser found that houses priced below market ended up selling for more than similar houses listed above market. That's because lower prices attract more buyers.

More from Yahoo! Finance:

• The Stampede of White Elephants

• America's Next Foreclosure Capitals

• Home Prices: Now for the Good News

Visit the Real Estate Center

If You're Buying:

Look for homes that have been sitting around

In many areas of the country, such as Phoenix, San Diego and Washington, D.C., it's common for perfectly good homes to linger on the market for six months or more. So start your search by looking for properties that have been up for sale for at least three months: At that point most sellers will be willing to deal.

Drive a hard bargain when you find a house you're interested in. Sellers know you have a lot to choose from. They also know that if they wait they will probably get less. So offer less now.

Barry Miller, a buyer's agent in Denver, suggests you make your first offer as much as 13% below the seller's asking price. "You might not get the house for that, but it's a good starting point," he says.

Improve your credit score

More than ever, that three-digit number could cost you. Lenders have begun imposing fees for everyone who doesn't fall into the top tier of credit - and that's a whole lot of people.

"Let's say 680 got you the best rate on a mortgage 24 months ago," says John Ulzheimer, a credit expert with Credit.com. "Today you need to shoot for 780 to 820 to get the best deal."

Boosting your credit score from 660 to just 740 can lower your mortgage rate by a quarter of a point. To improve your score, focus on paying down debt, which will bring your crucial debt-to-credit ratio down.

Asian stock markets rebound from early lows

2008-11-06T23:08:00.000-08:00

By Jeremiah Marquez, AP Business Writer

Asian stock markets rebound from early lows; Toyota plunges 9 percent on grim forecast HONG KONG -- Asian markets were mixed Friday but rebounded from early lows amid grim profit forecasts from Toyota and other companies as well as sluggish U.S. economic data.

But several of the region's bourses showed surprising resilience -- notably in Hong Kong, South Korea and Taiwan -- as lower prices lured some value investors and short sellers covered their trades ahead of the weekend.

"The expectation was to open much lower following the trouncing in the U.S.," said Benjamin Collett, head of hedge fund sales trading Daiwa Securities SMBC Co. in Hong Kong.

Hong Kong's benchmark Hang Seng index was up 1.4 percent to 13,975.83 by midafternoon, and Taiwan's index rose 1 percent.

South Korea's main stock index rebounded from a 4.9 percent fall to close 3.9 percent higher after the country's central bank cut interest rates by a quarter of a point -- the third cut in less than a month-- in a bid to boost an economy hammered by the global financial crisis.

The move followed interest rate cuts by the European Central Bank and the Bank of England overnight.

In Tokyo, the Nikkei 225 stock average pared earlier losses to close down 316.14 points, or 3.6 percent, to 8,583. Investor sentiment took a hit after Japan's top automaker Toyota slashed its annual forecast to a third of what it was a year ago. Its shares plunged 9.2 percent.

Wall Street's stock indexes plunged more than 4 percent on widespread anxiety about the economy after computer gear maker Cisco Systems warned of easing demand and retailers reported weak sales for October. A jump in unemployment benefits aggravated concerns.

"We're seeing data every day that looks really bad," said Nicole Sze, Singapore-based investment analyst at Bank Julius Baer & Co., which manages about $300 billion in assets. "The question is, has all the bad news been factored in? That's what investors are asking themselves."

Markets were likely to see more volatility as along as bad news forced investors to readjust their expectations about the scope of a recession and its impact on company profits, analysts said.

Weakening prices for metals and oil pressured Australia's S&P/ASX 200 index, down 2.4 percent, as resource giants like BHP Billiton Ltd. slumped. Singapore's index was flat after the city-state's biggest bank, DBS Group Holdings Ltd., posted a worse-than-expected fall in quarterly profits.

Toyota Motor Corp. shares sank to 3,460 yen after the company on Thursday afternoon cut its net profit forecast for the fiscal year through March 2009 to 550 billion yen ($5.5 billion). That's half of its earlier projection of 1.25 trillion yen ($12.6 billion), and about a third of the previous year's profit of 1.72 trillion yen. If that projection holds, it would be the smallest annual profit in eight years.

Japan's leading automaker blamed a contracting U.S. auto market, strong yen and higher materials prices. Executive Vice President Mitsuo Kinoshita went so far as to call it "an unprecedented situation."

In Europe on Thursday, the Bank of England slashed its key interest rate by 1.5 percentage points to its lowest in more than 50 years in a dramatic bid to cushion its economy, while the European Central Bank, which sets rate for the 15-nation zone that uses the euro, settled for a more conservative half-point trim.

In New York on Thursday, the Dow Jones industrial average fell 443.48, or 4.85 percent. The losses combined with another decline Wednesday represent the Dow's worst two-day percentage decline since the October 1987 crash.

U.S. stock index futures were up, suggesting Wall Street would rebound Friday morning. Dow futures were up 101 points, or 1.2 percent, to 8,801, while S&P futures were up 12.1 points, or 1.3 percent, to 916.6.

Oil prices rebounded modestly after plummeting overnight, with a barrel of light, sweet crude for December delivery up 64 cents to $61.41 in Asian trade. The contract fell 7 percent, or $4.53, to settle at $60.77 overnight.

In currencies, the dollar was trading at 96.32 yen from 97.30 late Thursday in New York. The euro rose to $1.2722 from $1.2681 the day before.

Obama to talk economy, meet the press

2008-11-06T23:06:00.000-08:00

By Deborah Charles

CHICAGO (Reuters) - Barack Obama will have his campaign promises put to the test on Friday as he meets with economic advisers to discuss his transition to the White House and holds his first news conference as U.S. president-elect.

After two straight days of huge losses on Wall Street, for a decline of roughly 10 percent since Tuesday's election, Obama will seek advice from seasoned economists, businessmen and policy experts on how to deal with the country's worst financial crisis since the Great Depression.

Obama, who won a sweeping victory in Tuesday's election in part because of his promise to revitalize the U.S. economy, has assembled a 17-member transition economic advisory board to help him as he tries to decide who to put on his White House team and how to implement promised measures.

The board includes former Treasury secretaries Robert Rubin and Lawrence Summers, former Labor secretary Robert Reich, Google Inc chairman Eric Schmidt, former Federal Reserve Chairman Paul Volcker and billionaire Warren Buffett.

After the meeting, at 1330 CST, Obama will face the news media for the first time since Tuesday's historic win, which will make him the first black American president when he is inaugurated on January 20.

In addition to the economy, Obama will likely face questions about who he plans to appoint to various Cabinet posts and other aspects of the transition.

The meeting with economic advisers comes after reports of even more of a slowdown in U.S. productivity growth. More bad economic news is expected on Friday when analysts expect the Labor Department to announce a huge drop in jobs in October.

Obama has acknowledged the pressing urgency of revitalizing the economy and he is expected to quickly make choices about key appointments to his economic team. It was not clear if he would make any top-level appointments at the news conference or by the end of the week.

The market is looking closely at who Obama will name as Treasury Secretary. Top candidates for the job included Timothy Geithner, president of the Federal Reserve Bank of New York, Summers and Volcker.

A Reuters poll of economists found 26 of 48 respondents thought Geithner would be chosen for the job, while Summers came second with 14 votes.

Whoever takes the Treasury job will guide the $700 billion economic bailout package and the regulatory reform needed to prevent a repeat of the current crisis.

Obama and his economic advisers will likely talk about the $700 billion package and also about a possible second fiscal stimulus package the Democratic-dominant Congress is expected to address when it returns to Washington.

"We expect President-elect Obama to move decisively to address economic stress," said Jan Hatzius, senior economist at Goldman Sachs. "We suspect he will support even more fiscal stimulus than the $200 billion we have penciled into our forecast. Congress could move on this even before the change-over on January 20."

The economic advisers may also discuss how to help U.S. automakers, who are facing an unprecedented financial crisis due to the global credit crunch. The automakers are lobbying for up to $50 billion in additional aid.

(Additional reporting by Pedro Nicolaci da Costa in New York and Caren Bohan in Chicago)

Financial crisis complicates Obama transition

2008-11-06T23:01:00.000-08:00

WASHINGTON - As president-elect, Barack Obama faces a tricky task as he begins dealing ever more directly with the economic meltdown, grappling with the worst financial crisis in seven decades but not yet wielding the power to do much about it.

He won't be a participant at President Bush's global summit next week, although the 20 leaders attending are no doubt keenly interested in his views. And he may have to eventually push back against some members of his own party in Congress over details of a new plan to stimulate the economy.

Congress convenes for a lame-duck session on Nov. 17, and Obama is giving all indications that he'll play a direct role rather than keeping his distance until he is sworn in.

"The president-elect has said he wants another stimulus, the president-elect therefore has views on what that stimulus should be, and the Democratic Congress should take its cues from the president-elect," said economist Rob Shapiro, a top Commerce Department official in the Clinton administration who now is on Obama's team of transition advisers.

Will Obama be able to pull off a smooth changeover in economic management in such trying times? "He'll have to work very hard at it, but of course he can. This is a man who pulled off the smoothest campaign in history," said Shapiro, now associated with NDN, a think tank formerly known as the New Democratic Network

The Illinois senator meets on Friday with his economic team and holds his first postelection news conference.

Obama's victory emboldened Democrats and helped them expand their House and Senate majorities. "The fact is that this president goes into office with more expectations than any president I can ever remember in my lifetime," said House Speaker Nancy Pelosi.

But some liberal Democrats may expect him to deliver more than they're likely to get. As Pelosi was quick to note, "The country must be governed from the middle," and that will increase pressure on Obama to make compromises.

He may have to scale back some of the long-term spending programs he advocates to pay for crash legislation to keep what already looks like a recession from turning into something much worse.

"The need has never been greater for the absolutely seamless transition of economic teams," said William Galston, who was a White House domestic policy assistant in President Clinton's first term. "We're in a race against time to prevent a global financial meltdown, and I think everybody knows it."

Obama has called for about $175 billion in new stimulus spending, including money for roads, bridges and aid to hard-pressed states. He wants a rebate of $500 for individuals, $1,000 for families and a new $3,000 tax credit for businesses for each new job created.

Many congressional Democrats have been cool to the notion of more tax rebates, on top of the $168 billion handed out earlier this year.

Obama and congressional leaders will have to sort out any differences, said James Thurber, a political science professor at American University. "He has to hit the ground running or he'll be left behind on some of these key policies dealing with the economy," Thurber said.

Lawmakers seem likely to settle on relatively modest measures for now — such as a $60 billion package for extended unemployment benefits, food stamps and subsidies to states — rather than risk a Bush veto. Then, with expanded Democratic majorities in both chambers, Congress can tackle a more-ambitious plan early next year.

On Thursday, Obama named Rep. Rahm Emanuel, a hard-charging fellow Democratic lawmaker from Chicago, to be his White House chief of staff. Now he is under pressure to name a treasury secretary as quickly as possible.

Former Treasury Secretary Lawrence Summers, who served at the end of the Clinton administration, and Timothy Geithner, president of the Federal Reserve Bank of New York, are viewed as top contenders.

Geithner has played a key role in the government's response to the financial crisis and worked closely with Treasury Secretary Henry Paulson. Summers, whose tenure as president of Harvard was rocky after inflammatory remarks about women in the sciences, has been a close adviser to Obama.

Other names being mentioned include another former Clinton treasury secretary, Robert Rubin, New Jersey Gov. Jon Corzine, former Fed Chairman Paul Volcker and Jaime Dimon, chief executive of JP Morgan Chase. During one of the presidential debates, Obama and GOP rival John McCain suggested billionaire investor Warren Buffett would make a fine, if unlikely, secretary.

Obama has promised to keep in close contact with Paulson, who has made it clear he will leave his post in January and leave to his successor key decisions on how to spend the rest of the $700 billion financial rescue package passed last month by Congress.

Paulson pledged Thursday to work closely with Obama, saying, "A methodical and orderly transition is in the best interests of the financial markets and Treasury is committed to making sure that the incoming team can hit the ground running in January."

The Bush administration is already pouring $250 billion into banks in return for partial ownership. It also may use some of the money to buy bad mortgages and other toxic debt held by financial institutions.

Presidents have to be careful about what they pick as their top legislative goals. Despite wide Democratic majorities, President Carter stumbled with energy proposals and President Clinton with health care overhaul. In 2004, Bush squandered political capital from his re-election victory to push a partial privatization of Social Security that he couldn't sell even to most fellow Republicans.

White House press secretary Dana Perino said Thursday that the administration has been briefing Obama aides. "What we have pledged to do and we are doing is to work and consult with the Obama team on issues as we move forward, one of those being the financial summit that's coming up next week," she said.

Obama declined an invitation to attend himself. Why? The Obama camp says it's one thing for the president-elect to work with his party in Congress on a stimulus package, another to participate directly in something that is the prerogative of the president. But he's expected to send a representative.

Highland Credit Strategies Fund Announces Declaration of Regular Distribution

2008-11-06T16:39:00.000-08:00

DALLAS--(BUSINESS WIRE)--Highland Credit Strategies Fund (the “Trust”) (NYSE: HCF - News) today announced that its Board of Trustees (the “Board”) has declared a regular distribution on its common stock, for the month of November 2008, of $0.1200 per share, payable on last business day of the month to holders of record at the close of business ten calendar days prior to such date.

The following are annualized historical distribution rate calculations based on the total declared distribution for the month, the Trust’s net asset value (“NAV”) at month-end and the Trust’s month-end closing price (“Market Price”).

Annualized Period-End Distribution Rates	Amount						NAV		Market Price
Annualized Period-End Distribution Rates	Ordinary		ST Cap Gain		Total		NAV		Market Price

October 31, 2008	$	0.1500	$	-	$	0.1500	18.67	%	19.87	%
September 30, 2008	$	0.1500	$	-	$	0.1500	14.48	%	18.83	%
August 29, 2008	$	0.1500	$	-	$	0.1500	13.15	%	14.90	%
July 31, 2008	$	0.1500	$	-	$	0.1500	12.94	%	15.15	%
June 30, 2008	$	0.1500	$	-	$	0.1500	12.47	%	13.45	%
May 30, 2008	$	0.1500	$	-	$	0.1500	11.92	%	12.67	%
April 30, 2008	$	0.1500	$	-	$	0.1500	12.15	%	12.86	%
March 31, 2008	$	0.1500	$	-	$	0.1500	12.41	%	13.82	%
February 29, 2008	$	0.0650	$	0.0850	$	0.1500	11.98	%	13.15	%
February 4, 2008	$	-	$	0.1500	$	0.1500	11.54	%	12.88	%
January 31, 2008	$	-	$	0.1500	$	0.1500	10.77	%	12.81	%
December 31, 2007	$	-	$	0.1500	$	0.1500	10.00	%	11.38	%
November 30, 2007	$	0.1500	$	-	$	0.1500	9.70	%	10.73	%

Distribution rates are calculated by annualizing the distribution declared during the period and then dividing the resulting annualized distribution by the month-end NAV (in the case of NAV) or the month-end closing price (in the case of Market Price). The distribution rate is based on an estimation of investment income and may or may not include a return of capital. The distribution rate is based solely on actual distributions, which are made at the discretion of the Board.

This press release is not for tax reporting purposes but is being provided to announce the amount of the Trust’s distributions that have been declared by the Board. In early 2009, after definitive information is available, the Trust will send shareholders a Form 1099-DIV specifying how the distributions paid by the Trust during the calendar year should be characterized for purposes of reporting the distributions on a shareholder’s tax return (e.g., ordinary income, short-term capital gain, long-term capital gain or return of capital).

About Highland Credit Strategies Fund

The Trust is a non-diversified, closed-end management investment company. The Trust’s investment objectives are to provide both current income and capital appreciation. The Trust seeks to primarily invest in secured and unsecured floating and fixed rate loans, bonds and other debt obligations, debt obligations of stressed, distressed and bankrupt issuers, structured products and equities. Highland Capital Management, L.P. (“Highland”) has served as the Trust’s investment adviser since the Trust’s inception in 2006. The Trust’s shares are listed on the NYSE under the symbol “HCF”. An investment in the Trust is not appropriate for all investors. No assurance can be given that the Trust will achieve its investment objectives.

Shares of closed-end investment companies frequently trade at a discount to net asset value. The price of the Trust’s shares is determined by a number of factors, several of which are beyond the control of the Trust. Therefore, the Trust cannot predict whether its shares will trade at, below or above net asset value.

Highland, the Trust’s investment adviser, is a leading alternative investment management firm specializing in credit and structured products. Headquartered in Dallas, Texas, Highland manages assets on behalf of investors around the world with offices in New York, Singapore, and London.

Past performance does not guarantee future results.

http://biz.yahoo.com/bw/081106/20081106006751.html?.v=1

Morgan Stanley sees 4Q loss at Goldman Sachs

2008-11-06T16:37:00.000-08:00

NEW YORK (AP) -- Goldman Sachs shares tumbled Thursday, as Morgan Stanley's Patrick Pinschmidt joined a handful of analysts who expect the investment bank to report its first quarterly loss since going public in 1999.
Shares dropped $6.71, or 7.7 percent, to close at $80.72, after falling as low as $79.41 earlier in the session. The stock traded as high as $240.05 a year ago.

In a note to clients released Wednesday, Pinschmidt chopped his estimate for the bank's fiscal fourth quarter, which ends Nov. 30, to a loss of $1.09 per share from a profit of $3.21 per share.

Analysts polled by Thomson Reuters, on average, expect earnings of $1.62 per share.

Pinschmidt said the chief reason for his lowered estimate is a projected $2.6 billion loss in the firm's investment portfolio, due to steep declines in the stock market so far this quarter. He also increased his estimate for asset write-downs to $1.5 billion from $800 million.

A spokesman for Goldman Sachs declined to comment on the report.

Earlier this week, Merrill Lynch analyst Guy Moszkowski also predicted that Goldman would report a loss for the fourth quarter.

During its fiscal third quarter, which ended Aug. 31, Goldman's profit fell 71 percent, but that performance was still better than many of its competitors, which have reported quarterly losses throughout much of the year.

Still, September was considered one of the worst months during the credit crisis as banks essentially stopped lending money to each other for fear loans would not be repaid. Problems intensified when Lehman Brothers Holdings Inc. filed for bankruptcy and the government loaned insurer American International Group Inc. $85 billion to help it stay afloat.

Goldman and fellow independent investment bank Morgan Stanley have since received approval to become bank holding companies, which will allow them to grow a large deposit base to help fund operations.

Goldman and Morgan made the change as investors worried the stand-alone investment bank model may no longer be viable following the hasty sale of Merrill Lynch & Co. to Bank of America Corp. and the demise of Bear Stearns in March.

Pinschmidt said a number of recent capital injections "have effectively taken balance sheet adequacy issues off the table."

Goldman struck a deal with billionaire investor Warren Buffett to sell preferred and common stock to Buffett's Berkshire Hathaway Inc. As part of the deal, Buffett planned to invest at least $5 billion in fresh capital to help Goldman and could double that investment to $10 billion. At the same time, Goldman issued common stock to raise an additional $5 billion through a public offering. Goldman is also among the beneficiaries of the government's $125 billion capital investment in banks.

Goldman, once considered the strongest investment bank on Wall Street, is cutting 3,200 employees globally as it works to slash expenses.

http://biz.yahoo.com/ap/081106/goldman_sachs_mover.html?.v=2

Stocks’ two-day loss total nears 10 percent

2008-11-06T16:33:00.000-08:00

NEW YORK - Wall Street plunged for a second day, triggered by computer gear maker Cisco Systems warning of slumping demand and retailers reporting weak sales for October. Concerns about widespread economic weakness sent the major stock indexes down more than 4 percent Thursday, including the Dow Jones industrial average, which tumbled more than 440 points.

Major indexes have lost about 10 percent since Barack Obama was elected president — a vote preceded by a steep rally — and the losses represent the Dow’s worst two-day percentage decline since the October 1987 crash.

Paper losses during that time in U.S. stocks came to $1.2 trillion, according to the Dow Jones Wilshire 5000 Composite Index, which represents nearly all stocks traded in America.

Comments from Cisco that it saw a steep drop in orders in October and reports from retailers that consumers are skipping trips to the mall provided fresh evidence of the economy’s struggles. Worries about automakers and the financial sector compounded investors’ unease.

A day ahead of Friday’s key October employment report, a widely watched barometer of the economy’s health, the Labor Department said the number of people continuing to draw unemployment benefits jumped to a 25-year high. The increase by 122,000 to 3.84 million in late October marked the highest level since late February 1983, when the economy was being buffeted by a protracted recession.

“The economy is in a pretty significant downturn and I think that is broad-based because it is all interconnected,” said Ed Hyland, global investment specialist at J.P. Morgan’s Private Bank. “This is something that we haven’t really seen, this level of this rapid and significant pullback both in the market and the economy.”

Thursday’s rout follows a drop of more than 5 percent in the market Wednesday that saw the Dow plunge nearly 500 points as investors fretted that weak readings on employment and downcast profit forecasts and job cuts from financial companies to steelmakers signaled broad economic troubles.

Still, the market’s two-day slide follows an enormous run-up since last week so some pullback was expected, analysts said. Through the six sessions that ended Tuesday, the benchmark Standard & Poor’s 500 index surged 18.3 percent.

Richard Campagna, chief investment officer at Provident Investment Counsel in Pasadena, Calif., contends the market’s pullback isn’t surprising given the size of the recent run-up, which gave the Dow its best run in 34 years last week. He said the weak economic readings aren’t a surprise because of the freeze in credit markets that has disrupted lending and other economic activity since the mid-September bankruptcy of Lehman Brothers Holdings Inc.

Campagna said the light volume and overall fear among investors is exacerbating the market’s volatility.

“Some people are pushing this market around more than they should be out of fear,” he said. “Many everyday investors are sitting on the sidelines.”

“Everyone has been shellshocked with the moves in the market,” he said.

The Dow fell 443.48, or 4.85 percent, to 8,695.79 after falling as much as 502 in the final five minutes of trading. The blue chips remain 520 points, or 6.4 percent, above 8,176, their Oct. 27 closing low from the market’s yearlong decline.

Broader stock indicators also posted sharp losses. The Standard & Poor’s 500 index fell 47.89, or 5.03 percent, to 904.88, and the Nasdaq composite index fell 72.94, or 4.34 percent, to 1,608.70.

Asia shares to fall on Wall St dive

2008-11-06T16:27:00.000-08:00

Jakarta, Financeroll.com (07/11) -- Asian shares are set to slide sharply on Friday amid fears of a deepening economic downturn in the United States. Wall Street fell by up to 5 percent as major U.S. retailers reported larger-than-expected falls in sales, and some large corporates produced bleak outlooks. The euro and sterling both fell after cuts by respective central banks, while the yen was lifted by increasing risk aversion.

Written by Lukman Hakim

Stocks end quiet session mixed ahead of election

2008-11-03T15:27:00.000-08:00

NEW YORK – Wall Street ended the calmest session in recent memory with a narrowly mixed performance Monday as investors largely looked past a weak reading on the manufacturing sector and focused on the election.

Before finishing essentially flat, the Dow Jones industrials moved in a range of 155 points — well below October's average daily swing of 594. While trading was quiet, including the often-volatile final hour, the calm doesn't necessarily mean the market has overcome all its worries; analysts said investors weren't making big moves ahead of the voting.

Stocks showed little lasting impact from the Institute for Supply Management report that its measure of U.S. manufacturing dropped last month to the lowest level since September 1982 as credit conditions tightened and disruptions remained from Hurricane Ike. The trade group said its index of manufacturing activity fell to 38.9 from 43.5 in September, well below the 41.5 economists predicted, according to Thomson/IFR.

A separate report showed construction spending fell by a smaller-than-expected amount in September as a rebound in nonresidential activity helped offset further weakness in home building. The Commerce Department said construction spending fell by 0.3 percent in September, less than the 0.8 percent decline many economists expected.

Major auto companies reported weak sales for October on Monday as tight credit and nervousness about the economy kept consumers away from showrooms. General Motors Corp.'s U.S. sales plunged 45 percent, Ford Motor Co.'s sales fell 30 percent, while Toyota Motor Corp.'s dropped 23 percent.

The range of data support the growing belief that the economy is in recession, hurt by a drop in lending and slower overall spending. But with the Dow having tumbled more than 14 percent in October — its worst month in 21 years — the market has priced in a significant falloff in economic activity. Wall Street must now determine whether the selloff in stocks is adequate, not enough or overdone.

Stephen Massocca, co-chief executive of Pacific Growth Equities, said the economic readings weren't a surprise given the hits the economy has taken from the evaporation of lending since September. He said Wall Street's tepid reaction also reflects the market's process of forming a bottom after its selloff. Investors are also waiting to make big bets until after the election, he said.

In addition, the fiscal year for mutual funds ended Friday, removing one source of selling pressure from the market. Some funds had been selling last month ahead of Oct. 31 for tax purposes and to raise cash.

"What we've seen was a rally last week taking a dire depression off the table, and I think now what we have is a severe recession," Massocca said. "By and large, the economy is bad but it's not as bad as many people think it is. There are still people going to work every day."

The Dow Jones industrial average fell 5.18, or 0.06 percent, to 9,319.83, after rising as much as 86 and falling 70. The day's trading range was its lowest since Sept. 3.

Broader stock indicators were mixed. The Standard & Poor's 500 index fell 2.45, or 0.25 percent, to 966.30, while the Nasdaq composite index rose 5.38, or 0.31 percent, to 1,726.33.

The Russell 2000 index of smaller companies rose 0.98, or 0.18 percent, to 538.50.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to a light 4.36 billion shares compared with 6.23 billion traded Friday.

The quiet session wasn't a surprise as many investors sat on the sidelines ahead of the election. Many analysts have said that in general, neither candidate is more favored than the other on Wall Street, but investors are eager to put the uncertainty behind them.

John Dorfman, portfolio manager of the Dorfman Value Fund, noted that even with a difficult economy the market has priced in a tough recession.

"I think we are groping for a bottom here and there is often a relief really after the election is resolved," he said.

Given how far stocks have already tumbled, some analysts believe the market is showing signs of bottoming but that volatility likely will remain. Last month, for all its problems, did end with a positive tone, thanks in large part to weeks of gradual improvement in the tight credit markets, but also because mutual funds were finished with selling at the end of their fiscal year. The Dow added 11.3 percent last week, its best weekly performance in 34 years, while the S&P 500 index climbed 10.5 percent.

Still, the Dow is down 34.2 percent from its Oct. 9, 2007, record close of 14,164.53, while the S&P 500 is down 38.3 percent from its October 2007 peak of 1,565.15.

Craig Peckham, market strategist at Jefferies & Co., remains cautious. He said the market is still trying to determine how long the slowdown will last and if it will be longer than normal slowdowns, which he suspects it will.

"There continues to be risk to equity values particularly if we have a long-term downturn," said. "I think we probably do end up bouncing around for a while and I think real conviction to the upside or the downside won't come until people get better visibility on 2009."

The key bank-to-bank lending rate known as Libor was unchanged with Friday's rate of 3.03 percent for three-month dollar loans. A fall in the London Interbank Offered Rate indicates that banks are more willing to lend to one another.

Investors' demand for short-term government debt remained high, however, a sign that they are still cautious. The yield on the three-month Treasury bill, seen as one of the safest assets around, rose to 0.47 percent from 0.43 percent Friday. A higher yield indicates decreased demand.

The yield on the benchmark 10-year Treasury note fell to 3.91 percent from 3.96 percent late Friday.

The dollar rose against most other major currencies. Gold prices also rose.

Light, sweet crude fell $3.87 to settle at $63.91 a barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 rose 1.51 percent, Germany's DAX index rose 0.78 percent, and France's CAC-40 advanced 1.17 percent. Hong Kong's Hang Seng Index climbed 2.69 percent. Japan's stock market was closed for a holiday.

news.yahoo.com

Nov 4 - Open: Dollar calms after bouncy night

2008-11-03T15:20:00.000-08:00

The New Zealand dollar had a bouncy night, but in the end opened close to where it ended on local trading yesterday evening.

At 8am the kiwi was buying US59.24c, having ranged between about US58.15c and US59.75c during the night. BNZ currency strategist Danica Hampton said that on one hand, economic data overnight had painted a bleak picture of global growth.

On the other hand, demand for growth sensitive currencies had been bolstered by hopes a slew of interest rate cuts would help prevent a deep and prolonged global recession.

A strong surge in the Australian dollar against the greenback during the New York session had dragged the NZ dollar back above US59.50c.

Earlier the kiwi had slipped to around US58.20c as the euro and sterling had heavy losses against the United States currency.

Speculation about today's interest rate decision by the Reserve Bank of Australia, due at 4.30pm NZT, had kept the game interesting, Ms Hampton said.

The NZ dollar strengthened against the aussie overnight to be at A87.94c by 8am from A86.90c at 5pm yesterday.

The kiwi also rose against the European currency to 0.4693 euro by the local open from 0.4610, while against the yen it slipped to 58.63 from 58.85.

The trade weighted index was 60.08 at 8am from 59.58.

Reuters currency rates (8am today - 5pm yesterday):

NZ dlr/US dlr US59.24c - US59.27c

NZ dlr/Aust dlr A87.94c - A86.90c

NZ dlr/euro 0.4693 - 0.4610

NZ dlr/yen 58.63 - 58.85

NZ dlr/stg 37.48p - 36.39p

NZ TWI 60.08 - 59.58

Australian dollar US67.38c - US68.15c

Euro/US dollar 1.2626 - 1.2861

US dollar/yen 98.89 - 99.33

www.stuff.co.nz

Dollar pares losses, but slips vs. yen after cut

2008-11-02T20:43:00.000-08:00

By Lisa Twaronite, William L. Watts & Nick Godt, MarketWatch

The dollar index (DXY:

US Dollar Index Future - Spot Price

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Last: 85.13+1.28+1.52%
11:14pm 11/02/2008
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U.S. ISM Manufacturing Expect to Fall Further, Can the Dollar Hold Its Ground?

2008-11-02T20:37:00.000-08:00

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What's Expected

Time of release: 11/02/2008 15:00 GMT, 10:00 EST

Primary Pair Impact : EURUSD

Expected: 42.0

Previous: 43.5

Impact the ISM Manufacturing has had on EURUSD after the last 3 Quarters

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September 2008 U.S. ISM Manufacturing

Manufacturing activity in the U.S. contracted for the second consecutive month in September to reach its lowest level since 2001. The ISM manufacturing index plunged to 43.5 from 49.9 in August, indicating that demands are slowing at a faster pace as fears of a global recession intensify. A breakdown of the report showed that new orders slipped to 38.8 from 48.3, while the employment component weakened to 41.8 from 49.7 in the previous month. The drastic downturn in the manufacturing sector indicates that the U.S. economy is clearly heading into a recession, and the Fed could be forced to act in order to stave off further downturns in the world's largest economy. Despite the neutral policy stance taken on by the FOMC, mounting fears of a recession has spurred speculation that the MPC will look to lower the benchmark interest rate at their next meeting.

August 2008 U.S. ISM Manufacturing

The ISM manufacturing index contracted for the first time in three months, falling to 49.9 from 50.0 in July. The summary of the report showed that inventories of unsold goods surged to 49.3 from 45.0, while the employment component eased to 49.7 from 51.9. Fading demands from the domestic economy paired with higher input costs have certainly led producers to cutback on production and employment, and conditions may only get worse as rising inflation continues to sap purchasing power for consumers. Meanwhile, export orders increased to 57.0 from 54.0, which suggests that the weaker dollar has helped to boost foreign demands. However, as the effects of the fiscal stimulus plan wear off, manufacturing activity may fall further throughout the rest of the year as inflation remains well above the Fed target.

July 2008 U.S. ISM Manufacturing

Manufacturing in the U.S. inched lower to 50.0 from 50.2 in June as firms continue to face higher input costs amid slowing demands. The breakdown of the report showed that new orders plunged to a seven year low of 45.0 from 49.6, while export orders slipped to 54.0 from 58.5. Indeed, rising food and energy costs have lowered domestic and foreign demands as inflationary concerns accelerate across the globe, and conditions may only get worse as economic activity in the world's largest economy continues to falter. The growth outlook for the U.S. has clearly weakened throughout the first half of the year, and may deteriorate further as the labor demands waver.

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Manufacturing activity is anticipated to contract for the third consecutive month as economists forecast the ISM index to slip to 42.0 from 43.5 in September despite the decline in input prices. Falling commodity prices have helped to lower production costs for firms as the producer price index declined to 8.7% from 9.6% in August, but fading demands from the domestic as well as the global economy has clearly taken a toll on economy as manufacturing activity weakened considerable throughout the country. In October, the Philadelphia Fed index plunged to -37.5 from 3.8 in the previous month, while the Richmond Fed index slipped to -26 from -18. In addition, manufacturing activity in New York fell to its lowest level since recordkeeping began in 2001 as the Empire manufacturing survey dipped to -24.6 from -7.4 in September. Meanwhile, just two weeks ago we saw that the retail sales index contracted for the third consecutive month as consumer spending fell 1.2% in September. Moreover, as the advance GDP reading for the third quarter showed that the world's largest economy contracted 0.3% in the third quarter, increased fears of a sever downturn is likely to limit production over the coming months. As growth prospects turn increasingly dim, the Fed could be forced to ease policy further and may bring the benchmark interest rate below 1.00% for the first time in history, which could stoke increased selling pressures for the U.S. dollar in the near-term.

Despite the considerable slowdown in the economy, the greenback continues to benefit from its safe haven status, and a surprising improvement in manufacturing could stoke increased buying pressures for the reserve currency. As a result, if the data crosses the wires much higher than the 42.0 estimate, we will favor a long position for the U.S. dollar (short EURUSD). We will look for a red, five-minute candle following an improved reading to confirm an entry on two lots of EURUSD, and will place our initial stop at the nearby swing high (or reasonable distance). This initial risk will determine our first target, and our second target will be based purely on discretion. In order to preserve our profits, we will move the stop on the second lot to breakeven once the first trade reaches it target.

On the other hand, if the ISM release falls inline or below the projected estimate, we anticipate increased selling pressures to push the greenback lower against its major currency counterparts. Therefore, fall in manufacturing would favor a short U.S. dollar poistion (long EURUSD), and we will follow the same strategy for short trade as the long mentioned above, just in reverse.

news.tradingcharts.com

Swiss Franc Fundamentals Faltering, But Positioning May Point to Strength

2008-11-02T20:34:00.000-08:00

The Swiss Franc will be under pressure next week as economic data continues to weaken, but technical positioning is supportive of near-term strength against the US dollar.

Fundamental Outlook for Swiss Franc: Bearish - Switzerland's UBS Consumption Index Improves, But Will It Hold? - KOF Leading Indicator Disappoints, Stoking Increased Growth Fears The Swiss Franc will be under pressure next week as economic data continues to weaken, but technical positioning is supportive of near-term strength against the US dollar. The SVME-Purchasing Managers Index is expected to show sentiment deteriorate for the sixth consecutive month with a print at 45.5. October's Consumer Price Index is expected to show the pace of price growth slow to an annualized 2.5%, the lowest since April. As with most inflation readings across the G10, Swiss CPI peaked in July as oil prices reached above $147/barrel and began easing when the crude rally faltered and changed direction. Still, trading in overnight index swaps suggests the markets are betting on inaction from the Swiss National Bank at the next meeting on November 12th. Unemployment figures round out the week, with the jobless rate expected to tick up to 2.5% in October. Unemployment bottomed at a 6-year low in June and has since started moving in the opposite direction as Swiss companies cut back in response to slowing global demand (particularly from the EU, which accounts for 60% of Switzerland's exports). Technical positioning looks supportive of Franc strength against the US dollar in the near to medium term. USDCHF price action has consolidated in a Rising Wedge formation since early September, with confirmation offered by negative divergence with the Relative Strength Index (RSI) oscillator. This hints the likelihood of a bearish breakout following another test of resistance near the 1.17 level. Still, we would see any such move as a counter-trend correction: the yield gap between the Swiss Franc and the US dollar is expected widen by at least 50 basis points over the next 12 months, pointing to a bullish long-term bias for USDCHF. - IS Visit our recently updated USD/CHF Currency Room for more resources dedicated to the franc.

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