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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (45999)	2/10/2004 10:42:47 PM
From: elmatador	Respond to of 74559

Asia facing tough battle against currency strength By Jennifer Hughes Published: January 16 2004 4:00 \| Last Updated: January 16 2004 4:00 Seoul's announcement yesterday of measures to curb speculative dealing in the won is the latest example of Asia's determination to resist the pressure for stronger currencies. But rising flows of foreign investment into the region's equity markets highlight the task the central banks face. South Korea has now restricted the dollar amount overseas investors can sell to domestic players via the non-deliverable forwards market. The move is designed to head off the sort of speculative activity that led to the currency crises of 1997 and 1998 by curbing the bets foreigners can place on currency direction. The won weakened on the news but stayed near recent highs due to strong investor interest in the region. According to UBS, foreigners poured more than $2.8bn into the region in the first full trading week of 2004 - a record weekly flow and far higher than the average $520m the bank saw each week in 2003. Overseas investors are buying Asian equities to take advantage of the region's relative cheapness and its exposure to a recovering global economy. But Korea intervened heavily last year to stem currency strength and - judging by yesterday's announcement - it intends to continue fighting. It is not alone. Japan spent Y20,000bn on intervention last year and is planning to raise the ceiling sharply on the amount it can spend this year. Thailand last year announced similar measures to Korea's, and this week warned it would intervene if the baht continued to strengthen. But market speculation that this is the year Asian currencies will revalue is still widespread. Rumours of a change in China's strict currency peg - the lynchpin of the region's currencies - have spread. Malaysia's prime minister was this week forced to deny the government had any plans to revalue its ringgit peg, in place since 1998. Speculative pressure on China's renminbi last week indicated investors were pricing in a 6 per cent appreciation in 2004. Hong Kong's dollar peg was designed to prevent weakness, not strength, and the monetary authority has spent HK$51.25bn (US$6.7bn) since September limiting the currency's appreciation. Investor interest in Hong Kong has, ironically, been boosted by the peg, which means dollar weakness makes its assets look cheap in comparison to non-pegged currencies such as the yen. Asia's central banks have been buying unprecedented amounts of US Treasury bonds in an effort to counter the flows of funds into their economies, but strategists believe this is not enough. "This is only part of the equation and seems only capable of offsetting the heavy speculative positions that are shorting the US dollar," said Claudio Piron at Standard Chartered. "As a result, the real money flows that are focused on long-term portfolio positions appear to be having an increasing influence on the currency markets." South Korea's foreign exchange reserves rose by 28 per cent last year - proof of its action in the market. But others went further. China's reserves rose by 41 per cent, while both India and Japan saw a 43 per cent rise. Overall, foreign exchange reserves in the region increased by one third last year to total $1,900bn. Most strategists expect equity inflows into the region will remain strong, yet few are prepared to bet against the ability of the authorities to continue to weaken their own currencies. Japan this month is already rumoured to have spent more than in any single month last year, but the yen is still only just off three-year highs against the dollar. And this pattern could be repeated across the region.

To: TobagoJack who wrote (45999)	2/11/2004 12:00:27 AM
From: Box-By-The-Riviera™	Respond to of 74559

depends partly on the climate i think but given modern technology and all that.... i'm thinking, what is the definition of paradise really???

To: TobagoJack who wrote (45999)	2/11/2004 3:09:01 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Jay, they went to sleep. We can discuss now: No jobs' growth, no Bush re-election, by hook or crook these jobs must materialize. Hence the talk about growth just before the G7 meeting in Boca Raton. Lets see which kind of rabbit comes out of AG hat today. Carefree spenders take care of world economy By Christopher Swann Published: February 10 2004 4:00 \| Last Updated: February 10 2004 4:00 In recent years US consumers have performed the same role in the global economy as the god Atlas did in Greek mythology - supporting the world on their shoulders. Their relentless spending and refusal to be intimidated by stock market crashes, rising unemployment, terrorism and war has been seen by many economists as the single most important factor in averting a deep global recession. Between the end of 1991 and 2003 US consumers increased their spending in every single quarter. Spending over those years rose by 55 per cent after inflation - dwarfing the 23 per cent increase in the eurozone and a 16 per cent rise in Japan. The key question for economists now is whether this marathon of consumption can continue. The answer is widely expected to lie with the labour market - which has remained sluggish despite the rebound in growth. Earnings growth in the year to January 2004 was just 2 per cent, barely keeping pace with an inflation rate of 1.9 per cent. Rates of job creation have also remained weak. The proportion of disposable income Americans save has fallen to an ominously low 1.5 per cent - diminutive even by the standards of the 1990s and well below the long-run average of 7.2 per cent. Economists are expecting another boost to consumption from tax rebates in the spring but warn that this will be shortlived if there is not a pick-up in wage and employment growth. But the long record of strength in spending makes most economists reluctant to write off the US consumer. The reason for this strength, most believe, has been a combination of American culture and the willingness of policymakers to pull out all the stops to avert recession. The Federal Reserve has been the most pro-active of the world's large central banks, cutting interest rates by 5.5 percentage points from their peak in January 2001. The European Central Bank, by contrast, has shaved just 2.75 percentage points off rates. Tax cuts by the administration of George W. Bush were also fortunately timed, offsetting slow earnings growth and leading to a 6.9 per cent surge in consumption in the third quarter of 2003. "Policymakers have been shovelling money into people's pockets in an effort to keep them spending," says Nariman Behravesh, chief economist at Global Insight, the economic consultancy. "Fiscal and monetary policy has been much more helpful here and the auto companies have also weighed in by giving strong incentives to buy." Americans' sense of wealth, though battered by the volatility in the stock market, has been bolstered by the strength of the housing market. Americans have also found it easier to free cash locked up in their homes through mortgage equity withdrawal. Economy.com, a consultancy, has estimated that mortgage equity withdrawal contributed around 1.8 percentage points to economic growth in 2003 and the economy grew by only 2.9 per cent. The cash raised by withdrawing equity from homes has been estimated at $775bn (€614bn, £420bn) last year. Even those Americans who did not own their home have not been reluctant to borrow in order to finance spending. "The 1990s was a period in which credit was democratised," says Brian Nottage, an economist at Economy.com. Credit companies are ever more willing to lend to the young and those with low incomes. Marc Chandler, an economist at HSBC, says his five-year-old son has already started to get offers of credit cards through the mail. "An early familiarity with debt means that Americans overall have a relatively relaxed attitude to credit," he says. Because the stigma attached to bankruptcy is less obvious in the US than in many other parts of the world, many US consumers have been willing to accumulate ruinous levels of debt. Ten years ago about nine households in 1,000 were going bankrupt. This has now risen to 15 households in every 1,000. A greater willingness to borrow means that US consumers have been remarkably consistent spenders even when wages are not rising strongly. It also means they would be more vulnerable in the event of a long downturn. The longer growth continues, the more confident consumers appear to be that growth will simply continue, helping them pull through the tougher times. "The US economy has delivered the goods for such a long time that consumers have good reason to be confident," says Vernon Smith, Nobel prize winner in economics in 2002 and professor of economics and law at George Mason University. "There is an unconscious confidence that lulls in the economy aren't going to last for long." Despite the weakness in the labour market there are few signs that this confidence is ebbing away.