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The franc showed mixed trading versus other major currencies during early North American session on Monday. The franc rose to a multi-day high against the pound, eased from a 6-day high against the yen and a 10-day high against the dollar and recovered from near a 4-week low versus the euro.
Against the Japanese currency, the Swiss franc eased slightly from a 6-day high of 88.37 hit at 7:05 am ET. Currently, the franc-yen pair is worth 88.25, compared to 87.42 hit at last week's close.
The franc rose to a 5-day high of 1.6281 versus the pound at 8:45 am ET, compared to 1.6396 hit at last week's close. As of now, the franc is quoted at 1.6301 against the pound.
The franc that rose to a 10-day high of 1.0553 against the dollar around 1:00 am ET eased thereafter. The franc is now trading at 1.0590 against the dollar. This level may be compared last week's close of 1.0661.
The franc, which slipped to near a 4-week low of 1.4468 against the 16-nation currency at 2:25 am ET reversed its direction shortly thereafter. Currently, the franc is trading at 1.439 versus the euro, compared to previous week's close of 1.4388.
In the upcoming hours, the U.S. monthly budget statement for March has been slated for release.
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The International Monetary Fund took a major step on Monday towards a more than ten-fold increase in the size of its primary credit facility to $550 billion and also reformed the fund's standing credit arrangement into a more flexible and effective tool of crisis management.
It responds to the call by the leaders of the G20 nations to increase the financing available to the fund, by expanding the IMF's New Arrangements to Borrow or NAB, which currently stands at about $50 billion.
The NAB is supplementary to the IMF's quota-based resources and is only called upon to forestall or cope with an impairment of the international monetary system.
Thirteen new countries, including the likes of China, India, Russia and Brazil, will now contribute to the lender's NAB, in addition to the 26 predominantly developed nations.
"The expansion and enlargement of the NAB borrowing arrangements provides a very strong multilateral foundation for the fund's efforts in crisis prevention and resolution, as an essential back-stop to the fund's quota resources," said IMF managing director Dominique Strauss-Kahn.
"This will help ensure that the fund has access to adequate resources to help members that are vulnerable to financial crises."
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Thursday morning, the Federal Reserve Bank of Philadelphia released its report on regional manufacturing activity in the month of April, showing that the expansion in the manufacturing sector is continuing for the eighth consecutive month.
The Philly Fed said its index of activity in the manufacturing sector rose to 20.2 in April from 18.9 in March, with a positive reading indicating growth in the sector. With the increase, the index came in slightly above economist estimates for a reading of 20.0.
A faster pace of new orders growth contributed to the improvement in the sector, as the new orders index rose to 13.9 in April from 9.3 in March.
On the other hand, the shipments index slipped to 5.6 in April from 13.6 in the previous month, although it remained positive.
The report also showed a notable increase by the inventories increase, which rose to a positive 2.0 in April from a negative 11.0 in March, indicating a turnaround in inventories. The inventories index has now recorded positive readings in two of the last three months.
The Philly Fed also said that firms' responses continue to suggest that labor market conditions are improving, although the number of employees index slipped to 7.3 in April from 8.3 in March.
With regard to inflation, the report showed that the prices paid index rose to 42.7 in April from 38.6 in March, while the prices received index edged up to a positive 1.0 in April from a negative 0.4 in the previous month.
Looking ahead, the future general activity index fell to 44.2 in April from 52.0 in March, but it remained positive for the sixteenth consecutive month.
"Bottom line," said Peter Boockvar, equity strategist for Miller Tabak, "manufacturing remains the key source of strength in this recovery and today's data confirms that."
Earlier in the day, a report released by the New York Federal Reserve showed that conditions for New York State manufacturers improved at a rapid pace in April, with the regional index of activity in the sector rising by much more than economists had expected.
The New York Fed said its general business conditions index jumped to 31.9 in April from 22.9 in March, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting a much more modest increase to a reading of 24.0.
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Standard & Poor's lowered its 2010 growth forecast for Italy on Tuesday citing feeble demand, weak capital spending and export prospects.
The rating agency cut the growth forecast to 0.5% from a previous 0.7%, reports said. Looking ahead, S&P forecast the economy to grow 1% next year, which is half of what is seen for the Eurozone as a whole.
Feeble consumer demand on the back of falling earnings, anemic capital spending because of damaged corporate profitability and export prospects penalized by weak competitiveness are holding the economy in check, the rating agency was quoted as saying in a report that made no reference to ratings. S&P expects any return to growth in 2010 to be modest.
The Italian economy contracted 0.3% sequentially in the fourth quarter following the 0.5% growth in the third quarter, when the economy ended five quarters of negative GDP. The statistical office is due to release the preliminary estimate of first quarter GDP on May 12.
Interim forecast from the European Commission showed 0.4% growth for the Italian economy in the first three months of this year. The Paris-based Organisation for Economic Co-operation and Development said in an interim assessment recently that the economy likely grew 1.2% in the first three months of the year. The economy is forecast to expand 0.5% in the second quarter.
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Germany's Finance Minister Wolfgang Schaeuble said on Monday that the German parliament is expected to approve a bill on financial aid for Greece before May 19, when the debt-ridden country holds next debt auction.
After a meeting with parliamentary leaders, the minister said German lawmakers have signaled their basic willingness to get the bill approved to defend the stability of the euro.
He said the bill will be presented before the parliament only when Greece concludes its talks with the European Commission, the European Central Bank and the International Monetary Fund. Schaeuble expects Athens to reach in a conclusion this weekend.
Eurozone members have pledged to provide up to EUR 30 billion loan for Greece, of which Germany's contribution would be EUR 8.4 billion, the largest. Meanwhile, France pledged to provide EUR 6.3 billion from its 2010 fiscal budget. IMF's contribution is expected to be between EUR 10 billion to EUR 15 billion.
Elsewhere, German Chancellor Angela Merkel said her country is ready to provide financial assistance to Greece, if Athens takes "tough measures" for next several years to cut budget deficit.
On Sunday, Greek Finance Minister George Papaconstantinou said his country is soon expected to conclude negotiations with the IMF.
IMF Managing Director Dominique Strauss-Kahn said the Fund, the European partners, and everyone involved in the financing effort recognizes the need for speed to activate the rescue package and talks will be ended in time to meet Greece's needs.
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The average monthly total cash earnings per regular employee in Japan rose 0.8% year-over-year to JPY 275,637 in March, data from the Ministry of Health, Labor and Welfare showed Friday. That was the first annual increase in twenty-two months. In February, earnings fell by a revised 0.6%.
Overtime pay growth accelerated to 11.7% from February's 8.1% as overtime work increased in factories.
Adjusted for inflation, the average total earnings grew 2.1% year-on-year following an increase of 0.6% in February. Earnings grew for the third successive month.
On a quarterly basis, the downturn in wage eased in the first quarter. Total cash earnings in the first quarter fell just 0.1% annually, compared to the 4.1% drop in the final quarter of 2009.
BNP Paribas economist Azusa Kato said the slowdown in quarterly wage fall was due to the narrowed negative margin on scheduled earnings and rebound of non-scheduled earnings to positive growth. "Consumption is picking up due to more than just fiscal stimulus, as household sentiment is improving because the worst seems to be over for both employment employee wages," the economist said.
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Asia-Pacific nations should employ capital controls to moderate short-term capital inflows that created asset bubbles and inflationary pressures in the region's developing countries, a UN agency said Thursday.
The United Nations Economic and Social Commission for Asia and the Pacific, or ESCAP, also urged governments to increase their social spending to consolidate the region's stronger-than-anticipated economic rebound.
"Governments must embrace this opportunity to secure the gains of the economic rebound by investing in social programs that directly benefit people hardest hit by the crisis," Noeleen Heyzer, UN Under-Secretary-General and Executive Secretary of the ESCAP said.
The Economic and Social Survey of Asia and the Pacific 2010, an annual publication of ESCAP, points out that while monetary tightening may be necessary to rein in inflationary pressures, policy makers must be cautious about withdrawing fiscal stimulus packages, as an early exit would disrupt the fledgling recovery process.
According to the Survey, even at the height of this crisis, Asia and the Pacific was still the fastest growing region in the world, supported mostly by fiscal stimulus packages adopted by the region's biggest economies. The Survey finds that the outlook for 2010 has improved significantly, with Asia-Pacific region's developing economies forecast to grow by 7%, led by China 9.5%, and India 8.3%.
The Survey states that the governments have to re-balance the region with greater regional consumption through increased intra-regional trade, accelerating the development of an Asia-Pacific consumer market.
The Survey also recommends that Asia and the Pacific increase efforts to create a more integrated and sustained regional market, benefiting both national economies and a larger consumer class.
Increased social spending directly supports income security for households by providing food security, education and access to health care, reducing the need by poorer families to maintain precautionary savings to protect against adversity. These families will then able to contribute more to local economies and invest more in their own development, the survey stated.
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Europe is bracing for a moderate and uneven recovery, supported by the rebound in global trade and policy stimulus, the International Monetary Fund said Tuesday.
Growth in the region is expected to pick up during 2010-11, but the traditional drivers of recovery are likely to be weaker than usual, the Washington-based global lender said in its latest regional economic outlook for Europe.
However, in the near term, growth will continue to benefit from exports, fiscal support and an upswing in inventories. Improvements in investor and consumer confidence should raise domestic demand.
Nevertheless, with unemployment expected to increase, and with lingering difficulties in the banking sector likely to restrain credit supply, consumption and investment will remain lackluster, IMF added.
Confirming its earlier prediction, the IMF said the Eurozone economy would grow 1% this year and 1.5% in 2011. Risks to this outlook is broadly balanced, it added.
Further, the Fund said emerging Europe will face a key challenge of attracting and harnessing healthy capital inflows to restore economic growth.
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In early European deals on Friday, the U.S. dollar registered strong gains against other major currencies as traders seek refuge in safe-haven currencies on the back of a decline in stock markets on debt crisis in Europe. The dollar rose to near a 1-1/2-year high against the euro, near 1-year high against the franc and more than a 1-year high against the pound.
On the flip side, the dollar pared recent gains against the yen due to across the board rallying of the Japanese currency.
In the upcoming hours, traders will be focusing on economic reports such as the U.S. advance retail sales, capacity utilization, industrial production reports- all for April, University of Michigan's preliminary consumer confidence index for May and the business inventories for March.
Friday in early European deals, the U.S. dollar inched higher against the euro. The dollar rose to near a 1-1/2- year high of 1.2434 against the euro at 5:55 am ET, from a low of 1.2577 hit at 3:00 am ET. On the upside, the dollar may target around the 1.233 level. At present, the greenback is trading at 1.244 against the euro, compared to yesterday's close of 1.2534.
Rising from a low of 1.1155 hit at 1:35 am ET, the dollar rose to near a 1-year high of 1.1268 against the franc at 5:55 am ET. The dollar-franc pair, which was worth 1.1179 at yesterday's close, is now worth 1.1244. On the upside, 1.197 is seen as the target level for the US currency.
The dollar rose to more than a 1-year high of 1.4507 against the pound at 6:00 am ET. As of now, the dollar is trading at 1.4507, compared to yesterday's close of 1.4612. If the dollar gains further, it may target the 1.400 level.
The dollar pared its recent gains against the Japanese currency. Moving down from a high of 93.10 against the yen hit at 2:40 am ET, the dollar fell to a 3-day low of 92.27 at 5:40 am ET. If the dollar weakens further, it may target around the 88.00 level. Currently, the dollar is trading at 92.37 against the yen.
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Financial markets are really out of control and there is an urgent need for effective regulation, German Finance Minister Wolfgang Schauble said in an interview to the Financial Times newspaper.
"I'm convinced the markets are really out of control," Schauble said in the interview published on Thursday. "That is why we need really effective regulation, in the sense of creating a properly functioning market mechanism."
Markets would not function properly if the risks and rewards are "completely unbalanced", the minister said. He also pointed out the need for transparency and standardization of products. "We need transparency for all market participants," he said.
Further, Schauble said over-the counter transactions must be regulated and attention must be paid to the ratio of financial transactions to the real exchange of goods and services. "They bear no relationship to each other," the minister said.
"We need new financial instruments to cope with the huge financial tasks that we face," Schauble said. "But, forgive my saying so, minimum profits of 25 per cent are simply unimaginable in the real economy. It isn't healthy."
According to the German finance minister, it is "very likely" that there would be no agreement on the adoption of a global financial transaction tax at the G20 summit in Canada in June. However, efforts would be made to see if such a tax can be implemented at a European level, he told the daily.
Late Tuesday, Germany's financial regulator BaFin banned short selling of debt securities by euro zone countries as well as shares of 10 large German financial institutions and insurance companies. Regulator also banned naked short-selling of Credit Default Swaps. The move took markets by surprise.
Germany has "a role as a locomotive", Schauble said, yet it will keep trying to reduce deficit and boost employment. Eurozone members with largest budget and trade deficits need more fundamental structural reforms to make themselves more competitive, he said. "Spain, for example, must solve its labor market problem."
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