Asian stocks rise as solid US performance lifts spirits

SINGAPORE — Asian markets climbed higher on Wednesday as a sweep of positive news from Wall Street and beyond boosted confidence in the U.S. economy.

KEEPING SCORE: Japan's benchmark Nikkei 225 gained 1.0 percent to 22,921.20 and South Korea's Kospi added 0.3 percent to 2,304.64. Hong Kong's Hang Seng gained 0.6 percent to 28,351.53. The Shanghai Composite index added 0.4 percent to 2,808.24. Australia's S&P/ASX 200 climbed 0.8 percent to 6,254.20. Shares rose in Taiwan and Southeast Asia.

WALL STREET: U.S indexes rebounded after a weak start on solid gains for retailers, technology and household goods companies. Prescription drug business Johnson & Johnson and financial services company Charles Schwab posted bullish earnings, adding to the largely positive corporate earnings season. The S&P 500 index rose 0.4 percent to 2,809.55. The Dow Jones Industrial Average gained 0.2 percent to 25,119.89. The Nasdaq composite jumped 0.6 percent to 7,855.12, surpassing the record high it set last week. The Russell 2000 index of smaller-company stocks climbed 0.5 percent to 1,687.26.

UPBEAT FED COMMENT: Delivering his twice-a-year report on monetary policy to Congress, Federal Reserve Chairman Jerome Powell said he expects the job market to remain robust and inflation to hover around the Fed's 2 percent target for the next few years. Stocks have fallen after Powell's previous major addresses, but not on Tuesday.

U.S. INDUSTRIAL PRODUCTION: The Fed said U.S. industrial production, including output at factories, mines and utilities, climbed 0.6 percent in June. It fell 0.5 percent in May after a fire disrupted production of Ford Motor's F-series pickup trucks, America's bestselling vehicle. U.S. manufacturing still looks healthy despite trade conflicts with China, Europe and Canada and a rising dollar that makes U.S. products more expensive abroad.

ANALYST VIEWPOINT: "While earnings and the highly-watched testimony to Senate by Fed chair Powell played a part, movements remained largely muted with the likes of the Dow and the S&P 500 index clocking only moderate gains overnight," Jingyi Pan of IG said in a commentary.

ENERGY: Benchmark U.S. crude dropped 34 cents to $67.74 per barrel in electronic trading on the New York Mercantile Exchange. The contract was relatively unchanged at $68.08 in New York on Tuesday. Brent crude, used to price international oils, shed 30 cents to $71.86 per barrel.
CURRENCIES: The dollar rose to 112.95 yen from 112.83 yen late Tuesday. The euro eased to $1.1654 from $1.1664.

source: philstar.com

CRYPTO CURRENCY | Hotly anticipated bitcoin futures surge on debut

NEW YORK/SYDNEY — Bitcoin futures jumped more than 20 percent in their eagerly anticipated U.S. debut, which backers hope will encourage wider use and legitimacy for the world’s largest cryptocurrency even as critics warn of the risk of a bubble and price collapse.

The launch on Sunday night may have caused an early outage of the Chicago-based CBOE Global Markets’ website. The exchange said that due to heavy traffic on the CBOE Global Markets website, the site “may be temporarily unavailable.”

The one-month bitcoin contract <0#XBT:> opened trade at 6 pm (6.00 p.m. ET) at $15,460, dipped briefly and then rose to a high of $18,700.

As of 0430 GMT, it was up 16 percent from the open at $17,940, with 2,211 contracts traded.

On the Luxembourg-based Bitstamp BTC=BTSP, bitcoin prices surged 7 percent to $15,720. It is up more than 1,400 percent so far in 2017, and its gains in the past month have been rapid.


Experts had worried that the risks associated with the currency’s Wild West-like nature could overshadow the futures debut, but so far the price action has been unlike the wild swings seen in the past few weeks. Bitcoin tumbled 20 percent in 10 hours on Friday.

“Even if there is an institution or institutional-sized trader out there, they are going to want to make sure that the mechanics work first, just for the futures,” said Ophir Gottlieb, chief executive officer of Los Angeles-based Capital Market Laboratories.

“I think the excitement will come when the futures market is established. That can take a few days,” Gottlieb added.

The futures are cash-settled contracts based on the auction price of bitcoin in U.S. dollars on the Gemini Exchange, which is owned and operated by virtual currency entrepreneurs and brothers Cameron and Tyler Winklevoss.

Market participants said the launch of the futures contract wouldn’t necessarily reduce volatility in the cryptocurrency.

“There are no ways to arbitrage between the market and other exchanges, CBOE cannot settle Bitcoin as far as I know,” said Leonhard Weese, president of the Bitcoin Association of Hong Kong.

“Regular bitcoin traders don’t have access to it, and the trading desks that use the futures market don’t have access to bitcoin.”

Cryptic currency

While bitcoin’s price rise mystifies many, its origins have been the subject of much speculation.

It was set up in 2008 by someone or some group calling themselves Satoshi Nakamoto, and was the first digital currency to successfully use cryptography to keep transactions secure and hidden, making traditional financial regulation difficult if not impossible.

Central bankers and critics of the cryptocurrency have been ringing the alarm bells over the surge in the price and other risks such as whether the opaque market can be used for money laundering.

“It looks remarkably like a bubble forming to me,” the Reserve Bank of New Zealand’s Acting Governor Grant Spencer said on a television program run on Sunday.

“We’ve seen them in the past. Over the centuries we’ve seen bubbles and this appears to be a bit of a classic case,” he said.

Many investors have stood on the sidelines watching its price rocket. However, it is possible to buy bitcoin without having to spend the full price of one coin. Bitcoin’s smallest unit is a Satoshi, named after the elusive creator of the cryptocurrency.

Somebody who invested $1,000 in bitcoin at the start of 2013 and had never sold any of it would now be sitting on around $1.2 million.

Heightened excitement ahead of the launch of the futures has given an extra kick to the cryptocurrency’s scorching run this year.

Controversial move

Bitcoin fans appear excited about the prospect of an exchange-listed and regulated product and the ability to bet on its price swings without having to sign up for a digital wallet.

Others, however, caution that risks remain for investors and possibly even the clearing organizations underpinning the trades.

“You are going to open up the market to a whole lot of people who aren’t currently in bitcoin,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

The launch has so far received a mixed reception from big U.S. banks and brokerages, though.

Several online brokerages, including Charles Schwab Corp and TD Ameritrade Holding Corp (AMTD.O), did not allow trading of the new futures immediately.

The Financial Times reported on Friday that JPMorgan Chase & Co, Citigroup Inc would not immediately clear bitcoin trades for clients.

Goldman Sachs Group Inc said on Thursday it was planning to clear such trades for certain clients.

Bitcoin’s manic run-up this year has boosted volatility far in excess of other asset classes. The futures trading may help dampen some of the sharp moves, analysts said.

“Hypothetically, volatility over the long run should drop after institutions get involved,” Gottlieb said. “But there may not be an immediate impact, say in the first month.”

source: interaksyon.com

Venezuela, where a hamburger is officially $170

CARACAS - If a visitor to Venezuela is unfortunate enough to pay for anything with a foreign credit card, the eye-watering cost might suggest they were in a city pricier than Tokyo or Zurich.

A hamburger sold for 1,700 Venezuelan bolivares is $170, or a 69,000-bolivar hotel room is $6,900 a night, based on the official rate of 10 bolivares for $1.

But of course no merchant is pricing at the official rate imposed under currency controls. It's the black market rate of 1,000 bolivares per dollar that's applied.

But for Venezuelans paid in hyperinflation-hit bolivares, and living in an economy relying on mostly imported goods or raw materials, conditions are unthinkably expensive.

Even for the middle class, most of it sliding into poverty, hamburgers and hotels are out-of-reach excesses.

"Everybody is knocked low," Michael Leal, a 34-year-old manager of an eyewear store in Caracas, told AFP. "We can't breathe."

Shuttered stores

In Chacao, a middle-class neighborhood in the capital, office workers lined up outside a nut store to buy the cheapest lunch they could afford. Nearby restaurants were all but empty.

Superficially it looked like the center of any other major Latin American city: skyscrapers, dense traffic, pedestrians in short sleeves bustling along the sidewalks.

But look closely and you can see the economic malaise. Many stores, particularly those that sold electronics, were shuttered.

"It's horrible now," said Marta Gonzalez, the 69-year-old manager of a corner beauty products store.

"Nobody is buying anything really. Just food," she said as a male customer used a debit card to pay for  a couple of razor blades.

A sign above the register said "We don't accept credit cards."

Lines for necessities

An upmarket shopping center nearby boasted a leafy rooftop terrace, a spacious Hard Rock cafe, chain stores for Zara, Swarovski and Armani Exchange.

They were all virtually deserted except for bored sales staff.

Instead a line of around 200 people was waiting patiently in front of a pharmacy.

They didn't know what for, exactly, just that the routine now was to line up for daily deliveries of one subsidized personal hygiene product or another -- toothpaste, for instance -- and grab their rationed amount before it ran out, usually within a couple of minutes.

"We do this every week. And we don't know what we're trying to buy," said Kevin Jaimes, a 21-year-old auto parts salesman waiting with his family.

"What's frustrating is when you get into a gigantic line but they run out before you get any."

The alternative then is to turn to black market merchants who sell goods at grossly inflated rates, often 100 times more than the subsidized price tag.

Jaimes lives with his family of seven, and tries to get by on a monthly salary of 35,000 bolivares -- in reality, around $35.

That sum is too paltry for him to even think about dropping into the cinema upstairs in the center, where tickets are 8,800 bolivares.

If somehow he could, he'd find the same sort of entertainment being shown in American multiplexes: "The Jungle Book," "Captain America: Civil War," and "Angry Birds."

But motion pictures and popcorn, while maybe an enticing diversion, are luxuries Venezuelans these days can ill afford.

source: interaksyon.com

China forex reserves fall almost $100B in January

BEIJING, China -- China’s foreign exchange reserves have fallen to their lowest level in more than three years, the central bank said Sunday, as Beijing sells dollars to stop the yuan from depreciating further.

The world’s largest currency hoard shrank by $99.5 billion in January to some $3.2 trillion, the People’s Bank of China said on its website, the lowest since May 2012.

Worries about China's economy have pushed the yuan to a five-year low. The country saw its first-ever annual decline in foreign exchange reserves last year as Beijing tried to prevent a more drastic devaluation.

The PBoC is selling dollars to buy yuan amid a capital flight spurred by the slowing growth in the world's second largest economy.

But some analysts predict a more drastic weakening of the yuan this year and question China's ability to continue rapidly shedding the reserves.

"While the remaining reserves represent a substantial war chest, the rapid pace of depletion in recent months is simply unsustainable," IHS Global Insight economist Rajiv Biswas told Bloomberg News.

Outflows increased "as expectations mount that the PBoC will eventually be forced to capitulate once its reserves are sufficiently depleted," he added.

George Magnus, economic commentator and associate at Oxford University's China Centre, wrote on Twitter: "China's fx reserves fell another $100bn ... clearly this can't go on for long."

The pace of decline in the reserves in January was slower than December, which at some $108 billion was the largest monthly drop on record.

China has also tightened some capital controls to try to curb outflows.

"The smaller decline in the reserves suggests that some capital outflow restrictions imposed in January worked," Shen Jianguang, chief Asia economist at Mizuho Securities, wrote in a note.

The drop in February will be much smaller, he added.

China has set its growth target for this year at between 6.5-7 percent, the top economic planner said Wednesday, an acknowledgement that expansion -- already at its slowest pace in 25 years -- will continue to weaken.

Global investors are closely watching the slowdown in the world's second largest economy, which has created turbulence in world markets.

source: interaksyon.com

Brent drops toward $59 as dollar firms on U.S. jobs data

SINGAPORE - Brent crude fell toward $59 a barrel on Monday as a promising U.S. jobs report pushed the dollar up, offsetting geopolitical tensions and the threat of output cuts in Libya and Iraq.

The dollar hit a more than 11-year high against a basket of currencies after data showed the U.S. unemployment rate fell to the lowest since May 2008 in February, making commodities priced in the greenback costlier for holders of other currencies

Brent eased 43 cents to $59.30 by 0445 GMT, after dropping 75 cents in the previous session. It fell 4.6 percent last week in its biggest decline since the week ended Jan. 9.

U.S. crude was down 27 cents at $49.34. It closed down $1.15 on Friday to complete a third week of declines.

Goldman Sachs  said in a note that oil prices would reverse recent gains on rising global inventories, with U.S. crude expected to drop to around $40 a barrel.

Oil prices rose by almost a third between January and February on the back of Middle East supply disruptions, strong winter demand and high refinery margins.

But the focus is now on the dollar, analysts said.

"The U.S. dollar is continuing to strengthen. In the short-term it's more about the dollar than anything else," said Ben LeBrun, market analyst at Sydney's OptionsXpress.

U.S. economic data to be released on Tuesday could lead to a further strengthening of the U.S. dollar which would be negative for commodities including oil, said LeBrun.

He said geopolitical issues in North Africa and the Middle East "are all playing second fiddle to the U.S. dollar".

Goldman said in its note that "absent further unexpected OPEC disruptions, we expect Brent oil prices and timespreads to reverse their recent strength".

Members of the Organisation of the Petroleum Exporting Countries (OPEC) should not cut output to "subsidize" higher-cost shale, OPEC Secretary-General Abdullah al-Badri has said.

In Libya, up to 10 foreign workers are missing in the latest attack on the country's oil fields by Islamist militants and there is a possibility they have been taken hostage, Czech and Libyan officials said on Saturday.

Brent should trade within a range of $55.36-$63.04 this week, said Singapore's Phillip Futures in a note on Monday.

U.S. crude should trade between $48.45-$55.02 although prices could move sharply upwards if the U.S. refinery strikes end this week, Phillip Futures said.

source: interaksyon.com

Asian shares sag, dollar rises on upbeat U.S. data

TOKYO - Asian shares sagged on Friday though upbeat signals on China's manufacturing activity limited losses, while the dollar pushed higher after upbeat U.S. data led some investors to price-in a less dovish stance at the U.S. Federal Reserve.

China's manufacturing sector grew at the fastest in 18 months in October, with the official Purchasing Managers' Index (PMI) rising to 51.4 last month from September's 51.1, beating economists' consensus forecast of 51.2.

The final HSBC/Markit Purchasing Managers' Index (PMI) came in at 50.9, up from 50.2 in September and unchanged from a preliminary flash estimate released last week.

MSCI's broadest index of Asia-Pacific shares outside Japan fell about 0.2 percent, while Australian shares .AXJO gave up 0.2 percent, but still remained just shy of five-year highs. Japan's Nikkei stock average erased early gains and dropped 0.6 percent.

U.S. S&P E-mini futures edged up 0.1 percent, after the S&P 500 Index closed down about 0.4 percent but still gained 4.5 percent for the month.

Later on Friday, the U.S. ISM survey of manufacturing for October could offer investors a fresh signal on the Fed's future course.

"If the ISM report is better than expected, it could add to revived tapering expectations, and U.S. yields and the dollar could go up and stocks could go down," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

Data on Thursday showed the pace of business activity in the U.S. Midwest jumped more than expected in October, soothing some worries about sluggish fourth-quarter growth after last month's federal government shutdown.

A decline in new jobless claims in the latest week also added to evidence that the economy weathered the shutdown. New claims fell by 10,000 to 340,000, just above the average estimate of 339,000.

Still, not all investors or economists were convinced that the latest U.S. data heralded a shift in monetary policy expectations.

"The existence of noise in the October data will likely make it difficult for the Fed to gather enough evidence to start tapering in December," strategists at Barclays wrote in a note to clients, adding that they still to expect the central bank to begin reducing its current $85 billion monthly bond purchases in March 2014.

Pressure on euro

The euro remained under pressure after plunging in the previous session as euro-zone inflation dropped to its lowest rate in nearly four years, heightening expectations that the European Central Bank will further ease its monetary policy.

The euro dropped about 0.3 percent to $1.3545, moving away from a two-year peak of $1.3833 set one week ago. On Thursday, it suffered its biggest one-day fall against the greenback in six months, tumbling 1.1 percent.

Data on Thursday showed euro-area inflation slowed to a four-year low of 0.7 percent last month, far below the ECB's target of just under 2 percent. Other data showed unemployment held at record highs in September.

The dollar index, which measures the greenback against six major currencies, was on track for a sixth session of gains, rising 0.3 percent to 80.398 after touching a two-week peak of 80.418 and pulling further away from a nine-month trough of 78.998 hit one week ago.

Against the Japanese currency, the dollar was about 0.2 percent lower on the day at 98.18 yen.

In commodities trading, gold steadied but was still trading close its lowest in nearly two weeks, hurt by sharp losses in the previous session from month-end profit-taking, the strong U.S. economic data and the higher dollar. Spot gold edged up 0.1 percent to $1,326.53 an ounce, after sliding 1.4 percent on Thursday.

source: interaksyon.com

End-Sept forex reserves enough to pay for a year's worth of imports

MANILA - The Philippines' foreign exchange reserves grew last month, allowing the country to pay for nearly a year's worth of imported goods and services, the Bangko Sentral ng Pilipinas (BSP) said today.

In a statement, the BSP said the country's gross international reserves (GIR) climbed to $83 billion at end-September from $82.9 billion at end-August. Compared with a year ago, the end-September GIR was $1 billion higher.

Alternatively, the country's end-September GIR would allow it to pay 8.7 times over its short-term foreign debt based on original maturity, or 5.7 times over the same obligations based on residual maturity. Residual maturity includes debt payments on long-term obligations falling due within the next 12 months.

An ample GIR helps prop up the peso and keep domestic inflation at bay. Inflation averaged 2.8 percent in the first nine months of the year, or well below the lower-end of the BSP's full-year target range of 3-5 percent.

source: interaksyon.com

Dog eats money, US Treasury pays owner

A Montana man who pieced together the remnants of five $100 bills eaten by his one-eyed dog last year is sporting a $500 check he says he received this week from the US Department of the Treasury to replace the digested funds.

Wayne Klinkel said his dog Sundance, a golden retriever, sniffed the wad of bills out of a car cubby space while waiting for Klinkel and his wife to return from lunch, and the canine made the currency his lunch.

Klinkel, a graphic designer from Helena, Montana, who works for the local newspaper, the Independent Record, said he found Sundance had left nothing uneaten but one intact dollar bill and a small piece of a single $100 note.

"He's been notorious for eating paper products," Klinkel said about Sundance. "I knew right away what had happened."

Klinkel rescued Sundance as a puppy from a shelter 12 years ago and the dog later lost his left eye to surgery.

For days after the December incident, Klinkel followed Sundance around in the snow, collecting his droppings in a plastic bag, he said.

Klinkel kept the bag of doggy mess frozen in the cold outside his house, and after weeks of hesitation, he went forward with his plan for retrieving the soiled cash by thawing the droppings in a bucket of soapy water.

Using an old metal mining screen and a hose, he separated the $100 bill pieces from the rest of the matter, then washed and began to assemble the tiny paper fragments.

"It was sort of like putting the puzzle pieces back together," Klinkel said.

He then took the taped bills to a local bank and the Federal Reserve in Helena but was turned away, he said. Klinkel was eventually directed to the US Department of Treasury's Mutilated Currency Division, where he mailed the digested bills with a notarized letter on April 15.

"There was no guarantee I was going to get anything back," Klinkel said.

The Treasury Department offers reimbursement for some proven cases of damaged currency, and a standard claim can take up to two years to be processed, according to the department's website.

"When mutilated currency is submitted, a letter should be included stating the estimated value of the currency and an explanation of how the currency became mutilated," the website says.

Klinkel said he didn't hear a word from the department until Monday, when he received a crisp $500 check in the mail from the Mutilated Currency Division to replace Sundance's midday snack six months prior.

The Independent Record, the paper that employs Klinkel, has posted a picture on its website of Sundance with the check dangling from its mouth.

An operator with the US Department of Treasury on Thursday said department representatives were furloughed and unavailable for comment on Klinkel's reimbursement.

source: interaksyon.com

Asian stocks hit three-month highs, oil slides

SYDNEY - Fresh signs of global economic stability drove Asian stocks to a three-month high on Tuesday as investors turned their attention to more data out of China, while oil nursed heavy losses as fears of an imminent U.S. military strike against Syria receded even further.



Russia on Monday proposed to work with Damascus to put its chemical weapons under international control, a move that President Barack Obama said could be "potentially positive".



Benchmark Brent oil prices fell 0.8 percent to $112.85 in early Asian trade, extending Monday's 2.1 percent slide. Lower oil prices are usually a positive development for Asia, a region that relies heavily on imports for its energy needs.



MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.4 percent, extending Monday's 1.3 percent gain to reach highs not seen since early June.



Tokyo's Nikkei climbed 0.8 percent, adding to Monday's 2.5 percent rally on euphoria that Tokyo has won the rights to host the 2020 Olympic Games.



China's trade and inflation data this week have pleased investors and the market is hopeful that industrial output and retail sales will provide more evidence the world's second biggest economy has averted a sharp slowdown.



A recent run of upbeat factory activity data from China, Europe and the United States further underlined that the global economy was on a firmer footing.



In a slight twist to this narrative, however, market sentiment, particularly for emerging markets, found further support after disappointing U.S. jobs data on Friday raised doubts about whether the Federal Reserve can scale back stimulus in any significant way next week.



A Reuters poll on Monday showed economists generally expect the Fed to announce a reduction in its massive $85 billion monthly bond-buying program by a very modest $10 billion.



Such an outcome should be good news for emerging markets, which have suffered from an outflow of funds as investors positioned for a world with less easy money from major central banks.



On Monday, Thai stocks boasted gains of 3.6 percent, while Indonesia rose 2.9 percent. That spread to Latin American markets overnight.



The MSCI emerging equities index advanced 1.9 percent to a three-month high on Monday and has rallied more than 4 percent in the last four trading sessions.



"There is no denying that the market backdrop for now is more supportive, especially if you also consider the strong data coming from China. But I am afraid what we are currently observing is a just a short-term bounce," said Benoit Anne, strategist at Societe Generale.



"I don't buy the argument that the global emerging market correction is over. Outflows have been robust over the past few weeks and are showing no signs of reversal. But at the same time, positioning in local debt markets remains rather elevated. This to me suggests that there is more pain to come."



The disappointing U.S. jobs data has cast a long shadow on the dollar, which fell further on Monday as investors continued to cut bullish positions.



Adding to the uncertainty, San Francisco Federal Reserve Bank President John Williams said on Monday he hasn't made up his mind yet over whether to support a reduction in the Fed bond purchases.



The dollar wallowed at a 1-1/2 week low against a basket of major currencies, having fallen 1 percent since Friday.



That helped the euro recover from last week's selloff sparked by dovish comments from the European Central Bank. The common currency last traded at $1.3254, having hit a 1-1/2 week high of $1.3281 on Monday.



The greenback fared better against the yen, which sagged on Monday as the Nikkei rallied. The Japanese currency has tended to move inversely to the Nikkei this year.



The dollar fetched 99.68 yen, down from a pre-jobs data high of 100.24 on Friday.



Analysts at BNP Paribas said it was too early to turn bearish on the dollar. "This is more of a temporary setback than a game changer for USD bulls," they wrote in a note.



They cited Fed tapering risk, the chance of U.S. data surprising to the upside and the possibility of Larry Summers being nominated for the Fed Chairman position as dollar positive factors.



Copper, benefiting from growing optimism over China, was steady at $7,205 a ton, having climbed from last week's trough of $7,082.

source: interaksyon.com

Bitcoin group, US regulators discuss digital currency

WASHINGTON — U.S. regulators and law enforcement agencies met on Monday with an advocacy group for Bitcoin, a digital currency that has been under fire for its purported role in facilitating anonymous money transfers.

Jennifer Shasky-Calvery, director of the Financial Crimes Enforcement Network (FinCEN), said her unit hosted a presentation by members of the Bitcoin Foundation, an advocacy group of Bitcoin-related businesses.

“This is part of our ongoing dialogue aimed at enhancing communication with our regulated financial industries,” Shasky-Calvery said in a statement.

She also noted that virtual currency exchanges must register with regulators and face requirements similar to those imposed on other financial firms. FinCEN is the Treasury Department’s anti-money laundering unit.

Bitcoins, which have been around since 2008, are a form of electronic money that can be exchanged without using traditional banking or money transfer systems.

Bitcoins are the most prominent of these new currencies, which have come under scrutiny from regulators and law enforcement officials.

Representatives of the Bitcoin Foundation did not immediately respond to requests for comment. The group’s website says it aims to make the currency more respected and to improve and protect its integrity.

The currency first came under scrutiny by law enforcement officials in mid-2011 after media reports surfaced linking the digital currency to the Silk Road online marketplace where marijuana, heroin, LSD and other illicit drugs are sold.

In recent months, the U.S. government has taken steps to rein in the currency and more regulatory action is expected.

Tokyo-based Mt. Gox, the world’s largest exchanger of U.S. dollars with Bitcoins, had two accounts held by its U.S. subsidiary seized this year by agents from the Department of Homeland Security on the grounds that it was operating a money transmitting business without a license.

The Federal Bureau of Investigation reported last year that Bitcoin was used by criminals to move money around the world, and the U.S. Treasury said in March that digital currency firms are money transmitters and must comply with rules that combat money laundering.

The Senate Committee on Homeland Security and Government Affairs launched an inquiry into Bitcoin and other virtual currencies earlier this month, asking a range of regulators to list what safeguards are in place to prevent criminal activity.

source: interaksyon.com

Emerging countries must be able to control capital flows -- study

JACKSON HOLE, Wyoming - Emerging market nations can be adversely affected by large swings in investment and, therefore, must develop tools to control credit flows or risk relinquishing any independent monetary policy, a study shows.

These findings were presented at the Kansas City Federal Reserve's monetary policy symposium at Jackson Hole, which highlighted the global impact of the unconventional monetary policy of the United States and other major central banks.

Many countries, including India and Brazil, have recently experienced steep sell-offs in their currencies, linked in part to the prospect that the Fed might soon dial down the pace of its bond-buying monetary stimulus.

The Jackson Hole study highlights a shift in conventional economic thinking, which used to champion an open flow of money between countries, regardless of the consequences.

"Macroprudential policies are necessary to restore monetary policy independence for the non‐central countries," wrote Helene Rey, professor at the London Business School. "They can substitute for capital controls, although if they are not sufficient, capital controls must also be considered."

That, said the study, is because countries with floating exchange rates, the dominant global practice, would be abdicating their control over interest rates and credit creation from sources outside their control.

"Independent monetary policies are possible if - and only if - the capital account is managed, directly or indirectly, via macroprudential policies," Rey said. These can take many forms, including efforts to restrain credit growth in particular areas of the economy.

"Since, for a country, the most dangerous outcome of inappropriately loose global financial conditions is excessive credit growth, a sensible policy option is to monitor directly credit growth and leverage in each market," she said.

Terrence Checki, executive vice president of the Federal Reserve Bank of New York, charged with commenting on the paper, pushed back against the notion that rich-country central banks should start paying more attention to the international effects of their policies.

He said that, in keeping with conventional wisdom at the Fed, monetary policy should be aimed at domestic objectives.

"It's not clear we can control the financial cycle very well with monetary policy," Checki said.

source: interaksyon.com

Brazil central bank launches $60 billion currency intervention

SAO PAOLO - Brazil's central bank announced a currency-intervention program on Thursday that will provide $60 billion worth of cash and insurance to the foreign-exchange market by year-end, a move aimed at bolstering the country's currency, the real, as it slips to near five-year lows against the dollar.

The bank said in a statement it will sell, on Mondays through Thursdays, $500 million worth of currency swaps, derivative contracts designed to provide investors with insurance against a weaker real. On Fridays, it will offer $1 billion on the spot market through repurchase agreements.

Both are designed to prevent companies and individuals with dollar obligations from scrambling to the market at the same time, afraid that waiting will force them to pay more to buy dollars. When that happens, the real tends to weaken further and faster.

"This shows the firm determination of monetary authorities to keep the exchange rate from slipping further," said Andre Perfeito, chief economist with Gradual Investments in São Paulo.

The program starts on Friday and runs until December, the central bank said, adding it may announce additional auctions if it sees fit.

The move comes as the government seeks ways to control inflation and keep the real from sliding while at the same time trying to kick-start an economy that has stagnated despite a rapid expansion of credit. While a weaker real can help Brazil's export of commodities and manufactured goods, it makes raw materials and other imports more expensive, helping drive inflation higher.

Brazil cut its outlook for gross domestic product (GDP) growth to 2.5 percent from 3 percent in 2013 and to 4 percent from 4.5 percent for 2014, Finance Minister Guido Mantega said in an interview with Brazil's Globo Television Network late on Thursday.

For Perfeito, the move signals the central bank's intention to limit interest rate hikes. In addition to controlling inflation, higher rates would attract investment to Brazil, helping the real firm against the dollar. At the same time higher rates could also slow growth by making borrowing more expensive.

"I think that this is an effort to adjust expectations a bit because $60 billion is a lot," Perfeito said. "This kind of attitude just before a Copom meeting shows that exchange rate controls won't be carried out only through monetary policy."

The bank's Copom monetary policy committee, which sets Brazil's benchmark rate, meets on August 28.

Interest-rate futures contracts suggest that there is a 76 percent chance that the central bank will raise the benchmark Selic target rate half a percentage point to 9 percent and a 24 percent chance of raising it 1.25 percentage points to 9.25 percent, according to Thomson Reuters data.

The real's weakening and the Copom meeting come as the United States' central banking authority, the Federal Reserve, is moving closer to ending a bond-buying program that has injected billions into the U.S. economy driving down interest rates.

As a result investors have been searching for higher-yielding, emerging market securities.

With the end of the Fed's "quantitative easing" program expected soon, capital flows have flowed out of emerging markets such as Brazil and back to the United States and other developed countries, helping to weaken the real.

"Today, the big problem is there is a structural change (in the world economy)," said Eduardo Velho, chief economist with Miami-based investment bank INVX Global Partners LLC, in São Paulo. "The central bank's move is an important measure to reduce volatility and slow the pressure on the exchange rate. I see this as positive."

On Thursday Brazil's real firmed 0.1 percent to 2.4305 reais to the dollar.

source: interaksyon.com

Unease over US Fed leaves global markets at one-month low

LONDON - World shares sank to their lowest level in more than a month on Tuesday as unease about an expected cut in U.S. stimulus and a related rise in bond yields left markets on edge.

Europe's main stock markets opened down 1 percent following a fourth straight day of falls on both Wall Street and in Asia to leave MSCI's global index, which tracks shares in 45 countries, at its lowest level since July 12.

Wednesday's minutes from the most recent Fed meeting could offer fresh hints on when the U.S. central bank will start winding down its $85 billion-a-month support program, a tricky process markets have been nervous about for months.

The uncertainty has broadly driven up bond market borrowing costs in recent weeks. The upward pressure on U.S. government bonds eased overnight, leaving the benchmark 10-year Treasury just off a 2-year high at 2.83 percent.

As has been the recent pattern, German government bonds, Europe's equivalent benchmark, moved in lockstep with yields edging down to 1.879 percent having topped 1.9 percent on Monday.

On European share markets, a 10.8 percent jump to 19.38 points in the Euro STOXX 50 Volatility Index .V2TX indicated uncertainty over the near-term outlook, though the measure remained below its 2013 peak of 26.80 points.

Ramin Nakisa, a global macro strategist for UBS in London, said market turbulence was bound to pick up as the Fed starts to switch the direction of its policy.

"We expect volatility... People will start to wonder whether there is anything in the fixed-income world that really is safe," he said adding that there was also likely to be another short selloff in share markets.

Emerging woes

The jitters about the U.S. moves continued to batter emerging markets where there are fears an end to cheap money and improvement outlooks in advanced economies could see a stampede of investment leaving already-strained markets.

Indonesia and India had another torrid session with their stock markets down 4 and 1 percent respectively as their currencies also continued to tumble.

Japan's Nikkei slumped too, falling 2.7 percent, reflecting the exposure of many Japanese companies to India and Indonesia.

"India's problems are nowhere near resolution because New Delhi has not done anything - there is no focus on improving productivity, infrastructure or getting FDI (foreign direct investment) back," said Nomura credit analyst Pradeep Mohinani in Hong Kong.

"It's all about stemming the flow of currency and that is not the cause of the problem."

Despite the focus on the Fed, the dollar was steady against a basket of major currencies. There was also little movement in the euro and sterling.

Emerging market volatility did spur the yen however. "The yen tends to attract buying when tensions in the market increase," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

In commodities, copper prices dropped to $7,264.75 per tonne, while gold eased to $1,361.66 per ounce after snapping a three-day winning streak on Monday and moving away from a two-month high hit that session.

Brent crude prices fell 0.5 percent to $109.36 a barrel, pressured by the Fed speculation but supported by the loss of Libya's oil exports as well as concerns that continuing unrest in Egypt could spread and interfere with supply.

source: interaksyon.com

Rupee, rupiah lead emerging market slide on US Fed fears

MUMBAI/JAKARTA - India's rupee crashed to a record low and the Indonesian rupiah hit a 4-year trough on Monday, as the expected withdrawal of U.S. monetary stimulus prompts investors to shun emerging markets burdened by weak external balances, slowing economies and inflation.

It followed a slide on Friday in Brazil's real, a currency that, like the rupee, has been hammered by investor doubts that actions taken by monetary authorities last week will prove effective in stemming the sell-off.

"Our primary concern is that the policy authorities still don't 'get it' - thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions," Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore, wrote in a note on the Indian currency on Monday.

Growing expectations that the U.S. Federal Reserve will start scaling back its bond purchases as early as next month, slowing the flow of cheap money into higher yielding overseas assets, have weighed on many emerging markets.

The currencies of countries already struggling with wide current account deficits, such as India and Indonesia, are seen as among the most vulnerable to sudden capital flight and have been hit hardest.

"The market is still acting on the negative current account and fiscal deficits," said Nizam Idris, a strategist with Macquarie Capital, when asked about the two Asian laggards.

The latest blow for Indonesia's currency was delivered by central bank data released late on Friday that showed the current account deficit grew to 4.4 percent of GDP in the second quarter of the year, from 2.4 percent in the previous quarter.

"Although the current level of reserves is still equivalent to a reasonably healthy 5.5 months of imports, the Bank can't continue to burn reserves at the current rate without the market worrying about a 'crisis' scenario unfolding," Credit Suisse said in a note.

Indonesia's Finance Minister Chatib Basri said he was not worried by the rupiah weakness and predicted the current account deficit, though it would remain into next year, would narrow.

'Tapering' threat

Some analysts predicted the weakness could ripple out to other Asian markets, with Malaysia's current account data due on Wednesday likely to be closely watched.

India's tumbling currency has been the worst performer in Asia since late May, when the Fed first signaled that it may begin "tapering" its monetary stimulus this year.

Indian policymakers are grappling with a record current account deficit at 4.8 percent of GDP - and market participants aren't convinced the government can reduce the gap to a targeted 3.7 percent this financial year.

The Reserve Bank of India (RBI) has been selling dollars to support the rupee and last week announced curbs on outflows from companies and individuals, denting stock and bond markets.

"Forex intervention will continue by the central bank," said Param Sarma, chief executive at Brokerage NSP Forex. "Further measures are expected from the RBI but are unlikely to be effective."

Brazil's central bank has also intervened to try and reassure investors, but could not prevent the real from sinking on Friday to its lowest level since the depths of the global financial crisis in 2009.

The real's poor record during previous bouts of market volatility and its steep gains over the past decade are some of the reasons why it is now seen as a risky trade - a "high beta" currency in the jargon of the foreign exchange markets.

Domestic concerns have also made things worse.

As with India, a previously fast-growing economy has slowed, disappointing investors. Also, like Indonesia, a cooling in China's appetite for its commodities exports has resulted in a sharp deterioration in its balance of trade.

source: interaksyon.com