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OctaFX_Farid · May 16, 2012

OctaFX.Com -U.S. stocks rise on data, euro turns on Greek hope

NEW YORK (Reuters) - The euro pared losses and bond prices slid on Wednesday after comments by German Chancellor Angela Merkel bolstered hopes that Greece would remain in the euro zone, while U.S. stocks rose on encouraging U.S. economic data.

U.S. industrial production posted its fastest growth in over a year in April and a rebound in groundbreaking for new U.S. homes last month suggested a recovery in U.S. housing was gaining some traction, bolstering U.S. investor sentiment that has been heavily hit by news about Greece.

Industrial output grew 1.1 percent, the most since December 2010 and nearly twice the pace expected by analysts polled by Reuters. Housing starts increased 2.6 percent to a seasonally adjusted annual rate of 717,000 units, while March's starts were revised upward.

"Nice to see some turnaround. Ideally supply is getting more in line with demand, and low (interest) rates may be finally helping the turnaround," David Carter, chief investment officer at Lenox Wealth Advisors in New York, said about housing.

"However, this housing story is much smaller than news out of Greece and might get

easily forgotten," Carter said.

Stocks on Wall Street opened higher, while equity markets in Europe pared much of an early sell-off.

The Dow Jones industrial average (DJI:^DJI - News) was up 38.52 points, or 0.30 percent, at 12,670.52. The Standard & Poor's 500 Index (MXP:^GSPC - News) was up 6.00 points, or 0.45 percent, at 1,336.66. The Nasdaq Composite Index (NAS:^COMP) was up 10.66 points, or 0.37 percent, at 2,904.42.

The FTSEurofirst 300 index (.FTEU3) fell 0.2 percent to 997.22.

MSCI's global equity index <.MIWD00000PUS> was down 0.4 percent to 306.53.

Prices on German government Bund bond futures fell to a session low, while Spanish and Italian bond yields eased, with traders citing comments from Merkel reiterating that Germany wanted Greece to stay in the euro zone.

Bund futures fell to 143.11, and the benchmark 10-year U.S. Treasury note was down 11/32 in price to yield 1.81 percent.

Both Bunds and U.S. Treasuries have safe-haven appeal and their prices rise when investors become jittery.

The euro climbed to a session high against the dollar expectations that Germany and France will act together to keep Greece in the euro zone after Merkel met French President Francois Hollande on Tuesday. .

The euro pared losses to trade near break-even at $1.2725. The dollar (.DXY) rose 0.2 percent to 81.359 , its highest in four months against a basket of currencies.

Oil prices slid, accentuated by a surprise build in U.S. crude inventories.

May 16, 2012 13:58

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OctaFX_Farid · May 21, 2012

OctaFx -Greek euro zone exit unlikely, say money market traders

Greek euro zone exit unlikely, say money market traders

BANGALORE (Reuters) - A slim majority of euro zone money market traders surveyed regularly by Reuters reckon Greece will still be in the euro zone at the end of 2013, a poll showed on Monday.

Fourteen of 22 euro money market traders said Greece would not abandon the euro either this year or next - an event once seen as unthinkable but is now being openly discussed as the country battles political and economic upheaval.

A summit of the G8 leading industrialized nations came down solidly in favor of a push to balance European austerity with a new dose of U.S.-style stimulus seen as vital to healing ailing euro zone economies.

The consensus among traders is in-line with a similar poll of economists taken last week, where a slim majority - 35 out of 64, said Greece would still be in the euro zone by the end of next year.

In the regular weekly survey, traders expect the European Central Bank (ECB) to allot 40 billion euros this week in its seven-day operation, a little lower than the 42.99 billion euros maturing from last week's.

May 21, 2012 13:01

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OctaFX_Farid · May 21, 2012

OctaFX.Com -Euro slides but may see short-term bounce

Euro slides but may see short-term bounce

NEW YORK (Reuters) - The euro weakened against the dollar on Monday, weighed down by concerns about Greece and Spain's debt problems, although key technical signals and overextended bearish positioning suggested a short-term bounce.

Speculators who had piled up a record amount of bets against the euro cut some of those positions, rising from last week's four-month low and giving the currency a respite from this month's relentless selling.

The euro has fallen in six of the last seven sessions, down nearly 4 percent so far this month.

"Euro/dollar made an important double bottom and the positioning is definitely getting stretched," said Brad Bechtel, managing director, at Faros Trading in Stamford, Connecticut.

"Many will not shake out too much on the positioning given deep imbedded gains, but it is a currency that likes its double tops and bottoms, so we could be in a for a good-sized bounce."

In early New York trading, the euro fell 0.4 percent at $1.2734, well above Friday's low of $1.2640. A break below the nearby 2012 low of $1.2624 would take the shared currency back down to levels not seen since August 2010.

Bechtel said offers on the euro are thick above $1.2880 and above $1.2950.

"I ... still think it (euro) is a sell on rallies, not just against the dollar but also the yen," said Jeremy Stretch, head of currency research at CIBC World Markets.

"That 2012 low is still the target and the euro would need a catalyst for that. That could come if the informal (EU) leaders' meeting this week offers no consensus (on tackling the euro zone debt crisis)."

French President Francois Hollande and some other euro zone leaders are expected to promote the idea of metalized European debt at an informal summit in Brussels on Wednesday, although Germany reiterated its opposition to the idea on Monday.

The euro zone crisis has escalated since inconclusive Greek elections on May 6 raised questions over whether Greece will stay in the bloc. Concerns about the fragility of the Spanish banking sector have also weighed on sentiment.

The Group of Eight leading economies over the weekend, however, backed Greece to stay in the euro zone. The G8 countries also stressed that their "imperative is to promote growth and jobs," which means far less in the way of austerity measures that have plunged some euro zone economies into recession.

The euro drew little support from those comments, with investors viewing the statements as short on detail and long on rhetoric.

Overall, the focus on growth could mean far more involvement of the European Central Bank in terms of stimulus measures, analysts said, and a weaker euro.

Chinese Premier Wen Jiabao called on Sunday for additional efforts to support growth, but concerns about the slowdown in emerging economies remained.

RECORD SHORT POSITIONS

Investors dumped the euro in recent weeks with many seeking the relative safety of the dollar, the yen and even sterling.

The euro was flat against the yen at 100.96, having hit a 3-1/2 month low 100.219 yen on Friday.

The U.S. Commodity Futures Trading Commission said on Friday speculators' short euro positions climbed to 173,869 contracts, the highest on record, while their bets in favor of the dollar against other currencies also rose to a high not seen since at least mid-2008.

"The outlook for the euro is still extremely vulnerable," said Jane Foley, senior currency strategist at Rabobank.

"The market is getting a bit more optimistic ahead of the EU summit and looking for signs policymakers may announce some policies that will support the system. But they won't be able to solve the crisis in one fell swoop."

With sentiment fragile across global markets, investors preferred the safe-haven dollar, which rose 0.4 percent to 79.2 yen, well above a three-month low around 79.00 set on Friday.

May 21, 2012 13:35

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OctaFX_Farid · May 21, 2012

OctaFX.Com - Euro rises from 4-month low against dollar

OctaFX.Com - OctaFX.Com - Euro rises from 4-month low against dollar

Euro rises from a 4-month low vs dollar even as worries about Europe's debt crisis continue

NEW YORK (AP) -- The euro is rising against the dollar despite ongoing concerns about Europe's debt crisis.

The euro rose to $1.2782 in afternoon trading Monday from $1.2737 late Friday. The euro hit a four-month low against the dollar on Thursday.

The euro has fallen about 2.5 percent against the dollar since anti-bailout political parties made gains in elections in Greece in early May. But Greek leaders weren't able to form a new government, so Greece will hold new elections next month.

Over the weekend, leaders from eight of the world's biggest economies meeting in Washington failed to create a plan to ease Europe's debt crisis.

In other trading, the British pound fell to $1.5798 from $1.5803. The dollar rose to 79.31 Japanese yen from 79.08 yen.

May 21, 2012 17:26

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OctaFX_Farid · May 23, 2012

Exclusive: Eurozone tells members to make contingencies for "Grexit"

OctaFX.Com -Exclusive: Eurozone tells members to make contingencies for "Grexit"

BRUSSELS (Reuters) - Euro zone officials have told members of the currency area to prepare contingency plans in case Greece decides to quit the bloc, an eventuality which Germany's central bank said would be "manageable".

Three officials told Reuters that the instruction was agreed on Monday by a teleconference of the Eurogroup Working Group (EWG) - experts who work on behalf of the bloc's finance ministers.

"The EWG agreed that each euro zone country should prepare a contingency plan, individually, for the potential consequences of a Greek exit from the euro," said one euro zone official familiar with what was discussed.

The news comes at a highly sensitive time, just hours before EU leaders gather to try to breathe life into their struggling economies at a summit over dinner on Wednesday.

Although minds will be focused by the prospect of Greece exiting the currency area, which has earned the monicker "Grexit" and is something policymakers say they want to avoid, disagreements over a plan for mutual bond issuance and other measures to alleviate two years of debt turmoil have already been laid bare.

In its monthly report, Germany's Bundesbank said the situation in Greece was "extremely worrying" and it was jeopardizing any further financial aid by threatening not to implement reforms agreed as part of its two bailouts.

It said a euro exit would pose "considerable but manageable" challenges for its European partners, raising pressure on Athens to keep its painful economic reforms on track.

Greek officials have said that without outside funds, the country will run out of money within two months.

For the first time in more than two years of debt-crisis meetings, the leaders of France and Germany have not huddled beforehand to agree positions, marking a significant shift in the Franco-German axis which has traditionally driven European policymaking.

Instead, new French President Francois Hollande met Spanish Prime Minister Mariano Rajoy in Paris to discuss policy, before the pair travel to Brussels for the 1800 GMT summit.

Despite fears Greeks could open the exit door if they vote for anti-bailout parties at a June 17 election, Spain, where the economy is in recession and the banking system is in need of restructuring, is at the frontline of the crisis, with concerns growing that it too could need bailing out.

After meeting Hollande, Rajoy said he had no intention of seeking outside aid for Spain's banks.

Hollande's election victory has significantly changed the terms of the debate in Europe, with his call for greater emphasis on growth rather than debt-cutting now a rallying cry for other leaders.

That has set up a showdown with German Chancellor Angela Merkel, who supports growth but whose primary objective is budget austerity and structural reform.

At his first EU summit, Hollande has chosen to make a stand on euro bonds - the idea of metalizing euro zone debt - despite consistent German opposition to an idea that has been hotly debated for more than two years.

He will have support from Italian Prime Minister Mario Monti and European Commission President Jose Manuel Barroso, among others. But Merkel shows no sign of dropping her objections to the proposal, which she has said can only be discussed once there is much closer fiscal union in Europe.

The Netherlands, Finland and some smaller euro zone member states support her.

"Introducing euro bonds is the equivalent of ringing the bell for a happy hour so the inebriated can postpone their hangover indefinitely," one EU diplomat said.

NO MAJOR DECISIONS

No decisions will be made at Wednesday's summit, which is intended to promote ideas on jobs and growth ahead of another meeting at the end of June, but it is clear the debate will be intense, not just over euro bonds but over how to rescue European banks and whether to give more time to struggling euro zone countries to meet their budget deficit goals.

Officials tried to play down any prospect of a rift.

"This shouldn't be a tense discussion because it's a broad debate about propositions that are on the table. We are not there to negotiate or take decisions," a French presidential adviser said.

"Germany today is not firmly against euro bonds forever, and that's what makes a discussion possible. What is the time frame and what (budget) commitments would we require, that's what the discussion will be based on."

Having rallied on Tuesday, European stocks dropped 1.6 percent as investors priced in a lack of dramatic policy intervention. Spanish and Italian borrowing costs rose in turn.

A German two-year debt auction gave a stark illustration of how money is dashing for safe havens. Investors snapped up the 4.5 billion euros of paper on offer even though it came with a zero coupon - offering no return at all.

As well as exploring ways of resolving the sovereign debt problems that have torn the economies of Greece, Portugal and Ireland apart, the leaders will assess how to stabilize their banking systems.

Spain is a particular concern, with a number of its banks laden with bad debts from a property boom that turned to bust and still has some way to go before it touches bottom.

One proposal on the table is for the euro zone's rescue funds to be allowed to recapitalize banks directly, rather than having to lend to countries for on-lending to the banks.

But that is another idea with which Germany is uncomfortable, even though Merkel said on Tuesday a way should be found to dismantle banks across borders, a possible nod to a pan-euro-zone bank restructuring scheme.

With the euro zone registering no growth in the first quarter of the year and threatening to slip back into recession, the formal summit agenda is jobs and growth, with policymakers touting three ideas they hope will provide near-term stimulus:

- 'Project bonds' backed by the EU budget to finance infrastructure projects alongside private sector investment.

- Doubling the paid-in capital of the European Investment Bank, the EU's co-financing arm, to a little over 20 billion euros.

- Redirecting structural funds which tend to flow to poorer countries, to other areas where it might reap more immediate growth rewards.

Even if all three proposals were to be activated quickly economists and analysts say they will not provide a sufficient shot in the arm to the euro zone and wider EU economy.

"The hard truth is that there are no magic solutions to solving this crisis. We will all have to keep our spending in check, pay off our debts and swiftly introduce healthy reforms. This is what will kickstart growth," Dutch Prime Minister Mark Rutte said.

May 23, 2012 12:22

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OctaFX_Farid · May 25, 2012

OctaFX.Com -Euro slumps vs. dollar on Greek, Spain worries

Euro slumps vs. dollar on Greek, Spain worries

NEW YORK (Reuters) - The euro tumbled to nearly two-year lows against the dollar on Friday, rattled by fears of a possible Greek exit from the euro zone and the risk other debt-plagued countries could also leave the bloc.

A plea from Spain's wealthiest autonomous region, Catalonia, for help from the central government to refinance its debt this year was the latest news to hit the euro, which was on track for its worst weekly showing in five months.

Catalonia's appeal reverberated across financial markets. Spanish and Italian bonds sold off, equities fell, and U.S. crude futures turned negative.

"The Catalonia news was a big deal because it implies that the Spanish government may have to take on more debt and it cannot afford to do so," said Richard Franulovich, senior currency strategist at Westpac Securities in New York.

"It looks like all the euros that were bought need to be resold. For now, it's all about contagion," he added.

In midday New York trading, the euro slipped 0.1 percent to $1.2525, after earlier falling to a nearly two-year low of $1.2495 on trading platform EBS, taking out a key options barrier at $1.25. That placed the euro on pace for its worst weekly performance since December.

The common currency has lost 5.5 percent against the dollar so far this month and is facing its fourth straight week of losses, raising the possibility of a test of the 2010 low of $1.1875.

Macro funds and institutional investors have ramped up euro selling after an inconclusive election in Greece left the country at risk of bankruptcy and a possible exit from the euro zone.

"I think markets are pretty complacent about a Greek exit," said Gabriel de Kock, executive director of FX research at Morgan Stanley in New York.

"Everyone says it's going to happen, but if it does, the Europeans will have to do extraordinary things to avoid contagion of the sort that could knock out Ireland, Spain and Portugal pretty quickly. So people are not ready."

Greeks vote again on June 17, with polls showing a close race between parties supporting and opposing austerity measures that are part of the terms of the country's international bailout, keeping markets on tenterhooks.

Investors are also concerned about the health of the Spanish banking sector, chances of a deep and damaging slowdown in the euro area, and the lack of any aggressive policy measures to address the escalating debt crisis.

Spanish lender Bankia (BKIA.MC), which was partly nationalized this month, was set to ask the government for a bailout of more than 15 billion euros (US$19 billion) on Friday, a financial sector source told Reuters.

Many strategists expected euro selling to continue next week, although heavy short positioning could slow the momentum.

"We have...a standoff where the market is short and the news is bad, and so we have tended to go down in stages," said Kit Juckes, currency strategist at Societe Generale.

"Although it's almost impossible to imagine a set of circumstances where we get good news, the pullbacks in this move down since the break of $1.30 have gotten really tiny."

Investor nervousness was well reflected in the options market, as euro/dollar one-month implied volatility hit 13.13 percent for a second straight day. It was last at 12.0 percent, well above its 50-day moving average.

With the euro under pressure, the dollar has been the chief beneficiary. An index that measures the dollar against a basket of major currencies edged up to 82.461 (.DXY), the highest level since September 2010.

Against the yen, the dollar was steady at 79.62 yen, supported by Tokyo importers and investors squaring positions ahead of a long holiday weekend in the United States. Sell offers around 80.00 yen were poised to cap any further gains, traders said.

The euro was flat against the Swiss franc at 1.2009 francs, having jumped to 1.20769 francs on Thursday, its highest level since mid-March on market talk the Swiss government is going to impose a tax on deposits and chatter that the Swiss central bank initiated a short squeeze in the pair.

Traders said the Swiss National Bank has been buying euros in the past few weeks to protect the floor at 1.20 francs, although some investors were still piling on bets through the options market that the peg will be breached in coming days if the euro zone crisis escalates.

May 25, 2012 14:00

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OctaFX_Farid · May 28, 2012

OctaFx -Insight: U.S. hedge funds find ways to trade euro misery

BOSTON/NEW YORK (Reuters) - Two decades ago, George Soros rose to fame and fortune on his now-historic trade in which he took on the Bank of England and shrewdly wagered on a devaluation of the British pound.

But it's unlikely the current European monetary crisis and worries about Greece's potential exit from the euro zone will give rise to an investing legend like Soros, who made $1 billion in 1992 by betting on a decline in the price of the pound.

Instead, there are a multitude of strategies to play Europe's troubles, and many different participants, according to U.S. hedge fund managers.

"There is not room for one player to have such impact," said John Brynjolfsson, whose California-based Armored Wolf hedge fund has been betting against the euro for quite some time. "Financial markets are so much bigger today."

A spokesman for Soros, who last year converted his Soros Fund Management to a family office and stopped managing money for outside investors, could not be reached for comment.

Brynjolfsson and several other U.S. money managers who are trying to profit from Europe's misery say they expect the current crisis to produce a lot of winners.

So far this year, the euro is down 3.3 percent against the U.S. dollar.

U.S. money managers say it's hard to swing for the fences the way Soros did because institutional investors are far more squeamish about having too much money riding on any single trade. There is also heightened sensitivity from pensions and endowments to taking an investment strategy that might spark political outrage from European leaders.

Another thing working against the rise of a new Soros is that trading the euro zone, or even the fallout from a Greek exit, is a much more complicated than betting against a single currency.

Money managers are playing the euro zone crisis by trading currencies, wagering on the direction of bank stocks or using derivatives like credit default swaps to bet on potential corporate and bank failures. Greenlight Capital's David Einhorn recently said he is bullish on gold and gold miners, in part because of concern about the fallout from a euro zone meltdown.

Some managers are even going both short and long on different European sovereign debt, depending on their views of the financial stability of different countries.

Adam Fisher, manager of the $320 million Commonwealth Opportunity Capital hedge fund, noted that Soros faced a "single country, not 17 different countries, one decision maker, not 17."

Fisher's fund, which has more than 80 percent of its money invested in Europe, is taking a somewhat contrarian position by owning the European sovereign debt of Germany, the Netherlands, Italy and Spain.

Hedge fund managers point out that given the up-and-down nature of the euro zone crisis, most hedge funds have been in and out of trades or forced to adjust positions depending on the changing political winds.

Earlier this year, for instance, it looked like concern about Greece exiting the euro had passed. But with the recent results of the Greek election at odds with the austerity measures demanded by its currency partners, the risk of a Greek departure from the euro zone has risen dramatically.

Recently, Fisher said his Los Angeles-based fund had reduced the size of some of its more bullish sovereign debt trades because he believes there will be "violent" market swings this summer.

"It is going to be incredibly difficult to manage risk through that environment," said Fisher, whose fund was up 8.8 percent through April. "I don't think hedging will do anything. The way you hedge, is you sell. You don't subtract risk by adding risk."

Brynjolfsson, a former top portfolio manager for bond mutual fund firm Pacific Investment Management Co, is betting on Greece exiting the euro. He said it will be hard for European leaders to take the necessary steps to appease the Greek government without infuriating politicians in other euro zone countries.

"As the wheels began falling off the bus, we adjusted to have a short bias and that has worked out," said Brynjolfsson, whose $750 million hedge fund is up 2 percent this year, largely on its short bet against the euro.

Axel Merk, president and chief executive officer of Merk Investments, an investment advisory firm that specializes in currencies, said the growing problems with Greece and the euro zone led him recently to dump all the euros in his $517 million Merk Hard Currency Fund, which is up 2.29 percent for the year.

Merk now favors the Singapore dollar, which has climbed 1.34 percent since January.

Ray Dalio's $120 billion Bridgewater Associates gained 23 percent in 2011 in part because of profits made from a series of European bets, said a person familiar with the Westport, Conn.-based fund who declined to discuss specifics of the strategy. In a recent interview with Barron's, Dalio said European banks "are now over-leveraged and can't expand their balance sheets" and European nations "don't have enough buyers of their debt."

Dalio may be the U.S. money manager who comes closest to rivaling the Soros of two decades ago. His hedge fund is the industry's largest and he widely regarded as one of the most successful managers.

Among the ways funds are playing the European turmoil, some are betting against the fortunes of Spanish and Italian banks instead of simply focusing on sovereign debt.

John Paulson, among others, bets against European sovereign debt as way to hedge the overall portfolio of his Paulson & Co hedge fund firm.

Daniel Loeb's Third Point fund put on a long position in Portuguese sovereign bonds in the first quarter because the New York-based manager believed the nation is in better shape than others in the euro zone.

"Portugal's debt profile is more consistent with Italy's than Greece's, its banks are substantially healthier than Spain's, and its government has enacted more aggressive labor reforms and is more stable than regimes in both countries," Loeb wrote in a May 16 investors' letter seen by Reuters.

If nothing else, the European crisis is forcing managers to keep coming up with new strategies to trade. One might say it's almost become an incubator for hedge fund managers to stretch their investment acumen.

Merk said he might look again at Europe if the political and financial situation gets more clarity. But he would likely do it a bit differently.

"If there is clarity in the process again, then we will certainly look at Europe again," he said. "But not through Greek debt, but through German bills."

May 28, 2012 06:04

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OctaFX_Farid · May 28, 2012

OctaFx - World stocks inch higher on Greek vote hopes

World stock markets inch higher as polls suggest Greeks prefer to stay in eurozone

MOSCOW (AP) -- European markets posted modest gains Monday morning after weekend opinion polls strengthened hopes that Greece might stick with the euro and austerity measures.

Investor sentiment remained fragile, however, with Spain's bond yields rising after the announcement of bailout plans for troubled lender Bankia. Trading volumes were also expected to remain low with Wall Street due to remain closed for the Memorial Day holiday.

The likelihood of Greece leaving the eurozone has been growing steadily since early May, when political parties opposed to the harsh terms of the country's financial rescue received unexpectedly high support in polls. The Greek exit would extend financial turmoil in the country and spread financial difficulties to other nations using the euro.

Surveys over the weekend showed that Greeks, while angry after more than two years of austerity measures that have produced lower pensions and higher taxes, still want Greece to keep the euro currency and not revert back to the drachma.

The May election results were so splintered that it left the country without a coalition government. Another election has been set for June 17.

Ric Spooner, chief market analyst at CMC Markets in Sydney, said it made sense for investors to remain subdued this far ahead of the election.

"The response has so far been very muted because these things could easily wax and wane over the course of the next two weeks," said Spooner. "One of the key drivers for investors will be trying to assess what the outcome of Greek election may be."

European stocks inched up Monday Morning. Britain's FTSE 100 and France's CAC-40 were both 0.7 percent higher, at 5,391.82 and 3,068.76 points, respectively. Germany's DAX added 0.6 percent to 6,388.88.

Moscow-based investment bank Troika Dialog warned in a morning note that "given the large number of very uncertain events on investors' watch list, any rebound will be modest."

Spanish markets declined Monday on bailout plans for troubled lender Bankia, sending its shares plummeting 21 percent. Spain's IBEX 35 was lower 0.6 percent at 6,500.7 in morning trading. Yields for Spain's 10-year bonds on the secondary markets hit 6.45 percent in morning — close to the key 7 percent rate beyond which long-term financing on the bond markets is considered unaffordable.

In Ireland, Prime Minister Enda Kenny made an appeal to voters to support the European Union's fiscal treaty in a referendum this week. Ireland's current EU-International Monetary Fund loans are due to run out by the end of next year, and only members of the treaty can access EU funds. Ireland is the only nation among 25 signatories putting the deficit-fighting treaty to a national vote. Ireland's benchmark ISE was up 0.7 percent at 3,113.34.

Wall Street will be closed Monday for Memorial Day, which typically results in subdued stock trading globally.

Asian stock markets closed modestly higher. Japan's Nikkei 225 index swung between gains and losses before settling 0.2 percent higher at 8,593.15. Hong Kong's Hang Seng added 0.5 percent to 18,800.99. Australia's S&P/ASX 200 rose 1 percent.

In mainland China, the Shanghai Composite Index climbed 1.2 percent to 2,361.37 and the smaller Shenzhen Composite Index shot up 1.4 percent to 948.42.

Later in the week, the U.S. government will release employment data for May, while China will release monthly manufacturing data. A private survey last week showed activity weakened further in May.

Benchmark oil for July delivery was up 89 cents to $91.75 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 20 cents to settle at $90.86 in New York on Friday.

In currencies, the euro rose to $1.2578 from $1.2518 late Friday in New York. The dollar fell to 79.36 yen from 79.66 yen.

May 28, 2012 11:58

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OctaFX_Farid · May 30, 2012

OctaFx -Euro falls near 2-year low as debt crisis widens

NEW YORK (Reuters) - The euro slumped to a near two-year low against the dollar on Wednesday with no relief in sight as Italian borrowing costs soared and concerns mounted over Spain's banking sector.

Selling accelerated after the euro broke beneath the psychologically important $1.25 level and option barrier at $1.24, opening the way for a slide toward the low $1.20 area. Real money and institutional investors stepped up selling on signs the bloc's debt crisis is spreading to larger economies.

"I think everybody was looking for an excuse to jump on the bandwagon for selling the euro," said Ravi Bharadwaj, market analyst at Western Union Business Solutions in Washington, D.C.

"The fear is that a lot of the imbalances that have been built up so far have been funded and financed by banks in Europe. As the different sovereign entities look to stabilize their financial systems, they are in effect just feeding a massive feedback loop."

Italy's funding costs rose sharply at a bond sale on Wednesday, with 10-year yields topping 6 percent for the first time since January. The Spanish equivalent neared the dangerous 7 percent level that had forced Ireland and Greece to seek bailouts.

The euro fell as low as $1.2384 on Reuters data, the lowest since July 1, 2010. It was last at $1.2402, down 0.8 percent on the day. Support now lies around $1.2150, a low touched in late June 2010, and then the 2010 low of $1.1875.

Adding to pressure on the euro were poll results showing Greece's radical leftist SYRIZA party has taken the lead over the pro-bailout conservatives. Greece is holding a national parliamentary election next month that may determine whether the debt-laden country stays in the euro zone.

The euro staged the short-lived bounce after the European Commission said the euro zone should move towards a banking union and consider eurobonds and the direct recapitalization of banks from its permanent bailout fund.

The jump in Italian and Spanish bond yields came a day after Egan-Jones Ratings cut Spain's credit rating, the agency's third downgrade of the country's sovereign rating in less than a month, citing the country's weak banks as the reason for the downgrade.

A government source told Reuters on Tuesday that Spain would likely recapitalize Bankia (BKIA.MC), which asked for 19 billion euros on Friday, by issuing new debt and possibly drawing cash from the bank restructuring fund and Treasury reserves.

"The euro is in an extremely vulnerable position and downside risks are very strong indeed," said Jane Foley, senior currency strategist at Rabobank. "The Spanish banking crisis has the potential to knock the stuffing out of the euro zone irrespective of the Greek election results."

"The issues for Spain are undoubtedly huge and most people are coming round to the idea that it will need to go outside of its borders for assistance. The longer it delays, the more the risk of a bank run."

The euro lost 1.5 percent against the safe-haven yen, taking it to a four-and-a-half month low of 97.73 yen. The dollar hit a three-and-a-half month low of 78.85 yen and was last down 0.7 percent at 78.94.

The dollar index (.DXY), which measures its value against a basket of currencies, rise to a 20-month high of 82.941.

Technical analysts said a monthly close about the 100-month average in the dollar index around 81.82 may herald a shift in the longer-term trend of the dollar and reverse a multi-year drift lower.

The dollar also rose to a 15-month high against the Swiss franc at 0.9696 francs on EBS.

The higher-yielding Australian dollar fell 1.2 percent to $0.9716, slipping towards a six-month low at $0.9690, after weaker-than-expected retail sales data underscored the case for interest rate cuts.

May 30, 2012 16:57

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OctaFX_Farid · June 6, 2012

It's your job to fix crisis, ECB tells governments

FRANKFURT (Reuters) - The European Central Bank on Wednesday put the onus firmly on euro zone governments to solve the bloc's debt crisis, dashing expectations it could take near-term action despite saying the currency area's economy was under increasing threat.

After the ECB left interest rates at 1 percent, President Mario Draghi said the bank was not open to trading with governments on the policy response to the crisis.

Increasingly alarmed by signs Spain's banking crisis is opening a new front in the debt crisis, some in financial markets had hoped Draghi would signal a readiness for the ECB to take fresh action if euro zone governments take bolder action.

Instead, Draghi said it was wrong for the ECB to fill a policy vacuum created by others and that there would be no quid pro quo between the central bank and governments.

"There is no sort of horse trading here," he told a news conference.

"Some of these problems in the euro area have nothing to do with monetary policy ... and I don't think it would be right for monetary policy to fill other institutions' lack of action."

The respite the ECB bought the euro zone early this year by injecting over 1 trillion euros into its banking system with twin 3-year loan operations (LTROs) has faded, with borrowing costs for troubled countries such as Spain soaring again.

Draghi played down prospects of any imminent third round of long-term money creation, saying LTROs and the ECB's dormant bond-buying program were instruments that are in place but temporary and "not infinite".

"The issue now is whether these LTROs would actually be effective," he said when asked about another round.

Draghi said the decision to leave rates unchanged was taken by "broad consensus". He said a few members, but not many, of the bank had wanted a rate cut.

The ECB has never before lowered its main refinancing rate below 1 percent. Berenberg Bank economist Holger Schmieding said it was an open question whether the ECB would cut rates in July.

"In addition, the ECB offered no hint today that it may re-activate its two most important non-standard measures, that is the 3-year long-term refinancing operations (LTROs) and the purchases of sovereign bonds," Schmieding said.

"This suggests that it would take a major further escalation of financial tensions for the ECB to go beyond a possible rate cut in July," he added.

Draghi said markets tensions had not returned to the levels of late last year, when the ECB offered the 3-year LTROs, and stressed the euro zone was far from facing a situation like the one after the collapse of Lehman Brothers in September 2008.

Although flagging the increasing threat to the currency area's economy, new ECB growth forecasts for 2012 were unchanged -- in a -0.5 to +0.3 percent range. The prediction for the following year was barely changed either.

"The economic outlook for the euro area is subject to increased downside risks relating in particular to a further increase in the tensions in several euro area financial markets and their potential spillover to the euro area real economy," Draghi said.

Markets were unsure how the ECB would react to a recent wave of weak economic data, knowing that the bank also wants to keep the pressure on euro zone leaders to tackle the crisis more effectively.

The euro was steady at $1.25 after the decision, Europe's benchmark stock market (.FTEU3) was up 2 percent after a recent steep fall.

DILEMMA

Jolted into action by Spain's banking crisis, EU leaders have started considering the form of economic union needed to make the bloc durable as well as more immediate measures to help Madrid.

But that end-game is still months or years away and in the meantime investors view the ECB as the institution with the firepower to keep the crisis in check.

"For the time being, the ECB is sitting on its hands as the bloc's economy and financial markets deteriorate further," said Nicholas Spiro, managing director of Spiro Sovereign Strategy.

"The message from today's ECB meeting is a worrying one: any mutualization of euro zone debt is a long way off yet credible interim measures to shore up confidence will not be forthcoming for the time being," Spiro added.

In the run up to Wednesday's meeting, International Monetary Find chief Christine Lagarde said the bank had room to cut rates [iD:nL5E8H50YO]. Spain and other hard hit parts of the euro zone would also like the ECB to revive its bond buying program to provide them with cover while they undertake planned repairs to their economies.

Euro zone unemployment stood at a record 11 percent in April, business confidence has slumped and surveys of manufacturing have hit three-year lows, adding to conviction that the bloc's economy is set to drop back into recession.

The bank's dilemma is that if does too much, pressure for government action falls. Yet if it does nothing, troubled sovereign debtors could find it harder and harder to finance themselves or maintain confidence in the banks that have bought much of their debt.

Draghi said the ECB would continue to supply euro zone banks with all the liquidity they ask for at least until January 15 next year. It had said in October it would give euro zone bank unlimited access to central bank funding at least until July 10.

Before the crisis, the ECB allotted a certain amount in its refinancing operations for which banks had to put in bids. Since the crisis began, the ECB has extended the maturity of such operations to as long as 3 years and has lifted funding limits.

Most ECB watchers had expected it would keep its powder dry until after June 17 Greek elections and a crunch summit of EU leaders at the end of June, which Draghi and his colleagues hope will dispel any doubts about Europe's commitment to the euro.

There are also growing signs that a decision on a bailout for Spain's debt-laden banks will have been taken by the end of the month.

Jun 06, 2012 15:26

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OctaFx - Euro rises after ECB decision

Euro rises vs dollar after ECB decision; Atlanta Fed president says stimulus may be considered

The euro is rising against the dollar after the European Central Bank left its benchmark lending rate unchanged.

Some economists expected the ECB to cut rates to help ease Europe's debt crisis, but bank President Mario Draghi said it's also up to governments to come up with a solution.

Traders also sold the dollar on rising speculation that the Federal Reserve might launch another round of bond-buying to help the U.S. economy. Atlanta's Fed president said in a speech that monetary actions need to be considered.

Bond buying lowers interest rates, and lower rates can weigh on a currency by reducing the returns investors get from holding it. With a third round of bond-buying mentioned, investors sold dollars.

Jun 06, 2012 16:47

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OctaFX.Com -UK's Cameron, Obama urge action on eurozone crisis

UK's Cameron, Obama agree 'immediate plan' needed to tackle eurozone crisis

LONDON (AP) -- British Prime Minister David Cameron and US President Barack Obama have agreed on the need for immediate action to resolve the eurozone crisis.

Downing Street says the two leaders spoke on the phone late Tuesday ahead of the G20 summit in Mexico later this month, when world leaders will discuss Europe's financial woes.

A spokesman for Cameron said he and Obama agreed on the need for an immediate plan to tackle the crisis, as well as a longer-term strategy to secure a strong single currency.

Cameron is visiting Berlin Thursday for a student conference with Chancellor Angela Merkel and Norwegian Premier Jens Stoltenberg, where the eurozone crisis is likely to be discussed.

Cameron is pressing for eurozone countries to protect their currency with measures including greater fiscal burden-sharing among member countries.

Jun 06, 2012 17:46

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OctaFX_Farid · June 7, 2012

OctaFX.Com -Canadian Dollar Forecast Turns Bullish on USD Weakness

Forex retail trading crowds are now their least short US Dollar (ticker: USDOLLAR) versus the Canadian Dollar since the USDCAD first crossed above the CS$1.00 mark. We unabashedly called for important USDCAD gains as crowds sold into rallies. Yet short positions are down 22 percent since last week while longs have risen 19 percent.

As with other US Dollar pairs, we believe that the Canadian Dollar stands to benefit as the USD itself looks likely to correct lower through short-term trading. (USDCAD losses)].

Jun 07, 2012 14:43

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OctaFX_Farid · June 14, 2012

OctaFX.Com - Merkel firmly behind euro, but will she act?

Germany's Merkel stresses commitment to saving euro, but will she act?

BERLIN (AP) -- Germany's Chancellor Angela Merkel has insisted repeatedly that "if the euro fails, Europe fails."

Now the crisis in the 17 countries that use the euro is coming back to the boil, with Spain admitting it needs help to rescue its banks and voters in Greece deciding whether to back a party that could pull out of the single currency. And all eyes are on economic powerhouse Germany to see what it will do to save Europe's union from collapse.

There's no denying Merkel's commitment to keeping the common currency together. But that doesn't mean she's ready to take the politically difficult measures many say are needed to save the day. She appears torn between freeing funds to rescue a wider European dream and pressures from her narrower power base at home.

Which way she turns will be critical to Europe's future — and the fate of the global economy.

The two sides of the leader who can make or break the common currency have been on prominent display at crucial moments of the crisis.

— As Europe's No. 1 budgetary hawk, Merkel was the architect last year with former French President Nicolas Sarkozy of a strict set of fiscal rules designed to put a lid on the chaos of too many governments holding too much debt.

— But she also has a pragmatic side. Notably, she has shown flexibility in signing up to rescue packages she initially resisted — starting with the initial bailout deal for Greece in mid-2010.

It's certainly in Germany's economic interests to ensure the euro has a future. Of Germany's €276 billion ($346 billion) in exports in this year's first quarter, nearly €110 billion went to other eurozone countries. The full 27-nation EU accounted for more than half of its exports. So Germany desperately needs a stable market close to home.

It's also clear that Europe needs Germany: The nation's GDP of €2.6 trillion is 30 percent larger than that of France, the second biggest eurozone economy, meaning Germany alone has the funds to bail out the struggling bloc.

Still, absent a threat of immediate disaster, Merkel has shown little sign of budging from her insistence that help comes with strings attached, that thrift is a fundamental virtue and that there's no magic wand to save the euro. At the recent G8 summit of leading economic nations at Camp David, Merkel cut a lonely figure fending off pressure from fellow leaders to ditch austerity and jump-start growth.

When the global financial crisis first flared in 2008, Merkel famously invoked the "Swabian housewife" — the traditional personification of Germany's prudent housekeeping named after a region in the southwest of the country.

"She would have told us a piece of worldly wisdom," Merkel said: "You cannot live above your means in the long term." The image stuck.

Polls consistently show Merkel at or near the top of the list of Germany's most popular politicians. Her hard line on the crisis has a great deal to do with that popularity.

Merkel led calls to saddle Greece with tough austerity measures, such as cuts in public sector pay and pensions, as part of its two multibillion-euro rescue packages. Germans see it as just desserts for years of profligate spending, while they kept their finances in order.

But the spending cuts have left the Greek economy mired in a deep recession. Angered by the seemingly endless pain, Greeks have turned away from the two traditional parties in elections last month. They voted instead for more radical parties that have vowed to pull the country out of its bailout and austerity agreements. This weekend Greece faces another election. And if it backs a radical left party that promises to ditch its bailout terms, it's hard to see Merkel allowing Greek aid payments to keep flowing.

That could lead Greece to default and force it out of the euro, a move into uncharted territory that could undermine the entire global financial system.

The threat has held little sway in Germany. A poll by the Forsa agency released last week found that 62 percent of Germans want Merkel to stick to her tough line on Greece. And they favor — by 49 percent against 39 — a Greek exit from the common currency.

"I think her commitment to keep the euro alive is very strong, but I think it's not that strong to keep Greece within (it)," said Carsten Brzeski, senior economist at ING in Brussels. "They would like to keep Greece in but ... if Greece wants to go out as a result of the elections, then so be it."

The fact is, the direct effect of a Greek exit on the German economy would be small. Germany's €1.2 billion of first quarter exports to Greece amount to only a tiny fraction of what it sold to Europe as a whole. But Brzeski argues that there are broader risks: there would be a probability of losing billions of euros in German-guaranteed loans for Greece and the heightened danger of bailouts to other troubled countries such as Spain and Italy if Greece pulled out, neither likely to go down well with Germans.

And Merkel faces increasing criticism abroad for over-emphasizing austerity, notably from her longtime partner in fighting the economic crisis: France, which has a new Socialist president. Francois Hollande has rapidly become one of the strongest voices among European leaders pushing measures to boost growth.

One of these measures has been "eurobonds"— jointly issued debt that could be used to fund anything and could eventually replace an individual country's debt. Eurobonds would protect weaker countries by insulating them from the high interest rates they now face when they raise money on bond markets. Those high interest rates are ground zero of the crisis: They forced Greece, Ireland and Portugal to seek bailouts.

In the face of such pressure, Merkel has already shown signs of her other notable trait: pragmatism. She has started to soften her tone lately on promoting growth, hinting she'd be willing to do more as long as it means deeper European integration in the long run.

And there is a possibility that she will make further concessions. Ahead of elections due in Germany next year, the center-left opposition — from which Merkel needs support for her cherished European fiscal pact to be approved by Parliament — has begun demanding pro-growth measures.

Merkel's coalition recently proposed fostering growth by increasing the capital of the European Investment Bank, a development bank that lends money for public projects, using existing EU funds more efficiently and implementing structural reforms — but no more stimulus money.

Concessions aren't likely to include Eurobonds any time soon. They're politically toxic to Merkel's center-right coalition, unloved by other prosperous countries and could run into trouble with Germany's highest court, which has guarded parliament's control over the German budget.

More feasible may be a so-called debt redemption fund along lines proposed last November by the German government's panel of independent economic advisers. That would see a country's debts above 60 percent of GDP transferred to a common redemption fund with joint liability. They would be obliged to pay them off over 20-25 years and would have to pledge part of their foreign exchange or gold reserves as security.

Germany's opposition backs the idea. Merkel's spokesman, Steffen Seibert, said last week that "significant constitutional and legal concerns" need to be discussed.

Merkel herself cautioned last week against expecting a revolutionary "big design" to emerge from an EU leaders' summit at the end of this month. She made clear that she is still playing a long-term game to strengthen the eurozone through more centralized control of how governments run their economies. That will provide little comfort to Greeks hoping for a quick resolution as they head to the polls.

"We need not just a currency union; we also need a so-called fiscal union, more common budget policies. And we need above all a political union," she said. "That means that we must, step by step as things go forward, give up powers to Europe as well."

Jun 14, 2012 06:42

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OctaFX.Com -Spain banks borrowed 324.6 billion euros from ECB in May

MADRID (Reuters) - Spanish banks borrowed a new record high of 324.6 billion euros from the European Central Bank in May, up from 316.9 billion euros in April, data from the Bank of Spain showed on Thursday.

The data reflected that banks remain largely shut of the interbank funding market as banks shy away from lending to each other in a worsening euro zone debt crisis.

Total net borrowing was 287.8 billion euros in May compared with 263.5 billion euros in April.

The data chime with figures from Portugal, where borrowing in May also hit a new record high of 58.7 billion euros.

Jun 14, 2012 08:13

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OctaFX_Farid · July 6, 2012

OctaFX.Com -Finance chiefs confront Europe's unfinished business

BRUSSELS (Reuters) - Euro zone officials are cautioning against expecting any quick action from the currency bloc's finance ministers when they meet on Monday to sort out the tangle of loose ends and disagreements left by last month's EU debt-crisis summit.

Banking supervision, the use of European Union bailout money, aid to Spain and Cyprus and how to deal with Greece -- together it could take months to finalize, despite pressure from financial markets for clarity on the details.

Leaders from the 17 nations sharing the euro reached a deal in the early hours of last Friday to give the European Central Bank greater oversight of the bloc's banks and to use the euro zone's rescue funds to reduce countries' borrowing costs.

But after going beyond what many diplomats, finance officials and investors had expected, critical elements were left vague. Time-frames may already be slipping and opposition is building in euro zone hardliners the Netherlands and Finland.

"You have a Finnish problem. You have a Dutch problem. You have a German problem too," said one euro zone diplomat, pointing to the reservations of those countries about what was announced at the summit and German Chancellor Angela Merkel's reluctance to help its partners without strict conditions.

"I don't see a package done by Monday. They will work until the end of July or the beginning of August on these things," said the diplomat, who is involved in preparations for the Eurogroup meeting of euro zone finance ministers.

The meeting's crowded agenda may hamper progress. Discussing an aid package for Spain's banks, dealing with a request from Cyprus for emergency help, and whether to ease the conditions of Greece's second bailout are also on the table.

Euro zone leaders have committed to ECB-led supervision for banks, which would then allow the permanent rescue fund - the European Stability Mechanism - to recapitalize banks directly, rather than having to lend to governments.

That is seen as a major concession to Spain, which has requested a bailout of up to 100 billion euros ($125 billion) for its banks, but does not want to see that money added to its national debt and possibly push it towards a sovereign rescue.

Leaders agreed to remove the ESM's preferred creditor status when it lends to Spain, to calm investors who were worried they would not be repaid the money they had already lent.

They also decided that the ESM and the euro zone's temporary bailout fund, the EFSF, can buy euro zone bonds at auction and in the open market to lower borrowing costs, with some conditions attached but without a full program.

POLITICAL PROBLEMS

In their summit statement on June 29, leaders told the Eurogroup of finance minister "to implement these decisions by July 9". That now looks optimistic and delays could test market patience.

Ministers will look at the mechanics of how it will work in practice on Monday, but much depends on the ECB's crucial role as supervisor, which will need to be grounded in European law.

It now falls to the European Commission to propose such legislation, which is not expected until at least September.

"It will take at least until the first half of next year to be implemented," said Douglas Renwick, a director responsible for government credit ratings at Fitch Ratings.

"This could run into political problems. The major banks are often national champions and governments have been quite protective of them in the past. The idea of ceding oversight to a European level is a politically painful step to take."

Despite the obstacles to the broad package outlined by leaders, the range of measures agreed allow some short-term action, and vocal opposition to euro zone bond buying in the Netherlands and Finland is unlikely to ruin those plans.

Finland has said it opposes bond-buying in secondary markets, because it considers such purchases to be ineffective.

In emergency cases, the ESM's treaty allows for decisions to be taken with an 85 percent majority, and the Netherlands and Finland only account for 8 percent combined.

"The ESM discussion is being complicated by politicians talking to their electorates, but I think there is a consensus to move ahead with what was decided at the summit," said another euro zone official, briefed ahead of the Eurogroup.

TOUGH TROIKA

If only things were so straight forward for southern Europe.

Greece's new Finance Minister Yannis Stournaras said on Thursday he had been warned to expect a tough time at the Eurogroup, having acknowledged Athens was off course on its pledges linked to a 130-billion-euro rescue.

Ministers will discuss the findings of the "troika" of the European Union, the European Central Bank and International Monetary Fund from their first mission to Greece since the June 17 election. Another mission is due to return later in July.

Greece's Prime Minister Antonis Samaras wants to ease the terms of the bailout, but that would mean more money for Athens.

"Even if the second program as it stands were fully implemented, it is not clear that market access could resume (in 2015)," said David Mackie, an economist at JP Morgan. "A third program seems likely in any event."

For Spain, ministers are unlikely to sign off formally on an aid package for its banks as they are still awaiting an expert report on the situation, despite expectations of a July 9 deal.

"If the euro zone is to survive it has to be more integrated," said Fitch's Renwick. "Further difficult political concessions will have to be made over the coming years."

Jul 06, 2012 09:35

OctaFX.Com News Updates

OctaFX.Com -US Dollar Inches Higher Ahead of NFPs; Japanese Yen Steady, Gold Lower

High beta currencies and risk-correlated assets have traded slightly lower against the world’s reserve currency, the US Dollar, ahead of the most important data release this week: the US Nonfarm Payrolls report for June. A significantly disappointing figure in May stoked expectations of a third round of quantitative easing from the Federal Reserve; and even though the Federal Reserve did not deliver on those hopes, as expected, there is speculation that another bombshell could reignite the conversation.

Meanwhile, some discouraging developments out of Europe have stunted any rebound in the Euro after the EURUSD broke out of its Symmetrical Channel to the downside in the wake of yesterday’s European Central Bank rate decision. As noted earlier this week, the performance of Italian and Spanish bond yields, especially on the shorter-end of the yield curve (in light of the two longer-term refinancing operations (LTRO), yields within the three-year umbrella are the most accurate gauge of funding stresses in the Euro-zone) have disappointed. The Italian 2-year note yield has risen to 3.733% (+10.3-bps) while the Spanish 2-year note yield has risen to 4.838% (+39.7-bps). The Italian 10-year note yield has risen to 6.015% (+6.3-bps) while the Spanish 10-year note yield has risen to 6.936% (+23.8-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:54 GMT

GBP: +0.12%

JPY: +0.05%

CHF: -0.10%

EUR: -0.12%

CAD: -0.14%

AUD:-0.28%

NZD: -0.29%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.05%See More

Jul 06, 2012 10:58

OctaFX.Com News Updates

OctaFX.Com -Stocks, euro slide on worries over U.S. jobs

NEW YORK (Reuters) - Stocks on major exchanges extended their losses on Friday and the euro hit 5-week lows after U.S. jobs data for June came in weaker than expected, fueling concerns that Europe's debt crisis is pushing the world's largest economy into low gear.

Prices of oil and copper fell along with those gold as the dollar surged amid a broad flight from risk.

U.S. and German government bond prices leapt, with investors seeking safe havens in U.S. Treasuries and German bunds.

The Labor Department said U.S. non-farm payrolls expanded by just 80,000 jobs in June, falling short of forecasts. A Reuters poll showed the market expecting a growth of 90,000 jobs.

The data raised pressure on the Federal Reserve to do more to boost the economy, and imperiled President Barack Obama's chances of reelection in November.

The 80,000 jobs added in June was "a poor number and a very political number and it will not sit well with the market," said Jeff Savage, regional chief investment officer for Wells Fargo Private Bank in the Northwest in Portland, Oregon.

"There is no question that the QE3 conversation becomes very alive in the coming days and weeks," he said, referring to a third round of quantitative easing since 2008 that markets were expecting from the Fed. The first two rounds of QE involved large-scale Treasuries buying, aimed at lowering long-term interest rates.

Futures traders added to bets that the Fed will keep short-term interest rates near zero until the end of 2014.

Fed fund futures, tied to the overnight lending rate between banks, ticked up after the jobs report, signaling traders see the Fed first hiking rates in the fourth quarter of 2014, either at its October or its December meeting of that year.

The Dow Jones industrial average (^DJI) was down 126.32 points, or 0.98 percent, at 12,770.35. The Standard & Poor's 500 Index (^GSPC) was down 13.36 points, or 0.98 percent, at 1,354.22. The Nasdaq Composite Index (^IXIC) was down 29.03 points, or 0.98 percent, at 2,947.09.

European shares fell further after the jobs data (.FTEU3), down nearly 0.8 percent on the day, having been 0.2 percent lower beforehand. World stocks <.MIWD00000PUS> fell 1 percent.

The euro extended losses to fall to a fresh five-week low against the dollar, sliding nearly 0.5 percent to $1.2332 after falling as low as $1.2317 earlier.

Monetary policy loosening by a trio of major central banks failed to impress investors on Friday, pushing Spanish borrowing costs back up to unsustainable levels reached before last week's EU summit took measures designed to ease pressure on them.

China, the euro zone and Britain all loosened monetary policy on Thursday, signaling growing alarm about the world economy. But to little avail.

The 19-commodity Thomson Reuters-Jefferies CRB index was headed for its sharpest loss in a week as oil and copper prices fell about 2 percent each.

Gold slid more than 1 percent in choppy trade as investors turned to the perceived safety of the dollar. The spot price of gold, which tracks trades in bullion, was at $1,588.19 from $1,604.33 at Thursday's close.

U.S. Treasuries' benchmark 10-year note yields were at 1.5559 percent, their lowest levels in four days. Safe haven German Bund futures hit a session high.

Jul 06, 2012 12:47

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OctaFX_Farid · July 7, 2012

OctaFx -Japanese Yen To Appreciate Further As BoJ Maintains Current Policy

Fundamental Forecast for Japanese Yen: Bullish

The Japanese Yen continued to appreciate against its U.S. counterparts as positive real interest rates in Japan increases the appeal of the low-yielding currency, and we may see the USDJPY track lower in the week ahead should the Bank of Japan preserve its current policy in July. Indeed, the BoJ is widely expected to uphold its zero interest rate policy, and there’s speculation that the central bank will continue to carry out its current asset purchase program as the board raises its outlook for the region.

Indeed, the BoJ raise its fundamental assessment of all the nine regions for the first time since October 2009 while presenting the quarterly Sakura Report and it seems as though the central bank will stick to its wait-and-see approach as economic activity starts picking up. Although Governor Masaaki Shirakawa maintained his pledge to purse ‘powerful monetary easing,’ it seems as though the central bank is becoming more upbeat towards the economy as the recent developments coming out of the world’s third-largest economy raises the prospects for future growth. Meanwhile, the Nikkei newspaper said that the BoJ may scale back on its 6-month operation and expand its shorter-term programs, but the central bank may see scope to inject additional liquidity into the system as the ongoing turmoil in Europe dampens the outlook for the world economy. BoJ Deputy Governor Hirohide Yamaguchi held a cautious tone while speaking in Tokyo earlier this week and said that excessive gains in the local currency would dampen private sector activity, and we may see the central bank try to talk down the Yen as it lowers the scope for an export-led recovery.

As the USDJPY threatens the ascending channel carried over from June, a close below the 20-Day SMA (79.56) would instill a bearish outlook for the pair, and the dollar-yen may continue to give back the rebound from 77.65 as the relative strength index fails to maintain the upward trend from the previous month. However, we may see the dollar-yen face sideways price action ahead of the rate decision as market participants weigh the outlook for monetary policy, and the outcome of the rate decision should generate a clearer picture for the USDJPY amid the mixed views surrounding the BoJ

Jul 07, 2012 02:02

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OctaFX.Com -British Pound Looks to FOMC Minutes, EU FinMin Summit for Direction

Fundamental Forecast for British Pound: Neutral

The British Pound remains sensitive to risk sentiment trends, with GBPUSD showing a firm correlation with the MSCI World Stock Index. In the aftermath of last week’s disappointing US jobs report and underwhelming stimulus efforts from the ECB and the BOE, this puts the spotlight on minutes from June’s FOMC outing amid hopes the Fed will deliver some relief. Although Ben Bernanke and company opted not to introduce QE3 last month, traders will be keen to gauge the degree to which such an option entered into the conversation to guide expectations for a possible expansion of the balance sheet to be unveiled in the coming months.

On balance, the utility of another QE program seems highly suspect. Indeed, with US Treasury yields already so low that after adjusting for inflation, real rates are in negative territory out to the 10-year maturity, it seems unlikely that a further push lower will materially encourage those not borrowing to do so. The Fed is surely not oblivious to the limitations of more QE, but it is equally sensitive to the fact that a strong signal against stimulus may trigger pandemonium across financial markets. That means the door to further easing is likely to be kept open, at least rhetorically. With that in mind, language perceived as increasing the likelihood of added accommodation is likely to boost risk appetite and with it the Pound. Needless to say, the inverse scenario is likewise the case.

Besides investors’ yearning for looser monetary conditions, the Eurozone debt crisis is set to return to the forefront as the currency bloc’s finance ministers convene for a meeting on Monday. The sit-down is expected see officials begin implementation of June’s EU leaders’ summit framework. While little is likely to be achieved on longer-term issues like joint bank governance and the expansion of EFSF/ESM bailout fund powers, the Spanish bank rescue is likely to figure prominently into the proceedings.

Details of the effort are expected to be ratified at the sit-down. The British Pound continues to be a beneficiary of regional haven flows at times of rising concern about the Euro area, meaning an outcome perceived as disappointing by investors may boost the UK currency.

Jul 07, 2012 07:10

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OctaFX_Farid · July 10, 2012

OctaFX.ComSpanish deal lifts shares, euro stays weak

LONDON (Reuters) - European shares inched up on Tuesday after the region's finance ministers made limited progress on measures to help embattled Spain, but the euro and commodities fell as signs of a sharp slowdown in China fuelled anxiety about the global economy.

The FTSE Eurofirst (.FTEU3) index of top European shares edged up 0.6 percent to 1036.40, after the euro area finance chiefs agreed a deal which will release 30 billion euros of bailout funds for Spain's troubled lenders by the end of July.

The euro zone ministers also decided to grant Spain an extra year until 2014 to reach its deficit reduction targets but made no apparent progress on how the bloc's new rescue fund, the ESM, will be used to help lower Madrid's elevated borrowing costs.

The euro fell 0.3 percent to $1.2280, slipping back in the direction of a two-year low of $1.2225 hit on Monday.

The euro's struggles saw the dollar index (.DXY), which measures the greenback against a basket of major currencies, climb 0.1 percent at 83.219, near a one-month high.

"With the (euro zone) finance ministers' meeting out of the way without proving to be a source of inspiration for risk assets, the focus of the market now turns to the German constitutional court," said Chris Weston, an institutional dealer with IG Markets.

The German court is due to give its preliminary ruling on complaints against the European Stability Mechanism (ESM) and the euro zone's fiscal compact, which could ultimately lead to a further implementation delay.

Spanish 10-year bond yields eased about 14 basis points on news of the deal to just under the crucial seven percent level widely seen as unsustainable.

The euro finance chiefs plan to reconvene in Brussels on July 20 to finalize the agreement, having first obtained the approval of their governments or parliaments.

"I think we have a long ways to go before we reach the stage at which policymakers will be ready to act, particularly as it relates to potential bond purchases in the secondary market," said Todd Elmer, currency strategist for Citi.

CHINA WORRIES

Meanwhile the world's second largest economy China sharply curtailed its levels of imports in June in further evidence that Europe's three-year debt crisis is dragging down economic activity around the world.

Demand for Chinese goods in June was also below its usual pace in part because the U.S. economy has also not fully recovered, a top Chinese customs official said.

Annual import growth was 6.3 percent in June, far short of the 12.7 percent forecast by economists and the 12.7 percent achieved in May. China's crude oil imports for June plunged to their lowest levels of the year from a record high in May.

The lackluster trade numbers came a day after data showed inflation in China eased further in June, giving room to the central bank to loosen its monetary policy to stimulate growth without stoking upward price pressures.

This is a busy week for Chinese economic data releases which culminates on Friday with second-quarter gross domestic product figures, which are expected to show the lowest growth in at least three years.

The latest batch of numbers sent share markets lower across Asia but left the MSCI world equity index <.MIWD00000PUS> largely unchanged at 309.50 after three days of losses.

Brent crude oil was down 1.7 percent at $98.60 a barrel after the data with worries over supply disruptions also easing as a labor strike in Norway's oil industry ended.

Gold prices edged down as the nervousness about global economic growth saw investors turn towards the dollar for safety.

Spot gold dipped $1.50 to $1,585.15 an ounce while the U.S. gold futures contract for August delivery edged down 0.2 percent to $1,585.30.

"The market is being a little pessimistic and cautious about the global economy, and investors are choosing the dollar as the top safety haven," said Li Ning, an analyst at Shanghai CIFCO Futures.

Jul 10, 2012 07:27

OctaFX.Com News Updates

OctaFX.Com -Euro Approaches 2-Year Low on French, Italian Production Concern

The euro declined to within 0.4 percent of its lowest level in two years versus the dollar as industrial production shrank in France and was forecast to fall in Italy as Europe's debt crisis undermined growth.

Europe's 17-nation currency weakened most against the yen among its 16 major peers after European Union Economic and Monetary Affairs Commissioner Olli Rehn said Spain will soon have to take additional measures soon to meet budget targets. The dollar strengthened versus most of its most traded counterparts as Asian stocks declined. Australia and New Zealand's currencies dropped after data showed growth in exports and imports slowed in China.

"The euro is going to stay quite weak, particularly against the U.S. dollar and the yen," said Joseph Capurso, a strategist in Sydney at Commonwealth Bank of Australia (CBA), the nation's biggest lender. "The euro zone is still in recession and it's probably getting even deeper."

The euro lost 0.1 percent to $1.2297 at 8:15 a.m. London time after sliding to as low as $1.2251 yesterday, the weakest since July 2010. The shared currency fell 0.3 percent to 97.62 yen. It touched 97.43 yesterday, the least since June 5.

French output fell 1.9 percent from a month earlier, Insee, the Paris-based statistics office, said today. April's production increase was revised down to 1.4 percent. Economists had forecast a decline of 1 percent in May, according to the median estimate of 21 forecasts in a Bloomberg News survey.

Jul 10, 2012 07:35

OctaFX.Com News Updates

http://www.octafx.com/?refid=154' rel="external nofollow">

OctaFX.Com -EU talks up Spanish banks package, markets skeptical

BRUSSELS (Reuters) - Euro zone ministers struggled to reassure financial markets on Tuesday that an aid package for Spain they outlined overnight will help stabilize the currency bloc - a task made all the harder by a German legal challenge to its crisis-fighting tools.

The ministers agreed early on Tuesday to grant Madrid an extra year until 2014 to reach its deficit reduction targets in exchange for further budget savings. They also set the parameters of an aid package for Spain's ailing banks.

The decisions were aimed at preventing the currency area's fourth largest economy, mired in a worsening recession, from needing a full state bailout which would stretch the limits of Europe's rescue fund and plunge it deeper into a debt crisis.

"There's no emergency here, there's a clear path towards stabilization," Luxembourg Finance Minister Luc Frieden said of the measures agreed for Spain. "The markets have to realize that the money is there, more money than is necessary."

But markets were disappointed the meeting did not offer more. The euro initially traded near a two-year trough against the dollar and hit a five-week low versus the yen, with sentiment edgy as the focus shifted to a German court hearing.

Germany's top court also will pick up the issue on Tuesday about whether Europe's new bailout fund and budget rules are compatible with national law in a process influencing not just how to tackle the euro zone crisis, but how much deeper European integration can go.

The hearing into complaints about the fund, the European Stability Mechanism (ESM), and fiscal pact may indicate how long the court will keep Europe on tenterhooks.

Anything more than a few weeks would mean a serious delay to implementing the ESM, which has already been postponed from July 1, and raise serious doubts about whether Europe will really get the extra firepower it needs to combat the crisis.

"A considerable postponement of the ESM (bailout fund) which was foreseen for July this year could cause considerable further uncertainty on markets beyond Germany and a considerable loss of trust in the euro zone's ability to make necessary decisions in an appropriate timeframe," German Finance Minister Wolfgang Schaeuble told the court/

At their meeting overnight, euro zone finance ministers did not agree a final figure for aid to ailing Spanish lenders, weighed down by bad debts due to a housing crash and recession, but the EU has set a maximum of 100 billion euros ($123 billion) and some 30 billion euros would be available by the end of July if there was an urgent need.

A final loan agreement will be signed on or around July 20, Eurogroup chairman Jean-Claude Juncker told a news conference.

Frieden, arriving for Tuesday's meeting of finance ministers from the broader 27-member European Union, said the 100 billion euros available to Spanish banks was much more than they needed.

In one key decision watched by investors, ministers agreed overnight that once a single European banking supervisor is set up next year, Spanish banks could be directly recapitalized from the euro zone rescue fund without requiring a state guarantee.

That fulfils an EU summit mandate to try to break a so-called "doom loop" of mutual dependency between weak banks and over indebted sovereigns, but represented a climbdown for hardline north European creditor countries.

"It is a very, very positive agreement," Spanish Economy Minister Luis de Guindos said on arrival for Tuesday's meeting.

KEY APPOINTMENTS

In a nine-hour marathon meeting ministers of the 17-nation euro zone also settled a series of long delayed appointments.

But they made no apparent progress on activating the bloc's rescue funds to intervene in bond markets to bring down the spiraling borrowing costs of Spain and Italy, which threaten to drive them out of the market.

The ministers reappointed Juncker as their chairman for a further term of up to 2-1/2 years, though Europe's longest-serving government leader said he intended to step down from the position at the end of this year or early in 2013.

They nominated another Luxembourger, inflation hawk Yves Mersch, to the vacant position on the European Central Bank's six-member executive board, and picked German Klaus Regling to head their permanent bailout fund, the European Stability Mechanism, due to come into force this month.

Regling had already set up and run the temporary European Financial Stability Facility which has funded rescues for Greece, Ireland and Portugal.

The Eurogroup ministers were tasked with fleshing out a bare-bones agreement reached by EU leaders at a summit last month on establishing a European banking supervisor and using the bloc's rescue funds to stabilize bond markets.

But differences persisted between north European countries such as Finland and the Netherlands and southern states led by Italy and Spain.

On Monday, ECB President Mario Draghi endured at times hostile questioning in the European Parliament, notably from German, Dutch and Finnish lawmakers concerned at the prospect of European bank bailouts using taxpayers' money.

Tuesday's meeting will formally ease a deficit reduction goal that has forced Madrid to make punishing cuts that are exacerbating a recession.

SLIPPAGE

Spanish and Italian borrowing costs eased on Tuesday, with Spain's 10-year bond dipping back below the critical 7 percent level.

Spain's de Guindos spelled out to the euro zone ministers on Monday his government's plan for a package of up to 30 billion euros over several years through spending cuts and tax hikes that are due to be announced this Wednesday.

A source close to the Spanish government said 10 billion euros of cuts would come this year and that the measures would include a hike in VAT sales tax, reduced social security payments, reduced unemployment benefits and changes to pensions calculations.

The European Commission proposed in return easing Madrid's deficit goal for this year to 6.3 percent of economic output, 4.5 percent for 2013 and 2.8 percent for 2014.

European Economic and Monetary Affairs Commissioner Olli Rehn said Spain was expected to take additional savings measures very soon to ensure it meets its new targets.

The new targets may still prove hard to reach, according to a draft recommendation from European partners, loosening Spain's goals and demanding the country be subjected to three-monthly checks.

The figures highlighted Spain's dramatic fiscal slippage due to a worsening recession. Madrid was originally meant to cut its budget shortfall to 4.4 percent this year. Prime Minister Mariano Rajoy unilaterally changed the target to 5.8 percent in March before eventually accepting an agreed goal of 5.3 percent.

Ministers sought to project confidence in Spain.

"We are confident that Spain is (doing) and will do all that is necessary to overcome this crisis," said Dutch Finance Minister Jan Kees de Jager.

Jul 10, 2012 09:31

OctaFX.Com News Updates

OctaFX_Farid · July 12, 2012

OctaFX.Com -Japanese Yen Strength Persists; EURUSD Consolidates

Australian labor market data was a major disappointment in the overnight, showing that nearly all of the jobs gained in May were wiped out in June (save 0.8K). Australia, as a proxy to China, has been putting out weaker than expected data once again, raising emerging market growth concerns. In light of recent Chinese data, which has showed significantly weaker domestic demand in the world’s most important economy, the People’s Bank of China has cut its key rate twice since the first week of June. Scope for further rate cuts, not only from the People’s Bank of China but from the Reserve Bank of Australia as well, will be revealed tomorrow when the Chinese second quarter GDP report is released.

More importantly, however, is that the US Dollar is surging in the wake of the Federal Reserve’s June 20 to 21 meeting Minutes yesterday. While it’s evident that policymakers are concerned about the direction of the US economy, any further easing will be on the sidelines as long as the recovery muddles along at its current rate. One needs to look no further than commodities and highly-correlated currencies to

appreciate the US Dollar’s strength: AUDUSD and NZDUSD are both down over 1% thus far today; NYMEX WTI Crude Oil has fallen 1.13%; spot Gold is down 0.91% and spot Silver is down 1.78%; and COMEX Copper Click here to See More

Jul 12, 2012 10:55

OctaFX.Com News Updates

OctaFX_Farid · July 17, 2012

OctaFX.Com -Australian Dollar Gained as RBA Reports Stronger Economic Growth, Headwinds Exist

THE TAKEWAY: Minutes from July third meeting reports Australian economic strength > GDP growth is expected to continue at moderate pace while inflation figures suggest easing prices and substantial risk of spillover from European financial crisis exists > Australian Dollar gained

The Australian Dollar gained versus the U.S. Dollar after the Reserve Bank of Australia released their minutes from the July third meeting. Overall, RBA officials noted that the economy had been growing at a stronger than previously estimated rate since mid 2011 as gross domestic product registered at 4.3% over the first three months in 2012. Furthermore, the recent CPI data suggests that inflation appears to have moderated, decreasing to 1.6 percent in March 2012, year over year, from 3.1 percent in December 2011, year over year. Officials also said holding borrowing rates at 3.50% allows for “more domestic growth.”

Moreover, it was noted that there still remains a substantial risk of spillover from the European financial crisis, however recent developments from the European summit helped to boost market sentiment for the time being.

Officials also noted that China’s economy slowed at a slower rate than initially indicated and that the outlook remains uncertain.

Markets likely interpreted the data to mean that further rate cuts may not be on the horizon thus providing support for the higher yielding Aussie currency.

AUDUSD, 5 Minute Chart

Jul 17, 2012 03:25

OctaFX.Com News Updates

OctaFX.Com -Canadian Dollar Strengthens as Bank of Canada Keeps Rate at 1.00%

THE TAKEAWAY: CAD Bank of Canada Rate Decision > Overnight Interest Rate Unchanged at 1.00% > USDCAD BEARISH

The Bank of Canada kept its main refinancing rate on hold at 1.00% today, as expected, while similarly leaving its Bank Rate at 1.25% and the deposit rate at 0.75%. As the Bank of Canada noted in its policy statement, the main reasons for keeping the main rate on hold have more due to with exogenous factors and less to do with the Canadian growth picture itself.

Governor Mark Carney said that “the United States continues at a gradual but somewhat slower pace, developments in Europe point to a renewed contraction. In China and other emerging economies, the deceleration in growth has been greater than anticipated, reflecting past policy tightening and weaker external demand.” The main headwind to confidence and growth, the Euro-zone crisis, has led the Bank of Canada’s “base case projection assumes that the European crisis will continue to be contained, although this assumption is subject to downside risks.”

However, “domestic factors are expected to support moderate growth in Canada.” Governor Carney finds that “consumption and business investment are expected to be the primary drivers of growth.” “Lower commodity prices,” influenced by the slowdowns in China, Europe, and the US will hurt “incomes and wealth,” as well as “record-high household debt.”

Presented below without commentary are the Bank of Canada’s outlook on inflation and growth:

Core inflation is forecast to remain around 2% over the projection horizon as the economy operates near its production potential, growth in labour compensation stays moderate and inflation expectations remain well anchored.

Given the recent drop in gasoline prices and with futures prices suggesting persistently lower oil prices, the Bank expects total CPI inflation to remain noticeably below the 2% target over the coming year before returning to target around mid-2013.

The economy will grow by 2.1% in 2012, 2.3% in 2013 and 2.5% in 2014.

The economy is expected to reach full capacity in the second half of 2013, thus operating with a small amount of slack for somewhat longer than previously anticipated.

Jul 17, 2012 13:20

OctaFX.Com News Updates

OctaFX_Farid · July 18, 2012

OctaFx -Australian Dollar Declined as Chinese Real Estate Data may Provide Support for Softening Economic Conditions

THE TAKEWAY: Chinese real estate prices ease > Data in line with the recent softening in economic conditions > Australian Dollar declines

The Australian Dollar declined in value versus the U.S. Dollar as Chinese real estate prices show signs of economic slowing. From a sample of 70 Chinese cities surveyed, prices for new residential apartments decreased in 57 cities. Moreover, 58 cities also experienced declining prices for existing residential apartments. The data fell in line with recent CPI figures which increased by 2.2 percent in June, the slowest rate of increase in 29 months.

Declining real estate prices might suggest that credit demand may also be slowing. Earlier in July the PBOC cut lending rates in an effort to provide credit-borrowing incentive, offering additional support for a possible flagging credit demand case.

Finally, softening Chinese data could have negative spillover effects to the Australian economy as China is in large demand for Aussie exports. If the Aussie economy experiences a drop in export demand, then markets may likely project a more accommodative RBA monetary stance and thus reduce expectations for rate hikes.

Jul 18, 2012 03:02

OctaFX.Com News Updates

OctaFx -Japanese Yen Strength Persists; EURUSD Consolidates

Risk-aversion is the tone across the board on Wednesday as US equity futures have declined, commodities have sold off, and the Japanese Yen is the top performer. In the wake of this, the Euro is leading losses (though quizzically, the Australian Dollar is the second best performer against the US Dollar on the day) as the German 2-year note yield fell to -0.06%, perhaps one of the best indicators that uncertainty remains high among investors.

Despite yesterday’s promising results from the Spanish bond auction, Spanish debt is back under pressure which is adding to the Euro’s woes. The Italian 2-year note yield has pulled back to 3.426% (-7.3-bps) while the Spanish 2-year note yield has risen to 4.802% (+21.0-bps). Similarly, the Italian 10-year note yield has dropped to 5.973% (-3.9-bps) while the Spanish 10-year note yield has risen to 6.767% (+5.1-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:55 GMT

JPY: +0.13%

AUD: -0.09%

CAD: -0.14%

GBP: -0.32%

CHF:-0.48%

NZD: -0.49%

EUR: -0.50%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.19%(-0.48% past 5-days) READ MORE

Jul 18, 2012 10:59

OctaFX.Com News Updates

OctaFX_Farid · July 18, 2012

OctaFX.Com -Dollar rises as Bernanke gives no hint of stimulus

Dollar rises against the euro as Fed Chairman Ben Bernanke gives no hint of imminent stimulus

NEW YORK (AP) -- The dollar is rising against the euro after Federal Reserve Chairman Ben Bernanke gave no indication that the Fed was about to step in again to help the U.S. economy.

In his second day of testimony before Congress, Bernanke said Wednesday economic growth remains weak and that the Fed will contemplate additional action if unemployment stays high.

But he offered no hints that the Fed would launch another round of bond purchases. The Fed has already launched two rounds of bond purchases, most recently in August 2010. Those programs push interest rates lower and can weaken the dollar.

The euro fell to $1.2269 in afternoon trading Wednesday from $1.2289 late Tuesday. The British pound fell to $1.5650 from $1.5647.

Jul 18, 2012 17:01

OctaFX.Com News Updates

OctaFX_Farid · July 20, 2012

OctaFX.Com -Euro vs. Dollar: Who's the Ugliest One of All?

The euro may be winning the unpopularity contest in the markets at the moment, but the dollar is close behind, according to David Bloom, head of foreign exchange strategy at HSBC.

He described the euro (EUR), which has continued its medium-term fall against the dollar this year after rallying slightly in February and June, as "the ugliest of all" - but maintained the U.S. dollar is far from beautiful.

The Eurodollar is also becoming less effective as a benchmark as investors move away from both currencies, Bloom argued.

"Investors are abandoning the euro and the dollar. We've been focusing on the Eurodollar as the bellwether but if you look at the dollar against other currencies like the Australian dollar or the rand, it's actually weakening," he told CNBC's "Squawk Box Europe" Friday.

"You've got the ugliest of all, which is the euro, but the dollar is starting to look quite ugly as well. The Eurodollar as a benchmark isn't working - people are selling the U.S. dollar now too because we're heading towards elections and the fiscal cliff."

"We're stuck between Europe and the U.S. QE 3, 4, 5 - it's like the Rocky movies!" he said, referring to a third, fourth or even fifth round of quantitative easing.

He is far from the only currency expert to warn against the euro. In the absence of any headline-grabbing meetings or summits in the euro zone this week, markets' attention has turned elsewhere - but risks remain (click here for a slideshow on the world's most indebted nations).

"We still have plenty of event risk up ahead in the euro zone - the German constitutional court for starters - and the chance of a full-fledged (troika) program in Spain," Geoffrey Yu, currency strategist at UBS, told CNBC.

"The euro is being considered more as a funding currency and people aren't trading much off euro-specific news. Looking at our volumes in the past week, people are packing up for the summer.

Politics in the developed world are going to keep their grip on markets and currencies, according to Bloom.

"Politics is the new economics. There's no longer this laissez faire attitude to free markets,"

he said."Look at the Swiss. They have made a political decision to keep manufacturing jobs and its costing them to keep the franc low."

The Swiss National Bank is buying bonds in an effort to keep the Swiss franc (CHF) at a level which will not put companies off investing in jobs in the country.

New safe havens are emerging from the mire, with Nordic currencies like the Swedish krona (SEK), which recently hit a 10 year high against the euro, performing well.

"We're trying to find beauty in this world of ugly. Sweden has turned the corner. It's the rose amongst the thorns," Bloom said.

"The market has switched on to this change already, but we think that it's right to continue buying it."

There are some who believe that the krona has already come too far and now is the time to sell, including analysts at Nomura, who issued a sell note on the currency earlier this week.

The Australian dollar (Exchange:euraud=) has also strengthened, but is more vulnerable than most global currencies to any slowdown in China because of the Australian economy's dependence on commodities.

"A lot of clients are finding the Aussie difficult to sell right now," Yu said.

"If the money does flow in Australia's direction (from China), it'll be hard to fight. If clients want a commodity-linked currency, the Aussie seems the best place to go."

Jul 20, 2012 09:14

OctaFX.Com News Updates

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