Latin American Currencies Bounce Back

Currencies in Latin American nations recovered yesterday due to the weak retail sales statistics of the Unites States which affected the US dollar.

This helped end a three-day decline in the region's FOREX markets.

Meanwhile, equities were generally lower owing to gains of Brazilian mining company Vale and energy giant Petrobras. These led to the positive performance of the MSCI stock index in Latin American.

The USD was also hurt by the announcement of downward adjustments for American economic growth made by the International Monetary Fund.

The Brazilian real recovered over 1.4 percent and wiped out previous losses to trade close to 3.07 per US dollar.

It was also propelled by news that state-managed Petrobras will be releasing audited figures within April. Company shares, which entice many overseas investors looking for opportunities in Brazil exposure, have been adversely affected by an ongoing probe of corruption charges.

Release of the investigation’s results can alleviate concerns about the company’s condition.

Preferred shares of the company increased two percent while those of Vale SA were almost four percent higher Meanwhile, the BOVESPA stock index decreased lower to some extent after a five percent decline in beef shares of producer JBS SA.

Weak data from the US can drive investors into riskier assets like LATAM securities on speculations that a prolonged period of low US rates will sustain the pursuit of higher returns in upcoming markets.

Aussie Currency Recovers

The AUD rallied following the release of the National Australia Bank’s business survey which implied at recovery of local enterprises.

The AUD and USD pair traded at 0.7612 which was up 0.30 percent. On the other hand, the USD and JPY swapped hands at 119.94 which went down 0.16 percent.

Meanwhile, EUR and USD registered an increase of 0.02 percent at 1.0569.

The National Australia Bank Survey on Business Confidence and Conditions for Australia perceived conditions at positive six last month from plus two in February. Business confidence went up to plus three from a flat mark last February.

The Reserve Bank of Australia observed the increase of capital expenditure intentions in the survey which has higher weight for non-mining sector investments.

In another part of the world, the Monetary Authority of Singapore announced it adhere to its present position on monetary policy which allows additional moderate and slow but sure appreciation of the Singapore currency as progress and inflation look headed toward the expected direction.

The decision surprised many analysts who were expecting the Monetary Authority to opt for another policy easing in three months.

The verdict of the Indonesian Central Bank is also due today in Jakarta.

In China, data releases are also scheduled for first quarter currency reserves, new loans and monetary supply. The dollar index of the United States was listed at 99.74.

Demand for the USD is supported by hopes for higher cash rates as market investors became more confident the American economy will continue to get better after recent reports indicated a slowdown at the beginning of 2015.

Gold Futures Cut Back on Losses

Gold futures capped losses yesterday following a weak recovery of US retail sales last month although it still remained at the lowest level as market players watched closely at the probability of the Fed’s interest rate increase.

Gold for settlement this June at COMEX decreased $6.70 (0.6 percent) to remain at $1,192.60 per ounce. This is said to be the lowest futures price payment since March 31. Silver also dropped 13 cents (0.8 percent) to $16.161 per ounce.

According to a group of financial consultants, outlook on gold is very bearish even if the decline of oil prices which is beneficial to the mining sector is being disregarded.

The US Department of Commerce announced retail sales in March increased 0.9 percent which is the strongest in one year but still fell short of the 1.1 percent growth expected by economic experts, based on a Market Watch survey.

Producers’ prices went up 0.2 percent after four consecutive months of degeneration.

Meanwhile, the common currency traded at 1.0659 against the US dollar on Tuesday.

For other precious metals, platinum for July dropped 20 cents to $1,153.70 per ounce. On the other hand, palladium for June gave up $8.90 (1.2 percent) to $762.50 per ounce.

Copper for May settlement declined 1.9 cents (0.7 percent) to $2.70 per pound.

Russia’s FOREX Law

The Bank of Russia is finalizing the country’s foreign exchange legislation as it will also act as mega regulator in charge of supervision of this particular market segment.

Working sessions were conducted at the central bank with the participation of the Securities Market and Commodity Market Department head as well as representatives from the country’s FX industry.

The primary objective of this forum is to agree on necessary amendments to regulations since statues and secondary acts must be forged and published before greater part of FOREX law provisions are implemented within the year.

The short announcement regarding the meeting on the CRFIN website did not specify the type of revisions that were discussed. However, issues such as accounts of nominees; maximum leverage (supposed to be 1:50) although many think this ratio should be higher; banks that do not offer retail FOREX services; foreign currency dealers barred from offering Contract for Differences (CFD) trading; and, accounting as well as reporting policies for FOREX dealers.

CRFIN is a self-regulating and non-profit organization to enhance transparency levels and uphold growth for the over-the-counter FOREX market through an effective regulatory structure.

Meanwhile, the Central Bank of Russia announced that it cold around $3 billion during a one-year FOREX repo auction yesterday with demand going beyond $4 billion. It arranged the papers at an average yearly cost of 2.5955 percent with cut-off rate at 2.56 percent.

Euro Currency Falls against US Dollar

The euro dropped to $1.05 yesterday reaching its lowest in four weeks as the US dollar continued to increase on speculations the US central bank will move up interest rates within the next few months.

The Australian dollar also gave up 1.7 percent and headed towards a six-year trough after tightening of exports from China fuelled apprehensions of feeble growth in the second-biggest economy.

The shared currency went down 0.8 percent versus the USD and traded at $1.05205 near a 12-year slump of $1.0457.

The euro also touched a two and one-half month trough versus the Swiss note at 1.0368 francs.

Meanwhile, the USD climbed 0.6 percent against its major peers and reached 99.986 which are the highest in a month.

Majority of large banking institutions expect the USD to continue rising against the euro. Morgan Stanley was one of those to modify its projection for the euro and predicted that the currency will come to $0.98 by the end of 2015. On the other hand, the Aussie dollar declined to $0.7553 which is close to the six-year slump of $0.7534 which was posted during the early part of April.

The World Bank also reduced its growth forecasts for this year as far as developing nations in East Asia including China and issued warnings of major risks from global vagueness.

These provide a downbeat picture for the AUD particularly as current data was influenced by regression in exports, according to the European FOREX strategy head of Morgan Stanley (London).

The UK pound sterling touched a five-year low ($1.4567) with less than one month before the British parliamentary elections take place.

Greece Considers Debt Default

Athens is looking at debt non-payment unless the government manages to strike an agreement with creditors by April. Greece must repay €2.4 billion in Treasury bills after paying back a loan worth €460 million to the IMF.

It decided to hold back another €2.5 billion of payments to the IMF for May and June if the euro zone refuses to make available the bailout fund.

The Greek government is running out of cash to pay salaries and pensions for public sector employees. However, the finance ministry reiterated the government's commitment to arrive at a reciprocally beneficial solution compliant with its charter.

Greek officials have already recommenced technical discussions with representatives of the IMF, World Bank and ECB both in Athens and Brussels regarding monetary measures, budget goals and privatization. Creditors say they will not give out funds to settle debt installments.

The problem arose after €7.2 billion in rescue money which was supposed to have been released to Greece in 2014 was withheld due to differences of opinion between Athens and European/IMF lenders over economic reforms.

Among these are changes in the pension system, cuts in payments given to Greek pensioners, and procedures to allow mass firings by employers in the private sector.

JPY and USD

The Japanese yen gained versus the US dollar as the Bank of Japan maintained its policy. The pair of USD and JPY swapped hands at 119.76. It was down 0.45 percent. On the other hand, AUD and USD traded at 0.7674. It was up 0.54 percent.

The Bank of Japan voted 8 to 1 vote to just keep the policy mark untouched while the only dissenter (Takahide Kiuchi) who opposed the October 31 easing wanted a lower target than that one prior to the last easing.

That board member said the central bank should continue this excessive degree of easing only from April 4, 2013 up to the two-year period so it will not be exaggerated. He also insisted policy target prior to the October 31 easing was proper.

Kuichi suggested that the central bank must perform money market operations along with asset acquisition so the monetary source and unsettled amount outside of JGB holdings will grow annually at about ¥45 trillion.

The board rejected his proposition.

Meanwhile, the US Dollar Index was recorded at 97.82. It was down 0.43 percent in Asian trading.

The MARKIT Euro Zone Services Business Activity Index went up from 53.7 (February) to 54.2 (March).

Growth in Germany, Spain and Italy accelerated development while the UK’s PMI service sector reached a peak of 58.9 reaching a multi-month high.

Price discounting in the euro region pushed growth in the rest of the European continent.