Australian dollar hits 6-1/2-yr low, set for another sorry week

The Australian dollar plumbed a fresh 6-1/2-year low on Friday as renewed worries about global growth encouraged more selling by investors who were already deeply bearish, in turn dragging the New Zealand dollar lower. 

PHOTO: BLOOMBERG

SEP 4, 201511:15 AM

[SYDNEY] The Australian dollar plumbed a fresh 6-1/2-year low on Friday as renewed worries about global growth encouraged more selling by investors who were already deeply bearish, in turn dragging the New Zealand dollar lower.

The Australian dollar fell as far as US$0.6960, its lowest since 2009, after key support of US$0.6980 finally gave way. It was last at US$0.6975.

It has slipped 2.8 per cent since Monday and if sustained, it would be the second largest weekly loss this year.

The Aussie was hit on all fronts, even losing ground against a depressed euro. The common currency took a broad hit overnight after the European Central Bank suggested it may have to expand its already massive stimulus program.

The Australian currency also dropped to a two-year trough of C$0.9219 versus its Canadian peer, while it was down 4.5 per cent against the safe-haven yen for the week.

Investors have been aggressive sellers of the Aussie in recent weeks, in large part due to heightened concerns about a hard landing for the Chinese economy. China is Australia's top export market.

Focus is on US nonfarm payrolls due later on Friday and a solid payrolls outcome would bolster the case for an interest rate hike by the Federal Reserve this month. Conversely a weak number would cloud the view for a September lift off. "Failing a completely disastrous US employment print, we could easily test US$0.6900 as regional woes (China) compound," said Stephen Innes, a senior trader at FX/CFD firm OANDA Australia and Asia Pacific.

The New Zealand dollar fell in sympathy with the Aussie to US$0.6365.

Investors were beginning to look ahead to the Reserve Bank of New Zealand's policy review meeting next week. The market has fully priced in a cut to the official cash rate by 25 basis points. "If they provide an outlook that suggests that they are not completely convinced that a rate cut is necessary in coming meetings, then that could give the NZD a bit of support," said Chris Tennent-Brown, an economist at ASB. "But likewise if they come out very downbeat, the path of least resistance for the New Zealand dollar is probably down." Analysts predicted the kiwi would fall into the early US$0.6000 range by the end of the year.

New Zealand government bonds were unchanged with yields mostly flat along the curve.

Australian government bond futures rose, with the three-year bond contract up 2 ticks at 98.240. The 10-year contract added 3.5 ticks to 97.3200.

REUTERS

    
 

Ringgit gets no reprieve as it slides with oil on slowing China

Malaysia's ringgit fell for an 11th week in its longest stretch of losses since 1993 as lower energy prices weigh on the oil exporter's earnings and capital flows out of emerging markets amid slowing Chinese growth. 

ST PHOTO: JAMIE KOH

SEP 4, 201511:03 AM

[KUALA LUMPUR] Malaysia's ringgit fell for an 11th week in its longest stretch of losses since 1993 as lower energy prices weigh on the oil exporter's earnings and capital flows out of emerging markets amid slowing Chinese growth.

The nation's foreign-exchange reserves have fallen 19 per cent this year, fueling speculation the central bank bought the ringgit to stem declines in Asia's worst-performing currency. Data for the last two weeks of August are due after markets close on Friday, while a report on exports due at noon is forecast to show growth slowed and the trade surplus shrank. Malaysia's benchmark stock index dropped this week and is down more than nine per cent in 2015, with a US interest-rate increase likely to spur more outflows.

"For the ringgit, it has almost become a perfect storm," said Mitul Kotecha, head of Asia Pacific currency strategy at Barclays Plc in Singapore. "The external position has come under focus. There are lower oil prices, weaker external demand and looming Federal Reserve rate hikes." The ringgit depreciated 1.4 per cent in the past five days and 0.3 per cent on Friday to 4.2595 a dollar as of 10:30 am in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It has weakened 18 per cent this year and fell to a 17-year low of 4.2990 on Aug 26.

Brent crude has halved in the past year, lowering government revenue for Malaysia, which derives 22 per cent of its income from oil-related sources. Exports rose 3.2 per cent in July from a year earlier, after advancing 5 per cent the previous month, according to the median estimate of economists in a Bloomberg survey. The trade surplus narrowed to 6.3 billion ringgit (S$2.1 billion) from 7.98 billion ringgit.

Malaysia's reserve holdings declined 2.3 per cent to a six- year low of US$94.5 billion in the first 14 days of August from two weeks earlier. While the reserves remain sufficient, their adequacy is the weakest among the 10 Association of South-east Asian countries, Moody's Investors Service sovereign analyst Christian de Guzman said in an Aug. 27 briefing in Kuala Lumpur.

Government bonds advanced, with the 10-year yield falling 16 basis points this week and two basis points Friday to 4.24 per cent, according to prices from Bursa Malaysia.

BLOOMBERG

    
 

Putin urges investors to invest in Russia's Far East  

Russia is interested in both foreign and domestic investment, especially in the country's Far East region, President Vladimir Putin told the Eastern Economic Forum on Friday. 

PHOTO: REUTERS

SEP 4, 201510:21 AM

[VLADIVOSTOK] Russia is interested in both foreign and domestic investment, especially in the country's Far East region, President Vladimir Putin told the Eastern Economic Forum on Friday.

Making an appeal to countries from the Asia-Pacific region, Putin said his government will increase efforts to develop Russia's Far East.

"(We) will provide to investors the best conditions to do business so the Far East of Russia can successfully compete in terms of efficiency and return on capital with leading business centers," Mr Putin told the conference in Vladivostok.

He added that the country's largest oil firm, Rosneft , will invest 1.3 trillion roubles (S$27.55 billion) in projects in the region.

REUTERS

China: Markets closed on Friday   

PHOTO: REUTERS

SEP 4, 20159:08 AM

FINANCIAL markets in China are closed on Friday for a public holiday.

Amazon buys streaming video startup Elemental

Amazon on Thursday announced a deal to buy a startup that tailors traditional television broadcast for the vast array of Internet-linked devices used for streaming video. 

PHOTO: AFP

SEP 4, 20158:06 AM

[SAN FRANCISCO] Amazon on Thursday announced a deal to buy a startup that tailors traditional television broadcast for the vast array of Internet-linked devices used for streaming video.

Amazon did not disclose how much it is paying for Portland-based Elemental Technologies, but a report at tech news website The Information put the price at US$500 million.

The nine-year-old startup specialises in software that takes live or on-demand traditional television, cable or satellite broadcasts and reformats the video to play on smartphones, tablets, computers or other devices.

Elemental boasts more than 700 media customers including CNN, BBC and HBO. The startup also supports 4K ultra high-definition services, including some delivered by the BBC during last year's World Cup coverage, according to Amazon.

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Euro tumbles on ECB's weaker inflation, growth outlook    

The euro tumbled against the dollar Thursday after the European Central Bank revised down its growth and inflation estimates and said it could expand its stimulus to battle deflation. 

PHOTO: AFP

SEP 4, 20157:32 AM

[NEW YORK] The euro tumbled against the dollar Thursday after the European Central Bank revised down its growth and inflation estimates and said it could expand its stimulus to battle deflation.

The single currency fell to US$1.1127 per euro, from US$1.1225 on Wednesday. The Japanese yen also picked up, to 133.53 per euro and 120.01 per dollar.

Saying it was still too early to determine the extent and impact of the economic fallout from China's slowdown and lower oil prices, the ECB held its benchmark "refi" rate at the current all-time low of 0.05 per cent.

But it cut its key forecasts through 2017, putting growth this year at 1.4 per cent and inflation at a bare 0.1 per cent.

ECB head Mario Draghi said that the single currency area could even see negative inflation rates in the coming months, largely due to lower oil prices, but that was likely to prove only temporary.

Mr Draghi said that the bank's quantitative easing asset purchase programme "provides sufficient flexibility in terms of adjusting the size, composition and duration," if the region's economy remains weak.

It was "intended to run until the end of September 2016, or beyond, if necessary," he added.

"The downward revisions to the ECB's forecast for inflation in 2016 imply that QE will go on longer than the current end point of September 2016," said Tom Rogers of EY Eurozone Forecast.

There was still caution over the dollar ahead of Friday's US jobs market report, which if strong could push the Federal Reserve to begin hiking interest rates.

Most analysts anticipate middling numbers that will provide little extra support for an increase.

AFP

      

China's growth transition will be positive, Spain's economy minister says

Investors have overreacted to China's slowdown and the transition will prove positive for the global economy in the longer term, Spanish Economy Minister Luis de Guindos said. 

PHOTO: REUTERS

SEP 4, 20157:28 AM

[MADRID] Investors have overreacted to China's slowdown and the transition will prove positive for the global economy in the longer term, Spanish Economy Minister Luis de Guindos said.

"In the world economy, when you have a transformational mood of such an important economy as the Chinese economy, it has an impact," Mr de Guindos, 55, said in an interview with Bloomberg Television in Madrid. "In the short term, markets overreact, overshoot, but I think in the medium term that will be positive for world growth and world trade." China's cooling expansion and surprise currency devaluation last month has fueled concern about the global economy just as the US Federal Reserve prepares to raise interest rates for the first time in nine years. Global leaders will discuss the outlook in depth at a Group of 20 summit in Ankara starting Friday. Mr De Guindos - who is attending the meetings - said he expects Chinese officials will explain the situation facing the country at the meeting.

The Spanish minister said Chinese authorities have been "crystal clear" about the need to converge to lower growth rates. He also acknowledged that the pace of world expansion remains mediocre, fragile and uneven, and this creates "jitters in the markets, and volatility and unease." The Stoxx Europe 600 Index has fallen almost 10 per cent in the past month, while Spain's benchmark IBEX 35 has dropped 11 per cent.

Mr De Guindos put a positive interpretation on higher US interest rates, saying that will be a sign that the financial conditions in the world's biggest economy are starting to normalise.

"We cannot get used to living in a world with zero interest rates," he said in the interview at the economy ministry in Madrid. "Sometimes markets overreact but they will accept that, well, we have to normalise the situation." Mr De Guindos said he did not see any risk of a currency war in which nations or economic blocs weaken their exchange rates to give themselves a competitive advantage. Governments must avoid "beggar-thy-neighbour" policies, he said.

European Central Bank President Mario Draghi made similar comments in Frankfurt yesterday, saying that all G-20 nations have "several times reaffirmed their commitment" not to take such actions. He told reporters that uncertainty surrounding China will be "one the major themes" at the meetings in Ankara.

"A currency war is the prelude of a trade war, so I do not see it," Mr de Guindos said. "I think the Chinese authorities perfectly understand the situation and we should not repeat the mistakes that we made in the past during the times of the Great Depression."

BLOOMBERG