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The dollar hit a four-month low against major currencies...

Friday, September 14, 2012 4:41 AM GMT

          Good Morning,

 

§  The dollar hit a four-month low against major currencies, extending its losses after the U.S. Federal Reserve announced a new round of aggressive monetary stimulus to promote U.S. job creation, investment and consumption. USD lows in Asia: EUR 1.3035, CHF 0.9335, JPY 77.46, GBP 1.6206, AUD 1.0588 EURCHF high 1.2170

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§  Stocks: Nikkei +2.13 %, Hang Seng +2.84 %, Shanghai Composite +0.78 %, Dow Jones +1.55 %, S+P500 +1.63 %

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§  The Federal Open Market Committee met our expectations by voting for more unconventional policy accommodation. This easing took two forms: 1) initiating a new large-scale, open-ended asset purchase program and 2) extending the "late 2014" forward interest rate guidance to "mid-2015". These were not the FOMC's "conventional unconventional" policy changes. They were both innovative and aggressive in several respects, all of which point to the strong likelihood that the Fed will be actively involved in the securities markets well into 2013 and possibly beyond. As we asserted in an October 2011 research note, "You ain't seen nothing yet." (see attachment)

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§  We have revised our 3m EURUSD forecast higher from 1.19 to 1.23, our 3m EURGBP forecast higher from 0.76 to 0.78 and have turned more bullish on MXN, revising our 3m forecast from 13.00 to 12.75 and our 12m from 12.75 to 12.25. (see attachment)

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§  ECB in informal talks to ensure IMF participates in possible aid, Dutch newspaper Financieele Dagblad reports, citing unidentified people. * ECB is working on framework for new bond-buying program that includes strict IMF supervision, FD cites unidentified person * ECB requires full IMF participation to ensure strict conditions for Spanish austerity and reforms * Aid package to be discussed at European finance ministers meeting in Cyprus today

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§  Europe is already seeing "positive results" from the European Central Bank's announcement that it stands ready to buy unlimited amounts of bonds issued by euro zone states, ECB President Mario Draghi told Sueddeutsche Zeitung.

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§  A Greek exit from the euro zone could be a "very expense path" for the country, for Europe and also for Germany, European Central Bank policymaker Joerg Asmussen was quoted as saying, warning it should not be talked about lightly.

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§  Spain's Andalusia region is close to requesting a total of at least 2.4 billion euros from the regional bailout fund, after asking for a EUR1 billion advance earlier this month, reports El Pais in its Friday internet edition.

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§  Japan lowered the assessment for its economy, capping the first consecutive downgrade since the waning of the global credit crunch in 2009, fueling concern the world's third-largest economy will contract this quarter. Japan's "recovery appears to be pausing due to deceleration of the world economy," the Cabinet Office said in a monthly report released in Tokyo today. "Private consumption is almost flat," while industrial production and exports are weakening, it said.

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§  Japanese Finance Minister Jun Azumi declines to comment on whether he had any conference calls with the U.S. or the G-7. * Azumi says recent yen gains are one-sided, don't reflect Japan's economic situation * Azumi says he'll take "decisive action" if necessary * Azumi says FOMC decision reflects concern about U.S. economy, which he's watching "carefully"

 

§  "We know that the currency is still undervalued," US Ambassador to China Gary Locke said today after giving a speech at the Carnegie Endowment for International Peace in Washington. While the yuan has appreciated against the dollar in recent years, "still more needs to be done," he said, without providing specific steps to be taken.

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§  S&P upgrades South Korea's l/t ratings to A+/AA- from A/A+, outlook stable

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§  More European and Southeast Asian countries want to start buying South Korean treasury bonds, reflecting the growing popularity of the bonds as a safer asset, a senior finance ministry official told Reuters on Friday. Shin Hyung-chul, director general of the ministry's treasury bureau, did not identify any of the countries but said several countries have contacted local brokerages about potential investment in the securities.

Have a nice  day  !

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