Dollar Rises Versus Yen on Signs of Global Recovery Before Fed

[Benny B]

Bloomberg

Dollar Rises Versus Yen on Signs of Global Recovery Before Fed
April 24, 2010, 12:35 AM EDT

By Ben Levisohn

April 24 (Bloomberg) -- The dollar advanced for the first time in three weeks against the yen on evidence of a global economic recovery including a surge in the U.S. housing market before next week’s Federal Reserve policy meeting.

The euro touched its weakest level in almost a year against the dollar before Greece asked the European Union and the International Monetary Fund yesterday to activate a bailout of as much as 45 billion euros ($60 billion). The yen fell against all of its major counterparts this week as central banks signaled they will begin increasing borrowing costs to contain inflation, encouraging demand for higher-yielding assets.

“There’s lots of good data in the U.S. and globally, and that’s keeping the yen on the back foot,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “The aid package for Greece is a temporary stop-gap. The combination of strong U.S. numbers, a more upbeat Fed and sovereign concerns in Europe means it’s just a matter of weeks before the euro breaks $1.30.”

The dollar increased 2 percent to 93.97 yen, from 92.17 on April 16. The euro declined 0.9 percent to $1.3384, from $1.3503 last week. It touched $1.3202 yesterday, the lowest level since April 30, 2009. The euro appreciated 1 percent to 125.73 yen, from 124.44 yen.

New Zealand’s dollar gained 3.2 percent to 67.40 yen and Mexico’s peso increased 2.8 percent to 7.72 yen this week on speculation investors will increase carry trades, in which they buy higher-yielding assets with amounts borrowed in nations with low interest rates. Japan’s benchmark of 0.1 percent has made the yen popular for funding such transactions.

Yuan Forwards

Yuan forwards touched a three-month high on April 22, before yesterday’s meeting of Group of 20 finance chiefs in Washington. The officials called in a statement for “credible” plans to withdraw economic stimulus as the recovery gains momentum and Greece’s fiscal turmoil highlights the risks posed by mounting government debt.

Treasury Secretary Timothy F. Geithner earlier this month called the talks an “avenue for advancing U.S. interests” on the Chinese currency.

Twelve-month non-deliverable yuan forwards ended the week at 6.6115 per dollar, compared with 6.6185 on April 16. The contracts reached 6.5930 on April 22, reflecting bets that the currency will strengthen about 3 percent.

The dollar rose to the strongest level in two weeks versus the yen yesterday as government reports showed U.S. new-home sales rose in March by the most in almost five decades and orders for durable goods surged.

U.S. Housing Market

The housing number was “incredible,” and the durable- goods report was “strong,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration. “These reports will send the FOMC back to the drawing board to fine-tune the interest rate trajectory.”

The dollar decreased 0.2 percent against the yen on March 16, when the Fed retained its pledge to keep the target lending rate at virtually zero for an “extended period.”

Euro Versus Krone

The euro fell for a fourth week against the Norwegian krone, dropping 1 percent to 7.8833, as Greece called for financial assistance in an unprecedented test of the 16-nation currency’s stability and European political cohesion.

“The fragmented nature of the European bond market will call into question the euro’s credibility as a reserve currency,” said Adam Cole, head of global currency strategy at Royal Bank of Canada in London.

Canada’s currency touched its strongest level versus the greenback in almost two years this week after the Bank of Canada signaled it may be the first Group of Seven nation to increase borrowing costs as economic growth accelerates and stokes inflation.

The central bank dropped a phrase regarding its “conditional commitment” to keeping the record low 0.25 percent target lending rate unchanged until July unless the inflation outlook shifted.

The Canadian dollar gained 1.4 percent to 99.91 Canadian cents per U.S. dollar, from C$1.0128 last week. The currency reached parity with the greenback on April 6 for the first time since July 2008.

India’s rupee climbed 1.7 percent to 2.12 yen after the central bank raised interest rates for the second time in a month and ordered lenders to set aside more cash as reserves in an attempt to slow the highest inflation rate among the G-20.

--With assistance from Paul Dobson in London. Editors: Dennis Fitzgerald, Greg Storey

[dario73]

Result of over printing the dollar.

The Stimulus package is a filure.  Now for a reality check:

General Motors is running ads on all the major networks this week claiming it has repaid its bailout from the taxpayers "in full." But the claim isn't standing up to scrutiny from lawmakers and government watchdogs who have found that the automaker was able to repay the bailout money only by dipping into a separate pot of bailout funds.

The TV spot may land GM in hot water with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are "likely to mislead consumers."

"We have repaid our government loans in full — with interest — five years ahead of the original schedule," says Ed Whitacre, chairman and CEO of General Motors Company, asking Americans to give the bankrupt company another look.

But a top Senate Republican has accused GM of misleading taxpayers about the loan repayment, saying the struggling auto giant was able to repay a $6.7 billion bailout loan only by using other bailout funds in a special escrow account.

Iowa Sen. Chuck Grassley's charge was backed up by the inspector general for the bailout — also known as the Trouble Asset Relief Program, or TARP. Watchdog Neil Barofsky told Fox News, as well as the Senate Finance Committee, that General Motors used bailout money to pay back the federal government.

"It appears to be nothing more than an elaborate TARP money shuffle," Grassley, the ranking Republican on the Senate Finance Committee, said in a letter Thursday to Treasury Secretary Timothy Geithner.

The FTC said it could not provide any comment on the ad or whether it had received any complaints or inquiries about GM's claims from the public or from government officials.

The FTC has a division of advertising practices that investigates possible false claims, but specific investigations are not made public. If the FTC determines that truth-in-advertising laws have been violated, the agency files complaints against the organizations in violation.

GM announced Wednesday that it had paid back the $8.1 billion in loans it received from the U.S. and Canadian governments in 2009. Of that, $6.7 billion went to the U.S. Treasury.

"A lot of Americans didn't agree with giving GM a second chance," Whitacre said in the 60-second ad. "We invite you to take a look at the new GM."

Well, meet the new GM. Same as the old GM. The company is still majority-owned by the federal government, which has a 60 percent stake in the Detroit titan; the Canadian government owns another 12 percent.

GM is not yet solvent, continues to be racked by debt and is still unable to turn a profit — something that has eluded the company since 2004. GM filed for bankruptcy in 2009 but was saved from collapse by a $52 billion infusion from the federal government.

But the company says the repaid TARP loan is a "good start," a signal that the company is emerging from its debts and moving back into the black.

"I think any way you look at it, that we're giving (loans) back with interest before we had to should be taken as a positive sign," said GM spokesman Greg Martin.

Martin said GM has not received any communications from the FTC or complaints from federal officials, and said that public feedback has been positive.

But Senator Grassley has called on Treasury Secretary Geithner to provide more information about why the company was allowed to use bailout money to repay bailout money, and how much of the remaining escrow money GM would be allowed to keep.

"The bottom line seems to be that the TARP loans were 'repaid' with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the administration have claimed in their speeches, press releases and television commercials," he wrote.

But Barofsky told Fox News that while it's "somewhat good news," there's a big catch.

"I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn't from earnings. ... It's actually from another pool of TARP money that they've already received," he said Wednesday. "I don't think we should exaggerate it too much. Remember that the source of this money is just other TARP money."

Barofsky told the Senate Finance Committee the same thing Tuesday, and said the main way for the federal government to earn money out of GM would be through "a liquidation of its ownership interest."

Grassley criticized this scenario in his letter.

"The taxpayers are still on the hook, and whether TARP funds are ultimately recovered depends entirely on the government's ability to sell GM stock in the future. Treasury has merely exchanged a legal right to repayment for an uncertain hope of sharing in the future growth of GM. A debt-for-equity swap is not a repayment," Grassley wrote.

[Benny B]

Result of over printing the dollar.

LOL
clueless