Monday, April 02, 2007


Trade "Continues To Weigh On US$"

Bloomberg reports on currencies. "The dollar was little changed against the euro and the yen after an industry report showed slower U.S. factory growth last month while a gauge of prices manufacturers pay rose more than economists forecast. The evidence of accelerating inflation suggests the Federal Reserve will be more likely to keep borrowing costs at a six-year high, reducing pressure on the dollar."

"The dollar fell to $1.3366 against the euro at 4:11 p.m. in New York, from $1.3354 on March 30. The U.S. currency was unchanged at 117.83 yen."

"'I don't think the report will have a big impact on the dollar,' said Christian Dupont, a senior currency trader in Montreal at Societe Generale SA. 'The weaker ISM number simply gave some dollar bears an excuse to sell the dollar. The sentiment surrounding the dollar has been negative.'"

"The dollar fell against the euro and the yen last week after the U.S. added tariffs on imports from China and on speculation mounting tension in the Mideast will increase geopolitical risks. 'The news about levies on imports from China will continue to weigh on the dollar,' said Scott Schultz, a currency trader in New York at Brown Brothers Harriman & Co. 'Protectionism is not good for trade flow and is negative for the dollar.'"

From MarketWatch. "Gold futures climbed Monday to close at their highest level in three trading sessions, taking a turn higher as some traders viewed developments in the stand-off between Iran and the U.K. as taking a slight turn for the worst."

"Gold for April delivery climbed $2.70 to close at $665.70 an ounce on the New York Mercantile Exchange, reversing from an earlier dip to $657. Although April remains the front-month contract for futures, most of the trading volume has moved to the June contract, which closed at $671.50, up $2.50, after trading as low as $661.70 earlier."

"'Geopolitics should not be ignored as the pendulum could swing from diplomacy to confrontation over a single word or nuance,' said Jon Nadler, an analyst at"

"Overall, gold's price action 'screams physical selling (or leasing) in the London market which means the gold is coming out of central bank vaults,' said Neal Ryan, director of economic research at Blanchard. 'There is no other explanation for this type of price activity.'"

"'Oil has been up and down all morning and gold prices [hadn't] reacted to oil price fluctuations until the London market closed,' he said. May crude closed slightly higher Monday."

"Juxtaposed against this uncertain backdrop, gold's earlier weakness came as a bit perplexing to some analysts. 'There is no clear reason, with the dollar down, oil prices volatile (but still holding over $65), no resolution to the U.K./Iran standoff now going into it's second full week and only bullish news entering the market from a demand standpoint, that precious metals should be falling,' said Ryan."

"And looking further ahead, 'we are now moving into what is traditionally the strongest period for physical demand, with the start of the monsoon/wedding season later in the month,' said James Moore, metals analyst at"

"Most other metals prices moved lower. May silver lost 0.7%, or 10 cents, to close at $13.35 an ounce. July platinum fell $5.80 to end at $1,249 an ounce and June palladium skidded $3.55 to close at $353.70 an ounce."

The Asia Sentinel. "Amid the myriad booms and bubbles the asset world has witnessed in recent months, one stands out, at least for originality: Vietnam. It is awash in more money than it can handle."

"In mid-March, a thousand portfolio investors, investment bankers and fund managers crowded into Hanoi’s Melia Hotel for an investment conference that coincided with a flurry of announcements about new funds being formed to invest in Asia’s latest miracle economy."

"Here was the successor to China of the past decade, Thailand-Malaysia of the 1985-1995 era, Taiwan and Korea of 1975-1985 and Japan during the post-1965 boom. Vietnam is the latest to fly in the Asian geese formation."

"New markets are particularly prone to speculative excesses and Vietnam is no exception. This has been a money-and-momentum driven market with scant regard for such niceties as price-to-earnings or price-to-book ratios. They are there for quick profits and an improvement on the modest yields of bank deposits."

"The estimated $2 to 3 billion of new foreign portfolio money waiting in the wings is a huge amount for this market to absorb. It may not seem so big relative to a $16bn market capitalization but it is huge relative both to the free float of those listed and bearing in mind that foreign holdings for some counters, mainly banks, are close to their limits (30 percent in the case of banks)."

"As the banking system is largely state-owned it may not be in danger of the kind of meltdown suffered in many countries during the Asian financial crisis of 1997-1998. However, credit has almost certainly been growing too fast even for an economy with 13 percent nominal growth and still in the process of monetization."

"In short, Vietnam has probably not done enough during this period of easy money to reduce risk by increasing its forex reserves. So it will need to be on guard so that today’s inflow excesses do not become tomorrow’s outflow flood and drain those reserves."

These lazy carry-traders are likely to crash the Vietnamese stocks and currencies, IMO, just like they did in Iceland.
[To continue the discussion started in the last thread...]

Yes, the yen may be a good port in a storm. What about the Australian dollar?

What country out there has stable politics, reasonably sound monetary policy, and is not overly dependent on discretionary exports (especially to the US)??
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