Japan sold a total of 1.02 trillion yen in currency interventions during the first four days of November, according to the report.
Japan sold its currency five times in the final quarter of last year, the Ministry of Finance said on its website today, as the government moved to shield exporters’earnings from the impact of yen gains.
The ministry’s quarterly data confirmed speculation that the nation carried out so-called stealth intervention following a record daily sale of 8.07 trillion yen ($105 billion) on Oct. 31, when the Japanese currency climbed to a post World War II high of 75.35 against the dollar. Japan sold a total of 1.02 trillion yen in currency interventions during the first four days of November, according to the report.
“Coming under growing criticism from overseas, Japan couldn’t openly intervene in the markets,” said Junichi Ishikawa, an analyst in Tokyo at IG Markets Securities Ltd.“Japan had to choose stealth intervention from the very few options to deal with increasing pressure within the country.”
Stealth intervention is defined as intervention without any official announcement from the finance ministry, he said.
Finance Minister Jun Azumi reiterated last week he’s ready to take “decisive” measures to curb the yen’s appreciation, an indication that Japan is closer to resuming intervention even after criticism from U.S. authorities.
The yen reached 76.03 per dollar on Feb. 1, the strongest since Oct. 31. It traded at 76.56 as of 9:08 a.m. today in Tokyo.
An epic lack of foresight, accuracy and rationale... https://www.tfmetalsreport.com/comment/170246#comment-170246
When the euro officially entered circulation at the stroke of midnight on Jan. 1, 2002, fireworks lit up the night sky across Europe to celebrate the scrapping of the French franc, German deutsche mark, Greek drachma, and a clutch of other ancient currencies. Brussels hosted an extravagant sound-and-light show, while Frankfurt unveiled a five-story statue of the freshly minted euro as a pop band belted out "With Open Arms (Euro World Song)." "I am convinced," European Central Bank President Wim Duisenberg declared, that the launch of euro coins and banknotes "will appear in the history books in all our countries and beyond as the start of a new era in Europe."
Can Europe's struggling economies be saved or are we too far down the road to meltdown? Will the contagion reach the United States? And what's at the root of the crisis -- political or economic dysfunction? In this edition of the Foreign Policy/Brookings Institution Deep Dive, we delve into the dimensions of the European debt crisis, the potential solutions, and the future of the eurozone and global financial system -- starting with a briefing on how the IMF could rescue Europe by Brookings scholars Domenico Lombardi and Sarah Puritz Milsom. Former Obama administration economic adviser Larry Summers, Pimco CEO Mohamed El-Erian,Berkeley economist Barry Eichengreen, and others also weigh in -- with almost uniformly gloomy news. Thankfully, our contributors also offer prescriptions for a solution to the eurozone crisis --ranging from conditional Eurobonds tosweeping bank bailouts to a wholesale retreat from neoliberalism. As Europe takes its first furtive steps toward greater fiscal unity while Britain lingers behind, markets churn, and periphery economies wobble -- this in-depth special report couldn't be more timely.
By Mohamed El-Erian
The Last Hope for Redemption
By John Muellbauer
Keeping Markets Happy
By Rick Rowden
It's the Politics, Stupid
By Kathleen McNamara
A Bridge to Nowhere
By Barry Eichengreen
BRIEFING: Weighing Options for Unconventional IMF Interventions
By Domenico Lombardi, Sarah Puritz Milsom
Where There’s a Will...
By Mark S. Sheetz
An Interview With Larry Summers
By Uri Friedman
By Karl Smith
The Reluctant Firewall
By David Bosco
A Watchful Eye
By Martin S. Edwards
China to the Rescue?
By Jean Pisani-Ferry
In March 2009, in the midst of the financial crisis, the normally circumspect governor of China's central bank made waves. In a speech published on the bank's website, Zhou Xiaochuan argued that the world needed a "super-sovereign reserve currency" to be managed by the International Monetary Fund (IMF). The influential banker said that an IMF-issued currency would serve as a "light in the tunnel for the reform of the international monetary system."
Zhou's call was widely interpreted as a jab at the U.S. dollar and the privileges that the United States retains as the issuer of the world's leading reserve currency. The U.S. Treasury Department dutifully pushed back against the suggestion that the dollar should lose its preeminence. "I think the dollar remains the world's standard reserve currency. I think that's likely to continue for a long period of time," saidTreasury Secretary Timothy Geithner. For his part, President Barack Obama insisted that the dollar was "extraordinarily strong."
Zhou's suggestion was, in many respects, less remarkable than it seemed. The IMF already has in place the "super-sovereign" currency that he envisioned. Moreover, it is stated IMF policy that this currency -- the awkwardly titled Special Drawing Rights (SDRs) -- should become the world's leading reserve currency. Zhou's suggestion appeared revolutionary only because of the convoluted history of this would-be global currency.
The idea of an IMF currency emerged in the early 1960s. At that time, a group of leading economists -- notably Robert Triffin -- was alarmed at what it perceived as a looming liquidity shortage. The Bretton Woods system established at the end of World War II acknowledged the dominant place of the dollar, but it pegged the dollar to gold. Triffin argued that this limited the dollar's ability to serve as an effective reserve currency. The more dollars the United States pushed into the system, the more doubt there would be about its ability to back the dollar with gold. As John Williamson of the Peterson Institute for International Economics describesit, "The Triffin dilemma posited that the world therefore confronted a choice between running short of liquidity and undermining confidence in the dollar, which was destined sooner or later to produce a crisis."
The solution that financial policymakers hit upon was to have the IMF create a new international reserve currency: the SDR. This new currency's value would be determined by a basket of widely traded currencies, basically hedging against the risk inherent in any one currency.....
It is getting to be a European winter tradition. In 2006, 2009, and now again in 2012, temperatures plunge, and Russia interrupts its gas supplies. But while this spectacle is sadly familiar, Europe's response continues to be hampered by internal divisions, Moscow-friendly European gas companies, and the Kremlin's clever machinations.
Europe's deep freeze is no laughing matter. Heavy snow fell in Rome for the first time in a quarter-century, Venice's canals have begun to freeze, and temperatures in Ukraine have plunged as low as -32 degrees Celsius. As a result, more than 300 people have diedacross the continent.
Russian gas exports have dropped by 15 percent as its own consumption has soared in the cold weather -- meaning there's less to go around. Deliveries to some countries, including Austria and Bulgaria, have been reduced by as much as 30 percent, and Russia accusedtransit country Ukraine of siphoning off more gas than it was entitled to. This time -- unlike the 2009 supply cut, which arose from a pricing dispute -- the cause of the shortages seems to be that Russian gas monopoly Gazprom simply does not have enough gas to serve both its domestic and international markets, and Prime Minister Vladimir Putin reportedly ordered the company to prioritize Russian consumers.
The United States may have turned "energy independence" into a populist rallying cry and boosted its own gas production dramatically, but European countries have gone in the opposite direction. They have concentrated on trimming demand, developing renewable energy sources, and striking individual deals with Russia. Germany's shutdown of its nuclear plants and Italy's decision not to restart its nuclear program post-Fukushima will further increase Europe's reliance on Russian gas.
Greek Prime Minister Lucas Papademosplans today to discuss with the nation’s political leaders the implementation of additional fiscal measures needed to secure a second European Union-led bailout.
While Papademos and the party chiefs already agreed to make further cuts this year equal to 1.5 percent of gross domestic product, they have yet to close gaps over measures demanded by creditors. European leaders raised pressure on meeting the conditions of the 130 billion-euro ($171 billion) rescue, with German Chancellor Angela Merkel saying “time is running out.”
“There are fears that the Greek government will note the country has reached the limits on austerity,” UBS AG currency analysts including Chris Walker in London wrote in a note to clients yesterday. “The week ahead will be extremely significant for event risk and headlines could become a dominant driver for the euro.”
At stake is whether Greece can win the bailout, secure a deal with private creditors and remain in the euro region. Finance Minister Evangelos Venizelos told reporters late yesterday that “failure of these talks, failure of the plan, the country’s bankruptcy, means even greater sacrifice.”
The euro was little changed at $1.3118 as of 10:06 a.m. inTokyo as investors await the outcome of the Greek talks. Asian equities were also little changed, after U.S. and Europeanstocks fell overnight, driving the Dow Jones Industrial Averagedown from an almost four-year high.
Greek political leaders have yet to resolve issues from recapitalizing banks, ensuring the viability of pension funds and reducing wages and non-wage costs to boost competitiveness. Greece still needs to agree on 600 million euros of fiscal measures for 2012, a government official told reporters in Athens yesterday. Meantime, unions called their first general strike of the year...
Market Pulse Archives
Feb. 7, 2012, 6:40 a.m. EST
By William L. Watts
FRANKFURT (MarketWatch) -- The interim head of the Swiss National Bank reiterated a warning Tuesday that the cental bank will intervene heavily at any time if needed to defend a cap on the value of the Swiss franc versus the euro. The SNB last year declared that it wouldn't allow the euro to trade below 1.20 francs. "This commitment applies at any time, from the moment the markets open in Sydney on Monday to when it closes in New York on Friday," said Thomas Jordan, in remarks prepared for delivery in Geneva. "We will not tolerate any trading below the minimum rate in the relevant interbank market. To enforce this policy, we are prepared to buy foreign currency in unlimited quantities if necessary," he said, adding that the SNB was ready to take further measures "if the economic outlook and the risk of deflation so require." The euro /quotes/zigman/4868091/sampled EURCHF +0.22% traded at 1.2071 francs in recent action, up 0.1%
Feb. 7, 2012, 9:09 a.m. EST
By Greg Morcroft
NEW YORK (MarketWatch) -- The U.S. Securities and Exchange Commission is close to rolling out its long-awaited proposal to firm up the $2.7 trillion money-market-fund industry in its effort to avoid losses from any future financial panics, the Wall Street Journal reported Tuesday. The paper said the proposal will emerge as a two-part plan. One part would require money-market-fund firms to set aside capital in reserve, while the other would put some restrictions on investors who wish to withdraw all their money at one time, the report, citing people familiar with the matter, said. The moves arrive more than three years after the Lehman Bros. collapse, which wreaked havoc across the money-market industry
Banks, accelerating efforts to movetroubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.
Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.
Losses for lenders are about 15 percent lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody’s. The deals accounted for 33 percent of financially distressed transactions in November, up from 24 percent a year earlier, said CoreLogic Inc., a Santa Ana, California-based real estate information company.
Karen Farley hadn’t made a mortgage payment in a year when she got what looked like a form letter from her lender.
“You could sell your home, owe nothing more on your mortgage and get $30,000,” JPMorgan Chase & Co. (JPM) said in the Aug. 17 letter obtained by Bloomberg News....
Illustration by Jordan Awan
China’s decision to veto a condemnation of Syria’s regime at the United Nations Security Council is just the latest signal that illustrates the need for a fundamental change in Chinese foreign policy.
The question is no longer whether officials in Beijing will abandon the principle of non-interference in other countries’affairs to protect their expanding interests around the globe. The question is when.
China joined Russia in vetoing last weekend’s resolution partly for fear that backing the UN’s rebuke of a government’s brutal suppression of its people may come back to haunt China itself, given its treatment of Tibetans and of Uighur Muslims in the Xinjiang autonomous region.
Yet China’s economic growth and associated need to secure resources increasingly have been at odds with this long-standing policy of being aloof. That’s especially true in the resource-rich region that stretches from the Atlantic coast of Africa to Central Asia and the subcontinent, much of which is now in revolt.
Over the past year, a series of incidents in the region have tested China’s non-interference policy, but without serious damage to the country’s image. With China’s veto of the UN resolution on Syria, Chinese determination to cling to a principle rooted in 19th-century diplomacy seems set to backfire.... https://www.bloomberg.com/news/2012-02-07/china-needs-to-change-mideast-...
2:06PM GMT 07 Feb 2012
14.06 Ahead of Labour's opposition day debate on bonuses and bank reform at 3.30pm (see 11.43), the Coalition has come out fighting. This from Lib Dem MP Lorely Burt, co-chair of the Business, Innovation and Skills committee:
The sheer hypocrisy of Labour to point the finger on bankers’ bonuses is staggering. Labour presided over the biggest boom in bonuses this country has seen, from £3.1bn in 2001 to £11.5 billion in 2007. At the same time, they sat back and knighted the financial speculators who led this country to the brink of economic collapse.
The Coalition Government inherited this economic mess from Labour and has taken decisive action to put the country back on track. We’ve capped cash bonuses at state owned banks to £2,000 and overall, the bonus pool is smaller than last year and considerably less than under Labour.
13.54 Ambrose Evans-Pritchard, our international business editor, offers his view on a euro break-up plan drafted by French economists:
A few extracts, loosely translated: "The obstinate determination of governments to take us by forced march deeper into the euro impasse can only lead to the general aggravation of the economic situation in Europe."
"Even though our American and Chinese competitors have an interest in the survival of the single currency, the euro is condemned to an uncontrollable explosion sooner or late". (A nice twist that one, inverting the false and widely believed conspiracy theory that the US is trying to destroy the euro.)
"National currencies should be recreated in each eurozone country". There will be a short transition period of dual notes as old euros are stamped by country ('U' for France) until new francs etc are printed. (This is what happened when the Austro-Hungarian monetary union fell apart in 1919.)
13.40 The Greek government is drafting a final document on the terms of its €130bn bail-out thatwill be put to the coailition for approval, according to reports. A government official told Reuters:
The Greek government is working on the final document that will be discussed at the political leaders' meeting later in the day.
13.23 It's banners away and fists out in Athens this afternoon. Greek police have been trying to disperse protesters with tear gas, leading to a few violent clashes outside parliament.
Police say up to 8,000 people took part in the protest outside parliament. Another 6,000 joined in a separate demonstration organised by Communist union PAME, AP reports.
Earlier, protesters burned a German flag in front of parliament, while AFP reports that some tried to set fire to one that portrayed the Nazi swastika.
A protester burns a flag of Germany as others clash with riot police during a general strike protest in Athens on Tuesday (Photo: EPA).
13.11 We want Greece in the euro.
That is the declaration by European Commission President José Manuel Barroso after one of his deputies suggested the eurozone would survive a Greek exit (see 08.53).
The cost of a Greek exit from the eurozone would be higher than the cost of continuing to support Greece.
he said ahead of a meeting with former EC head Jacques Delors.
8:59PM GMT 06 Feb 2012
The shipping specialist Lloyd's List said container traffic through the Port of Shanghai - the world's largest - fell by 100,000 boxes in January from a year earlier, or 4pc. Volumes fell by over one million tonnes.
The figures may have been distorted by China's Lunar Year but there has been a relentless slide in the Shanghai transport data for months.
"China's shipping markets face grievous challenges," said the Shanghai International Shipping Institute. It acknowledged that the industry in the grip of downturn and likely to face a "worsening situation" in early 2012.
The biggest falls in container volumes have been on the Asia-Europe route.
The data came as the International Monetary Fund warned that China is vulnerable to the "clear and present danger emanating from Europe" and could see growth halve to roughly 4pc if the crisis escalates.
"China's growth rate would drop abruptly if the euro area experiences a sharp recession. In the unfortunate event such a downside scenario becomes reality, China should respond with a significant fiscal package," it said.
A fall in global growth by 1.75 percentage points would cut Chinese growth by more than twice as much unless Beijing took active steps to counter the shock, showing how distorted China's economic model has become.
"China would be highly exposed through trade linkages," it said. The report is a none-too-subtle reminder that China has a huge stake in Europe's stability and should be ready to stump up more money for an IMF-led rescue.
The Fund said China had "ample room" to boost stimulus by 3pc of GDP if need be, but warned against another credit blitz through the banking system or fresh infrastructure projects.
"China still has a long way to go to digest the side effects of the surge of credit unleashed in the wake of the global crisis. A large external shock would bring many of these domestic risks more forcefully to the forefront," it said.
The IMF fears that China had already pushed debt to safe limits. The ratio of loans to GDP has doubled to almost 200pc over the last five years - a larger jump than in the US during the sub-prime bubble....
AMMAN - Syrian forces renewed their bombardment of Homs as Russian Foreign Minister Sergei Lavrov arrived in Damascus for talks aimed at pressing President Bashar al-Assad to end a bloody crackdown on a popular revolt and carry out reforms. Full Article | Video
JERUSALEM - Prime Minister Benjamin Netanyahu will need cabinet support should he decide to attack Iran, but military classifications may determine whether he can sidestep the need for full cabinet approval. Full Article
Feb. 7, 2012, 9:47 a.m. EST
By dlevine[at]marketwatch[dot]com (Deborah Levine) and bwatts[at]marketwatch[dot]com (William L. Watts), MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar turned down against the euro on Tuesday following reports that Greek government officials were putting together a detailed final document on a loan deal with international creditors.
Still to come is a meeting of Greek political party leaders later in the day, who are attempting to wrap up talks on additional austerity measures to avoid default against the backdrop of a nationwide strike.
The dollar index /quotes/zigman/1652083 DXY -0.26% , which measures the greenback against a basket of six currencies, turned down to 78.819 from as high as 79.265 and 79.064 last Monday in North America.
China's Premier indicates Beijing should help Europe with its debt crisis, but that message may be a tough sale to China's people.
The euro /quotes/zigman/4867933/sampled EURUSD +0.38% rose to $1.3197 compared to $1.3124 Monday.
Greek party leaders were set to meet Tuesday afternoon in an effort to come to terms on demands by the European Union and International Monetary Fund that the government impose a further round of sharp cutbacks in order to receive a second bailout.
Without the aid, Greece is seen as certain to default in mid-March. Read more about Greek negotiations.
“These meetings typically drag on for hours and market expectations for a quick resolution are low but we think the risks are to the upside,” said Elsa Lignos, currency strategist at RBC Capital Markets. “If leaders hammer out a deal tonight, it would open the way for the cabinet to discuss the plans tomorrow and a euro group meeting [of euro-zone finance ministers] to be called for Thursday. Any steps in that direction should be met with a rally in risk appetite and EUR/USD heading for resistance at $1.3198.”
Orion Drilling Co. LLC workers on Orion's Altair natural gas rig in Edna, Texas.
The U.S. is the closest it has been in almost 20 years to achieving energy self-sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo triggered a recession and led to lines at gasoline stations.
Domestic oil output is the highest in eight years. The U.S. is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal. Methanex Corp., the world’s biggest methanol maker, said it will dismantle a factory inChile and reassemble it in Louisiana to take advantage of low natural gas prices. And higher mileage standards and federally mandated ethanol use, along with slow economic growth, have curbed demand.
The result: The U.S. has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81 percent through the first 10 months of 2011, according to data compiled by Bloomberg from the U.S. Department of Energy. That would be the highest level since 1992.
“For 40 years, only politicians and the occasional author in Popular Mechanics magazine talked about achieving energy independence,” said Adam Sieminski, who has been nominated by President Barack Obama to head the U.S. Energy Information Administration. “Now it doesn’t seem such an outlandish idea.”
Three years ago, credit was so tight that the owner of a legal firm with a $400,000 salary and a very good credit score of more than 700 couldn’t get financed to buy the car he wanted from Michael Mosser’s dealership.
“The world is upside-down compared to then,” said Mosser, general manager of Chevrolet and Cadillac stores in Ann Arbor, Michigan. “Today, somebody with a 500 credit score, I can get approved and in a Malibu,” which starts at $22,110.
Lenders resisted extending credit to car buyers when the mortgage market collapsed in 2008, helping push General Motors Corp. and Chrysler LLC into bankruptcy and sending U.S. sales to the lowest point in almost three decades. Amid a slow housing market, auto demand is rebounding, spurring lenders from Bank of America Corp. to Capital One Financial Corp. to approve buyers faster and at better rates to compete for a piece of an expanding market.
“Banks have had to look elsewhere for growth opportunities, and auto has been one of the nice spaces over the last couple years,” Curt Beaudouin, a bank analyst for Moody’s Investors Service in New York, said in a phone interview. “The credit experience in terms of losses has been very good in recent times. It’s never gotten out of hand. Right now, it’s basically good for everybody in the industry.”
Submitted by Tyler Durden on 02/07/2012 - 02:05
Just a week ago we brought readers' attention to the fact that Francois Hollande, the Socialist Party candidate who is leading most opinion polls in the French presidential election, was extending his lead; well the lead is growing, to now 58-42 in the second round. In a must-read discussion this evening, George Magnus of UBS points to the significance of the French elections and how Hollande's victory could unleash 'a new wave of instability and uncertainty, and that the relative calm or optimism in financials markets since the turn of the year would prove short-lived'. Specifically Magnus highlights how the politics of Europe could well trump the liquidity of the ECB as the main determinant of the Euro Area's prospects. While not playing down the role of the initial (and forthcoming second) LTRO, the UBS senior economic adviser has grave concerns of the much bigger and less tangible issues of sovereignty and national self-determination that will not only impact Greece (very shortly) but also Germany, France, and the Euro-zone itself. The French election could be a catalyst for Franco-German (Merkande? Hollel?) divisions which 'would not sit comfortably inside the ECB or in the minds and actions of investors' and is evidently an unpriced and under-appreciated risk in global markets currently.
Submitted by Tyler Durden on 02/07/2012 - 04:37
Overnight excitement from the RBA (no rate cut) and concerns at China's GDP growth given a European recession did nothing to initially slow risk markets early on as they reached up to yesterday's highs as ES (the e-mini S&P 500 futures contract) and BE500 (the broad Bloomberg equity index for Europe) pushed higher out of the gate (as AUD strength sustained carry trades - which appear now to be leaking back off). EUR managed to get back to yesterday's highs and found resistance and once it began to leak lower (and USD lower implicitly) then equities (and commodities on China un-easing concerns) started to stumble pretty hard. Following China's Shanghai Composite, European stocks are now down around 1% and credit is slowly gathering pace to the downside (though not as weak as stocks for now). Portugal showed some strength early on but has given that back as most sovereigns are trading 0-3bps wider in 10Y cash spreads for now (likely the trigger for non-sovereign credit). Some comments from Juncker on special Greek accounts and Klass Knot on the Euro's success top off a quiet morning with some risk off starting to gather pace.
Submitted by Tyler Durden on 02/07/2012 - 07:09
The surge in the U.S. money supply in recent years has sent gold into a series of new record nominal highs. Money supply surged again in 2011 sending gold to new record nominal highs. Money supply has grown again, by more than 35% on an annualized basis, and this is contributing to gold’s consolidation and strong gains in January. The Federal Reserve's latest weekly money supply report from last Thursday shows seasonally adjusted M1 rose $13.2 billion to $2.233 trillion, while M2 rose $4.5 billion to $9.768 trillion.
Fed's Record Setting Money Supply Splurge Spurs Gold's Rally