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Yen Declines to Two-Week Low on Speculation Recession Is Easing

The yen declined to a two-week low against the euro on speculation European and U.S. reports this week will show the global recession is easing, damping demand for Japan’s currency as a refuge. The yen fell against all of its 16 most-active counterparts on prospects U.S. companies reporting results this week will announce stronger earnings, spurring investors to buy higher- yield assets. The dollar fell to the lowest in two weeks versus the euro on speculation commercial lender CIT Group Inc. is moving closer to avoiding bankruptcy, reducing the appeal of safer assets such as the U.S. currency. The South Korean won led Asian currencies higher as regional stocks rose for a fifth day.
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“A lot of indicators are showing improvement,” said Khoon Goh, a senior economist at ANZ National Bank Ltd. in Wellington. “The earnings reporting season in the U.S. has gotten off to a fairly solid start. If that trend continues, we’ll see risk appetite to continue to come back. We can expect both the Aussie and the kiwi to outperform the yen.” The yen dropped to 134.18 versus the euro as of 12:15 p.m. in Tokyo from 132.85 in New York last week, the lowest level since July 6. Japan’s currency slid to 94.66 per dollar from 94.19, after slipping to 94.68, the weakest since July 8. The dollar slid to $1.4171 per euro from $1.4102. It earlier declined to $1.4181, the lowest since July 1.
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Asian Currencies
Asian currencies strengthened as regional shares rose. The MSCI Asia-Pacific excluding Japan Index of shares advanced 2.2 percent. South Korea’s won rose 0.6 percent to 1,251.40 per dollar and Indonesia’s rupiah climbed 1.5 percent to 10,030. Commodity currencies also gained. The New Zealand dollar strengthened 1.2 percent to 61.46 yen and the Australian dollar gained 1.1 percent to 76.44 yen. “The seeming stability in equities is encouraging demand for higher-yielding commodity currencies,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “In fact, it would not surprise to see these currencies push higher this week.” Foreign-exchange movements may be volatile in Asia as a national holiday in Japan reduces liquidity, said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. The dollar declined versus 13 of the 16 major currencies before the Conference Board releases its index of U.S. leading economic indicators. The index rose 0.5 percent in June, after a 1.2 percent increase in May, according to a Bloomberg News survey of economists. The gauge points to the direction of the world’s largest economy over the next three to six months. French consumer spending gained 0.3 percent in June from the previous month, when it fell 0.2 percent a separate Bloomberg survey showed. The Paris-based national statistics office will publish the report on July 22.
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‘Encouraging Demand’
The yen and dollar declined before U.S. companies such as State Street Corp. disclose earnings this week. Standard & Poor’s 500 firms that have reported second-quarter results since July 8 topped estimates by 16 percent, according to data compiled by Bloomberg. Thirty out of 38 beat projections. The Dollar Index fell toward a six-week low on speculation New York-based CIT Group will reach a deal with bondholders to secure $3 billion in financing and avoid collapse. The company said last week it probably would not get a second federal bailout following a $2.33 billion loan in December. CIT’s board is scheduled to meet later today to discuss the bridge-financing offer, which would give the company time to restructure its debt outside of bankruptcy, according to a person briefed on the firm’s deliberations.

‘Rally in Risk’
“The news has led to a rally in risk, which may continue in Asia trading today,” analysts led by David Woo, London-based global head of foreign-exchange strategy at Barclays Capital, wrote in a research note today. “We will remain long carry for the week ahead,” referring to bets on higher-yielding currencies. Futures traders increased bets to the highest in five months that the yen will strengthen against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed on July 17. The difference in the number of wagers by hedge funds and other large speculators on a gain in the yen compared with those on a drop -- so-called net longs -- reached 33,567 on July 14, the most since February, versus net longs of 17,117 a week earlier. The figures are sometimes used as a contrary indicator. The Dollar Index, which the ICE uses to track the currency against those of six major U.S. trading partners, fell 0.2 percent to 79.216 today. The index dropped to 79.131 on July 16, the lowest since June 4.
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Swiss Central Bank
Switzerland’s central bankers are breaking the will of foreign-exchange traders with their first solo currency-market interventions since 1992. Less than a month after betting the Swiss National Bank’s franc sales would fail to halt its rise, investors are the least bullish since 2007, options prices show. This year’s five most- accurate franc forecasters in Bloomberg surveys see the currency trading between 1.50 and 1.55 per euro by Dec. 31, the range it has been in since after the bank started intervening March 12. “The SNB has won its battles, and they’ve given no indication that they are ready to end this policy,” said Jessica Hoversen, an analyst in Chicago for futures broker MF Global Ltd. She advises buying euros and selling the franc when it approaches the 200-day moving average. The currency traded at 1.5211 per euro today; the 200-day moving average was 1.5104.

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Source: Bloomberg

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$3.23 billion deficit recorded in fiscal year 2009

KARACHI: The country registered a deficit of $3.23 billion in services trade in the fiscal year 2008-09 mainly due to high payments on account of transportation, travel and financial services. However, overall services sector trade performance was sufficient as imports and deficit declined, while exports posted a massive increase during the fiscal year. The country s services sector deficit stood at 3.231 billion dollars during 2008-09, as overall services exports amounted to 4.043 billion dollars as against imports of 7.274 billion dollars. However, services sector deficit in fiscal year 2009 was 50 percent lower than last fiscal year s, in which country posted deficit of 6.457 billion dollars.
Overall exports of services sector performed well and witnessed a growth of 13 percent, while imports showed a decline of 28 percent. Services sector exports mounted to 4.043 billion dollars in the year as against exports of 3.589 billion dollars in fiscal year 2008, depicting an increase of 454 million dollars. Imports of services sector registered a decline of 2.772 billion dollars at 7.274 billion dollars against 10.046 billion dollars in fiscal year 2008. Meanwhile, services deficit in June 2009 stood at 251 million dollars with 326 million dollars exports and 577 million dollars imports. The country earned 1.283 billion dollars on account of transportation services, 222 million dollars from travel, 196 million dollars in communication sector, 59 million dollars in insurance and 63 million dollars from financial sector in fiscal year 2009.
Payments for travel stood at 3.527 billion dollars, communication 144 million dollars, construction 81 million dollars, insurance 127 million dollars, financial services 168 million dollars and computer and information services payment reached 122 million dollars during the period. Similarly, payments of royalties and licence fees stood at 93 million dollars, government services 380 million dollars and cultural services payment 3 million dollars. Economists said heavy payments of transportation, travel, insurance, technical fee, royalties and government sector were the major contributors in the services trade deficit, which could be controlled with some steps. However, they believed that rising trend in the services exports and decline in imports would further reduce the services sector deficit in the current fiscal year. They said that decline in services sector deficit had also helped to curb the rising current account deficit.
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Courtesy: Business Recorder

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Transparent petroleum pricing formula unveiled

Highlights - Business News

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Advisor to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain has said that a transparent mechanism is in place to determine oil prices and that the government is not earning through hidden taxes on the petroleum products.
He maintained that the sale price of petrol stands at Rs 59.59 per litre, high speed diesel Rs 62.73 per litre and kerosene oil at Rs 56.94 per litre following the imposition of 16 per cent general tax on imported crude oil, adding that this pricing formula would be implemented from August 1, subject to stability in the prices of the imported oil. Unveiling the petroleum products pricing formula here at a Press conference, Dr Asim Hussain said it was for the first time that pricing formula had been made public to keep the people abreast with the process for determining petroleum prices.
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Under this formula, determination of ex-refinery prices depends on import price of crude oil, he added. The prevailing import price of petrol stood at Rs 33.95, high-speed diesel at Rs 36.05 and kerosene oil at Rs 36.72 per litre including consignment charges on crude oil, he pointed out. The government had devised the methodology to restrict profits of oil marketing companies and dealers to a proper level. Under this method four per cent profit has been fixed for oil marketing companies on overall prices of petrol, high octane, kerosene oil and light diesel oil. In this way the minimum profit comes to Rs 1.09 per litre and maximum profit Rs 1.80 per litre. Profit at the rate of Rs 1.35 per litre had been fixed against high-speed diesel. The per litre profit for dealers on petrol and high octane had been fixed at the rate of five per cent, he indicated. This way minimum profit has been set Rs 1.36 per litre and maximum profit Rs 2.25 per litre, he added. Dealers would be able to earn profit at the rate of Rs 1.40 per litre on high-speed diesel. The government has imposed Petroleum Development Levy (PDL) after the determination of profit of oil marketing companies and dealers on the basis of ex-refinery price of petroleum products, he pointed out. PDL has been slapped at the rate of Rs 10 per litre on petrol, Rs 8 per litre on high-speed diesel, Rs 14 per litre on high octane, Rs 6 per litre on kerosene oil and Rs 3 per litre on light diesel oil.

Courtesy: The Nation

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