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To: Jim Willie CB who wrote (2668)	1/15/2003 11:11:44 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

I just sent you a report on how you can cash out your U.S. dollar bought Canadian stocks at a higher price. Thats positive! (gggggg)

To: Jim Willie CB who wrote (2668)	1/15/2003 11:14:53 AM
From: 4figureau	Read Replies (1) \| Respond to of 5423

Hedging activity could add to dollar pressure By Christopher Swann Published: January 14 2003 4:00 \| Last Updated: January 14 2003 4:00 Recently even the dollar's most loyal friends have been deserting it. ABN Amro, which has been sceptical of the euro's ability to rise against the dollar, is now taking a more downbeat view of the dollar's prospects. Its bearishness is not based on expectations of large sales by international investors, but rather on the growing temptation to hedge dollar risk by selling the greenback forward. The incentive to hedge against a further fall in the dollar has become quite compelling. The euro value of the S&P 500 fell by 35 per cent in 2002 - compared to a fall in its dollar value of 23.4 per cent. Many fund managers are now fretting that this currency loss may be repeated in 2003. The cost of hedging the dollar is cheaper than in many years. This is due to the fact that US interest rates are below eurozone rates creates and are now much closer to rates in Japan and Switzerland. Investors tend to hedge by buying dollars in the spot market - in order to buy the assets - and then selling dollars in the forward market. Since the forward price of the euro-dollar, for example, is calculated by taking the spot price and adding in the interest rate differential, the dollar forward is higher than the spot price. "For a eurozone investor, it now pays to hedge your dollar exposure and it is pretty cheap to hedge if you are in Switzerland or Japan too," said Tony Norfield, head of currency strategy at ABN Amro in London. Six-month interest rates in the US are now around 1.4 per cent, compared to 2.75 per cent in the eurozone and close to 4 per cent in the UK. Mr Norfield estimates that portfolio managers may increase their hedging ratios by as much as 15 percentage points by the middle of the year. If this forecast proves true it would have serious implications for the dollar. The US has become increasingly dependent on portfolio flows to fund the current account deficit - a net direct investment inflow of $3bn in 2001 became a $66bn outflow in 2002. At the end of last year US foreign investors held $1,200bn in US Treasuries, $1,700bn in US corporate and agency bonds and $1,100bn in US equities. Tony Norfield said that although a significant portion of these assets were held by central banks that were unlikely to hedge, a 15 percentage point rise in hedge ratios would imply around $270bn of dollar selling from European investors alone. ABN Amro is now forecasting a rise in the euro to $1.09 within the next few months. But not all strategists were so bearish about the short-term outlook for the dollar. Michael Woolfolk, head of currency strategy at Bank of New York, said that the bank's portfolio flows indicated a shift away from the eurozone into the US at the end of last week. The IMM data from the Chicago Mercantile Exchange also pointed to a reduction in long euro-dollar positions. "Positions against the dollar have become over-extended and there is a chance of a swift pull-back," he said. "The retail sales figures this week should underline the resilience of the US consumer," he said. The pull-back, he predicted, could take the euro back to $1.025 this week. news.ft.com

To: Jim Willie CB who wrote (2668)	1/15/2003 11:17:22 AM
From: 4figureau	Respond to of 5423

China December Factory Production Rises 14.9 Percent By Chi-Chu Tschang and Michael Forsythe Beijing, Jan. 15 (Bloomberg) -- China's industrial production rose at the fastest pace in seven years last month after foreign companies invested a record amount building factories last year and the government spent more on roads, bridges and railways. Industrial production rose a greater-than-expected 14.9 percent from a year earlier to 321.6 billion yuan, the State Economic and Trade Commission said on its Web site. That was the biggest rise since December 1995, according to figures from Hong Kong-based CEIC Data Co. ``Foreign-invested companies in China are really cranking up production,'' said Rob Subbaraman, economist at Lehman Brothers Inc in Tokyo. Industrial production is gathering pace as more foreign companies such as Unilever and Procter & Gamble Co. relocate production to China and government spending to improve utilities and transport links increases. That's helping China grow at the fastest pace among the world's top 10 economies. The Chinese government has been boosting spending to keep the economy growing above 7 percent, which it says is necessary to absorb workers laid off by state-owned enterprises. These companies fired 27 million workers between 1998 and the end of last year in a bid to become more competitive, Xinhua News Agency reported last month. The government and state-owned companies spent a total of $200 billion in the first 11 months of last year on projects such as the Three Gorges Dam, a railroad to connect Qinghai province to Tibet and a West-to-East gas pipeline. Foreign Investment Overseas demand also helped drive China's production growth. The country's exports jumped more than a fifth to $325.6 billion last year, according to customs statistics. This was achieved even as retail sales in the U.S., China's biggest overseas market, rose at the slowest pace in more than a decade. ``Consumption of high-end goods in the U.S. did not rise very much, but consumption of essential goods is more stable,'' said Wang Yuanhong, an economist at the State Information Center in Beijing. ``Many U.S. companies have transferred production of these essential goods to China recently, so Chinese exports supply that demand.'' Procter & Gamble has invested more than $300 million in China to date, according to the company's Web site. The company has six production plants in China to make Head & Shoulders shampoo, Tide laundry detergent and Oil of Olay skin care products. Unilever invested $1 billion in twelve companies in China by the end of 2001, according to the company's Web site. The company has Chinese factories making Lipton tea, OMO laundry detergent and Dove soap. Jobs Shortage Even as new factories spring up and roads and railways are built, Chinese workers are finding it increasingly hard to find jobs. About 15 million of the 22 million people looking for work each year can't find jobs, Economic Daily reported today, citing Li Rongrong, chairman of the State Economic and Trade Commission. China's official urban jobless rate stood at 3.9 percent at the end of September, yet the government admits the real rate is closer to 7 percent, when so-called ``laid-off'' workers at state- run factories are included. When migrants from the countryside are included, the jobless rate climbs to above 10 percent, some economists say. The government forecast December industrial production would rise 14.2 percent from a year earlier and is predicting 14.5 percent growth this month. It predicts the value of production will fall from December to 266.7 billion yuan. Production typically falls during the Chinese New Year holiday period, which starts January 31 this year, and picks up the following month. quote.bloomberg.com

To: Jim Willie CB who wrote (2668)	1/15/2003 11:20:43 AM
From: 4figureau	Read Replies (2) \| Respond to of 5423

Moody's calls on BoJ to reflate economy By David Pilling in Tokyo Published: January 14 2003 11:29 \| Last Updated: January 14 2003 20:06 Moody's on Tuesday said its outlook on Japanese sovereign debt would improve if the Bank of Japan took "more vigorous measures" to reflate the economy. The rating agency's support for a change of BoJ policy will add to an already ferocious debate about who should replace Masaru Hayami as central bank governor in March. Junichiro Koizumi, prime minister, has said he will nominate someone committed to tackling deflation, but it is not clear how aggressively the new governor will pursue such a policy. Moody's praised a proposal by Haruhiko Kuroda, who on Tuesday stepped down as vice-minister for international affairs at the finance ministry, that the BoJ set an inflation target of 3 per cent. Mr Kuroda is an outside candidate to take over as the BoJ's governor in March. Mr Hayami has repeatedly rejected the idea of setting an inflation target, saying the bank has exhausted all orthodox tools to reverse falling prices. The bank, which has flooded the market with unprecedented liquidity, has nevertheless been accused of using deflation as a means of pressuring the government to adopt structural economic reforms. Thomas Byrne, senior credit officer at Moody's, said that reflating the economy, while "not a silver bullet", would help reduce the country's growing debt burden. "Ending deflation would lead to a rise in nominal gross domestic product. Everything else being equal and if supported by other policies that would lead to deficit reduction as a percentage of GDP." Moody's caused enormous controversy in Japan last year when it downgraded Japan's sovereign debt by two notches to A2, the lowest of any G7 nation and on a par with a number of developing countries, including Botswana. Japanese officials said it was ridiculous to assign any default risk, since the vast bulk of Japan's debt was financed domestically. Mr Byrne added that, while the appointment of an inflation-fighter would improve Japan's outlook, a governor without a strong anti-deflationary stance would not lead to an immediate downgrading. "If BoJ policy stayed unchanged after March, most likely we would not change the rating or the outlook," he said. The current rating assumed that debt, approaching 150 per cent of GDP, would continue to grow and that macro- economic policy would not change substantially. However, current policies could not continue indefinitely, he said. "Something more urgent has to be done, and getting out of corrosive deflation is part of that." Moody's assessment came on the same day that BoJ figures showed money supply growth in December at its most sluggish pace in nearly two years. Money supply rose 2.2 per cent from a year earlier, down from a rise of more than 3 per cent in recent months. On Tuesday, Heizo Takenaka, the economy and financial services minister, said; "We recognise the need for more expansionary monetary policy." news.ft.com