Lian Giap & Co., (Hardware) Sdn Bhd - Malaysia Leading Aluminium Distributor

LME Copper New Record High (Dow Jones)

admin — Thu, 03 Jul 2008 01:09:20 +0000

DJ MARKET TALK: Commodity Roundup: LME Copper New Record High 2346 GMT [Dow Jones] COMMODITY SUMMARY: LME copper hits new record high of $8,940/ton overnight Wednesday, aluminum also up as strong fund buying hits buy stops. Other base metals slip; crude oil edges higher. Copper prices could continue higher with the ongoing mining strike in Peru, now starting to affect some production, supporting prices, says MF Global analyst Edward Meir. But several analysts and traders say copper and aluminum - while stronger performers of base metals - could face difficulties pushing significantly higher in environment of poor demand, minimal supply disruptions. Strike in Peru still ongoing, government declares worker action illegal. LME 3-month copper up $105 vs PM kerb at $8,715, aluminum up $46 at $3,200, lead down $60 at $1,705, zinc down $61 at $1,865, nickel down $400 at $21,150, tin up $495 at $23,100. Spot gold trades close to 10-week highs overnight as oil rises, USD falls after earlier softer tone on profit-taking; spot gold at $942.95/oz, down $2.35 vs NY close, silver at $18.31, down 6 cents, platinum at $2,070.50, up $15.50, palladium at $462.50, down 50 cents. Nymex August crude futures up 28 cents at $143.87/bbl. (EFB)

Aluminum Prices To Target $3,600/MT By Year End (Dow Jones)

admin — Wed, 25 Jun 2008 02:08:52 +0000

DJ MARKET TALK: Aluminum Prices To Target $3,600/MT By Year End 1222 EDT [Dow Jones] - Aluminum prices will trend up and will target $3,600 per metric ton by the end of the year and up to $4,250 per metric ton by the end of 2009, largely because China has changed the fundamentals of the industry, says Jorge Vazquez, founder and vice president of HARBOR Intelligence’s Aluminum Intelligence Unit. “The upward trend in prices could last beyond this decade,” Vazquez says at the firm’s Chicago conference, adding that many respected analysts expect aluminum prices will have a difficult time trading permanently below $3,100 per metric ton. Vasquez says China’s structural demand boom and a restrained supply have played a major role in unleashing an upward trend in aluminum output and capex costs, leading prices into a long-term uptrend. (RJD)

Oil drops on report Saudi mulling output hike

admin — Sat, 14 Jun 2008 02:18:50 +0000

NEW YORK, June 13 (Reuters) - Oil prices fell on Friday on a report that Saudi Arabia may increase production to stem crude’s record rally to peaks near $140 a barrel.
U.S. crude oil settled down $1.88 at $134.86 a barrel, while Brent crude settled $1.84 lower at $134.25 a barrel.
Saudi Arabia is considering bringing output to near record levels of around 10 million barrels per day ahead of a meeting of producer and consumer nations in Jeddah on June 22, the Middle East Economic Survey reported on Friday.
The world’s top oil exporter is expected to pump 9.45 million bpd this month, after announcing in May plans to increase output by 300,000 bpd to make up for production shortfalls by other members of the Organization of Petroleum Exporting Countries.
“Saudi Arabia is trying hard to talk the market down,” said John Kilduff, senior vice president at MF Global.
Separately, Saudi Oil Minister Ali al-Naimi, speaking to the state news agency SPA, reiterated that market fundamentals did not justify current prices and that producers and consumers would seek a solution in Jeddah.
“The kingdom called this meeting based on its positive role in international relations … and its commitment to the world economy and a balanced global oil market,” Naimi said.
Oil prices have jumped 40 percent this year to a record above $139 a barrel, causing protests around the world.
Prices have jumped more than six-fold since 2002 as supply struggles to keep pace with demand in emerging markets, especially China and India.
Further support this year has come from a wave of cash from investors seeking a hedge against rising inflation and the falling dollar.
Oil demand growth has shown signs of faltering under high prices.
OPEC on Friday became the latest group to cut its forecast for global growth in oil demand in 2008, adding that it is pumping more than the forecast demand for its oil.
The International Energy Agency this week cut its demand growth forecast for 2008 to 800,000 bpd. (Reporting by Matthew Robinson, Robert Gibbons, Gene Ramos in New York; Santosh Menon in London; Baizhen Chua in Singapore; Editing by Walter Bagley)

Oil Rises After Morgan Stanley Says Brent Oil May Reach $150

admin — Thu, 29 May 2008 02:14:51 +0000

May 28 (Bloomberg) — Crude oil rose more than $2 a barrel after Morgan Stanley said that Brent oil from the North Sea could “easily” reach $150 a barrel.
Prices are rising because “supply constraints are biting against the backdrop of still-strong global demand,” Richard Berner , co-head of global economics at Morgan Stanley, said in a report today. Oil rose last week after Societe Generale SA and Credit Suisse increased their price outlooks.
“When these price forecasts come out, traders don’t want to be short, so they are in a way self-fulfilling prophecies,” said Sarah Emerson , managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. Shorts are bets that prices will fall.
Crude oil for July delivery rose $2.18, or 1.7 percent, to settle at $131.03 a barrel at 2:51 p.m. on the New York Mercantile Exchange. Oil climbed as high as $131.58 and fell as low as $125.96 today. Futures reached $135.09 on May 22, the highest since trading began in 1983.
“Prices are swinging wildly back and forth, which indicates that the market needs to find equilibrium,” said Kyle Cooper , director of research at IAF Advisors in Houston.
Brent crude oil for July settlement rose $2.62, or 2 percent, to settle at $130.93 a barrel on London’s ICE Futures Europe exchange. The contract touched a record $135.14 on May 22.
Oil advanced above $127 for the first time on May 16 when Goldman Sachs Group Inc. boosted its estimate for the second-half of the year to $141 a barrel, from $107, citing supply constraints. Goldman analyst Arjun N. Murti wrote in a report on May 6 that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.”
$150 Brent
“While prices are high enough to curb demand in the developed economies, we think that supply limits could easily take Brent crude quotes to $150 a barrel,” Berner, who is based in New York, said in the report. Morgan Stanley is the second- biggest U.S. securities company.
The Movement for the Emancipation of the Niger Delta, Nigeria’s main militant group, threatened attacks and car bombings tomorrow in the Niger Delta to mark the first anniversary of President Umaru Yar’Adua ’s inauguration.
MEND, which has shut down about 20 percent of Nigeria’s oil production since February 2006, has increased its assaults on the country’s oil infrastructure since April. Nigeria was the fourth- biggest source of U.S. oil imports during the first three months of this year, according to the Energy Department.
Dow Chemical Co ., the largest U.S. chemical maker, will raise prices on all of its products as much as 20 percent because of surging costs for energy, raw materials and transportation.
The increases are needed after a 42 percent jump in first- quarter spending on raw materials and energy, Chief Executive Officer Andrew Liveris said today in a statement. The increases take effect on June 1, Midland, Michigan-based Dow said.
Dow is trying to pass on higher costs amid company forecasts that spending on energy and hydrocarbon-based ingredients will climb to $32 billion this year, a fourfold increase from 2002

Dollar Bulls Gain Control as Futures Signal Euro Close to Peak

admin — Mon, 12 May 2008 01:19:46 +0000

May 12 (Bloomberg) — For the first time since December 2005 , futures traders are turning bullish on the dollar.
The difference in the number of wagers by hedge funds and other large speculators on a gain in the greenback versus the euro, known as net longs, was 21,315 on April 29, figures from the Commodity Futures Trading Commission in Washington show. There were net-short positions in each of the previous 123 weeks. At the same time, traders have stepped up their purchases of options that profit from the dollar’s appreciation.
The measures are making long-suffering proponents of the dollar optimistic that this time the currency’s rally may hold, especially if the Federal Reserve’s Open Market Committee refrains from additional interest-rate cuts. The Dollar Index traded on ICE Futures in New York, which tracks the currency against six trading partners, is up 3.3 percent from an all-time low of 70.698 set on March 17.
“There is kind of a sea change taking place at the moment,” said Mitul Kotecha , head of foreign-exchange research in London at investment bank Calyon, whose forecasts on the euro-dollar exchange rate in the first quarter were more accurate than those of the two biggest currency traders. “It’s probably the early sign of perhaps a more sustained turnaround.”
The dollar has appreciated 3.4 percent to $1.5482 since dropping to $1.6019 per euro on April 22, the lowest since the European currency’s debut in 1999. By the end of the year, the dollar will strengthen to $1.50, according to the median estimate of 40 strategists surveyed by Bloomberg.
Gaining Traction
The dollar’s rebound gained traction last month after the Open Market Committee said “substantial” rate cuts since September would help foster growth. U.S. employers also eliminated fewer jobs in April than forecast by economists.
Meanwhile, a slide in business confidence in Germany and France, which account for about half the euro-region economy, renewed speculation the European Central Bank will reduce rates this year. An end to lower rates in the U.S. and the possibility of cuts in Europe raises the appeal of dollar-denominated assets.
“The recent shift to a neutral FOMC stance and from a very hawkish European Central Bank stance, together with U.S. data pointing to a stagnation rather than a deep contraction, have already contributed to the dollar’s rally,” said Marc Chandler , global head of currency strategy in New York at Brown Brothers Harriman Inc. Chandler said he expects the dollar to reach $1.44 per euro by year-end.
Rate Futures
Interest-rate futures on the Chicago Board of Trade show an 82 percent chance the Fed will keep its target unchanged at 2 percent when policy makers next meet on June 25, with the balance of the odds calling for a quarter-percentage point cut.
The ECB will lower its 4 percent main refinancing rate to 3.75 percent by the end of September and 3.50 percent by year- end, according to the median estimate of 31 economists surveyed by Bloomberg.
As declining home sales and mortgage losses curbed economic growth, investor sentiment grew so negative on the dollar that even longtime pessimists such as Jim Rogers , chairman of Rogers Holdings, say the U.S. currency is due to rebound.
“I expect a nice rally in the American dollar because so many have been bearish on the American dollar, including me,” he said on May 8 in Singapore. Rogers, who co-founded the Quantum fund with George Soros in the 1970s and correctly predicted the start of the commodities boom in 1999, cited the benefit of surging prices for U.S. agricultural products.
Contrarian Indicator
Futures can be viewed as a contrarian indicator because traders often rush to reduce positions when momentum in a currency shifts. The last time net longs were this high, in December 2005, the dollar was nearing the end of a one-year, 13 percent rally versus the euro. It weakened 11 percent in 2006 and depreciated by the same amount in 2007.
“It is more likely than not that reasons for speculators returning to selling the dollar will be greater than reasons for them to sell the euro,” said Derek Halpenny , head of global- currency research in London at Bank of Tokyo-Mitsubishi UFJ Ltd., who expects the euro to reach a record high within three months. “I see risk that the ECB doesn’t do anything this year and expect the Fed will ease again in 2008.”
Between May 2005 and the end of that year, futures traders were net long the dollar versus the euro 73 percent of the time. The U.S. currency gained 7.9 percent in that period.
Call Options
Net-short positions versus all currencies fell to $10 billion in the week ended April 29, from $22 billion in the prior period, according to CFTC data tracked by Morgan Stanley. Speculators had net-long bets on the dollar versus the pound and the euro. Hedge funds and other large speculators were net-short the euro for a second week in the period ended May 6.
In another bullish signal for the dollar, demand for one- month options that grant the right to sell the euro is greater than for those allowing for purchases. The so-called risk- reversal rate had a 0.44 percentage point premium for euro puts relative to calls on May 9.
As recently as March, demand for call options was greater than put options. On Jan. 28, the premium for euro calls reached 0.45 percentage point, the highest since April 2007.
“We may very well have seen the bottom in the dollar,” said Stephen Jen , the global head of currency research at Morgan Stanley in London, who forecasts the dollar will rise to $1.40 per euro by year-end. “The dollar has regained some traction lately. Against the euro, the U.S. dollar is around 25 percent undervalued.”

Oil Climbs Above $126 to Record as Dollar Weakens Against Euro

admin — Sat, 10 May 2008 03:17:56 +0000

May 9 (Bloomberg) — Crude oil rose above $126 a barrel in New York to a record as the dollar weakened against the euro, prompting investors to buy commodities as a hedge against the currency’s decline.
For a fifth day oil climbed to all-time highs as the euro strengthened on signs the European Central Bank will keep rates at a six-year high to cut inflation. Nigerian output fell to the lowest this decade in April because of a strike and attacks on oil installations.
“Oil is a safe haven because of the weak dollar and how badly the financial sector has been doing,” said Michael Lynch , president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There are also geopolitical concerns about places like Nigeria and Venezuela that are propping prices up.”
Crude oil for June delivery rose $2.27, or 1.8 percent, to a record closing price of $125.96 a barrel at 2:55 p.m. on the New York Mercantile Exchange. The contract surged to $126.27 today, the highest since futures began trading in 1983. Prices are up 8.3 percent this week, the biggest weekly gain in more than a year. Futures have more than doubled in the past year.
Brent crude oil for June settlement climbed $2.56, or 2.1 percent, to close at a record $125.40 a barrel on London’s ICE Futures Europe exchange. The contract touched $125.90 today, the highest since trading began in 1988.
Oil at $200 is “possible if we have a continuing devaluation of the dollar with respect to other currencies,” OPEC President Chakib Khelil said yesterday at a press conference in Washington.
The dollar fell 9.6 percent since Sept. 18, when the Federal Reserve began cutting rates to ease financial-market strains and stave off a recession. The U.S. central bank cut rates seven times while the ECB has left rates unchanged. The dollar fell 0.6 percent to $1.5483 per euro at 3:27 p.m. in New York.
Fed Policy
“Fed policy is accommodating the rise in energy prices,” said Bill O’Grady , director of fundamental futures research at Wachovia Securities in St. Louis. “The Fed and federal government are putting more liquidity in people’s pockets, which is being spent on expensive oil.”
The U.S. government started sending $117 billion in tax rebate checks last week as part of its fiscal stimulus plan.
Goldman Sachs analyst Arjun N. Murti wrote in a report on May 6 that “the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.” Murti first wrote of a “super spike” in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.
“There’s been a paradox, prices have surged over the last week while we’ve had bearish headlines,” said Nauman Barakat , senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “Clearly there’s been a lot of fund buying on the back of Goldman’s super-spike repot. They were right on the nose last time.”
OPEC Meeting
The Organization of Petroleum Exporting Countries, the producer of more than 40 percent of the world’s oil, may meet before September to consider increasing output in an attempt to rein in record crude-oil prices, Libya’s Shokri Ghanem said.
“We would consider among other options the possibility of increasing output as a way to ensure market stability,” Ghanem, who is the chairman of Libya’s National Oil Corp., said in a telephone interview today from Tripoli.
Nigerian Petroleum Minister of State H. Odein Ajumogobia said today that there are no plans for an additional OPEC meeting because oil supplies are adequate.
OPEC kept its production target unchanged at its past three meetings. The group last increased its target on Nov. 1.
“OPEC loves high oil prices, but they also value an orderly market,” said Adam Sieminski , Deutsche Bank’s chief energy economist, in Washington. “It would not surprise me if they meet soon to discuss these issues.”
Lebanese Unrest
Gun battles raged across western and southern Beirut, leaving 10 people dead, as fighters from the Shiite group Hezbollah pressed their party’s challenge to Lebanon’s pro- Western government. Oil surged to a record $78.40 on July 14, 2006, on concern fighting in Lebanon between Israel and Hezbollah would spread through the Middle East.
“The unrest in Lebanon could be very important,” O’Grady said. “This could be an early indication of further violence in coming months.”
Gasoline and heating oil also touched records in New York on forecasts for increased fuel demand. An Energy Department report on May 7 showed that U.S. inventories of distillate fuel, a category that includes heating oil and diesel, fell last week.
Record Fuel Prices
Heating oil for June delivery climbed 12.62 cents, or 3.6 percent, to close at a record $3.636 a gallon in New York. The contract reached $3.6524 today, an all-time high. Some traders use heating-oil futures to hedge their diesel and jet-fuel purchases.
Gasoline futures for June delivery rose 6.34 cents, or 2 percent, to $3.2012 a gallon in New York after reaching a record $3.2038 today.
U.S. pump prices followed futures higher. Regular gasoline, averaged nationwide, rose 2.6 cents to a record $3.671 a gallon, AAA, the nation’s largest motorist organization, said today.

Nymex Crude Settles At Record (Dow Jones)

admin — Wed, 23 Apr 2008 02:45:00 +0000

NEW YORK (Dow Jones)–Crude oil futures closed above $117 a barrel for the first time Monday, boosted by supply instability. Light, sweet crude for May delivery settled up 79 cents, or 0.7%, at a record $117.48 a barrel on the New York Mercantile Exchange. The May contract expires Tuesday. June Brent crude on the ICE futures exchange settled up 51 cents at $114.43 a barrel, also a record. In Nigeria, about 169,000 barrels a day of crude production was shut in following an attack on a pipeline operated by Shell Petroleum Development Co. The company declared force majeure on its April and May oil delivery contracts from its 400,000 barrel a day Bonny fields effective April 22, a move that indemnifies it from litigation if it fails to deliver on contractual obligations to buyers. Nigeria is a key producer of high-quality light crude that is easily refined into gasoline. About a fifth of the country’s roughly 2.47 million barrels a day in production capacity is on hold amid security problems, the International Energy Agency reports. “169,000 barrels in force majeure on Bonny Light is very significant,” said Christopher Mennis, president of brokerage New Wave Energy in Aptos, Calif. “That trumped the market.” The head of the IEA said Monday that tight supply and vigorous demand in China and other emerging markets are the main factors driving oil prices to records. Nobuo Tanaka, the Paris-based watchdog group’s executive director, said prices are too high for consumers. Perceptions of tight supply come as consumption in the world’s largest oil consumer loosens up. U.S. oil demand has fallen 1.9% year to date, according to the Energy Information Administration. The agency, an independent analytical and statistical wing of the U.S. Department of Energy, is expected on Wednesday to show U.S. crude oil stockpiles grew by 1.5 million barrels last week, while gasoline stocks fell by 2.3 million barrels and stocks of distillate, which include heating oil and diesel, remained unchanged, according to a Dow Jones Newswires survey of analysts. “If there’s a perception global demand can offset lag of demand in the U.S., that’s going to throw a monkey wrench into the bears’ best-laid plans,” said Stephen Schork, editor of Villanova, Pa.-based market newsletter the Schork Report. Supply perceptions were also shaken after a suspected pirate ship Monday fired on a Japanese oil tanker off the eastern coast of Yemen, according to the Associated Press. The 150,000-ton tanker Takayama, operated by Nippon Yusen K.K. (NPNYY) and headed for Saudi Arabia, leaked hundreds of gallons of fuel after the attack. Other supply developments also factored into the market. In Mexico, oil production slipped 7.8% in the first quarter to 2.91 million barrels a day as output at the country’s traditional oil fields wanes, state oil company Petroleos Mexicanos said. In Scotland, workers at Ineos PLC’s 196,000 barrel-a-day Grangemouth refinery and petrochemical plant have threatened to strike for 48 hours from April 27 over changes to an employee pension plan. Despite faltering U.S. oil demand, some observers say the market is less moved by such concerns than by short-term flows of investment funds. “The question is, how high is high?” said Scott Meyers, senior trading analyst at Pioneer Futures in New York. “There really is no number because we are in uncharted territory.” Front-month May reformulated gasoline blendstock, or RBOB, fell 1.02 cents, or 0.3%, to $2.9791 a gallon. May heating oil rose 1.91 cents, or 0.6%, to a new record $3.3114 a gallon. More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines: Nymex Light Crude Oil Close Nymex Harbor RBOB Gasoline Close Nymex Heating Oil Close ICE Brent Crude Oil Close ICE Gas Oil Close -By Gregory Meyer, Dow Jones Newswires; 201-938-4377; greg.meyer@dowjones.com (END) Dow Jones Newswires 04-21-08 1544ET Copyright (c) 2008 Dow Jones & Company, Inc.

How to cool growth

admin — Fri, 11 Apr 2008 03:08:43 +0000

*UPWARD revisions of China’s economic growth rates during the past two years and a big jump in inward investment last month highlight the challenges Beijing’s policymakers face as they attempt to cool growth, economists warn.*
China’s National Bureau of Statistics said it raised its estimate of gross domestic product growth in 2007 to 11.9 per cent from 11.4 per cent, and its estimate of GDP growth in 2006 to 11.6 per cent from 11.1 per cent.
“This adds emphasis to the view that growth and inflation remain high, and that slower growth will be difficult to engineer,” Royal Bank of Scotland economist Ben Simpfendorfer said.
“Even as the global economy slows, there can’t be a relaxation in China’s tight monetary policy.”
Macquarie Securities economist Paul Cavey said analysts were likely to upgrade their forecasts of GDP growth and inflation this year, following the revisions.
The International Monetary Fund said on Wednesday that it expected China’s GDP growth to slow to 9.3 per cent in 2008, still a rapid rate by global standards, but Mr Cavey said he thought it was unlikely to fall below 10 per cent, especially in light of yesterday’s revisions.
The People’s Bank of China also said yesterday that global inflation pressures would add to inflationary pressures in China, and that global grain prices could continue to rise.
China’s consumer price inflation accelerated sharply to 8.7 per cent in February from a year earlier, marking its fastest pace in nearly 12 years, driven mainly by a 23.3 per cent surge in food prices.
Also yesterday, the Ministry of Commerce said China had attracted $US9.29 billion ($10 billion) in foreign direct investment in March, 39.6 per cent more than in the same month last year.
In the first three months of this year, China’s actual FDI surged 61.26 per cent to $US27.41 billion, driven by a more than doubling in FDI in January.
Macquarie’s Mr Cavey said the figures showed increasing amounts of money were pouring into the country in anticipation of further appreciation of the yuan.
The Chinese yuan has risen 16 per cent against the dollar since 2005, when Beijing revalued the local unit 2.1 per cent and began allowing it to trade in a tightly managed band.
The yuan’s appreciation has accelerated this year, with the currency up 4.5 per cent against the dollar since January 1, compared with its 6.9 per cent rise for the whole of last year.
Yesterday, the US dollar fell below the key CNY7.0000 level for the first time in the modern era.
“Direct investment is one of the easiest legal ways to get money into the country quickly,” Mr Cavey said.
But Mr Simpfendorfer cautioned against reading too much into a few months of FDI data, saying there was often a surge early in the year.
China’s foreign exchange reserves reached $US1.590 trillion in January, up sharply from $US1.53 trillion at the end of last year, as foreigners converted foreign currency to yuan at a rapid rate.
The influx of money into China, seeking returns on yuan appreciation, complicated monetary policy, Mr Cavey said.
He said the central bank could not raise interest rates too far without attracting more foreign deposits.
Mr Cavey said he expected “a couple more” interest rate rises by the end of 2008, and for the ratio of deposits that banks must hold in reserve to rise to 18-19 per cent from 15.5 per cent now.
“Given the amount of money that’s coming in, they have to take some money out of system in one way or another,” he said.

Aluminum Seen Down Towards $2550/Ton

admin — Fri, 28 Mar 2008 02:08:02 +0000

DJ MARKET TALK: Aluminum Seen Down Towards $2550/Ton By Year End 1721 GMT [Dow Jones] Aluminum prices are expected to trend lower to around $2,550/ton, says Standard Chartered. Says prices should remain high in the weeks ahead, with a weak dollar expected to support commodity prices generally. However, the physical market is likely to soften as Chinese smelters restart and new greenfield smelters such as Sohar start to come on-stream. Moreover, the bank says it is assuming that economic weakness spreads from the US to other countries during the year, helping to slow consumption growth. LME aluminum is trading at $3030/ton, +2.9% from Wednesday’s close. (DNM) Contact us in London. +44-20-7842-9413 londonmetals@dowjones.com (END) Dow Jones Newswires

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

admin — Sat, 15 Mar 2008 01:07:25 +0000

March 14 (Bloomberg) — The dollar sank below 99 yen, to the weakest in 12 years, and slumped to a record low versus the euro after JPMorgan Chase & Co. and the New York Federal Reserve bailed out Bear Stearns Cos., as credit market losses widen.
The U.S. currency also plunged to below one Swiss franc for the first time as traders speculated the Fed will slash interest rates one percentage point next week to avert a recession. As investor confidence tumbled, stocks plunged and gold climbed to a record high of $1,009 an ounce.
“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 dollar sank to 98.90 yen, the lowest since September 1995. It traded at 99.32 yen at 4 p.m. from 100.65 late yesterday. The U.S. currency plunged to $1.5688 per euro, the weakest since the European currency’s 1999 debut. It traded at $1.5671 per euro from $1.5635 yesterday and $1.5355 a week ago. It declined a fifth straight week against the euro, the longest slide since November. It reached as weak as 0.9988 francs per dollar, from 1.0093 francs yesterday.
The dollar lost about 16 percent against the euro and 18 percent versus the franc in the past year as the worst housing slump since 1991 forced the Fed to cut rates 2.25 percentage points to bolster the economy, lowering returns on dollar deposits. It sank 15 percent against the yen in that period.
`Big Kahuna’
The yen rose to 155.58 per euro from 157.35 as the announcement on Bear Stearns led traders to exit so-called carry trades, in which they obtain cheap loans in Japan and use the funds to buy higher-yielding assets elsewhere. The euro fell to 1.5649 Swiss francs, close to the lowest since July 2006.
The Standard & Poor’s 500 index lost 2.1 percent. U.S. debt rallied, pushing two-year yields to the lowest since July 2003.
“Confidence in the dollar is down,” said Kenneth Rogoff , an economics professor at Harvard University in Cambridge, Massachusetts, in an interview on Bloomberg TV. “We’re seeing the big kahuna in the currency markets that many of us have been calling for for a long time.”
The New York Fed agreed to provide financing through JPMorgan for up to 28 days, the bank said in a statement today. Bear Stearns Chief Executive Officer Alan Schwartz said in a separate statement that the firm’s “liquidity position in the last 24 hours had significantly deteriorated.” Bear Stearns shares fell 47 percent in New York trading.
`More Rate Cuts’
The world’s largest banks and securities firms wrote down $195 billion of assets linked to the subprime mortgage market since the start of 2007.
The likelihood the Fed will cut its target rate by one percentage point to 2 percent next week rose to 50 percent, from zero percent yesterday, futures on the Chicago Board of Trade showed. The balance of bets is on a cut to 2.25 percent. The central bank has reduced rates five times since September, from 5.25 percent. Traders also see a 50 percent chance of a cut to 1.75 percent in April. The euro region’s main rate is 4 percent.
The bailout “argues for more rate cuts,” said Samarjit Shankar , director of global strategy for the global markets group in Boston at Bank of New York Mellon, the world’s largest custodial bank with over $20 trillion in assets under administration. “It’s an ongoing credit crisis.”
Government data showed consumer prices were flat last month, giving the Fed room to cut rates. At 1.45 percent, two- year Treasuries yielded 1.76 percentage point less than similar- maturity German debt, close to the widest gap since 1993.
Yen, Franc Soar
The yen and franc rose against major currencies, including about 2 percent against Australia’s dollar. The gains came as demand evaporated for the carry trade, where traders borrow cheaply in 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. Switzerland’s is 2.75 percent.
Currency volatility surged in recent weeks, increasing the risk of carry trades. One-month volatility on dollar-yen options was 16.5 percent, up from about 10.5 percent at the end of last month. Currency swings can erase profits from rate gaps.
The dollar gained earlier on speculation global central banks will join forces to support it for the first time since 1995, when it sank to a post-World War II low of 79.75 yen.
Policy makers have stepped up their rhetoric to break the slide in the past week.
`Excessive’ Volatility
European Central Bank council member Klaus Liebscher said he’s “very concerned” about the dollar’s “dramatic” decline, Dow Jones Newswires reported today, citing an interview. He also said recent currency volatility is “excessive.” Japanese Finance Minister Fukushiro Nukaga said today abrupt currency moves are “bad” for economic growth.
The Group of Seven, which next meets April 12-13 in Washington, said when they met in February in Tokyo that “excess volatility and disorderly” movements are “undesirable.” They also urged to China to accelerate the yuan’s appreciation.
The G-7 may signal its intent to consider coordinated intervention, strategists at UBS AG, the world’s second-biggest currency trader, wrote in a March 3 report. The group comprises the U.S., Japan, Germany, the U.K., France, Italy and Canada.
Goldman Sachs Group Inc. and Morgan Stanley said coordinated action by policy makers to stem the currency’s slide is increasingly likely. In intervention, central banks buy and sell currencies to influence exchange rates.
President George W. Bush said today the U.S. believes in a “strong dollar.”