Finance topics

The yen rose against 14 of the 16 most-active currencies as signs credit-market losses are worsening prompted investors to pare carry trades, where they use funds from Japan to buy higher-yielding assets.

The yen had its biggest gain against the euro in a week as UBS AG said 2008 will probably be another “difficult” year for financial services companies and the New York Times reported Merrill Lynch & Co. may write down $15 billion from mortgage- related losses. The Canadian dollar fell versus all 16 major currencies after the economy unexpectedly lost jobs last month.

“The market is very skittish,” said Mark Meadows, a strategist at currency-trading company Tempus Consulting Inc. in Washington. “Nobody knows how much the banks lost on subprime mortgages. When we hear this kind of news, stocks sell off and the yen strengthens.”

The yen advanced to 109.04 per dollar at 11:16 a.m. in New York, from 109.33 yesterday, declining 0.4 percent this week. It advanced to 161.31 per euro, from 161.88, falling 0.8 percent in the past five days. The dollar traded at $1.4792 against the euro, from $1.4804.

Japan’s currency surged 1.2 percent against Canada’s currency to 106.95 yen, while climbing 0.5 percent to 17.19 per Swedish krona, which declined versus 15 of 16 major currencies.

Canada’s Dollar

Canada’s dollar fell for a sixth day against its U.S. counterpart, the longest losing streak since March, as the economy lost 18,700 jobs in December. The Canadian currency touched C$1.0222 per U.S. dollar, the lowest since Dec. 17.

The U.K.’s pound fell to as low as 75.87 pence per euro, the weakest since the single currency’s introduction in 1999, before trading at 75.51 pence from 75.48 yesterday.

Japan’s Nikkei 225 Stock Index fell 1.9 percent to 14,110.79, the lowest since Nov. 15, 2005. Stocks in the U.S. and Europe weakened. The Standard & Poor’s 500 Index declined 0.7 percent.

Investors exited carry trades, in which they get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency moves erase those profits.

Bank of Japan Governor Toshihiko Fukui said the country’s economic growth is slowing “for the time being” as housing investment declines.

`Risk Aversion’

“The yen’s only strength comes from risk aversion,” said Boris Schlossberg, senior currency strategist in New York at currency dealer DailyFX.com. “2008 will be the year when interest rates globally will compress, and that’s negative for the carry trades.”

The yen will trade between 107 and 111 per dollar in the next two weeks, Schlossberg said.

The Australian dollar, a favorite of the carry trade, depreciated 0.4 percent to 97.54 yen.

Japan’s benchmark interest rate of 0.5 percent is the lowest among major economies no fax payday loan. Interest rates are 8.25 percent in New Zealand, 6.75 percent in Australia, 5.5 percent in the U.K. and 4 percent for the 15 countries that share the euro.

Merrill is trying to raise $4 billion from investors in the U.S., Asia and the Middle East to shore up its finances, the New York Times said, citing people it said were briefed on the plan. The bank is expected to disclose the loss when it reports earnings next week, the newspaper said.

Zurich-based UBS, Europe’s biggest bank by assets, urged shareholders to support its plan to raise 13 billion Swiss francs ($11.8 billion) from Government of Singapore Investment Corp. and an unidentified Middle Eastern investor, according to a letter posted on its Web site.

`Strengthening Further’

“Merrill’s writedown is unsettling,” said Carl Forcheski, vice president on the corporate currency sales desk at Societe Generale SA in New York. “The fact that more of this kind of bad news is coming prolongs the agony in the market. The yen is vulnerable to strengthening further.”

The yen may touch 107.23 per dollar in the next two weeks, Forcheski said. The Japanese currency touched that level on Nov. 26, the strongest since June 2005.

One-month implied volatility for the yen against the British pound rose to 14.75 percent, from 14.2 percent yesterday. A rise in volatility tends to discourage carry trades as it makes profits more unpredictable.

Dollar’s Weekly Decline

The dollar headed for a third consecutive weekly decline versus the euro, the longest losing streak since the period ended Nov. 9. Federal Reserve Chairman Ben S. Bernanke yesterday said more interest-rate cuts “may well be necessary.”

European Central Bank President Jean-Claude Trichet yesterday kept borrowing costs unchanged and said the central bank will “not tolerate” an inflation spiral.

Futures contracts on the Chicago Board of Trade show 68 percent odds the Fed will cut its target rate of 4.25 percent for overnight bank loans by a half-percentage point on Jan. 30.

“I’m in the dollar-bear camp,” said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. “Economic standings in other countries are faring better than ours. The dollar needs to depreciate another 4 to 5 percent before it starts to offer value.”
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RETAIL sales and job figures yesterday bolstered confidence that strong domestic demand can help keep Australian corporate profits healthy this year.

November retail sales rose by 0.8 per cent above October’s figure, as consumers kept spending.

This was despite an interest rate hike, market turmoil and higher living costs.

The spending jump easily beat the 0.5 per cent average analyst forecast, as strong gains in the hospitality, clothing and some retail sectors made up for softer department store and recreational goods sales.

November quarter labour market data, also released yesterday, shows the jobs picture remains tight.

The Australian Bureau of Statistics said the vacancy rate soared 6 per cent to record highs, meaning there are now fewer than three unemployed people going for every vacant job.

The retail sales and jobs data were seen as intensifying the Reserve Bank’s inflation concerns, raising the likelihood of a quarter-point increase in the official cash rate to 7 per cent early this year, despite arbitrary moves in recent weeks by some major lenders.

But UBS economist Adam Carr said while interest rate increases early this year should moderate the pace of 2008 domestic growth, tax cuts and strong jobs growth, coupled with buoyant income, should help ensure consumer spending held up well.

Shares in retailers fell on concerns of another interest rate rise. Harvey Norman lost 31? to $6.18, David Jones 11? to $5.13, Woolworths 70? to $32.33 and JB Hi-Fi 26? to $13.68. Coles-owner Wesfarmers lost 89? to $39.09.

CommSec analysts said retail spending could be expected to slow “somewhat” over 2008 in response to higher living costs but agreed the key supports of strong job and population growth would underpin domestic consumer spending.

CommSec chief equities economist Craig James said the retail data and job market strength showed an Australian economy “going gangbusters”, with consumers effectively teflon coated, with no bad news sticking.

He said the strong November retail sales data reinforced optimism and there was “more than enough” domestic strength to keep corporate profits in Australia strong despite the weaker US economy and uncertain implications for global growth.

“November had everything – higher food prices, a rate hike and a federal election but still consumers kept spending,” Mr James said http://payday-z.com. “And it’s not hard to see why. The job market is the strongest in a generation, wages are rising and spending levels are being boosted by the biggest migration boom in Australia’s history.

“The positives . . . have been more than enough to outweigh negatives of rising housing, petrol and food costs,” he said.

Analysts widely expect the Reserve Bank to raise the official cash rate early this year to slow the economy’s pace and prevent overheating.

But the jury is out as to whether it will boost the official rate to 7 per cent at its February 5 meeting or wait for more clarity on the outlook for global growth, given US recession fears.

Westpac senior economist Matthew Hassan said crucial to the RBA’s thinking would be the scale of the US slowdown amid fears the general economy there is being engulfed in the crisis that began with the collapse in mortgage loans to high-risk borrowers.

“The strength of inflation here would normally have drawn a rate rise and the retail sales data reinforce the RBA’s tightening bias, but the timing is still uncertain,” Mr Hassan said. “There are still dark clouds over the global economy.”

The Reserve Bank of Australia upped rates by a quarter of a point at its August and November meetings.

But it stayed on the sidelines in December, saying while it was concerned about inflation there was the potential that higher borrowing costs and international economic uncertainty could act to curb inflationary pressures.

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Willard Yellow Bird says many American Indians don’t even attempt to apply for home loans.

‘‘They’re just so used to getting denied,’’ said Yellow Bird, safety coordinator for the city of Fargo and a liaison to the city’s Native American Commission.

An analysis of home loan applications for 2006 by The Forum newspaper found that lenders denied one out of every three applications made by American Indians in North Dakota and more than one out of every four in Minnesota.

American Indians are North Dakota’s largest racial minority, accounting for 5.2 percent of the state’s population in 2006, according to the U.S. Census Bureau.

The Forum analyzed a database containing records of 34,373 home loan applications made in North Dakota and 537,288 filed in Minnesota last year, as reported under the federal Home Mortgage Disclosure Act.

American Indians, like other races, are denied loans for a variety of reasons.

The HMDA reporting form includes a space where lenders may list the reason for denial, but they’re not required to do so payday advance online. Roughly 71 percent (3,309) of the 4,643 loan applications denied last year listed a reason for denial.

Last year, 378 American Indians were the primary applicants for home loans in North Dakota. Financial institutions denied 126 of the applications.

Credit history was cited as the primary reason for denial in 26 of the 59 applications where a reason was listed.

Seven applications were denied because of collateral, five because the application was incomplete, three because of debt-to-income ratio and two each because of employment history.
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