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USD rose a bit against most major currencies Tuesday as some investors took profits after the Greenback’s declines in the previous session. On a weekend meeting held in Scotland, the G-20 policymakers agreed to maintain support for the economic recovery and failed to address the dollar appreciation issue. That action drove the US currency lower Monday, with the dollar index falling to its lowest level since August 2008. The USD took a break Tuesday on profit-taking and short-covering ahead of the Veterans Day Holiday. But savvy market observers believe that the USD will remain under pressures on the carry trade action. (Note: In carry trades, investors sells a currency with a relatively low interest rate and uses the funds to purchase a different currency or commodity yielding a higher interest rate.) There are indications that the USD is now serving as the funding currency for carry trades, said the International Monetary Fund in a report released last Saturday. Read more

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Considering China’s growth trend and Beijing’s effort to internationalize its currency, the Chinese Yuan can develop into the alternative to the USD as a global reserve currency in 10yrs, World Bank President Robert Zoellick said Wednesday. In an investment summit held on the sidelines of the 17th Asia-Pacific Economic Cooperation (APEC) Leaders’ Week meetings, Zoellick said though the Chinese currency now can not be used easily overseas, but he believes that it will become more internationalized over the next 10 to 15 ys. This does not mean that the Yuan will replace the USD but it can provide an alternative and you have the multiplicity of the exchange rates, Zoellick said, noting the rise in the number of currency swaps arrangements being inked between Beijing and governments around the world. China signed these arrangements with its trading partners to avoid the risks posed by a volatile USD. Since mid-December 2008, Beijing has signed currency swap contracts worth 650 billion yuan (US$95.6B) with central banks in the Republic of Korea, Malaysia, Belarus, Indonesia and Argentina and the monetary authorities of Hong Kong. Read more

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Global markets across a basket of assets are poised to challenge new highs for Y 2009, after a strong rally on Wall Street took the DJIA to a new high and a weak USD convinced investors into making riskier bets. European exchanges were predicted to start today with solid gains. This would be the 5th consecutive day of gains, taking the FTSE 100 close to its 12-month high of 5,281.54. Equity markets in Asia rose after the DJIA in New York finished at a new high for Y 2009, up 2% at 10,226. The US benchmark index, the S&P 500, rose 2.2%, and at 1,093.08 finished just shy its closing high for Y 2009 of 1,097.91. US futures currently point to the S&P 500 opening down about 4 pts on mild profit taking. Mainland China’s benchmark, the Shanghai Composite rose 0.4% to 3,189.03, Hong Kong’s Hang Seng was up 0.8% at 22,385.97. In Australia, the S&P /ASX 200 rose 1.3% as mining stocks surged. The dollar index hovered around the 75 level on a trade-weighted basis, having dipped to a 15-month low of 74.9 Monday. Traders will be watching to see if the US$ breaks decisively below 75 such a move could cause further selling. A well-received auction of US government bonds overnight supported Treasuries. Read more

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Gold futures on the COMEX Division of the New York Merc set a new all time high Monday as the US$ slid to a 15 month low. Silver and Platinum followed North. The most active Gold contract for December delivery climbed US$5.70, or 0.5 percent, to finish at 1,101.40 oz. The yellow metal ran to a record high of US$1,111.70 oz earlier in the session. The US Dollar, perhaps the most important factor affecting Gold, moved sharply South after the news over the weekend that the G-20 countries will keep stimuli in place. This encouraged investors to buy high risk currencies. The dollar index, which measures the “Greenback” against a basket of foreign currencies, fell more than 1% to its lowest level of 75.025 since last August, fueling Gold’s appeal of hedge. Rising stock and energy markets provided additional support to the precious metal. The DJIA rose to new highs for the year while Crude Oil for December delivery rose about US$2.00 bbl on the New York Merc. December Silver was up 10.5 cents to US$17.48 oz and January Platinum gained US$19 to US$1,367.20 oz. Read more

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Warren Buffett Friday highlighted his rebound from last year’s poor performance as strong stock markets and derivatives gains helped Berkshire Hathaway, his investment vehicle, triple profits in Q-3 to US$3.24B. Berkshire’s earnings were even higher than Q-3 profits at Goldman Sachs, Wall Street’s most profitable bank and one of Buffett’s holdings, and will provide the billionaire investor with more firepower for acquisitions. Last week, Buffett announced his biggest deal ever, the US$26.4B purchase of Burlington Northern Santa Fe, a giant US railroad operator, and said that he was in the market actively looking deals. After a tough Y 2008 during which Berkshire was hit by the global slowdown and recorded the worst performance since he took over the group in 1965, Warren Buffett has taken advantage of the recovering economy and stabilizing markets. Berkshire’s per-share book value, or total assets minus intangible assets and liabilities, surged 10% in the Q-3 and is up 15.2% from the start of Y 2009, because of a rise in the value of its huge stock holdings. Read more

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Productivity in the US non-farm-business sector grew at an annual rate of 9.5% in Q-3 Y 2009, the biggest quarterly gain in six years, the US Labor Department reported Thursday. The Q-3 reading for productivity, the amount of output per hour of work, was also better than the 6.4% gain that economists had estimated. Employers’ unit labor costs, or costs of wages and benefits for each unit of output, plunged at an annual rate of 5.2%. The US economy rose at a pace of 3.5% in Q-3 after four consecutive quarters of contraction, a strong signal that the worst recession since the Great Depression is over. Productivity is considered the Key ingredient needed for rising living standards because it allows companies to pay their workers more without having to raise the price of their products, which fuels inflation. Read more

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