Dollar Advances Versus Yen as Goldman, Lehman Beat Estimates

Dollar Advances Versus Yen as Goldman, Lehman Beat Estimates

March 18 (Bloomberg) -- The dollar rose versus the yen, snapping a four-day slide, as U.S. stocks rallied on stronger- than-forecast earnings from Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc.

The U.S. currency pared losses against the euro, after plunging to a record low yesterday following the fire sale of Bear Stearns Cos. The dollar is still down a fifth straight day against the euro as traders bet the Federal Reserve will cut interest rates as much as 1 percentage point today in an attempt to restore confidence to financial markets.

``The market is relieved that these two firms that are viewed as pillars of Wall Street survived the earnings season without major mishaps,'' said Michael Woolfolk, senior currency strategist in New York at the Bank of New York Mellon, the world's largest custodial bank with over $20 trillion in assets under administration. ``It's a relief for the dollar.''

The dollar rose to 98.28 yen at 10:20 a.m. in New York, from 97.33 late yesterday, when it touched the lowest since August 1995. The U.S. currency traded at $1.5785 per euro from $1.5729 yesterday, when it reached $1.5903, the weakest level since the euro started trading in 1999. The yen dropped to 155 per euro from 153.07. It fell against all 16 of the most-traded currencies as traders put on carry-trade bets funded by loans in Japan, where the benchmark rate is 0.5 percent.

Goldman, the world's biggest securities firm by market value, reported a smaller-than-estimated 53 percent drop in first-quarter profit. Lehman Brothers reported its smallest quarterly profit since 2003, yet still beat analysts' estimates.

Storm Weathered

The dollar fell to record lows against the euro on each of the past five trading days amid concern that losses from credit markets may erode the capital of Wall Street firms.

``The storm has been weathered,'' said Jeff Gladstein, global head of currency trading at AIG Financial Products in Wilton, Connecticut. ``The bulk of the dollar losses are in the market right now.''

The British pound rose to $2.020, from $1.999, after a U.K. government report showed inflation accelerated to a nine-month high in February, limiting the Bank of England's scope to cut rates. It also rose to 78.18 pence per euro from 78.69.

The yen lost 1.9 percent against the pound and New Zealand dollar as gaining stocks boosted confidence in carry trades, where investors buy high-yielding assets with loans from Japan, profiting from the difference in rates.

The Swiss franc, also used to fund carry trades, weakened against major currencies. Benchmark rates are 2.75 percent in Switzerland, 5.25 percent in the U.K., 7.25 percent in Australia and 8.25 percent in New Zealand.

Stocks Gain

The Standard & Poor's 500 Index rose 2 percent. Stocks in Asia and Europe also advanced.

``The yen is taking its cues from the equity market and its sentiment on risk,'' said Phyllis Papadavid, a London-based currency strategist at Societe Generale SA.

Implied volatility, a gauge of traders' expectations for future price swings, on one-month dollar-yen options fell to 18.75 percent, after reaching 24 percent yesterday, the highest since January 1999, according to Bloomberg data. Lower volatility tends to fuel demand for carry trades because it makes profit from the strategy more predictable.

The U.S. currency has slumped 9 percent against the yen in the past four weeks as losses in credit markets deepened. Japan's Finance Minister Fukushiro Nukaga said the dollar's decline is ``excessive.''

Nukaga's Concern

Nukaga expressed concern about currency movements for a second day and Kyodo News reported that Prime Minister Yasuo Fukuda is seeking contact with other countries about the dollar's drop. Nippon Steel Corp. said yesterday the surging yen poses a threat to earnings.

``I'm concerned with when the U.S. dollar will reach a bottom, and what monetary policies the U.S. will take,'' China's Premier Wen Jiabao told a press conference, promising ``forceful'' steps to damp inflation. The yuan traded at 7.0830, close to the highest since the end of its dollar link in 2005.

The South Korean won gained 1.5 percent to 1,014 per dollar after Deputy Finance Minister Shin Je Yoon said the central bank will take action against the currency's decline if the market doesn't ``stabilize.'' The currency fell 7.8 percent against the dollar this year and 19 percent versus the yen.

Traders see a 90 percent likelihood the Fed will cut its target rate by 1 point to 2 percent at today's meeting, futures on the Chicago Board of Trade showed. There is a 10 percent chance of a cut to 2.25 percent. The Fed unexpectedly lowered the rate it charges commercial banks for loans by a quarter- point to 3.25 percent on March 16. The decision will be announced at about 2:15 p.m. New York time.

Global stocks slumped yesterday after the Fed helped arrange the purchase of Bear Stearns by JPMorgan Chase & Co. for about 7 percent of its market value as of March 14.

The U.S. currency has lost 15 percent against the euro and 17 percent versus the yen in the past year as the worst housing slump since 1991 forced the Fed to cut its benchmark rate 2.25 percentage points.

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Forex news today

Dollar Falls to Record Low Against Euro, 12-Year Low Versus Yen

March 14 (Bloomberg) -- The dollar sank to the weakest ever against the euro and to a 12-year low versus the yen after JPMorgan Chase & Co. and the New York Federal Reserve agreed to provide emergency funding to Bear Stearns Cos., signaling credit market losses may widen.

The U.S. currency also plunged to below parity with the Swiss franc for the first time as traders speculated the Fed will slash interest rates a full percentage point next week to keep a credit-market crisis from triggering a recession.

``The initial reaction is to sell the U.S.: sell the dollar, sell the equities,'' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. ``This is bad news; it's definitely a confirmation of the reality that U.S. financial institutions are having a hard time.''

The U.S. currency plunged to $1.5688 per euro, the weakest since the European currency's debut in 1999. It then settled back to $1.5639 per euro at 10:29 a.m. in New York, from $1.5635 yesterday. The dollar sank to 99.57 yen, the weakest since October 1995, and then traded at 100.02 yen from 100.65 yesterday.

It reached as weak as 0.9988 francs per dollar, from 1.0093 francs yesterday.

The New York Fed will ``provide non-recourse, back-to- back'' financing for up to 28 days, JPMorgan said in a statement today. Bear Stearns Chief Executive Officer Alan Schwartz said today in a separate statement that the firm's ``liquidity position in the last 24 hours had significantly deteriorated.''

Exiting Carry Trades

The announcement on Bear Stearns led traders to exit so- called carry trades, in which they obtain cheap loans in yen and use the funds to buy higher-yielding assets elsewhere. U.S. stocks fell, with the Standard & Poor's 500 index dropping 1.7 percent.

The likelihood the Fed will cut its target rate for overnight loans between banks by 100 basis points to 2 percent next week rose to 36 percent, from zero percent yesterday, futures traded on the Chicago Board of Trade showed. The balance of bets is on a cut of 75 basis points to 2.25 percent. The central bank has already reduced rates five times since September, from 5.25 percent.

No Relief

``I don't see any relief for the dollar,'' said Win Thin, a currency strategist with Brown Brothers Harriman & Co. in New York. ``It's another brush fire for the Fed to put out. It's like you put a finger in the dike and another hole pops up.''

The yen and franc both advanced against more than a dozen major currencies, including about 1 percent against the Australian dollar. The gains came as demand evaporated for the carry trade, where traders borrow cheaply in countries such as Japan and Switzerland and invest in countries such as Australia, where the benchmark rate is 7.25 percent. Japan's main rate is 0.5 percent and Switzerland's is 2.75 percent.

Currency volatility has surged in recent weeks, increasing the risk of the carry-trade strategy. One-month volatility on dollar-yen options was about 16.5 percent, up from about 10.5 percent at the end of last month. Currency swings can erase profits from rate differentials.

Forex news

Dollar Falls to 12-Year Low of 100 Yen on Carlyle Fund Failure

March 13 (Bloomberg) -- The dollar fell below 100 yen earlier today for the first time since 1995 and dropped to a record low against the euro after a Carlyle Group fund moved closer to collapse, adding to turmoil in financial markets.

The dollar approached parity with the Swiss franc and slumped against the British pound after Carlyle said lenders will seize the assets of its mortgage-bond fund and President George W. Bush said the U.S. currency's decline was not ``good tidings.'' The dollar's drop may prompt Middle East central banks to reduce dollar holdings, Greg Gibbs, a strategist at ABN Amro Holding NV in Sydney, said in a report.

``Sentiment for the dollar continues to deteriorate very, very rapidly and if we're not careful this will turn into a dollar crash,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon, the securities unit of Credit Agricole SA, France's second-biggest bank. ``The risk is that we see a fairly aggressive move sharply lower towards 95 yen, and that could really perk up the interest of the Bank of Japan.''

The dollar fell to 99.77 yen, the lowest since October 1995, before trading at 100.18 at 10:29 a.m. in New York, from 101.79 yesterday. The dollar touched $1.5624 per euro, the weakest since the European currency's debut in 1999, and was at $1.5589, from $1.5551. It slid to a record 1.0045 Swiss francs. Japan's currency advanced to 156.21 per euro, from 158.30.

The U.S. currency fell against a basket of six major trading partners to the lowest since the index began in 1973. The Dollar Index traded on ICE Futures in New York declined as low as 71.82. The dollar dropped to $2.0365 per pound from $2.0270, touching the weakest since December.

Yen Sales

Japan sold the yen on the four occasions since 1995 when the currency approached 100 to support exporters including Toyota Motor Corp., the world's second-biggest automaker. The Bank of Japan sold 14.8 trillion yen ($148 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003.

The yen's 24 percent gain against the dollar from a 4 1/2- year low on June 22 was ``unexpected'' and will damage earnings, Toyota President Katsuaki Watanabe said today.

``We must continue cost cuts by all means, but the currency has reached the level where we have to think about other measures,'' Watanabe told reporters in Tokyo. A gain of 1 yen against the dollar cuts Toyota's annual operating profit by 35 billion yen, according to the automaker.

Intervention Risk

The yen may rise as high as 95 per dollar, according to forecasts this month by Citigroup Inc., the third-biggest currency trader, Lehman Brothers Holdings Inc., the fourth- biggest U.S. securities firm, and Mizuho Financial Group Inc., Japan's second-largest publicly traded bank. Deutsche Bank AG and UBS AG, the two biggest currency traders, had predicted the dollar would hold above 100.

``There's more than a 50 percent probability that the U.S. is in recession,'' Eisuke Sakakibara, dubbed ``Mr. Yen'' when he was Japan's top currency official from 1997 to 1999, said in an interview on March 6. ``The dollar-yen rate is dependent on the state of the U.S. economy.''

The Group of Seven, which next meets April 12-13 in Washington, may signal its intent to consider coordinated intervention, UBS strategists wrote in a March 3 report. Unilateral intervention ``seems unlikely'' as Japan's economy has grown every year since 2002, it said.

Central banks intervene in the foreign-exchange market when they buy or sell currencies to influence exchange rates.

Exiting Carry Trades

The yen also gained as investors exited so-called carry trades, in which they borrow in a country with low interest rates and buy higher-yielding assets elsewhere, earning the spread between the two. The risk is that currency moves erase those profits.

Japan's benchmark rate of 0.5 percent compares with 3 percent in the U.S., 4 percent in Europe, 7.25 percent in Australia and 8.25 percent in New Zealand.

Carlyle Capital Corp., co-founded by David Rubenstein, said in a statement it defaulted on about $16.6 billion of debt as of yesterday. Lenders will ``promptly'' take over all of its remaining assets and any remaining debt is expected ``soon'' to go into default, it said.

The yen has rallied 13 percent against the dollar as the Fed cut rates amid the worst housing slump in a quarter of a century and $190 billion of U.S. subprime-mortgage-related losses and markdowns at the world's biggest financial institutions.

Losing Confidence

``Investors are starting to lose confidence in the dollar, given the increased uncertainty over credit-related losses,'' Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note to clients today. ``Carlyle is unlikely to be the last hedge fund in difficulty. That will only further depress investor sentiment.''

Drake Management LLC, the New York based-firm started by former BlackRock Inc. money managers, said yesterday it may shut its largest hedge fund, while GO Capital Asset Management BV blocked clients from withdrawing cash from one of its funds.

The biggest job losses in five years and record fuel costs are eroding U.S. consumer confidence and spending, which accounts for more than two-thirds of the economy. Lehman and JPMorgan Chase & Co. last week said the U.S. is headed into a recession.

Forex Trading with Robots

Forex Trading Robots

Automated or automatic forex can be defined as the ability to trade forex with the use of a trading program or forex trading robot, without needing a human to physically trade a forex system. With forex, automated trading is an emerging field that began not that long ago.

There are 2 general categories of automated trading:

• Automated trading through managed forex. Some, though not all, forex managed accounts are traded via automated forex. In either case, the trading is passive in that you don’t have to do it. But in the case of automated forex, the trading program or robot executes the trades of their trading system, rather than a human team.
• When you program your own or someone else’s forex system into a program with programming and automatic trading abilities such as MetaTrader, or other trading program. Wealth Lab required programming skills (the programming language used is similar to Pascal), while other programs just emerging that will allow you to select parameters and test your system performance.

Advantages of automatic forex trading systems

What are the advantages of automated or automatic forex trading, whether it’s with a managed forex account using a trading robot, which is a much easier way as you do not have to design or program a system?

They are:

• You do not have to physically trade the system.
• Automated trading can take trades at anytime of the day or night. This is particularly important for systems where the performance is increased when taking a majority of trades in the system, which occurs in systems where trading opportunities occur at times when the person may be sleeping or otherwise cannot get to the computer. So being available for trading 24 hours a day, unlike a trader can, will the profitablility of these systems.
• You can trade multiple systems, such as systems that rely on different types of indicators, or which trade shorter or longer time frames, in order to diversify risk, as well as to smoothen out your equity curve and reduce drawdown.
• An automated system is unaffected by a trader’s psychology, which can sometime cause a system to be not traded properly. If your trader discretion causes you to improve performance, then that is fine, but if it causes a worse performance than if you traded the system mechanically, then this is an issue that is overcome by automated forex.
• Enables the development of new systems that may be difficult for a human to trade, such as systems with a high frequency of trades using tick data. Designing a system is no longer be limited by how practical or easy it is for a person to trade it.

These benefits of automated forex of course is based on the fact that:

• You have chosen a profitable forex system and has acceptable drawdown, as evidenced by historical performance.
• The forex system is not just mechanical, but is fully programmable.
• You are aware, with either active trading or automated trading, that you must monitor the performance to see that the system is still working as well as its past performance.

Hence, that's why it's mentioned that you'll have to use a automated forex provider including managed forex with MetaTrader for those inclined that

EUR USD weekly

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.5460 level and was supported around the $1.5145 level. The pair gained about 170 pips last week. Philly Fed’s Plosser said the Fed may normalize policy quickly when conditions warrant. Fed chief Bernanke called on lenders to enact “vigorous solutions” to counter mortgage foreclosures. The Fed’s Beige Book saw eight of twelve Fed districts report softening economic activity. The Fed announce it will increase its TAF liquidity provision to US$ 100 billion, announced another US$ 100 billion in 28-day repos, and announced it is in close consultations with central banks on liquidity provision. San Francisco Fed President Yellen sees inflation waning while Dallas Fed President Fisher warned against expecting automatic repeat Fed rate cuts.

The ECB kept its refinancing rate unchanged at 4.0%. Trichet cited “short-term upward inflation pressures.” The ECB raised its 2009 inflation forecast to a range of 1.5% to 2.7% and reduced its GDP growth forecast to 1.7% for 2008. Trichet said he is paying “extreme attention” to the U.S’s strong dollar policy.

ECB’s Liebscher said the price of oil is “crucial” to monetary policy. Ecofin finance ministers stepped-up verbal intervention against the euro’s rise. ECB’s Weber said the prospect of lower EMU-15 GDP growth “is not enough reason” to anticipate weaker inflation pressures.

Data released in the U.S. last week saw February ISM manufacturing fall to 48.3 from 50.7 with the prices paid sub-index narrowly lower at 75.5; January construction spending fell 1.7% m/m; January factory orders fell 2.5% with ex-transportation off 0.4%; ISM non-manufacturing improved to 49.3; ADP February payrolls evidenced a jobs loss of 23,000; Q4 productivity increased 1.9%, down from 6.3% in Q3; unit labour costs rose 2.6% in Q4; weekly initial jobless claims rose 29,000 to 2.831 million; January pending home sales were off 19.6% y/y; weekly initial jobless claims were up 29,000 to 2.831 million; January pending home sales were off 19.6% y/y; February non-farm payrolls growth were -63,000 with a cumulative downward revision to December’s and January’s tallies of 46,000; and the February unemployment rate was 4.8% with average hourly earnings up +0.3%.

Data released in the eurozone last week saw EMU-15 HICP unchanged at 3.2%; EMU-15 February manufacturing PMI printed at 52.8; EMU-15 January industrial product prices rose 0.8% m/m and 4.9% y/y; EMU-13 Q4 GDP were up 0.4% q/q and 2.2% y/y; the EMU-15 service sector PMI index improved to 52.3; EMU-15 January retail sales were up 0.4% m/m and off 0.1% y/y; German January manufacturing orders fell 1.5% m/m; and German January industrial output was up 1.8% m/m and 6.9% y/y.

Technical Outlook

Last week’s high (1) was a new lifetime high and last week’s low (2) was above the 38.2% retracement of the 1.4438-1.5460 range. The 1.5520/ 1.5854 levels represent upside resistance targets while the 1.5219/ 1.5069/ 1.4979/ 1.4813/ 1.4716/ 1.4631 levels represent downside support targets.

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