Last Updated on Tuesday, 30 November 1999 05:00 Monday, 29 June 2009 17:20
No significant ground has been made by Pak Rupee against the Greenback , the trade start off at Rs. 81.40 and remain unchanged until the end. In the International Market the dollar rose after China said the U.S. currency may keep dominating global trade and ruled out any “sudden” changes to its foreign-exchange reserves.
The dollar gained versus the Australian dollar, yen and Swiss franc after Guan Tao, deputy head of the international payment department at the State Administration of Foreign Exchange, wrote in Chinamoney Magazine that the greenback may maintain its status as the world’s reserve currency. The yen fell against the New Zealand dollar after a Japanese report showed retail sales slid for a ninth month in May, reducing the currency’s appeal as a refuge.
“China isn’t planning to make any abrupt changes in their reserve policies,” said Simon Derrick, chief currency strategist in London at Bank of New York Mellon Corp. “But there’s an acceptance of the reality that an over-focus on the dollar isn’t ideal.”
The dollar rose to 95.43 yen as of 7:04 a.m. in New York, from 95.18 at the end of last week. It traded at $1.4046 per euro, from $1.4056. Japan’s currency was at 134.04 per euro, from 133.85.
Guan’s article came after China’s central bank Governor Zhou Xiaochuan told reporters in Basel, Switzerland, yesterday that the nation’s “foreign-exchange reserve policy is always quite stable.”
China’s reserves policy is aimed at “liquidity, safety and returns,” Zhou said, easing concern overseas investors will shift away from the dollar. Chinese investors, the biggest foreign owners of U.S. Treasuries, cut holdings by $4.4 billion in April to $763.5 billion after Premier Wen Jiabao expressed concern about the value of dollar assets.
Brazil, Russia, India and China agreed at a summit in Russia on June 16 to demand a bigger say in the running of global financial institutions. China, which has almost $2 trillion of foreign-exchange reserves, and Russia called for the creation of alternatives to the U.S. dollar as a reserve currency.
The comment “alleviates some of the near-term concerns about diversification,” Jeremy Stretch, a senior currency strategist at Rabobank International in London, said in a Bloomberg Television interview. “Clearly there has been a great deal of news flow about this lately and one suspects this issue won’t die down.”
The Hong Kong Monetary Authority will sign a Memorandum of Cooperation with the People’s Bank of China at 5:30 p.m. today regarding yuan trade settlement in Hong Kong, the city’s government said today in a e-mailed statement.
The Dollar Index, which tracks the currency against those of six major U.S. trading partners including the euro, yen and pound, gained 0.1 percent to 79.929.
UBS AG, the world’s second-biggest currency trader, revised its long-term forecasts for the dollar against the euro and the yen. The dollar will trade at $1.30 per euro by year-end, $1.40 at the end of 2010 and $1.50 by end 2011, Ashley Davies, a strategist in Singapore, wrote today in a report. The greenback will trade at 100 yen by the end of the year, Davies said. That compares with a prior estimate of 95 yen.
“A combination of shifts in relative returns, terms of trade and external imbalances will drive the U.S. dollar lower,” Davies wrote. “While stronger U.S. policy stimulus should allow the dollar to modestly recoup recent losses over the rest of this year, we expect it to fall at least 10-15 percent versus a range of currencies in 2010 and 2011.”
Japanese Retail Sales
The yen weakened versus the dollar after Japan’s Trade Ministry said retail sales dropped 2.8 percent in May from a year earlier and industrial production climbed 5.9 percent from April, when it had risen at the same rate.
The yen is heading for a quarterly loss against 14 of the 16 major currencies, including a 13.6 percent decline versus the Brazilian real and a 14 percent slide against the South African rand. It fell 0.5 percent to 61.73 per New Zealand dollar today.
“With deflation deepening in Japan and yields plunging in response, any sign of improving economic conditions could encourage renewed outflows from Japan,” wrote Derek Halpenny, head of currency research at Bank of Tokyo-Mitsubishi in London.
Strategists who came closest to predicting the dollar’s value against the euro so far this year see it strengthening as much as 17 percent in the second half as the U.S. recovers from the recession faster than Europe.
‘Lot of Headwinds’
CIBC World Markets Plc, Deutsche Bank AG, Bank of America Corp. and Wells Fargo & Co. estimate the American currency will increase more than 4 percent by Dec. 31 after May ended with its sharpest three-month fall since 2002. At the start of the year, all had second-quarter forecasts within a penny or two of the $1.4056-per-euro close on June 26, Bloomberg’s currency survey shows.
“In Europe, there’s a lot of headwinds, so the bullish- dollar story is based on what’s going on elsewhere,” said Adam Fazio, a CIBC currency strategist in New York. “We are bullish dollar in the near term.” Toronto-based CIBC forecasts a 4.1 percent increase in the next two quarters.
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