Tuesday, February 06, 2007

 

"They Still Have Deflation In Japan": Paulson

Bloomberg reports on currency developments. "U.S. Treasury Secretary Henry Paulson said that Japan is still struggling with deflation and that the yen is set in a competitive foreign-exchange market. 'We have a Japanese economy that's growing, but they still have deflation in Japan,' Paulson said during testimony today before the House Ways and Means Committee. 'The yen is trading in a competitive marketplace based on economic fundamentals.'"

"Japan's currency has declined 4.8 percent against the dollar and 5.5 percent versus the euro since August. Japan has refrained from intervening in the foreign-exchange market to sell the yen for almost three years, Paulson noted. The yen erased its gains after his remarks, sinking to 120.44 per dollar from 120.10 in about five minutes."

"Federal Reserve Bank of San Francisco President Janet Yellen said China's policy of limiting gains in the yuan creates 'vulnerabilities' similar to those of Asian nations who suffered a financial crisis a decade ago."

"Yellen also said the main five nations that suffered in the crisis in 1997 and 1998, Thailand, South Korea, Indonesia, the Philippines and Malaysia, risk backtracking on free-market policies that have helped those economies expand in the past decade."

"'Despite China's recent successes, it still shares some of the vulnerabilities faced by the Asian crisis countries in the 1990s,' Yellen said. The yuan 'is still much less flexible than the currencies of the Asia crisis countries,' she said."

"China limits gains or losses in the yuan to 0.3 percent a day and has amassed a record $1 trillion in foreign-exchange reserves through managing its currency. It has allowed the currency to gain about 6.5 percent since ending a strict peg to the dollar in July 2005."

Yellen said risky lending practices and inflexible exchange rates vulnerable to 'speculative attacks' were among the problems faced by Asian nations at the time."

"The Fed, then led by Alan Greenspan, cut interest rates in 1998 to help offset the effects of the Asian financial collapse. Commenting on China's currency, also known as the renminbi, Yellen said, 'The central bank has resisted pressure for more rapid appreciation of the renminbi by intervening in the foreign exchange market and building up its holdings of foreign reserves.'"

"She said China could one day 'play a major role in promoting regional exchange-rate flexibility' and that an accelerated pace of gains in the yuan would lead to faster appreciation of currencies throughout East Asia. An inflexible yuan 'complicates the use of monetary policy' in bringing about a slowdown to China's 'booming economy,' she added."

"While Asian nations have overhauled their banking systems and made their currencies more flexible in the past decade, Yellen said 'continued vigilance will be required to prevent or ameliorate crises in the future.' She warned that the changes could be scaled back since the region became more prosperous."

From MarketWatch. "Gold futures closed higher Tuesday to tally a two-session gain of nearly $7 an ounce as recent strength in energy prices and ongoing tension in the Middle East helped fuel stronger demand for the precious metal. Gold for April delivery closed up $2.60 at $658.70 an ounce on the New York Mercantile Exchange, after reaching a high of $663.70."

"It's up $6.70 from Friday's closing level, but the contract is still below Thursday's close of $663, which was a nearly six-month high."

"Gold has rallied back, 'and continues to see scaled down support, as firm oil prices generate concerns about inflation,' said James Moore, an analyst at TheBullionDesk.com. Crude-oil futures rose Tuesday, holding below the $59-a-barrel level on uncertainty ahead of the Wednesday's data on U.S. petroleum supplies. But March crude had climbed earlier in the session to a high of $59.99 as bitter cold in the Northeast drove heating-oil prices higher."

"In currencies trading, the U.S. dollar fell against the euro and British pound, but traded nearly flat against the yen."

"For gold, 'dips remain well supported for now, suggesting investors/speculators are still keen to hold gold,' Moore said. Traders will potentially support the yellow metal to reach the $676 high from last July, once the $655 chart congestion is cleared, he said."

"Other metals prices also posted gains. March silver rose 11.5 cents to close at $13.675 an ounce. April platinum closed up 1.6%, or $18.60, at $1,190.30 an ounce and March palladium rose $1.70 to end at $344.05 an ounce."

Comments:
Remember this? "...The lower prices pose a different problem for the Bank of Japan and Governor Toshihiko Fukui's plan to gradually increase rates to keep from pumping up asset bubbles..." Perhaps Paulson really should describe this as, "...the yen is - trapped - in a competitive foreign-exchange market..."

From a different article, "...Under a disinflationary scenario, both Gold and the Dollar would move higher as market participants move towards safer assets... " What are the, "safer assets"? Is there such a thing?

I am looking for a new startpage. I like this blog, it is no HBB, but it loads fast and has info I like to know.
If you were ever to think of adding something to the top of this webpage, like the daily price of metals, especially gold, that would be great. Perhaps something - weekly - from the supply side as well, for example, gold inventories increased 27,810 troy ounces to stand at 7.46 million troy ounces as of late Wednesday, according to Nymex data. Silver supplies added 11,660 troy ounces to 113.97 million troy ounces, while copper stockpiles declined to 35,969 short tons, down 166 short tons. The official figures for global liquidity growth ran at 15% annually in 2006, up from almost 7% in 2005

I think I had to use two different IDs to use this blog and HBB, perhaps more ppl would comment if the IDs were the same.

The IMF is being given their financial advise from an expert panel including Alan Greenspan, former chairman of the US Federal Reserve, Jean-Claude Trichet, president of the European Central Bank (as in current?) and chairman of the panel Andrew Crockett, president of JPMorgan Chase International. Eventhough IMF gold sales requires 85 percent of the shareholders vote AND the ok of Congress, it does seem from this viewpoint, that if those once (and current) powerful people want to sell, it will get sold. The market does not seem to bat an eye to the idea of the gold sale even if it were to occur on top of central bank gold sales. Is this what a really smooth pump and dump environment is all about? The IMF holds 3,217 tonnes of gold in total that other countries, "hold" for them. Is this like leasing-to-own, for free?. The expert panel also advised the IMF to invest the proceeds of the gold sale in higher-yielding assets. What, "higher-yielding assets" would they invest in? "...In any event, there appears to be a growing trend toward mobilization of at least some of the gold that the IMF currently holds..."

From a different article at Bloomberg, "...Paulson told the committee that the People's Bank of China should ``progressively widen'' the trading band. It should also ``progressively reduce'' purchases of foreign currencies, Paulson said..." Did he just tell China to stop buying so many US TBills and to buy fewer every day? wow.

"...Only 30 percent of companies listed on the Shanghai Stock Exchange ``are good to invest in by Western standards,'' and investors in the remaining 70 percent will probably lose money, Cheng Siwei, vice chairman of the National People's Congress, said Jan. 30 at a conference in Dubai. Haitong Securities said yesterday ``a correction'' is under way..." - is this a stock market crash? A stock market crash in China would be deflationary, especially for commodities? ..."'Despite China's recent successes, it still shares some of the vulnerabilities faced by the Asian crisis countries in the 1990s,' Yellen said. The yuan 'is still much less flexible than the currencies of the Asia crisis countries,' she said."

Protesting Argentina INDEC CPI Staff Accuse Govt Of 'Coup'
Mon, Feb 5 2007, 18:01 GMT http://www.djnewswires.com/eu
Protesting Argentina INDEC CPI Staff Accuse Govt Of 'Coup'
BUENOS AIRES (Dow Jones)--Protesting workers from Argentina's national statistics agency issued a strongly worded statement Monday accusing the government of orchestrating an "institutional coup."
In the statement, workers from the consumer price index section of the agency, known as INDEC, called on the government to stop intervening in the calculation of inflation data and to withdraw police and security officers who'd entered the building Monday.
"The government has adopted a totalitarian attitude in opposition to basic human rights," the statement said. "We reject intervention in the CPI. We believe that an institutional coup has occurred against the right to true information on the country's economic conditions."
The statement was released in an air of heightened tension Monday, ahead of the scheduled release of consumer price data for January at 4 p.m. local time (1900 GMT).
It remains unclear whether the CPI report, which is subject to a dispute over whether to include health costs, will be released at all. Typically, statistical reports require the approval of various staff members before they can be released to the press.

"...Yellen said risky lending practices and inflexible exchange rates vulnerable to 'speculative attacks' were among the problems faced by Asian nations at the time."..." HAHA, replace exchange rate with interest rate, and Asian with American homeower today and you have honesty from the Fed.
 
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