Norway Growth Slows down

Statistics Norway said third-quarter gross domestic product figures published on Tuesday, coupled with a downward revision in first-half growth, highlight a clear slowdown in the Norwegian economy.

"Together with the revised figures for the first half year, this confirms the impression that growth rates so far in 2008 are clearly lower than in previous years," Statistics Norway said in a statement.

Gross domestic product grew 0.6 percent year-on-year in the third quarter, down from 5.3 percent in the second quarter.

Non-oil GDP, which strips out the offshore oil and shipping sectors, grew 1.5 percent in the third quarter, down from 6.2 percent in the second quarter.

Pakistan gets final approval for a $7.6billion loan from IMF

Pakistan won final approval for an emergency $7.6 billion International Monetary Fund loan on Monday to avert a balance-of-payments crisis in the strategically vital country.

Pakistan will immediately access $3.1 billion under the 23-month facility with the rest phased in subject to quarterly review, the fund said.

The programme has twin goals: to steady the economy and restore confidence by tightening macroeconomic policy, and to ensure social stability and support for the poor and vulnerable, the fund said.

WHY DOES PAKISTAN NEED AN IMF PACKAGE

- Foreign exchange reserves fell $100 million to $6.64 billion in the week that ended on Nov. 15, or just enough to cover nine weeks of imports. The central bank's own reserves fell to $3.46 billion from $3.50 billion a week earlier.

- Imports for October totalled $3.46 billion, while exports were worth $1.52 billion.

- The current account deficit almost doubled in the first four months of the 2008/09 fiscal year that began on July 1 from the same period a year earlier. The deficit stood at $5.9 million in the four months to the end of October, compared with $3 billion in the same period last year.

- Pakistan has a $500 million bond due to mature in February. The market had priced in the risk of a default but the IMF loan removes that risk.

Dubai assets not being sold to Abu Dhabi-official

Dubai has recieved no offers for its major assets from Abu Dhabi or other parties, a Dubai government official said on Monday.

"It is not true," Mohamed Alabbar, who is a member of Dubai's executive council and chairman of Emaar Properties told Al Arabiya TV.

"Dubai has recieved no offer either directly or indirectly from Abu Dhabi or any other party on earth," he said when asked if Dubai's assets were for sale.

Turkish stocks falls, but IMF deal hopes boost lira

Turkish stocks followed global markets lower on Monday on disappointment over the outcome of the G20 summit, but the lira strengthened some 1 percent on signs that Turkey and the IMF may agree a new deal soon.

IMF Managing Director Dominique Strauss-Kahn said at the weekend that the Fund had not reached an accord for a new loan deal with Turkey but he was confident that agreement would come rapidly.

Turkish media reported that Prime Minister Tayyip Erdogan had said the two sides were the closest they have been to resolving their differences.

"Both Erdogan and the IMF (managing director) hinted that Turkey is close to signing a deal with the fund. This would finally provide the long-awaited anchor for economic policies and reduce risk perception for external financing," brokers at Tera wrote in a research note. "This is welcome news but it would still not be enough for a sustainable market recovery."

The index of leading Istanbul shares closed the morning session down 2.03 percent at 24,909 points, underperforming the MSCI emerging market index which traded down only 0.8 percent.

Shares in Turkish Airlines outperformed, however, jumping 8.2 percent to 5.02 lira ($3.09) after the flag carrier's third-quarter earnings were higher than expected.

IMF says more countries seek help, Banks and Auto industries struggle

Japan's economy minister said recession in the world's second-biggest economy could last longer than feared. In the United States and Britain measures of inflation fell sharply, paving the way for further interest rate cuts.

And in an illustration of the alarm gripping America's auto industry and the impact of U.S. troubles on economies well beyond its frontiers, Ford Motor Co decided to sell its controlling interest in Japan's Mazda Motor Corp.

Banking, seat of a crisis inflicting the sharp international slowdown, also showed the strain. Britain's Barclays altered fund-raising plans to quell shareholder anger and profits in Japan's largest bank tumbled.

In Washington, Bush administration officials defended the decision to use bailout funds to recapitalize financial institutions, instead of buying bad assets as had been originally proposed.

U.S. Treasury Secretary Henry Paulson, in testimony to the House of Representatives Financial Services Committee, said the global slump had become so severe that "an asset purchase program would not be effective enough, quickly enough."

In a rare spot of positive corporate news, though, U.S. computer maker Hewlett-Packard Co said it expects its fiscal fourth-quarter earnings to beat Wall Street forecasts, and predicted a profit for the coming year that topped analysts' estimates.

Technology had been seen as an area particularly vulnerable to cutbacks in corporate spending, and HP's comments offset worries about the economic slump to help send U.S. stocks up at the opening. European shares turned flat after declines in Japan.

The economic crisis has spread steadily in recent weeks beyond major developed countries, with states from Ukraine and Iceland to Pakistan seeking help from the IMF.

"It is true to say that because of globalization the amount which the IMF is asking for is increasing, and increasing rapidly, and the list of countries asking for some support is increasing every day," IMF Managing Director Dominique Strauss-Kahn told a news conference on a visit to Libya.

He had said his organization was likely to need at least $100 billion in extra funding over the next six months to help countries out of the mire.

Latvia Central bank confidence on IMFs loan to add currency stability

The Chief of Latvia's central bank said on Friday that aid from the International Monetary Fund would boost the stability of the country's currency, the lat, rather than undermine it.

The prime minister said he saw no worries at the moment over the currency after a weekend rush of people selling it for euros.

The government on Thursday decided to seek help from the European Commission and the IMF as the economy has slid and the government had to take over the country's second-largest bank.

Latvia would become the second EU country after Hungary to get a bail out.

Central bank chief Ilmars Rimsevics said the amount of money which Latvia would need from the Fund would be known within about three or four weeks, when the government will draw up an economic plan and hold talks with the Washington-based lender.

"This money can only be an extra buffer, a cushion, to the stability of the lat and not the other way around," Rimsevics told public radio when asked whether the Fund could ask for the lat to be devalued or its peg changed.

Prime Minister Ivars Godmanis, speaking at a Baltic prime ministers meeting in the Estonian town of Tartu, said the sum would not be in the billions.

Asked about a newspaper's report that 1 billion euros could be needed, he said: " ... we have just started these talks with the European Commission and the IMF about some reserves' support."

"We are seeking additional help for our reserves. We will not be borrowing billions of euros," he told reporters.

He also saw little threat to the currency.

"I have to say that we have had such waves of rumours (about a devaluation) both in February and now before our national holiday. It is over now. There is no more. Our national bank has enough reserves."

The lat is pegged to the euro at a central rate of 0.7028 euros, with a 1 percent fluctuation band. It has been stuck at the weak end of its band, 0.7098 euros, for six weeks and the central bank has spent more than 600 million euros ($751.5 million) to support it.

The bank has more than 4 billion euros of reserves.

Rimsevics said the government would draw up a plan for economic steps and present it to the Fund, which would then decide how much extra money the government would need.

"We will know that at the earliest after three or four weeks," Rimsevics said.

Latvia got into trouble after state revenues began to slide due to the economic downturn and then it had to take over second-largest bank, Parex Bank, to save it from a run on deposits. The state is guarantor for more than 700 million euros of Parex syndicated credits, which will have to repaid if refinancing efforts fail.

Russia Transfer $1 Billion To IMF

Russia will transfer $1 billion to the International Monetary Fund (IMF) to help finance rescue packages for countries hit by the world financial crisis, Prime Minister Vladimir Putin said on Thursday.

"The decision has been taken to transfer $1 billion to the International Monetary Fund to help countries who found themselves in an especially difficult situations," Putin told the United Russia party congress in Moscow.

IMF Expected From Hungary to recover slowly From Crisis

The IMF expects the economy to contract by 1 percent next year and grow by only 0.6 percent in 2010, the text of the report, linked to Hungary's request for a standby loan last month, said. The report was published on the IMF's website on Monday,

Hungary's current account deficit, meanwhile, is projected to narrow to 2 percent of gross domestic product next year from an expected 6.2 percent this year, the report said.

"It is projected to drop by more than 4 percentage points of GDP between 2008 and 2009, mainly due to the depreciation of the real exchange rate ... and lower growth. The process will be driven primarily by a sharp contraction of imports," the IMF said.

It said economic growth is expected to reach its estimated potential of 3 percent only after 2011, due to a slowdown in Western Europe, Hungary's main export market, and the global deleveraging process.

"In a difficult global environment and with low domestic demand, the economy is projected to recover only gradually," it said.

Hungary secured a $25.1 billion financial rescue package from the IMF, the European Union and the World Bank last month in a bid to shore up its falling currency and financial markets.

The IMF financing was linked to strong commitments on the government's side to cut the budget deficit further and cut spending, mainly public sector wages and pensions.

The IMF said sticking to these plans was of key importance and urged broad political consensus on structural reforms.

It also highlighted the fact that Hungary's external financing need would stay high despite a sharp fall in the current account gap next year.

The gross external financing requirement is still projected at about 39 billion euros through the end of 2009, the IMF said.

Much of this financing is expected to be covered through foreign direct investment, net positive capital transfers with the European Union, portfolio flows, and bank and corporate foreign financing, leaving a 20 billion euro financing gap.

"Commitments by the European Union (6.5 billion euros) and the World Bank (1 billion euros) will lower the financing gap. Absent such financing, gross reserves would deteriorate substantially," the IMF said.

Hungary expects to sign the loan with the EU soon.

The IMF also warned monetary policy must remain cautious, after the central bank hiked interest rates by 300 basis points to 11.5 percent last month.

"With the risk that global deleveraging may continue to put downward pressure on the exchange rate (which could have inflationary consequences), monetary policy will need to remain vigilant and premature easing will be avoided," it said.

Pakistani rupee gains about 1% on IMF effect

The Pakistani rupee firmed nearly one percent on Tuesday on foreign inflows and improved sentiment following the government's agreement with the International Monetary Fund (IMF) for a $7.6 billion emergency loan, dealers said.

The rupee was quoted closing at 79.10/20 to the dollar, compared with Monday's close of 79.80/90. Dealers said the rupee traded as low as 79.05 to the dollar.

Dealers said they expected the rupee to stabilise, at least in the short term, following the IMF accord, after a sharp depreciation this year as a balance of payments crisis developed. By the close on Tuesday, the rupee was 22 percent weaker than it started the year.

"There were some inflows in the market and generally the sentiment has improved due to the IMF announcement," said a currency dealer.

Dealers said there were exporters selling dollars against the forward counters and there were inflows.

Last month Singapore sovereign wealth fund Temasek Holdings had agreed to a further investment of up to $12 billion rupees ($152 million) in Pakistan's NIB Bank via a rights issue, NIB said.

Dealers said this could have been the inflow in the market however there was no confirmation from the bank.

The government's top economic adviser, Shaukat Tarin, said on Saturday he expected the first tranche of an IMF standby credit to be released this month.

In a "Friends of Pakistan" conference on Monday held in Abu Dhabi, potential donors including Saudi Arabia, China and the United States agreed to draw up a plan to help Pakistan in the face of a financial crisis and security challenges, a statement said.

The central bank's currency reserves, at $3.5 billion on Nov. 8, were just enough to cover nine weeks worth imports.

The IMF news made no impact on a stock market. Trading dried up weeks ago due to an artificial floor authorities placed under the benchmark index at the end of August to protect a Karachi market that has dropped 35 percent so far this year.

The Karachi Stock Exchange (KSE) benchmark 100-share index ended flat at 9,184.09 points, just 40 points above its floor as no shares were traded.

Dealers said stocks were trading at least 20 to 25 percent lower in off-market transactions and those losses will be reflected once a floor on the main index is removed.

India Central Bank sell Dollars at 49.8 rupees-traders

Indian state-run banks have been selling dollars at 49.80 rupees, to prevent the rupee from falling sharply, four traders said on Wednesday.

At 2:16 p.m. (0846 GMT), the partially convertible rupee was at 49.75/76 per dollar, off a low of 49.8150, but still weaker than 49.66/67 at close on Tuesday.

Two dealers said there was pressure on the currency due to heavy dollar demand from banks looking to arbitrage between the onshore and offshore markets.

Australian dollar suffers as stocks drop

The Australian dollar was in a subdued mood on Tuesday as stocks fell again and dovish comments from the country's central bank

merely reinforced expectations of further sharp cuts in interest rates here.

The local currency was also undermined by a slide in U.S. stocks, which rippled through Asian markets to the benefit of perceived safe havens like the yen and U.S. dollars.

That left the Aussie hovering at $0.6467, off Monday's high of $0.6597 but at least above the recent trough of $0.6363.

It was not helped by minutes of the Reserve Bank of Australia's (RBA) November meeting that showed escalating concern about the impact that global gloom and the loss of household wealth were having on business and consumer confidence.

Indeed, the economic outlook dimmed so rapidly at the start of November that the board chose to cut by 75 basis points to 5.25 percent, when the initial recommendation just a few days earlier was for a 50 basis-point move.

'The conclusion is clearly that further easing of policy can be expected over coming months to take policy to accommodative settings,' said ANZ senior currency strategist Tony Morriss.

The market is pricing in a cut of at least 75 basis points at the RBA's December policy meeting and a further easing to around 3.5 percent by March.

Morriss noted that with so much easing already priced in, an actual cut in December might not be so negative for the Aussie, especially if it was seen supporting economic growth.

However, the weakness of the global economy, and lately China, meant commodity prices could fall yet further, with grim repercussions for a resource exporter like Australia.

'We now see the Aussie staying weaker for longer in light of the global slowdown,' said Morriss. He predicted a drop below 60 cents in 2009 and even a move toward 54 by year-end.

The November minutes also suggested the RBA would not try and stand in the way of further falls. The central bank made the point that its intervention of recent weeks was not intended to defend any particular level of the Aussie but rather to provide liquidity in disorderly markets.

That left the local currency looking defenceless against the Japanese yen which is benefiting greatly from being considered a safe haven in times of financial strain. The Aussie had lapsed to 62.47 yen in late trade, from a 64.11 peak on Monday.

The same focus on safety boosted bonds at first, with short-term futures reaching record highs, but profit-taking set in as the day wore on.

Three-year bond futures eased back 0.075 points to 96.14, after touching a fresh all-time peak of 96.305, while the 10-year contract fell 0.025 points to 95.00.

Pakistani rupee gain slightly after IMF help

- The Pakistani rupee firmed 0.4 percent on Monday, following the government's agreement with the International Monetary Fund (IMF) for a $7.6 billion emergency loan, dealers said.

The rupee was quoted closing at 79.80/90 to the dollar, compared with Saturday's close of 80.15/25.

Dealers said they expected the rupee to stabilise, at least in the short term, following the IMF accord, having already lost 23 percent against the dollar this year as a balance of payments crisis developed.

"There were few payments today but the rupee seems to have firmed following the IMF announcement on Saturday," said a currency dealer.

The IMF said on Saturday its executive board is expected to meet shortly on the 23-month standby credit after IMF and Pakistan agreed on a reform programme.

Pakistan had been in talks with the IMF for months, but officials had been coy about admitting they were seeking an IMF package because of the harsh conditions the Fund often proposes.

An IMF programme usually involves cutting spending, raising taxes, accelerating privatizaton, increasing interest rates, and exchange rate flexibility to correct fiscal and external imbalances and control inflation.

The central bank last week raised the key interest rate by 200 basis points to 15 percent.

The rupee has lost 22.8 percent against the dollar since the start of the year.

However, analysts said the rupee would only stabilise in the long-term when there is an improvement in inflation and the current account deficit.

Inflation is running at over 25 percent, and Pakistan's current account and fiscal deficits are unsustainable.

The central bank's currency reserves, at $3.5 billion on Nov. 8, were just enough to cover nine weeks worth imports.

But the government's top economic adviser, Shaukat Tarin, said on Saturday he expected the first tranche of an IMF standby credit to be released this month.

The interest rate on the credit facility would vary between 3.51 and 4.51 percent, and would be payable between fiscal 2011/12 and 2015/16.

Pakistan also faced defaulting on international debt obligations in February next year unless it received a multi-billion dollar infusion.

After an IMF deal, Pakistan's thinly-traded five-year CDS were quoted around 2,600 basis points, compared with 3,000 bps late on Friday, one trader said.

He warned though it was difficult to get a reliable quote because the market was so thinly traded.

Potential donors including Saudi Arabia, China and the United States are gathering in Abu Dhabi on Monday for a "Friends of Pakistan" conference, but government officials said they are not expecting any financial pledges at the meeting.

However analysts said on Monday the IMF accord would help bring in funding from bi-lateral donors, possibly including agreements by oil exporters in the Gulf to let Pakistan pay for imports on a deferred basis.

The IMF news made no impact on a stock market. Trading dried up weeks ago due to an artificial floor authorities placed under the benchmark index at the end of August to protect a Karachi market that has dropped 35 percent so far this year.

The Karachi Stock Exchange (KSE) benchmark 100-share index ended flat at 9,184.09 points, just 40 points above its floor and turnover was 2,200 shares.

Dealers said stocks were trading at least 20 to 25 percent lower in off-market transactions and those losses will be reflected once a floor on the main index is removed.

IMF Agrees more than $500 million Loan to Serbia

IMF Agrees $516 Million Standby Loan Deal With Serbia

The International Monetary Fund said Friday that Serbia should be able to withstand an economic crisis but could call on a loan of more than $500 million, if needed, under an IMF standby arrangement.

"Serbia is one of the more vulnerable countries in the region," said Albert Jaeger, the head of an IMF team that reached the 15-month standby arrangement with Serbia at the end of a 17-day visit.

"Serbia should be able to withstand financial difficulties that are coming" despite a "very high" external current account deficit, a "weak export base" and the economy's low savings rate, Jaeger said.

The "final problem that is now making the situation more difficult is that the fiscal policy in (the) last few years didn't use good time to prepare for a change in the cycle," he told a press conference in Belgrade.

The Balkan country was able, therefore, to cope with the global credit crunch but "this will very much depend on whether Serbia implements much stronger and more credible policies than in the past."

The arrangement, agreed late Thursday, was designed to preserve the macroeconomic and financial stability of Serbia, the country's finance minister, Diana Dragutinovic, said.

"This standby arrangement, reached out of precaution... will give us the possibility to withdraw funds only if we need them, but we will do our best not to use them," she told the press conference.

"There will be savings at all state levels but only on current expenditures. The budget clearly shows what is the priority of the state and capital investments are not put in question.

"The program acts preventively. It secured us more flexibility to absorb shocks of the crisis and strengthens the confidence of investors, foreign banks and gives us... more security."

The agreement, which the IMF said is subject to approval by its management and board, was supported by a loan of up to $516 million, which is 75% of Serbia's $700 million quota in special drawing rights.

Serbia, hard hit by capital flight in the wake of the global financial crisis, has downgraded its economic growth forecast for 2009 to 3.0% from an earlier estimate of up to 7.0%.

CAD Losses Against U.S. Dollar, While EURO gains

Poor equity-market performance continues to favour U.S. dollar bullishness at the expense of the loonie on Wednesday.

The Dow Jones industrial average is down 322.97 points to 8370.99 and the S&P 500 is down 37.37 to 861.58. The CAD/USD is down 0.0162 to 0.8123 (USD/CAD at 1.231). Adding to the loonie's woes are slumping commodity prices. West Texas Intermediate crude oil is now down $3.15 per barrel to $56.18.

Similarly, the loonie is down 3.36 points to 77.54 against the Japanese yen, which has been strong during current waves of risk aversion in financial markets.

The Canadian dollar is down 0.0139 to 0.6476 against the euro. CIBC FX strategists anticipate further gains by the euro (EUR/CAD 1.5442).

"We advocate flattening previously suggested long EUR/CAD positions at current levels, and would begin rebuilding core short positions on further cross strength to 1.5500-1.5600, using 1.5700 as the clear risk point," they wrote.

The Canadian dollar is meanwhile up 0.0076 to 1.2676 against the Australian dollar and up 0.0048 to 0.5433 against the weakening pound sterling. The CAD/GBP had been at session lows of 0.5366 at 5:30 a.m. EST when a dovish Bank of England (BOE) quarterly inflation report pushed the pound down against all major foreign currencies.

Commerzbank's Peter Dixon wrote in a reactionary e-mail to clients that interest rate cuts to 2.00% (from 3.25%) will likely be realized by next summer.

"This morning's release of the Inflation Report shows that the BoE is expecting a sharp downturn in economic activity over the next twelve months, with GDP growth next year likely to contract by at least 1.5%," he wrote, noting that a sub-2% overnight lending rate could prove unnecessary. "Either way, low interest rates are here to stay for at least the next two years."

CAD/USD down 0.0162 to 0.8123.
CAD/EUR down 0.0139 to 0.6476.
CAD/JPY down 3.36 to 77.54.
CAD/GBP up 0.0048 to 0.5433.
CAD/AUD up 0.0076 to 1.2676.

Asian Stock falls Again After Paulson Adjusts TARP Plan

Asian stock markets are falling again today after more dismal news out of the United States sent Wall Street stocks plummeting.Economists at Barclays Capital said worries over electronics company Best Buy and automaker GM, mixed with concern over an IMF bailout for Iceland and the descent in the Russian Ruble are all weighing on investor sentiment in Asia. Worst of all for sentiment, they added, is U.S. Treasury Secretary Henry Paulson's announcement today that half of the $700 billion TARP plan would not go to financial institutions but to support consumer credit,

"It reflects the short-comings in the TARP in terms of its ability to mitigate the real economy impact of the credit crunch," they said.

Economists at Calyon said the growing uncertainty in the United States will weigh on Asian markets today.

Sydney's S&P ASX 200 is down 169.40 points to 3757.9.

The Japanese Nikkei is down 445.46 points to 8250.047 and the Hang Seng down 786.97 points to 13152.12.

In currency markets, the Australian dollar lost more than two cents against the U.S. dollar today.

"The AUD has also suffered amid the continued losses in equities," said Amanda Tan, economist with St. George.

The Australian dollar is up 0.30 cents to 0.6435 against the USD and up 0.18 cents to 0.7947 against the Canadian dollar.

Meanwhile, the yen is on its way up as the usual winner in a flight-to-safety environment.

"Risk aversion is lending familiar support to the JPY," said Patricia Gacis, strategist with ANZ.

Against the yen, the U.S. dollar is up 0.71 points to 95.72 and the Canadian dollar is up 0.78 points to 77.48.

The euro is down 0.20 cents to 1.2480 USD

As for bonds, yields on Australian 10-year bonds down 16.1 bps to 4.92 % and Japanese 10-year government bonds down 1.0 bps to 1.50 %.

Yields on three-year Australian bonds were down 1.9 bps to 4.70 and the Australian 90-day March 09 contract is up 9.0 ticks to 96.58.

The Euroyen March 09 contract is down 0.5 ticks to 99.31.

In Australia, markets received the consumer inflation expectation for November, posting a decline to 3.3% from 4.4% in October.

There are no data releases of note tomorrow.

In Japan earlier today, domestic corporate goods prices ticked down by 1.6% month-over-month in October compared to forecasts for a 0.9% fall, and the prior month's downwardly revised 0.6% drop, which was previously reported as -0.4%.

Later today markets will receive final industrial production figures for September as well as the final capacity utilization operating manufacturing ratio for September.

With no data releases of note out of Japan tomorrow, markets will look ahead to Japan's release of third quarter GDP on Monday.

Riksbank United On Oct 23 Rate Cut; More Cuts Seen

Riksbank United On Oct 23 Rate Cut; More Cuts Seen

(Adds further detail, analyst comment.)

STOCKHOLM (Dow Jones)--The Swedish Riksbank board was united in its surprise decision to lower its key interest rate 50 basis points to 3.75% Oct. 23, minutes from the board's policy meeting showed Wednesday.

"The members of the executive board were unanimous in the decision to reduce the repo rate by 0.50 percentage points to 3.75%," the Riksbank minutes said.

The move caught off guard the vast majority of Sweden market-watchers, who had forecast at most a 25-basis-point cut.

Minutes showed there was also general board agreement on the Riksbank rate outlook, released the same day as the rate decision, which predicts rates dropping another half percentage point over the next six months and then holding steady around that level before rising slightly in 2010 and 2011.

But a few of the six board members said rates may need to be lowered further in the future to offset an economic slowdown that may be more prolonged than expected.

"It is also possible that the economic slowdown will be more prolonged than we expect today and thus justify an interest rate path that is somewhat lower than that presented in the main scenario," said Lars Nyberg, member of the central bank's executive board.

"The road back to normal conditions may be a more difficult and longer one. Growth next year may be weaker and recovery slower than predicted," said Barbro Wickman-Parak, who is also on the Riksbank's six-member executive board.

"If it becomes reality, it may be necessary to reduce the interest rate more to prevent the economy falling into a situation with very low resource utilization and a rate of inflation far below the target," said Wickman-Parak.

Along with an interest in votes on the rate cut and the rate outlook, Riksbank-watchers Wednesday are also focused on how board members viewed the recent weakening of the Swedish krona.

The krona has lost about 7% of its strength in the past month against the U.S. dollar, and reached a record low against the euro in October, amid a risk averse global investment climate.

"It is not unusual for a small currency like the krona to weaken in periods of financial unrest," said Riksbank Governor Stefan Ingves in the policy meeting.

"If the effects on the exchange rate for the krona should increase or become more permanent this could be a factor that drives up inflation," Ingves said in the meeting.

However, "the situation should correct itself when the financial crisis abates," he forecast.

Central bank Web site: www.riksbank.com

German Cabinet OKs Stimulus Plan To Trigger EUR50 Billion Invest

German Cabinet OKs Stimulus Plan To Trigger EUR50 Billion Invest

BERLIN -(Dow Jones)- The German cabinet Wednesday approved a growth stimulus plan that will trigger roughly EUR50 billion in investments in 2009 and 2010.

The government aims to cushion Europe's largest economy against the severe slowdown caused by the global financial crisis and hopes that the plan will safeguard 1 million jobs.

"The government measures will foster investments and orders for companies, private entities and local government and are worth around EUR50 billion for the years 2009 and 2010," said the 15-point plan "Ensuring Employment by Strengthening Growth." "Measures to safeguard companies' financing and liquidity are provided by funding investments worth slightly more than EUR20 billion."

The measures will provide incentives for public and private investment, creating the right conditions for a quick recovery from economic weakness, said the government.

"In the light of the global economic slowdown as a result of the serious crisis in the global financial markets, the government regards it as its priority task to continue safeguarding growth and employment," the plan states. "The government's package of measures approved today creates the prospect a quickly overcoming the weakness in growth and for safeguarding jobs."

Finance Minister Peer Steinbrueck said Tuesday that the government's new debt requirement will be higher next year than the EUR10.5 billion penciled in the 2009 draft budget.

The government will fund the measures by increasing net new borrowing and it will take into account "to the full extent" any lower revenue or higher spending caused by the economy's performance.

As a part of the package, state-owned KfW Banking Group will provide an additional financial instrument with a volume of up to EUR15 billion that aims to boost commercial banks' lending capacity, with the measure limited until the end of 2009.

The package also includes better conditions for companies to write off investments, providing financial help for home renovations to improve greenhouse emission levels, boosting infrastructure programs and more spending on urgently needed transportation investments.

Under the plan, private households will be allowed to offset bills from skilled workmen to a greater extent.

In addition, the government plans to help the ailing car sector by suspending the motor tax on environment-friendly cars until Dec. 31, 2010. It will also urge the European Investment Bank to increase loans for research, development and innovation projects for modern vehicle technology to EUR10 billion in 2009, compared with EUR7.2 billion in 2007.

The government also aims to safeguard jobs by increasing qualification programs for low-qualified and older employees and by paying benefits for 18 months for short-term work instead of the current 12 months.

Steinbrueck and Economics Minister Michael Glos are due to present the plan 1115 GMT.

Bangladesh c.bank conducts reverse repos at 6.5 pct

DHAKA, Nov 5 (Reuters) - Bangladesh's central bank said it drained 14.37 billion taka ($209 million) from the banking system on Wednesday through reverse repo operations at a 6.50 percent interest rate.

It accepted all the 12 bids it received for one-to-seven-day reverse repo auctions, the central bank said.

($1=68.65 taka)

S.Africa's blue chips turn negative, fall over 1 pct

JOHANNESBURG, Nov 5 (Reuters) - South Africa's blue chips gave back their gains on Wednesday, falling more than 1 percent as investors took profit after Barack Obama became the next U.S. president.

"I think it's a bit of profit taking coming in. We've had a couple of days of really good rallying in these markets and I think we were bound to consolidate," BoE Private Clients' Garth Mackenzie said. "I think markets were expecting an Obama win."

Johannesburg's Top-40 index slid 1.53 percent to 19,393.39 points by 1005 GMT and the All-Share index fell 1.37 percent to 21,353.20 points.

(Reporting by Serena Chaudhry) (For full Reuters Africa coverage and to have your say on the top issues, visit: http://africa.reuters.com/) Keywords: SAFRICA TOP40/

Pound Remains Lower Against Euro Despite Higher UK PMI Result

Renewed upside inflationary pressure in the United Kingdom is having little effect in foreign exchange markets, with the British pound remaining lower against the euro on Monday morning.

The UK manufacturing purchasing managers index (PMI) rebounded unexpectedly in October to 41.5, up 0.3 points from September's figure, according to Markit Economics. Economists had expected a further decline in the index to 40.1. Meanwhile, September's figure was revised up from an initial estimate of 41.0. The euro is subsequently up 0.0017 to 0.7939, at session highs following the release of the UK data at 4:30 a.m. EST.

Calyon deputy head of global FX strategy Daragh Maher wrote that the data was not that much of a surprise compared to September's print.

"After such a sharp plummet [in September from 45.9in August], it was always going to be difficult to decide whether it might extend or post a 'dead cat bounce'. That we have seen the latter rather than the former does not change the fact that this series remains at a very weak level historically and is consistent with a UK manufacturing sector mired in recession," he said in a research note.

Earlier in the overnight session, the euro zone manufacturing PMI came in slightly below expectations, with a 41.1 reading for the month of October, against expectations for a flat 41.3 reading. The EUR/GBP held steady, while the EUR/USD inexplicably rose 0.0046 to 1.2862 through the data's release. The euro is now up 0.0120 to 1.2845 against the U.S. dollar.

In the U.S., the Institute for Supply Management (ISM) manufacturing survey for the month of October will be released at 10 a.m. EST. A 41.5 reading is expected following a 43.5 reading in September.

Helaba Research's Ralf Umlauf is calling for a EUR/USD trading range of 1.2630-1.3260 for the week.

"A weak ISM index should underpin the euro today. The technical setting is also supportive. The [Moving Average Convergence / Divergence] is still heading north. If a buy signal is generated, there will be potential for a recovery. The 38.2% retracement of the downtrend since July is at 1.3750," he wrote.

The euro similarly rose to 127.54 levels from 16.90 levels against the Japanese yen prior to the 4 a.m. release of the European data. The euro dropped 0.0016 against the Canadian dollar during a session of particularly choppy trading. The cross is now down 0.0086 to 1.5351.

EUR/USD up 0.0120 to 1.2845.
EUR/CAD down 0.0086 to 1.5351.
EUR/GBP up 0.0017 to 0.7939.
EUR/JPY up 2.02 points to 127.36.

Canadian Dollar Makes Broad-Based Gains to Start Week

Despite little Canadian data in the pipeline, the loonie is faring quite well on Monday during a bout of risk appetite.

The loonie is up against all major foreign currencies. The Canadian dollar is up 0.0049 against the euro, with the cross on a gradual increase overnight. The Canadian dollar is also up 0.0081 to session highs of 0.5209 against the pound sterling, after initially turning higher at 3:30 a.m. EST.

The Canadian dollar is up 0.0128 to 1.2481 against the Australian dollar and up 1.09 points to 82.28 against the yen. Most notably, the Canadian dollar was up 0.0108 to 0.8357 against the U.S. dollar, but significantly lower from session highs of 0.8407.

At 10 a.m. EST, markets will receive the Institute for Supply Management (ISM) manufacturing survey. With the median forecast for a 41.5 reading in October, RBC Capital Markets chief FX technical analyst George Davis wrote that foreign exchange reaction on the data will depend on equities and commodities.

"A rally in equities/commodities should decrease risk aversion and send the USD lower, while weakness in equities/commodities should increase risk aversion and cause the USD to rally. Given the bearish trend reversal that took place in USD/CAD below 1.2289 last week, we are expecting the pair to attempt to test the 1.1748 support level sometime this week," he wrote in a research note.

Equity futures are pointing to a modestly weaker open, with contracts on the Dow Jones industrial average down 15 points to 9285 and S&P futures down three points to 964.30. Commodities are generally lower, with West Texas Intermediate (WTI) crude oil down $1.72 per barrel $66.09.

CAD/USD up 0.0108 to 0.8357.
CAD/EUR up 0.0049 to 0.6527.
CAD/JPY up 1.09 to 82.28.
CAD/GBP up 0.0081 to 0.5209.
CAD/AUD up 0.0128 to 1.2481.

Aussie Dollar Fading off Earlier Gains Ahead of RBA Rate Decision

The Australian dollar's gains in the North American session are leveling off ahead of the Reserve Bank of Australia's rate decision to come in afternoon Sydney trading, where the bank is expected to cut by 50 basis points to 5.50%.

Nevertheless, strategists say the currency's moves remain dominated by risk appetite.

Matthew Strauss, strategist at RBC Capital Markets said, ""Barring a major surprise similar to a month ago, FX reaction should be muted following the 50bp RBA cut and a dovish statement. The tug-of-war between risk aversion and risk appetite will continue to dominate AUD and NZD trading."

John Hardy, strategist at Saxo Bank, speculated whether the RBA cut will have an effect on the currency. "The RBA is expected to trim another 50 bps off the Cash Target. AUD has recovered very sharply of late - will tonight mark a turning point?" he said.

Tomorrow, markets will receive Australia's trade balance for September, expected to post a A$500 million surplus following August's A$1364 million surplus.

Building approvals will also be released, expected to decline 1.0% month over month, after August saw a 3.7% drop.

The euro was up 0.0086 to 1.8778 against the Australian dollar.

The Australian dollar was down 0.0073 to 0.6692 against the greenback.

The Canadian dollar was up 0.0119 to 1.2636 against the Australian dollar.

The Australian dollar was down 1.0646 to 65.9804 against the yen.

The Australian dollar was up 0.0069 to 1.1369 against the New Zealand dollar.

All data taken at 8:35 p.m. EST

Australian Dollar Gaining Despite Onslaught of Dismal Releases

The Australian dollar is up against majors despite a slew of gloomy data releases in early Sydney trading.

John Hydeskoy, analyst with Danske Bank said the Australian dollar's rise can be attributed to an increase in risk appetite, after last week stock markets "burst into euphoria, bringing on the rare sight of double-digit daily gains. This put the riskier currencies like the AUD, NZD and NOK back on investors' wish lists," he said.

Nicholas Jonas, strategist with Suncorp agreed, and said the Australian dollar "continues to be traded off equity market sentiment."

Sydney's ASX 200 is currently up 112.40 points to 4130.40.

Early in the trading session, Australian markets first received the AiG performance of manufacturing indicator, which hit its lowest level of 2008, at 40.4 in October.

TD Securities' inflation gauge revealed prices fell by 0.2% in October, the first decline in the survey since February 2006.

Financial firm ANZ released their measure of job advertisements for October, which revealed Australian jobs ads declined 5.9%.

Retail sales were released simultaneously, growing 0.2% month over month in September, while the seasonally adjusted figure fell 1.1% against expectations for a 0.5% fall.

Housing prices for the third quarter were also released simultaneously, revealing a quarterly decline of 1.8% in prices against expectations for a 0.5% fall.

Despite all this dismal data, Su-Lin Ong, economist with RBC Capital Markets said there was "limited reaction from the $A."

Markets are awaiting the release of the Reserve Bank of Australia's cash rate tomorrow, expected to be cut by 50 basis points to 5.50%.

The euro was down 0.0057 to 1.9004 against the Australian dollar.

The Australian dollar was up 0.0070 to 0.6749 against the greenback.

The Canadian dollar was down 0.0018 to 1.2335 against the Australian dollar.

The Australian dollar was up 0.8850 to 66.625 against the yen.

The Australian dollar was up 0.0002 to 1.1461 against the New Zealand dollar.

Asia-Pacific Market Recap: Fixed Income Gaining, Equities Mixed

Asia-Pacific fixed income markets are gaining and equities closed mixed with yields on Australian 10-year bonds down 6.0 bps to 5.17% and Japanese 10-year government bonds down 1.6 bps to 1.48%.

Sydney's S&P ASX 200 closed up 16.90 points to 4018.

The Japanese Nikkei closed down 452.78 points to 8576.98 and the Hang Seng down 780.88 points to 13548.97.

Yields on three-year Australian bonds were down 14.6 bps to 5.39 and the Australian 90-day March 09 contract was up 2.0 ticks to 95.51.

The Euroyen March 09 contract was up 2.5 ticks to 99.41.

The Australian dollar was down 2.19 cents to 0.6605 against the USD and down 1.07 cents to 0.8083 against the Canadian dollar.

Against the yen, the U.S. dollar was down 1.62 points to 96.96 and the Canadian dollar was down 2.86 points to 79.26.

The euro was down 2.20 cents to 1.2698 USD.

Generated by CEP Newswires

Closing Market Recap: U.S. Equities Able to Shake off Weak Data

(CEP News) - Investors are closing the books on what some reports are calling the worst October since 1987. But this last week has shown some promising signs, say some strategists.

In October, the Dow fell almost 14% and the S&P 500 fell 16.5%. But the news isn't all bleak, as buyers held the line today and ended the week with back-to-back positive closes for the first time in more than a month.

The Dow Jones Industrial Average closed up 144 points to 9325, the S&P 500 closed up 15 points to 969 and the Nasdaq ended the day up 22 points to 1721.

"There is some good news because we saw the volatility die off a little in the last couple of days," said Colin Cieszynski, market analyst from CMC Markets Canada. "It will be interesting to see if next week we can get a break in sentiment."

In Canada, there was choppy trading as the S&P/TSX followed commodity prices. But losses were limited and stocks held on to gains, which were made earlier in the week. Toronto's S&P/TSX composite index closed down 93 points to 9763.

Looking at commodity markets, WTI crude oil is up $1.54 to $67.50. The front month gold contract at the Chicago Board of Trade is down $16.10 to $723.70 per ounce.

European stock markets closed in positive territory with the Eurostoxx up 68 points to 2331, the UK FTSE 100 up 86 points to 4377 and the German DAX up 119 points to 4988.

Data wasn't even able to drag down investor sentiment today with weaker U.S. consumer spending and the biggest drop ever in the Chicago PMI. The Federal Reserve's Personal Consumption Expenditures report showed falling consumer spending in September. The Federal Reserve's preferred measure of inflation, the PCE core deflator, advanced by 0.2% (0.176%) in the month, a faster pace than the 0.1% expectation, and contributed to a year-over-year change of 2.4% (2.402%).

More Details at: Actionforex

The Sterling Advances Against The Dollar As Stocks Advance

The pound climbed for a third day against the dollar, as the longest run of stock gains in two months underpinned demand for the British currency. However gains by the pound may be limited as an industry report showed house prices slid almost 15 percent in the year and a Bank of England policy maker David Blanchflower said interest rates need to fall 'significantly.' 'Interest rates do need to come down significantly - and quickly,' Blanchflower said in a speech at the University of Kent in Canterbury, England, yesterday. 'If rates are not cut aggressively we do face the prospect of a relatively deep and long-lasting recession.' The GBP/USD is currently trading at $1.6580 as of 8:41am, GMT.

The dollar and the yen fell as a wave of global interest-rate cuts sparked a rally in Asian stocks, bolstering demand for higher-yielding assets. The greenback slid for a third day against the euro after the Federal Reserve reduced its target lending rate to the lowest in half a century. The yen dropped to a one-week low versus the European currency on speculation the Bank of Japan will lower borrowing costs when it meets tomorrow. 'The significant easing of monetary policy will help the global growth outlook,' said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group in Sydney. 'We're seeing a major correction of the U.S. dollar and Japanese yen. They were among the key beneficiaries of the flight to quality that's being unwound.' The USD/JPY is currently trading at 98.35 as of 8:50am, GMT.

The dollar could rise to parity with the euro in 2009 as the European Central Bank cuts interest rates and market volatility prompts U.S. investors to repatriate funds and hedge their currency risks. Given the increased volatility in currency and equity markets, 'the need for U.S. equity managers to think about their currency risk in a more systematic way is rising fast,' wrote Metcalfe. 'Following both repatriation and hedging flows at present, suggests that U.S. dollar strength is set to continue.' The EUR/USD is currently trading at $1.6559 as 9:06am, GMT

Economic Calendar

Time (GMT)	E Event	Currency	Period	Previous
23:30	Household Spending y/y	JPY	Sep	-4.0%
23:30	Core CPI y/y	JPY	Oct	1.7%
23:30	Unemployment Rate	JPY	Sep	4.2%
23:15	Manufacturing PMI	JPY	Oct	44.3
12:30	GDP q/q	USD	Quarterly	2.8%
12:30	Jobless claims	USD	Weekly	478.0K
10:00	Consumer Confidence	EUR	Oct	-19
09:00	Unemployment Rate	EUR	Oct	7.6%

USD Reversal Generates Strength for Most of the Majors

Daily Forex Technicals | Written by FOREXYARD | Oct 30 08 |

USD Reversal Generates Strength for Most of the Majors

Yesterday's interest rate cut by the U.S. Federal Reserve has made the USD drop in value across the board. The Dollar was already beginning to trade above $1.3200 per EUR in today's early trading sessions, after dropping 2.2 % yesterday, and has also climbed above 1.6500 against the GBP. Crude Oil prices have also begun to reach back up to the $70 price level!

Market Trend

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.3300	1.6715	99.90	1.1400	0.6956	0.8060
	1.3260	1.6680	99.56	1.1365	0.6925	0.8024
	1.3215	1.6635	99.15	1.1320	0.6880	0.7975
Support	1.3120	1.6524	98.00	1.1218	0.6800	0.7900
	1.3085	1.6490	97.60	1.1185	0.6777	0.7876
	1.3049	1.6470	97.35	1.1155	0.6729	0.7845

Economic News

USD - Interest Rate Cut Creates Massive One-Day Loss for USD

In a move anticipated by most market analysts, the Federal Reserve cut target lending rates yesterday to a level not seen in almost 50 years! This was done in an attempt to prevent a widening financial crisis from tipping the U.S. economy into a prolonged recession. It was not the first time the Fed cut rates to stave off further economic disaster during these most recent times of financial hardship.

Less than a month ago the Fed joined the European Central Bank (ECB), as well as other counterparts from the U.K., Canada, Sweden and Switzerland, in a coordinated reduction of interest rates, cutting its target rate by a half percentage point to 1.50%. Now, as a result of yesterday's further rate cut, the Dollar posted its biggest one-day fall against almost all of its major currency counterparts.

The Dollar was already beginning to trade above $1.3200 per EUR in today's early trading sessions, after dropping 2.2 % yesterday, and has also climbed above 1.6500 against the GBP. The Fed may also be expected to lower benchmark interest rates even further in the coming months given the downbeat economic outlook provided by the Fed's policy statement yesterday.

The market has been trading on a recovery theme lately; there is still a lot of uncertainty, and risk aversion is very much in place. If risk appetite continues improving, the Dollar may get even weaker. Despite showing signs of recession in the U.S. economy, the Fed's maneuver put the focus on the interest rate differential, and that might force the Dollar to go even lower no matter how the Advanced GDP figures appear when they are released later today.

EUR - EUR Finds its Strength from Weakened USD

The EUR rose against the Dollar to 1.3200, marking a distinct rebound from last week's doldrums. The 15-nation currency rallied after the U.S. Federal Reserve slashed its target rates by half a percentage point yesterday and also left the door open to further reductions if needed. The EUR made further gains following Germany's announcement of its preparation of an economic stimulus package. Deutsch Bank AG, the largest bank in Germany, also declared surprising profits after implementing a change to its accounting rules.

The USD no longer appears to be a save-haven for traders after the Federal Reserve released a statement that the pace of economic activity appears to have slowed significantly. The British Pound has also advanced against the Dollar as a report showed that mortgage approvals rose for the first time since June 2007.

The Bank of England (BoE) said lenders approved 1,000 more home loans last month than in August, and the government is expected to pledge extra borrowing today to support the economy as it enters its first recession since 1992. The Pound had its biggest intra-day decline versus the Dollar on Oct. 24, when a government report showed the economy contracted in the 3rd quarter by more than twice as much as economists predicted. This indicates that economic news is beginning to once again have a larger impact on the movement of the major currencies.

While appearing to gain strength recently, the EUR may in fact see a reversal to yesterday's giant upswing. News being released from the Euro-Zone today will likely show higher-than-expected unemployment in Germany and decreased consumer confidence throughout the region. While indicators have had less impact these past weeks due to the financial crisis, they nevertheless still carry weight in the confidence of investors; any negative economic data will have the potential to cause harm to the currency's value.

JPY - JPY's Excessive Volatility Ending as Japan Considers Cutting Interest Rates

As the market's speculation increases that the Bank of Japan (BoJ) will lower its interest rates, the Yen fell for a second day against its currency counterparts, extending its largest ever decline. The first motivation for a potential rate cut is to stem the Yen's appreciation; another motivation is to try to prop up the economy.

Yesterday, Japan's currency dropped 0.5% versus the pound to 156.47 on speculation investors will revive carry trades. In carry trades, investors borrow in currencies with low interest rates and invest in currencies with a higher yield. Japan's target rate of 0.5% is the lowest among major economies. The potential BoJ rate cut led to an unwinding of safe-haven flows to the JPY. Perhaps what has been driving the Yen to its recent strength is not speculation, but the repatriation of Japanese investors and de-leveraging by global investors.

The Group of Seven (G7) issued an unscheduled statement on Oct. 27 saying it was concerned about 'the recent excessive volatility' in the JPY. The Japanese government has also stated that it may intervene in foreign exchange markets by arranging purchases and sales of currencies, if necessary.

Technical News

EUR/USD

The pair continues to make bullish sounds, and is currently testing the 1.3200 level. However, it appears that the 1.3250 level has now become a strong resistance level, and a breach of that level might validate the continuation of the upward move.

GBP/USD

There is a very accurate bullish channel forming on the 4-hour chart as the cable is now floating in the middle of it. The RSI on the daily chart has crossed the 30 line, and the Slow Stochastic is still pointing up, all suggesting that another bullish session is pending. Going long appears to be the right choice today.

USD/JPY

Ever since bottoming at the 91.00 level, the pair has entered a very strong bullish trend and is currently traded around the 98.70 level. And now, a flag formation on the 4-hour chart suggests that the bullish move has more room to go.

USD/CHF

A very sharp bearish movement took place yesterday, as the pair dropped over 300 pips. The current price is floating beneath the Bollinger Bands lower border, indicating that the bearish move is still quite strong. Going short appears to be the right strategy today.

U.K. Chancellor Darling Looks to Revise Fiscal Rules as the Economy Faces a Recession

U.K. chancellor Darling says fiscal policy must evolve. In a speech to be delivered this evening, Darling notes that it "is natural that the conduct of policy should evolve. Just as markets change, so should policy" which appear to hint at the Treasury preparing to revise their fiscal rules to allow for increased borrowing. The Treasury's 40% debt-to-GDP ceiling was already broken after taking on Northern Rock's liabilities and will be push higher still once Brandford & Bingley will be taken into the public books, together with the GBP 37 bln so far estimated to be used for bank recapitalization. Further fiscal stimulus to counteract the growth slowdown is likely require further borrowing still. The fiscal rules, which includes a policy to borrow only to invest and to keep the budget in surplus over the economic cycle, have already lost most of its creditability with the market as the Treasury has been seen as shifting the goalposts by re-classifying some borrowing or extending or shortening the length of the perceived economic cycle. There are market expectations that chancellor Darling will announce revisions or a complete abolition of the rules and that details of the new borrowing plan will be included in next month's pre-budget report.

BoE Reiterates Dovish Outlook, Further Easing to Follow

BoE's Sentance's comments late yesterday adds to fuel expectations of further BoE rate cuts near-term. In a speech late yesterday, Sentance, who voted for a rate hike in the July and August, said that upside inflation risk has diminished since last summer but noted that the Sterling depreciation would squeeze people's living standard as imported goods become more expensive. In regards to a looser monetary policy, Sentance noted that a "cut in Bank Rate, on its own, will not be a magic bullet. No single instrument can work to achieve all goals". We expect the BoE to cut the repo rate by another 50 bp next week.

Daily Forex Fundamentals | Written by DailyFX | Oct 29 08 |

ECB Will Continue to Provide Liquidity as Growth Risks Increase

ECB's Gonzalez-Paramo said bank's role as liquidity provider is only temporary, "until the markets resume functioning normally". He added that the bank is "not meant to substitute to markets and to massively provide liquidity over the longer term". Separately the executive board member said the July hike has been vindicated by facts and gave the ECB room to cut in October. He also said that the economic recovery will be a long process and that downside risks to growth have increased. Nothing really new in the comments that would change the prospect for a rate cut next week.

Meanwhile, Euro-Dollar (EURUSD) consolidated around 1.2700 after it recorded Asian highs of 1.2842. Ahead of the European open an Eastern European name was a good seller around the 1.2800 area, which left the pair on a heavier footing, but demand for EUR-JPY and EUR-CHF on dips is underpinning in to levels underneath 1.2700. The Wall Street surge and subsequent gains in the Nikkei has given a boost to risk appetite. There evidence yesterday of pre-FOMC positioning, with the market optimistic that the Fed will delivery another policy injection to the economy. Also aiding the equity market rally is talk of pension fund related demand, which has loosened up some of the low risk safe haven FX strategies. JPY, CHF and the USD have eased across the board, although volumes and the type of names involved are still though to be low quality, suggesting that the movement we've seen is more speculative in nature. Layered offers are noted in EUR-USD from 1.2760 up to 1.2800, while the downside sees bids at 1.2700, 1.2680 and 1.2650-60.

Daily Forex Fundamentals | Written by DailyFX | Oct 29 08 08:56 GMT |

Waiting On The FOMC

Market Brief

The Usd was weaker in Asian session, as risk sentiment firmed on the back of the massive Wall Street surge. The EurUsd traded up to 1.2839 from 1.2471, while the UsdJpy moved higher on the open to 99.70, before slipping down to 96.09. Commodity currencies found buyers, with the AudUsd trading higher to 0.6532. The UsdNok fell to 6.6860, as crude prices rallied. Carry trades seem to have found a base and with easing risk aversion is regaining ground. The story today is Wall Street buying euphoria, with S&P up 10.78% (despite consumer confidence hitting a record low of 38.0). However, the jubilation failed to carry over into Asia, with a majority of the regional markets trading lower (Nikkei 7.74% as rumors of a BoJ 25bp rate cut circulate ). European futures are point to a higher open, as a VW new exalted status has breathed new life into the continents equity markets. The prospects of central banks easing interest rates, starting with today today's FOMC announcement, has been the core driver to price action as the effects carry over into the equity markets. Should we see another strong day in stocks, watch for the G10 to continue to rally against the Usd & Jpy.

Markets will be keeping their power dry for the Fed decision slated for 18.15gmt today. The market is expecting a 50bp cut, but, more importantly, the Fed has signaled that 1.00% is not necessarily the floor and additional cut are on the table. We expect the accompannying statement to stick a similar note to that release, with the coordinated interbank rate cut. It should highlight the fact that the financial crisis will likely restrain growth and the upside risk to inflation has decreased (as commodity prices have eased and prospects of a global slowdown).

For the Norges Bank policy decision today, we are in line with consensus and expect a 25bp cut. While inflation continued to run above the central banks comfort level, the downside risk to growth has moved to the forefront of concerns. The move should help the stability of the financial market and provide much needed liquidity.

Daily Forex Fundamentals | Written by AC-Markets | Oct 29 08 09:13 GMT |

FOMC Rate Decision, Durable Goods, Equity Dominance

German equity markets were getting sold heavily at the open, in what looks to a move that locks in the 8% trading day (15 days worth of trade in one direction) that came on Tuesday, whilst U.K. and French markets were heavily in the green; no wonder there was extreme volatility at the open of London trade that pulled the currencies all over the charts. The FOMC Rate decision is at 14:15 EDT today and will likely cause some volatility as trade desks get aligned for the expected Fed rate cuts.

There is nothing here until of note until the U.S. Futures market really gets going from around 07:00 EDT. Ahead of Durable Goods and a FOMC rate decision it once again will come down to the equity markets ability to hold in the green, or not. We have seen in overnight trade and at the European open that volatility and reaction to equity movement is still very much the order of the day, but hopefully that will calm down once the Fed's rate decision is out of the way. If so we are very well set for the next three months, times that historically have garnered the best results out of any others in the forex market.

Wall Street was able to make a dash for the finish and end equity trade in the green on Tuesday, and in doing so set the tone for global equity markets to test the resolve of Asian and European traders and their ability to continue the buying of stocks that started overnight on Monday/Tuesday. Asian traders did their part, but the European stock traders let things slip at their end at the beginning of play. The signal from the U.S. was that an equity bounce from dramatically oversold areas dragged the higher yielding currencies up against the dollar, and sent the Japanese yen lower. All of which would be expected under normal conditions, but 'normal' has had its challenges recently.

This is the last week of trade in the hedge fund's year, and apart from book-keeping for the next few weeks there will be no more chances to increase the dramatic holes in their equity balance sheets outside of Wednesday, Thursday and Friday trade. This may end up being nothing other than a fool's rally, care still needs to be taken in where we look, but many answers will come from the Asian and European market's ability to hold in the green.

Daily Forex Fundamentals | Written by TheLFB-Forex.com | Oct 29 08 09:54 GMT |

Federal Reserve May Cut Rate Today To 1% On Signs Of A Weak Economy

Federal Reserve May Cut Rate Today To 1% On Signs Of A Weak Economy

The Federal Reserve may lower its benchmark interest rate to 1 percent today, Tumbling commodities prices and weaker consumer spending are slowing inflation, which officials described as a 'significant concern' at their last scheduled meeting in September. Tomorrow, the Commerce Department will probably report that the economy shrank at a 0.5 percent annual rate in the third quarter. The Fed 'will be very aggressive,' said Mark Gertler, a New York University economist and research co-author with Fed Chairman Ben S. Bernanke. 'Inflation risks are off the table' and 'the issue now is how bad the recession will be.' The EUR/USD is currently trading at $1.2720 as of 8:29am, GMT.

The pound rose against the dollar and euro for a second day on speculation a rally in stocks will bolster demand for the British currency. A two-day gain by the pound versus the U.S. currency would be the first in more than two weeks as the FTSE 100 Index, a U.K. equity benchmark, soared 4.9 percent. Stocks surged yesterday in the U.S. and rose in Asia today. Chancellor of the Exchequer Alistair Darling will pledge extra borrowing today to support the economy as it enters a recession. The GBP/USD is currently trading at $1.6050 as of 8:47am, GMT.

Investors should buy the euro versus the dollar as global risk concerns ease, Citigroup Global Markets Inc. said, citing technical charts traders use to predict price movements. Investors who purchase the euro may gain as much as 4.2 percent as the 15-nation currency rallies from near a 2 1/2-year low, said Tom Fitzpatrick, head of global currency strategy at Citigroup Global Markets.

Economic Calendar

Time (GMT)	E Event	Currency	Period	Previous	Previous	Significance
23:00	Leading Index m/m	AUD		0.0%
21:45	Building Consents m/m	NZD		-7.9%		***
18:15	Fed rate	USD		1.50%	1.25%	***
14:35	Crude Oil Inventories	USD				**
12:30	Core Durable Goods Orders m/m	USD	Sep	-3.3%	-1.5%	****
12:30	Durable Goods Orders m/m	USD	Sep	-4.8%	-1.3%	***
09:30	Net Lending to Individuals m/m	GBP	Sep	1.4B	1.0B	**
09:30	Mortgage Approvals	GBP	Sep	32K	32K	**

Daily Forex Fundamentals | Written by Finotec Group | Oct 29 08 09:34 GMT |

Speculation

Exchange-traded funds (or ETFs) are Open Ended investment companies that can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the S&P 500 (e.g. SPY), but recently they are now replicating investments in the currency markets with the ETF increasing in value when the US Dollar weakens versus a specific currency, such as the Euro. Certain of these funds track the price movements of world currencies versus the US Dollar, and increase in value directly counter to the US Dollar, allowing for speculation in the US Dollar for US and US Dollar denominated investors aControversy about currency speculators and their effect on currency devaluations and national economies recurs regularly. Nevertheless, economists including Milton Friedman have argued that speculators ultimately are a stabilizing influence on the market and perform the important function of providing a market for hedgers and transferring risk from those people who don't wish to bear it, to those who do.Other economists such as Joseph Stiglitz consider this argument to be based more on politics and a free market philosophy than on economics.

Large hedge funds and other well capitalized "position traders" are the main professional speculators.

Currency speculation is considered a highly suspect activity in many countries. While investment in traditional financial instruments like bonds or stocks often is considered to contribute positively to economic growth by providing capital, currency speculation does not; according to this view, it is simply gambling that often interferes with economic policy. For example, in 1992, currency speculation forced the Central Bank of Sweden to raise interest rates for a few days to 500% per annum, and later to devalue the krona[14]. Former Malaysian Prime Minister Mahathir Mohamad is one well known proponent of this view. He blamed the devaluation of the Malaysian ringgit in 1997 on George Soros and other speculators.

Gregory Millman reports on an opposing view, comparing speculators to "vigilantes" who simply help "enforce" international agreements and anticipate the effects of basic economic "laws" in order to profit.[15]

In this view, countries may develop unsustainable financial bubbles or otherwise mishandle their national economies, and forex speculators allegedly made the inevitable collapse happen sooner. A relatively quick collapse might even be preferable to continued economic mishandling. Mahathir Mohamad and other critics of speculation are viewed as trying to deflect the blame from themselves for having caused the unsustainable economic conditions. Given that Malaysia recovered quickly after imposing currency controls directly against IMF advice, this view is open to doubt.nd speculators.

Exchange Traded Fund

Exchange-traded funds (or ETFs) are Open Ended investment companies that can be traded at any time throughout the course of the day. Typically, ETFs try to replicate a stock market index such as the S&P 500 (e.g. SPY), but recently they are now replicating investments in the currency markets with the ETF increasing in value when the US Dollar weakens versus a specific currency, such as the Euro. Certain of these funds track the price movements of world currencies versus the US Dollar, and increase in value directly counter to the US Dollar, allowing for speculation in the US Dollar for US and US Dollar denominated investors and speculators.

Financial instruments--Forward

A foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. The FX options market is the deepest, largest and most liquid market for options of any kind in the world.

Financial instruments--Swap

The most common type of forward transaction is the currency swap. In a swap, two parties exchange currencies for a certain length of time and agree to reverse the transaction at a later date. These are not standardized contracts and are not traded through an exchange.

Financial instruments--Future

Foreign currency futures are forward transactions with standard contract sizes and maturity dates — for example, 500,000 British pounds for next November at an agreed rate. Futures are standardized and are usually traded on an exchange created for this purpose. The average contract length is roughly 3 months. Futures contracts are usually inclusive of any interest amounts.

Financial instruments--Forward

One way to deal with the Forex risk is to engage in a forward transaction. In this transaction, money does not actually change hands until some agreed upon future date. A buyer and seller agree on an exchange rate for any date in the future, and the transaction occurs on that date, regardless of what the market rates are then. The duration of the trade can be a few days, months or years.

Financial instruments--Spot

A spot transaction is a two-day delivery transaction (except in the case of the Canadian dollar, which settles the next day), as opposed to the futures contracts, which are usually three months. This trade represents a “direct exchange” between two currencies, has the shortest time frame, involves cash rather than a contract; and interest is not included in the agreed-upon transaction. The data for this study come from the spot market. Spot has the largest share by volume in FX transactions among all instruments.

Algorithmic trading in forex

Electronic trading is growing in the FX market, and algorithmic trading is becoming much more common. According to financial consultancy Celent estimates, by 2008 up to 25% of all trades by volume will be executed using algorithm, up from about 18% in 2005.

Factors affecting currency trading

Although exchange rates are affected by many factors, in the end, currency prices are a result of supply and demand forces. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.

Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology.

Economic factors

These include economic policy, disseminated by government agencies and central banks, economic conditions, generally revealed through economic reports, and other economic indicators.

Economic policy comprises government fiscal policy (budget/spending practices) and monetary policy (the means by which a government's central bank influences the supply and "cost" of money, which is reflected by the level of interest rates).
Economic conditions include: Government budget deficits or surpluses: The market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends: The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.

Inflation levels and trends: Typically, a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency. However, a currency may sometimes strengthen when inflation rises because of expectations that the central bank will raise short-term interest rates to combat rising inflation.

Economic growth and health: Reports such as gross domestic product (GDP), employment levels, retail sales, capacity utilization and others, detail the levels of a country's economic growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.

Political conditions

Internal, regional, and international political conditions and events can have a profound effect on currency markets.

For instance, political upheaval and instability can have a negative impact on a nation's economy. The rise of a political faction that is perceived to be fiscally responsible can have the opposite effect. Also, events in one country in a region may spur positive or negative interest in a neighboring country and, in the process, affect its currency.

• Market psychology

Market psychology and trader perceptions influence the foreign exchange market in a variety of ways:

Flights to quality: Unsettling international events can lead to a "flight to quality," with investors seeking a "safe haven". There will be a greater demand, thus a higher price, for currencies perceived as stronger over their relatively weaker counterparts. The Swiss franc has been a traditional safe haven during times of political or economic uncertainty.[8]

Long-term trends: Currency markets often move in visible long-term trends. Although currencies do not have an annual growing season like physical commodities, business cycles do make themselves felt. Cycle analysis looks at longer-term price trends that may rise from economic or political trends.

"Buy the rumor, sell the fact:" This market truism can apply to many currency situations. It is the tendency for the price of a currency to reflect the impact of a particular action before it occurs and, when the anticipated event comes to pass, react in exactly the opposite direction. This may also be referred to as a market being "oversold" or "overbought".[10] To buy the rumor or sell the fact can also be an example of the cognitive bias known as anchoring, when investors focus too much on the relevance of outside events to currency prices.

Economic numbers: While economic numbers can certainly reflect economic policy, some reports and numbers take on a talisman-like effect: the number itself becomes important to market psychology and may have an immediate impact on short-term market moves. "What to watch" can change over time. In recent years, for example, money supply, employment, trade balance figures and inflation numbers have all taken turns in the spotlight.

Technical trading considerations: As in other markets, the accumulated price movements in a currency pair such as EUR/USD can form apparent patterns that traders may attempt to use. Many traders study price charts in order to identify such patterns.

Trading characteristics

There is no unified or centrally cleared market for the majority of FX trades, and there is very little cross-border regulation. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currencies instruments are traded. This implies that there is not a single exchange rate but rather a number of different rates (prices), depending on what bank or market maker is trading, and where it is. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs instantaneously. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. A joint venture of the Chicago Mercantile Exchange and Reuters, called FxMarketSpace opened in 2007 and aspires to the role of a central market clearing mechanism.

The main trading center is London, but New York, Tokyo, Hong Kong and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.

Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.

Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed (called base currency). For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.

The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.

On the spot market, according to the BIS study, the most heavily traded products were:

* EUR/USD: 27 %
* USD/JPY: 13 %
* GBP/USD (also called sterling or cable): 12 %

and the US currency was involved in 86.3% of transactions, followed by the euro (37.0%), the yen (16.5%), and sterling (15.0%) (see table). Note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers.

Trading in the euro has grown considerably since the currency's creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EUR/USD and USD/ZZZ. The exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market. As the dollar's value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased.

Retail forex brokers

There are two types of retail brokers offering the opportunity for speculative trading. Retail forex brokers or Market makers. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks. Retail forex brokers, while largely controlled and regulated by the CFTC and NFA might be subject to forex scams. At present, the NFA and CFTC are imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone. It is not widely understood that retail brokers and market makers typically trade against their clients and frequently take the other side of their trades. This can often create a potential conflict of interest and give rise to some of the unpleasant experiences some traders have had. A move toward NDD (No Dealing Desk) and STP (Straight Through Processing) has helped to resolve some of these concerns and restore trader confidence, but caution is still advised in ensuring that all is as it is presented.

Investment management firms

Investment management firms (who typically manage large accounts on behalf of customers such as pension funds and endowments) use the foreign exchange market to facilitate transactions in foreign securities. For example, an investment manager bearing an international equity portfolio needs to purchase and sell several pairs of foreign currencies to pay for foreign securities purchases.

Some investment management firms also have more speculative specialist currency overlay operations, which manage clients' currency exposures with the aim of generating profits as well as limiting risk. Whilst the number of this type of specialist firms is quite small, many have a large value of assets under management (AUM), and hence can generate large trades.