Car Company of South Korea target US for 2010

After making solid gains in 2009, South Korean automakers Hyundai and Kia are predicting more gains in market share in 2010 as they roll out more new vehicles.
John Krafcik, Hyundai Motor America's acting president and chief executive, said on Thursday he expects car sales in the United States to grow next year, and Hyundai's market share to grow with it.
"Sales should be up about eight per cent to 10 per cent next year," he said.
"The first and second quarter will be more like this year but things should pick up in the third quarter," Krafcik said.
Overall sales in the US market should grow beyond 11 million units in 2010. Hyundai's market share also will continue to grow, he said.
Hyundai, which sold over 401,000 cars so far in 2009, boosted its market share by a third this year and more gains are expected next year with introduction of the all new 2011 Sonata and new Tucson.
Both models were unveiled during the press previews ahead of the Los Angeles auto show.
The Sonata was designed to compete in the mid-sized segment, which is at the heart of the US car market.
Scott Magnusson, Hyundai's director of product planning, said the new Sonata offers efficiency, excellent packaging and solid driving dynamics at less than $US20,000 ($A21,600).
"But it's also well styled," he said.
"You still have great efficiency and great packaging and not have to drive a boring car thanks to our fluidic styling."
The same sculptural styling also was used in the design of the new Tucson, which Hyundai hopes will appeal to consumers who in the past have tended to go for the major Japanese brands - Toyota, Honda and Nissan.
"We're being cross-shopped much more frequently now with the Japanese," said Magnusson.
"Both vehicles are very, very nice both inside and out," said Stephanie Brinley, an analyst with Auto Pacific.
Tom Loveless, vice president of sales for Kia Motor America, a Hyundai subsidiary which markets its own brand in the US, also said the value message resonates with US consumers.
Kia also has posted double digit sales increases since mid-summer and will finish the year with a substantial increase in market share, Loveless said.
Kia's biggest market share-gains have come in the northeastern United States, where it as jumped 80 per cent.
Loveless said Kia also has added dealerships, placing some on prime real estate in major urban areas that were abandoned by other carmaker.
He said he expects Kia to make greater gains in sales and market share next year as it rolls out new models.
During the LA Auto Show preview, Kia rolled out the 2011 Sorento, which is being built at a new Kia assembly plant in West Point, Ga.
The introduction of Kia Soul and Kia Forte earlier this year also raised consumer awareness of the Kia brand with their aggressive styling, Loveless said.
"The Soul was a real game changer for us," he said.
Ed Kim, an analyst with Auto Pacific, said the styling on the Sorento is more conservative than the Soul or the Forte but it is still solid and the vehicle has been designed to reflect American taste and preferences.
So far this year, Hyundai Group sales have grown by more than 6 per cent in a soft market and Kia and Hyundai combined now hold nearly 6.2 per cent of the US market, the highest share ever, according JD Power & Associates.
Hyundai's market share has grown to 3.76 per cent from 2.58 per cent in 2008, while Kia's has increased to 2.41 per cent from 2 per cent in 2008.

Bollywood superstar Aamir to be an foreign ambassador.

Bollywood superstar Aamir Khan will once again reunite with 'Rang De Basanti' director Rakyesh Omprakash Mehra to spread the message of 'Athithi Devo Bhava'.
Four new commercials are being made for the Tourism Ministry, featuring the actor who once again is seen appealing to the public to stop defacing monuments and be cordial to tourists.
The aim of the commercials is to take further the 'Incredible India' campaign and are part of the 'Atithi Devo Bhava' initiative aimed at enlightening the public about being tourist friendly.
"The newly made four ad films are different from Aamir's early films made by the same director for the ministry. Aamir is donning the role of a sutradhar (narrator) in these films," said the official.

Vision of Asian development bank in Asia until 2020.

Another year, another long-term strategic blueprint-style plan for the Asian Development Bank. This year, however, the bank’s planning is underpinned by sizeable increase to its resources.
A particular theme seems to define the ADB agenda every year, depending on what economic/political/financial forces are engulfing the region. The past 12 months have all been about the credit crisis and the dwindling capital supply available to Asian SMEs. The ADB has tackled the problem at its most essential level: trade finance.
About US$50trn of the word's wealth was destroyed in 2008 – or one year's worth of GDP, according to a report released in mid-March by the Asian Development Bank. Asia accounted for nearly US$9.62trn or 19.25% of those losses.
The role of organisations such as the Asian Development Bank has become critical in responding to the global financial crisis. Efforts are being made to boost trade that would revive the global economy. The ADB president Haruhiko Kuroda talks to Prakash Chakravarti about the bank’s efforts in that regard and shares his views on the potential for an alternative international currency as well as Asian monetary integration.
Despite a 22-year stint with the ADB, Rajat Nag, managing director general, feels he has been with the bank for a very short time. The enthusiasm and excitement he had when he joined the bank still lives because of what Asia has gone through. He talks to Prakash Chakravarti about the ADB’s achievements and the way forward.
As the financial crisis blooms into a global economic recession, Asia’s fragile political arrangements and democracies are coming under stress. Asian politics can be tumultuous at the best of times – throw in two wars in the Middle East, increasing concerns about economic dislocation in China and ongoing power struggles in Thailand and Malaysia, and the region’s political risk problems start to mount.
Multilateral development banks are political beasts. In this article an ex-ADB staffer talks about the historic and organisational issues that complicate the aid logistics of development banks, and the urgent need for reform.
The oil price spikes may be a year behind us, but they were a timely reminder of the necessity of addressing Asia’s long-term energy needs. The ADB is rolling out all manner of sensible, practical solutions to bring energy to the people, and in an environmentally sustainable man.
As part of its corruption fighting measures, the ADB independently investigates dozen of cases every year. It manages to process this volume of casework partly because it does not publish those names it deems guilty of corruption.

Free market increased Korea's economy

South Korea's economy expanded 3.2 percent in the third quarter, the central bank said Friday, a better performance than initially estimated amid stronger growth in manufacturing, exports and services.

AP - South Korean labors work on a construction site in Seoul, South Korea, Friday, Dec. 4, 2009. South Korea's ...
The revised figure for the three months ended Sept. 30 compared with the previous quarter remains the country's strongest growth in more than seven years since an expansion of 3.8 percent in the first quarter of 2002, according to Bank of Korea figures.
The bank said in October that Asia's fourth-largest economy had grown 2.9 percent. The latest estimate is based on more complete data.
The 3.2 percent figure equates to annualized growth of 13.6 percent, according Lim Ji-won, economist at JP Morgan in Seoul. The BOK does not provide an annualized number.
The stronger quarterly growth adds to mounting evidence that South Korea is recovering from the global slowdown. GDP has expanded three straight quarters after contracting 5.1 percent in the final three months of last year amid the shock of the worldwide financial meltdown. Export markets for South Korean products had withered as consumers around the world slashed spending.
Manufacturing expanded 9.8 percent in the third quarter, compared with the initial estimate of 8.7 percent, the central bank said. Growth figures for capital spending, private consumption, exports and services were also revised upward.
The Bank of Korea also said that the economy grew 0.9 percent in the third quarter compared with the same period last year. That was higher than the initial estimate of a 0.6 percent expansion. Beginning in the fourth quarter last year the economy had contracted for three straight quarters compared with the year before.
Exports in November posted their first year-on-year gain in 13 months, increasing 18.8 percent to $34.3 billion. The country's foreign currency reserves hit a record high of $270.89 billion in November. And the jobless rate fell to 3.2 percent in October, the lowest level in 11 months.
The Bank of Korea steadily slashed its benchmark interest rate after the onset of the global financial crisis to help boost the economy. Attention is now focused on when Gov. Lee Seong-tae and other bank policy makers will decide to begin raising the rate from a record low 2 percent. The next rate-setting policy meeting is scheduled for Dec. 10.
Economists have broadly expected the bank to begin gradually lifting the rate in the first quarter of 2010.
Pressure from the government against a perceived early exit from the low rate strategy and the approaching conclusion of Lee's four-year term as central bank governor at the end of March have injected some uncertainty into that scenario, said JP Morgan's Lim

3-D Sony signed with Fifa

Sony Corp. said Friday it has signed a deal with FIFA, the international football governing body, to record up to 25 World Cup games in 3-D -- a technology that gives viewers an illusion of depth on the screen.
The Japanese electronics and entertainment company is one of several electronics makers planning or working on 3-D technology for TVs and movies. Sony makes 3-D capable video cameras, and plans to sell 3-D TVs for homes next year.
People wear special glasses to see 3-D footage because the illusion of dimension is created by sending different images to the left and the right eye, although manufacturers are working on upgrades that will show 3-D without glasses.
Chief Executive Howard Stringer expressed his enthusiasm for watching a soccer game in 3-D in an interview this week.
"I thought that was very cool," he said at Tokyo headquarters.
Most 3-D releases so far have been animation films but the feature is gradually spreading to other genres, such as the soon-to-be-released sci-fi epic "Avatar."
Stringer said sports was definitely one area 3-D could display its strengths.
He also said he wanted to see "thoughtful" movies someday being made in 3-D. He ruled out Michael Jackson videos and the next "Spider-Man" movie as 3-D possibilities.
For now, 3-D video of the World Cup in South Africa won't be shown in TV broadcast for homes, according to Sony, which makes Bravia TVs, Walkman portable players and PlayStation 3 game consoles.
They will be shown at Sony booths at FIFA events in Berlin, London, Mexico City, Paris, Rio de Janeiro, Rome and Sydney in June and July. Highlights will be shown in Sony showrooms, and a video version will be sold through Sony Pictures.
"It's a great opportunity to get people to experience 3-D firsthand," said Sony spokesman Atsuo Omagari.

Status of japanese banks

Investors found refuge in reassurance by the United Arab Emirates central bank that it would support local and international banks exposed to Dubai debt.
Japan's Nikkei 225 closed up 2.9%, Australia's S&P/ASX 200 rose 2.8% and South Korea's Kospi Composite climbed 2%.
Hong Kong's Hang Seng Index added 3.3% and China's Shanghai Composite tacked on 3.2%.
Bucking the trend, Singapore's Straits Times Index was down 0.8% in late trading, playing some catchup on the downside after being closed for a holiday Friday.
"Across Asia, regional markets have rebounded strongly this Monday as the United Arab Emirates' central bank pledged support for the country's local and foreign banks, in turn easing fears of contagion," said Ben Potter, a research analyst at IG Markets in Melbourne, in a note to clients.
Also, traders have come to realize that "the Dubai event, while serious, is not the beginning of a new phase of debt deflation greater than the real-estate crisis that started in 2007," said Richard Hastings, a consumer strategist at Global Hunter Securities.
Most financial stocks in the region advanced, rebounding from Friday's selloff.
In Hong Kong, HSBC /quotes/comstock/22h!e:5 (HK:5 91.65, +0.95, +1.05%) rose 4.3% after ending Friday down 7.6%. In Australia, National Australia Bank /quotes/comstock/22x!e:nab (AU:NAB 28.55, -0.07, -0.24%) added 6%, while in Japan, Mitsubishi UFJ Financial Group /quotes/comstock/!8306 (JP:8306 482.00, +38.00, +8.56%) rose 8.6%. In South Korea, Woori Finance Holdings /quotes/comstock/13*!wf/quotes/nls/wf (WF 36.99, +1.99, +5.69%) surged 9.4% after dropping nearly 16% over Thursday and Friday combined.
"Investors are figuring out that ... Asian bankers/brokers have very little exposure to the $60 billion default" in Dubai, said Tony Sagami, editor of Asia Stock Alert.
Bucking the trend, Singapore's banks lost ground in late-afternoon trading, led by a 2.3% decline in DBS Group Holdings, /quotes/comstock/22i!e:d05 (SG:D05 14.36, +0.04, +0.28%) on concerns the lender may have the most exposure to Dubai's debt woes.
"Among Singapore banks, DBS is the only bank known to have direct lending exposure to the Middle East," CIMB said in a report after downgrading the stock to underperform from neutral.
Greg Gibbs, currency strategist at RBS in Sydney, said: "It is pretty clear that some kind of debt restructuring for Dubai World will occur, and banks and other lenders to the government-related entity will be asked to take a haircut on these assets."
Even so, analysts at Macquarie said in a research note that their assessment of East Asia's own exposure through key sectors such as banks, construction and real estate suggests "minimal cause for concern."
Shares of real-estate operator Sumitomo Realty & Development /quotes/comstock/!8830 (JP:8830 1,495, +125.00, +9.12%) jumped 9.1% in Tokyo. Real-estate developers Gemdale Corp. /quotes/comstock/28c!e:600383 (CN:600383 15.47, -0.01, -0.06%) climbed 2.7% and Poly Real Estate Co. /quotes/comstock/28c!e:600048 (CN:600048 24.85, 0.00, 0.00%) rose 2.2% in Shanghai.
Chinese shares saw added support after Beijing late Friday said it will maintain an active fiscal policy and moderately loose monetary policy next year, allaying investor concerns over a tightening policy bias.
This "may indicate that Beijing wants to boost investor sentiment, especially amid continued uncertainty in the global economy," said Guosen Securities analyst Wang Junqing

Everything of google

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Uro rallied versuspound

The euro may have fallen against the greenback, but the currency rallied versus the rest of the majors, particularly against the British pound. European data was surprisingly strong and indicated that the region may have one of the strongest economies around. According to the IFO survey, German business confidence rose to a 13-month high of 91.9 in October from 91.3, adding to indications that growth is improving in Europe’s largest economy. The news comes a week after the German government raised forecasts for GDP, as they predict the economy will grow by 1.2 percent in 2010 after contracting 5 percent in 2009. Furthermore, the purchasing managers' index (PMI) for the manufacturing sector rose above 50 in October - signaling an expansion in activity - for the first time since May 2008. Meanwhile, PMI for the services sector signaled expansion for the second straight month by rising to match the February 2008 high of 52.3 from 50.9. Ultimately, this pushed composite PMI up to a nearly 2-year high of 53.0 from 51.1, suggesting the Euro-zone is closer to recovery than many other places.

Rate hikes by RBA

The Australian dollar was one of the weakest majors on Friday as broad US dollar strength and declines in equities weighed on the carry trade currency. The Aussie will face high event risk next Tuesday, when data is forecasted to show that Australia's headline consumer price index rose 0.9 percent during Q3, bringing the annual rate down to a 10-year low of 1.2 percent from 1.5 percent. However, the Reserve Bank of Australia’s core measures are projected to hold at more robust levels on an annual basis, with the trimmed mean anticipated to slip to 3.2 percent from 3.6 percent and the weighted median forecasted to slip to 3.7 percent from 4.2 percent. Such moves would tell us that prices for volatile items like energy are responsible for the steep drop in headline consumer prices, and unless the core measures plunge, the markets are likely to remain in favor of additional rate hikes by the Reserve Bank of Australia. In fact, Credit Suisse overnight index swaps are full pricing in a 25 basis point increase by the RBA during their next meeting on November 2, and stronger-than-expected consumer prices could further this sentiment and send the Australian dollar higher.

About British pound

By Friday’s close, the British pound fell more than 1 percent against the Japanese yen and nearly 2 percent versus the US dollar and euro after the release of a deeply disappointing Q3 report. Contrary to expectations, the UK did not emerge from recession, and instead, the economy contracted for the sixth straight quarter, this time by -0.4 percent. Though this is marginally better than the reading of -0.6 percent we saw in Q2, the index missed forecasts for a 0.2 percent increase. Likewise, the annual rate of growth edged up to -5.2 percent from -5.5 percent, but fell short of expectations for a move to -4.6 percent. A breakdown of the report shows that nearly every UK business sector remained in recession, as the services industry component fell by 0.2 percent while the production industry component tumbled 0.7 percent. The release of GDP led to a sharp reaction from the British pound as Credit Suisse overnight index swaps shifted to price in a 10 percent chance of a 25 basis point cut by the BOE during their next meeting, while expectations for rate increases over the next 12 months have fallen to 88.1 basis points from 93.4 basis points.

All told, the news will put much more pressure on the BOE when they meet again in November. In the minutes from the central bank’s last policy meeting, we learned that their quantitative easing (QE) program would take another month to complete. We also learned that the "forecast round ahead of the November Inflation Report would provide an opportunity to assess more fully how the medium-term outlook for activity and inflation had evolved since August," and if the latest economic data has any bearing on the MPC’s bias, they may have the justification to expand their target level of asset purchases

US consumer sntiment

Consumer sentiment in the U.S. unexpectedly weakened in September, with the Conference Board’s index slipping to 53.1 from a revised reading of 54.5 in August, and households may turn increasingly pessimistic towards the economy over the coming months as they continue to face a weakening labor market paired with tightening credit conditions. The breakdown of the report showed households held a weakened outlook for employment, with the index measuring present conditions slipping to 227 from 25.4 in the previous month, while the gauge for future expectations fell back to 73.3 from 73.8. The data reinforces a feeble outlook for personal spending as households ramp up their temperament to save, and the slump in domestic demands may raise the risks for a protracted recovery as private-sector consumption accounts for more than two-thirds of the economy.

Ways to reduce event risk

Consumer sentiment in the U.S. is anticipated to rebound in October, with economists forecasting the Conference Board’s index to rise to 54.0 after unexpectedly falling in the previous month, and the data is likely to spark volatility in the greenback as investors weigh the outlook for future growth. However, the University of Michigan confidence index foreshadowed a weakening outlook for household confidence as the index slipped more-than-expected to 69.4 from 75.5 in September, and the ongoing weakness in the labor market paired with the slump in wage growth may drag on the economic outlook as businesses continue to scale back on production and employment. A report by the Labor Department showed non-farm payrolls fell 263K in September amid expectations for a 175K decline, with the annual rate of unemployment rising to a 26-year high of 9.8%, and conditions are likely to get worse as policy makers see a risk for the jobless rate to reach 10% going into the following year. At the same time, consumer credit plummeted another 5.8% in August to mark the seventh consecutive monthly decline, with retail sales falling 1.5% in September, and households may scale back their willing to spending over the coming months as the Federal Reserve continues to see a risk for a protracted recovery. Nevertheless, the Fed’s Beige Book said that “gains in economic activity generally outnumbered declines,” with policy makers seeing “stabilization or modest improvements” in most districts, but went onto say that “virtually every reference to improvement was qualified as either small or scattered.” Moreover, the central bank said that employment remained “weak or mixed” in most regions as job losses intensified in 23 of the 50 states, and the FOMC is likely to maintain the benchmark interest rate at the record-low throughout the second-half of the year in an effort to foster a sustainable recovery. As a result, a dismal confidence report is likely to drag on the exchange rate as policy makers hold a cautious outlook for the economy, and the greenback may continue to underperform over the coming months as investors scale back long-term expectations for higher borrowing costs in the U.S.

Trading the given event risk favors a bullish forecast for the reserve currency as market participants anticipate household spending to improve in October, and price action following the release could set the stage for a short euro-dollar trade as policy makers see the economy emerging from the worst recession since the Great Depression. Therefore, if the index rises to 54.0 or higher, we will look for a red, five-minute candle following the release to confirm a sell entry on two-lots of EUR/USD. Once these conditions are met, we will set our initial stop at the nearby swing high or a reasonable distance, and this risk will establish our first objective. Our second target will be based on discretion, and we will move the stop on the second lot to breakeven if the first trade reaches its target in order to preserve our profits.

On the other hand, fears of a slower recovery paired with the rise in unemployment may lead consumers to hold a weakened outlook for the economy, and the unexpected decline during the previous month has left the door open for a dismal confidence report. As a result, if the index falls back to 51.0 or lower, we will favor a bearish outlook for the greenback, and will follow the same setup for a long euro-dollar trade as the short position mentioned above, just in reverse.

Gold price colds

Spot Gold - $1055.40 // $2.00 // 0.19%

Gold may have closed its fourth consecutive weekly advance; but the pace on the rally to record highs has certainly cooled. The commodity has yet to significantly retrace its surge over the past two weeks and yet neither have we seen a new record high after the $1,070.80 benchmark was set back on the 14th. A steady, rising trend channel calls up congestion at the end of a very prominent bull run. This is the same general chart pattern that can be seen in the Dow Jones Industrial Average and (the inverse of) the US dollar. From this, it is clear that all three are responding to the same driver: sentiment. Should optimism give way, the lack of any yield income to offset the potential capital losses will mean a sharp correction through profit taking. At these levels, demand is largely speculative. According to the COT figures, commercial positioning is 383,718 short contracts to 86,225 long. In contrast, non-commercial long positions have hit a record high of 286,864 contracts.

Crude oil rate

Crude Oil (WTI) - $80.50 // -$0.69 // -0.85%

Week-over-week, oil has offered another strong performance. The key commodity has closed its fourth consecutive bullish week, extending the initial surge sparked last week, pushing to new 12-month highs. Taking a more granular approach to the market’s health however, doubts and suspicions have started to bear down on the steady rally. We can see the hesitation in carry prices to new highs with the past two days worth of price action where congestion below the recent high of $82 and the trend low $80. A break is inevitable; but direction is up in the air.

The fundamental bearing on the oil has not been very clear lately. If underlying supply and demand were the only facet of price determination, crude would likely have collapse these past two weeks rather than rally to new highs. This past week’s US Energy Department inventory figures reveal the glut of supply that has refiners reducing imports. Through the week ending October 16th, crude stockpiles rose 1.31 million barrel to 339.1 million – 9.4 percent above the average levels for this period over the past five years. Further down the refinement line, gasoline supplies unexpectedly contracted 2.3 million barrels to 8.95 million; yet supplies are still significantly higher than the five year average. If demand were robust enough to absorb excess inventories while production levels continued unchanged, there would be a reasonable argument to be made for further appreciation. However, demand for fuel actually dropped 1.4 percent last week and consumption has largely struggled to recover despite the consensus that an economic recovery is underway.

So, while supply and demand imbalances will be a background concern, the true catalyst for price action will almost certainly be investors’ taste for risk and the pace of the US dollar. With the broader market recovery, confidence has led funds not only to yield bearing assets but also to those that can only provide capital gains. An optimistic outlook for steadily advancing markets is the foundation to stability. Should risk appetite falter, profit taking and a fundamental equilibrium set well below current price would act to accelerate crude’s plunge.

RBNZ Dollar decision

The Reserve Bank of New Zealand (RBNZ) is still anticipated to leave the Official Cash Rate target unchanged for the fourth straight meeting at 2.50 percent. In RBNZ Governor Alan Bollard's last policy statement on September 10, he sounded extremely cautious on the outlook for the economy, especially because the strength of the New Zealand dollar had created additional risks. Where the New Zealand dollar ends the trading day will likely have to do with the status of one statement though: the final portion. We also saw in the last policy statement that the RBNZ maintained that it was “appropriate to continue to provide substantial monetary policy stimulus to the economy” and that they “continue to expect to keep the OCR at or below the current level through until the latter part of 2010.” However, the RBNZ announced on October 14 that it would begin "removing and consolidating some of the temporary emergency liquidity facilities put in place during the financial crisis in 2008" as conditions had improved significantly, suggesting potential for a more hawkish tone. Overall, if the RBNZ eliminates the phrase noting that they could still lower rates, the New Zealand dollar is likely to surge in anticipation of rate hikes down the line. On the other hand, if the RBNZ maintains their dovish-neutral tone, the currency could dive as interest rate expectations would take a hit.

Sentiment overall

Sentiment was strongly posstive mainly driven by optimism fueled by the better than expected US Retail sales but mainly due to better than expected corporate earnings reports which continue to stream in and surprise largely for the better. The Dow was at the centre edging above the 10,000 milestone thus marking a 10 Years flat trend for the index gaining virtually zero for the decade. The Dow ended the day with a 1.47% gain trading at 10,015, The S&P was up 1.75% and in Europe the FTSE advanced 1.98% in response to the positive sentiment and the UK unemployment figure which is steady at 7.9%.In Frankfurt the DAX was higher by 2.45% and the Paris the CAC40 rose 2.14%.In the FX arena the broad Dollar selloff continued amid strong risk appetite with the Euro rising to 1.495$ just shy of the 1.5 mark and the CAD at the 1.2 zone with rising bets it is heading for parity versus the Greenback. The FOMC minuets released later in the day revealed some Fed members were in favor of additional or an expansion of the Mortgage related Quantitative Easing pointing more Dollar printing from the Fed is not yet out of the horizon and a rate hike is even more unlikely. Markets in reaction to the news pushed the Dollar lower as inventors start to asses Dollar depreciation as deeper than anticipated. In the commodities arena Gold continued to hover slightly under the record high trading at the 1060$ zone, Silver continued to confidently move to settle above the 18$ and oil pushed close to 76$ with the 80$ at its ai

High Rated pound

The British pound gained versus its main rivals the euro and the U.S. dollar, after a day of decisions in the Bank of England in which the asset-purchase program was voted to be held unanimously, together with statements published in newspapers that added attractiveness for the Great Britain currency.

Brazilian Real Rebounds

The Brazilian real posted sharp gains today after several negative sessions on speculations that the country’s economic strength will induce central bankers to raise interest rates in the country, attracting more foreign investors.

Strategy of Carry trade

Carry Trade As A strategy
For many years, money managers and banks have utilized the inflow and outflow of yield to collect consistent income in times of low volatility and high risk appetite. Holding only one or two currency pairs would invite considerable idiosyncratic risk (or risk related to those few pairs held); so traders create portfolios of various carry trade pairs to diversify risk from any single pair and isolate exposure to demand for yield. However, even with risk diversified away from any one pair, a carry basket is still exposed to those conditions that render this yield seeking strategy undesirable, such as: high volatility, small interest rate differentials or a general aversion to risk. Therefore, the carry trade will consistently collect an interest income, but there are still situation when the carry trade can face large drawdowns in certain market conditions. As such, a trader needs to decide when it is time to underweight or overweight their carry trade exposure.

Carry Trade

What is a Carry Trade
All that is needed to understand the carry trade concept is a basic knowledge of foreign exchange and interest rates differentials. Each currency has a different interest rate attached to it determined partly by policy authorities and partly by market demand. When taking a foreign exchange position a trader holds long position one currency and short position in another. Each day, the trader will collect the interest on the long side of their trade and pay the interest on the short side. If the interest rate on the purchased currency is higher than that of the sold currency, the result is a net inflow of interest. If the sold currency’s interest rate is greater than the purchased currency’s rate, the trader must pay the net interest.

Australian dollar

How are Rate Expectations calculated: Forecasting rate decisions is notoriously speculative, yet the market is typically very efficient at predicting rate movements (and many economists and analysts even believe market prices influence policy decisions). To take advantage of the collective wisdom of the market in forecasting rate decisions, we will use a combination of long and short-term, risk-free interest rate assets to determine the cumulative movement the Reserve Bank of Australia (RBA) will make over the coming 12 months. We have chosen the RBA as the Australian dollar is one of few currencies, still considered a high yielders. To read this chart, any positive number represents an expected firming in the Australian benchmark lending rate over the coming year with each point representing one basis point change. When rate expectations rise, the carry differential is expected to increase and carry trades return improves.

US and Japanese benchmark

What are Risk Reversals:

Risk reversals are the difference in volatility between similar (in expiration and relative strike levels) FX calls and put options. The measurement is calculated by finding the difference between the implied volatility of a call with a 25 Delta and a put with a 25 Delta. When Risk Reversals are skewed to the downside, it suggests volatility and therefore demand is greater for puts than for calls and traders are expecting the pair to fall; and visa versa.

We use risk reversals on USDJPY as global interest are bottoming after having fallen substantially over the past year or more. Both the US and Japanese benchmark lending rates are near zero and expected to remain there until at least the middle of 2010. This attributes level of stability to this pairs options that better allows it to follow investment trends. When Risk Reversals move to a negative extreme, it typically reflects a demand for safety of funds - an unfavorable condition for carry

DailyFX Volatility Index

What is the DailyFX Volatility Index: The DailyFX Volatility Index measures the general level of volatility in the currency market. The index is a composite of the implied volatility in options underlying a basket of currencies. Our basket is equally weighed and composed of some of the most liquid currency pairs in the Foreign exchange market. In reading this graph, whenever the DailyFX Volatility Index rises, it suggests traders expect the currency market to be more active in the coming days and weeks. Since carry trades underperform when volatility is high (due to the threat of capital losses that may overwhelm carry income), a rise in volatility is unfavorable for the strategy.

Globe finance

Emboldened by new highs and early signs of rising yields, risk appetite has pushed to a new high for the year. However, the progress made week-over-week was very limited. Once again, investors and traders have reached the point where caution and skepticism has stalled the steady appreciation that the markets have otherwise carried on with since February. Perhaps we have come to the next tipping point in speculative interests where stable fundamentals are needed to draw in the next wave of funds to feed the capital gains of those that have already taken the plunge. And if there were ever a single piece of event risk that could confirm or rebuff forecasts for a stable, bullish market and a revival of yields; it would be the quarterly growth data. Heading into this heavy round of economic data, we can see the hesitation in price action. For the currency market, the dollar may still be on its bearish path; but its pace of descent has clearly cooled. EURUSD is arguably the benchmark for the pace and direction of the top funding currency candidate; but AUDUSD is better for measuring market sentiment. Despite being spurred on by the RBA’s aggressively hawkish monetary policy stance, the pair has stalled this past week at 0.93. This is unusual considering the fundamental contrast seen between the US and Australian dollars. Even the more accessible and popular equities market is showing indecision. The benchmark Dow Jones Industrial Average has loosely been confined to a 10,100 to 9,900 range since last Wednesday. It seems, regardless of what direction sentiment eventually takes, we will soon find some resolution on direction.

In the past weeks and months, we have seen multiple instances of congestion after a leg of bullish price action; and inevitably, optimism picks up where it left off. The is the nature of any market. A trend will eventually grow exhausted; and that offers the opportunity for continuation or a reversal. The speculative rally that the markets have been able to run for most of the year is still running well beyond the reasonable limits of the fundamental backdrop; but a few developments may have actually furthered confidence and ensured the next round of sidelined capital finds its way into the speculative arena. The outlook for yield has taken a notable turn for the better over the past week. The RBA took another broad step into hawkish territory recently when Governor Glenn Stevens said that he would tolerate further appreciation in the Aussie dollar in his efforts to rein in monetary policy. And, though this was the most unabashedly hike-oriented language to come out of the central bank circles; we have seen a subtle shift amongst many authorities. The BoE is expected to announce its intentions to take a break from its quantitative easing efforts at its next rate decision in November and the Fed is testing reverse repos in the money markets as a way to remove liquidity from the market without collapsing bank balance sheets. The next fundamental milestone is the third quarter GDP numbers. China has already confirmed an impressive pace for the period; but the United Kingdom’s reading will be the first for an industrialized country. What’s more, since the UK is considered the underperformer of the G-20, it could define the lowball estimate for global growth. Next week, the stakes are raised with the activity report for the US.

Dollar Ratings

The U.S. dollar rose after extending once again its record high for 2009 after China missed slightly its quarterly growth forecasts, and economic stimulus in the country will continue for a certain amount of time, suggesting the country is not so recovered as previous expected.

Brazilian news

The Brazilian real posted sharp gains today after several negative sessions on speculations that the country’s economic strength will induce central bankers to raise interest rates in the country, attracting more foreign investors.

Forex News Trader

How do the majority of profitable Forex traders truly profit in the FX market? One way… they trade the news!

Forex News Trader was developed to give traders the edge they need to learn how to trade based on economic news events from around the world. The same edge the institutions use to make hundreds of millions and even billions of dollars in profit each year.

Forex News Trading will provide you with the information you need to give you a true insider’s understanding of the Forex markets. You will feel confident in your trading, and never doubt your trades again.

Does this mean you will win every trade? No, of course not, but armed with the knowledge Forex News Trader will provide you, you will never be afraid to take that next trade – as the odds will now be tipped in your favor.

Each and every month there are a tremendous number of news releases for the Off Exchange Retail Foreign Currency Market (FOREX). Many of these events and announcements move the markets considerably. But how do you properly capitalize on these moves? Get it wrong and you could be wiped out. Get it right and you can be in a small group of trading elite, consistently pulling pips out of the market each and every week.

One-sided market

A Closer Look at Market Conditions

The bullish trend behind the market’s most high profile benchmarks is still intact; but the progress these securities are making is growing strained. The Dow Jones Industrial Average produced a new high today at 10,119.47; but the session would actually end the day in the red and maintain congestion that has been building for a week. It seems the 3Q earnings session is finding a more skeptical crowd this time around as the realities of medium-term growth set in. A moderate recovery also has its tempering effects on commodities. Crude set a new 14 months high today; but supplies are ballooning and demand is shrinking with limited expansion on the horizon.

For the most part, fear and volatility within the market continues to deflate. The standard measures of activity are at or near yearly lows and the steady influx of capital is padding the winning sense of capital returns. However, this complacency suggests the makings of trouble. With fear gauges steadily declining and positioning measures showing an increasingly one-sided market (behind bulls), the imbalance will eventually have to be corrected. When the profit taking starts, it will likely be relatively staid at first; but the sheer interest in assets that bear no interest, just the hope of capital return, could easily incite panic of evaporating profits. This reversal may be closer than many expect.

Capitalism

The Financial and Capital Markets

Optimism among the world’s investors continues to rise – well, the influx of capital from otherwise safe haven assets is keeping the markets buoyant at least. It is important to differentiate between a true measure of confidence and a natural adaptation of the market. The ICI’s Money Market Funds Assets index dropped to its lowest level in a year; but even after this steady, nine-month decline the gauge still shows $3.402 trillion on the sidelines. Much of this capital will eventually find its way back into the speculative space; but if it hasn’t been rediversified yet then those managing the funds are likely skeptical of the aggressive bull run we have experienced so far this year and are awaiting a true return of yield income. It is not a stretch to assume a high percentage of the capital that has migrated back to equities and other risky assets belongs to speculators and traders that are looking to take advantage of the impressive capital gains since February. If this is the case, then a correction could easily encourage a broad wave of profit-taking. A reversal is just a matter of time; but depending on when it takes place, the impact can be very different. Given enough time for dedicated capital to return to stabilize the market, the pullback could be mild. Alternatively, a turn when speculative funds define the market could trigger a plunge.

Financial Looks

A Closer Look at Financial and Consumer Conditions

Speculators and investors are still finding their way back into the financial markets; but there are still serious doubts as to the stability that exists for these eager market participants. The promise of capital gain is still the primary draw for most as the more stable sources of income in bond yields and equity dividends are still a long ways off. Nonetheless, the capital turnover has revived liquidity to the market and bolstered confidence – perhaps long enough for economic growth to encourage capital investment and more permanent investments. However, all it would take to bring the markets crashing down is a round of profit taking or an unfavorable reaction to warnings that the government is ready to remove the stimulus safety net.

Like the rest of the world, the United States economy is expected to report positive growth in the second half of this year and really see its recovery get underway in 2010 and beyond. However, as currency traders know all too well, this is a relative game; and the strength of the dollar depends on the pace of the US recovery compared to that of its major counterparts. We will receive a definitive update on the nation’s health next week with the advance reading of 3Q GDP. In the meantime, the outlook is certainly measured. The Fed’s Beige Book offered reason for concern. While the general consensus was that many areas saw “stabilization” and “modest improvement,” labor markets were still week, there was no wage growth and credit quality was eroding.

American Banking

The Economy and the Credit Market

Though the dollar continues to push to new 14-month lows, the pace of this descent has cooled. However, this should not be considered a sign that conditions are actually improving for the US economy or its currency; because that would ignore the underlying fundamental current behind this benchmark – risk appetite. It has been said ad nauseam in the past months that the dollar’s primary driver is general market sentiment; and that reality has not changed. In fact, the correlation between currency and investor opinion may have actually intensified over the past week as the US dollar is forced more surely into its role of top funding currency while risk appetite maintains its bullish trajectory. Over the past few weeks, we have seen a notable pickup in the hawkish bearing of some of the Fed’s more prominent peers, which in turn leaves the American authority in deeper relief with its steadfast outlook for a mid-2010 return to tightening. Among the most notable central banks ahead of the curve are the RBA, RBNZ, ECB and perhaps even the BoE. While the Bank of England is still a long ways away from the milestone hike, the market’s perception of a hawkish turn on QE has set the tone. If the dollar has any hope of recovery in the near-term, risk appetite will have to plunge or US market rates inflate.