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February 22, 2013

China Disagrees with Abe Comments to Washington Post about Territorial Disputes

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China on Friday made strong representations to Japan over Prime Minister Shinzo Abe’s comments that characterized Beijing as having a “deeply ingrained” need to challenge neighbors over territory.

“China is strongly dissatisfied with the Japanese leader’s comments that distort facts, attack and defame China and stir up confrontations between the two countries,” Foreign Ministry spokesman Hong Lei said at a daily press briefing on Friday.

In an interview with the Washington Post, Abe said China has a “deeply ingrained” need to spar with Japan and other Asian neighbors over territory, because the ruling Communist Party of China uses the disputes to maintain strong domestic support.

Abe began a visit to the United States on Thursday, the same day his comments were published in the Washington Post.

Hong urged the Japanese government and leaders to take a correct view of China and its development, pursue positive policy with China, show sincerity through actions and make efforts to improve bilateral relations.

Hong said China carries out normal maritime activities in accordance with domestic and international law.

“Thus, navigational freedom and security in the East China Sea and South China Sea have never been affected,” Hong said.

The spokesman said Japan intends to play up the “China threat,” mislead world opinion and purposely create regional tensions, and the country has ulterior motives.

“Japan should do more to enhance bilateral trust in politics and security and work for regional peace and stability, rather than act contrarily,” Hong said.

Hong reaffirmed that the Diaoyu Islands are China’s inherent territory and China’s sovereignty over them is indisputable.

via Xinhua

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

February 13, 2013

EU and US Free Trade Agreement Talks to Begin

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The European Union and the US will begin formal talks on a free-trade agreement, paving the way for the biggest trade deal in history.

European Commission President Jose Manuel Barroso made the announcement following President Barack Obama’s State of the Union address.

A deal would bring down trading barriers between the two biggest economies in the world.

EU-US trade is worth around 455bn euros (£393bn; $613bn) a year.

Mr Obama announced US support for talks as part of his annual address to Congress on Tuesday, saying a free-trade deal would “boost American exports, support American jobs and level the playing field in the growing markets of Asia”.

In a joint statement, US and EU leaders said trade between the US and EU supported millions of jobs on both sides of the Atlantic.

“We are committed to making this relationship an even stronger driver of our prosperity,” the statement said.

via BBC

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

October 31, 2012

Usage of Yuan to increase in Thailand via local Chinese banks

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Industrial and Commercial Bank of China, the world’s largest bank by assets, is attempting to increase the use of the yuan between Thai and Chinese customers through retail products and “dim sum” bonds.
The group wants ICBC (Thai), its arm in Thailand, to play a role in supporting the use of the currency among Thai and Chinese counterparts, in line with growing trade volume between the two economies, said Ye Hu, chairman of ICBC (Thai).

The move follows China’s strategy to strengthen the role of its currency in the global arena, in light of fluctuations in the key international units – the US dollar and the euro. The yuan is now the settlement currency between Chinese businesses and their foreign counterparts in some countries.

The rising annual trade volume between China and Thailand presents an opportunity for the bank to expand yuan-currency products and services to support local and global Thai business, as well as Chinese business, he said.

ICBC (Thai) currently facilitates corporate finance for Chinese and Thai investors in the two countries, and provides debit cards to Thai customers with activities in China.

“To increase yuan transaction levels among the two countries, we have to have more retail products in Thailand. We are launching our first credit card in Thailand by the end of the year,” he said.

ICBC Group is the world’s fourth-largest and Asia’s largest in terms of the number of cards issued, with a combined 76 million cardholders.

ICBC (Thai) introduced dual-currency debit cards in Thailand last year and has since built up 6,000 cardholders, most of whom are Thai students in China seeking exchange-rate flexibility, Hu said.

Credit-card business will be similar to debit-card business, he said, adding that dual currencies would make life easier for Thai customers who have activities in China and want to minimise exchange-rate risks.

Apichart Kasemkulsiri, senior executive vice president of ICBC (Thai), said the bank was not targeting market share or a specific number of credit cards issued, as it was very much dealing with niche customers.

“The credit-card industry in Thailand is extremely competitive; we might not offer as many benefits as local banks. We want to focus on customers who want more convenience in yuan currency exchange and cross-border trade settlement. Overall yuan transactions will be larger once there is yuan settlement, and this will boost the transaction level of the credit card as well,” he said.

The bank next year will also launch an ICBC automated-teller-machine card and a network of its own ATMs, besides which it is considering adding to the current 20 branches across the country to serve its retail-banking expansion, he said.

Meanwhile, ICBC Group considers that ICBC (Thai) and ICBC Asia, the Hong Kong subsidiary, can work together to approach Thai companies in connection with the launch its dim sum bond, a yuan-denominated instrument issued by a Chinese entity in Hong Kong.

Hong Kong is the global hub for yuan trade settlement, and the dim sum bond is one of the fastest-growing instruments on the market, Apichart said, adding that the bond would be attractive for Thai companies as the funding cost is lower than that for baht-denominated bonds.

Trade volumes between Thailand and China this year have supported the growth of ICBC (Thai), especially interest and fee income, and the bank is confident that net profit will be higher than the Bt695 million recorded last year, said the executive.

October 16, 2012

Japan increases pace of US Bond purchases

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Japan closed in on China as the largest holder of US government debt during August as foreign demand for Treasury securities remained robust.

China added $4.3 billion in Treasuries in August to take its holdings to $1.153 trillion, while Japan bought $5.3 billion, for a total of $1.121 trillion.

Over the past year, Japan’s pace of buying has accelerated with its Treasury holdings rising from $907 billion, while China’s overall portfolio has dropped from $1.278 trillion according to US Treasury data.

The convergence between the two major buyers of Treasury debt comes during a closely fought US presidential election, with Mitt Romney, the Republican candidate seeking to cut spending in order to reduce US reliance on borrowing from China. Mr. Romney has also promised to name China a currency manipulator on his first day in office.

“Simply, we’re not just borrowing from the Chinese, we’re borrowing from the Japanese as well,” said Dan Greenhaus, chief global strategist at BTIG. “It’s important to remember that Japan lends the US every bit as much money as does China.”

China supplanted Japan as the largest foreign holder of Treasuries in September 2008 during the financial crisis, and peaked in July 2011 at $1.314 trillion. China’s need to recycle foreign exchange reserves into US debt has eased as its economy has slowed.

While Japan is close to officially overtaking China based on the monthly Treasury data, in the past China’s purchases of bonds have taken place through other financial centers such as London. When the Treasury revises its data annually, UK purchases often decline sharply and countries such as China are shown to have higher holdings.

The monthly Treasury International Capital Data released on Tuesday revealed $90 billion in net foreign purchases of long-term US securities. In a month when the 10-year yield rose to as much as 1.86 percent from 1.50 percent, Treasury buying amounted to $42.9 billion, down from $49 billion in July.

Demand from Caribbean banking centers, a proxy for hedge funds, was solid, $11.2 billion higher at $256.9 billion, while UK holdings rose $13.2 billion to $153.6 billion. Swiss holdings also continued to rise, up $12.1 billion to $202.1 billion, reflecting efforts to peg its currency.

Ahead of the Federal Reserve launching a third round of quantitative easing in September, demand for US mortgages, up $18.6 billion, and corporate bonds, up $10.8 billion, was also robust.

“In sum, total fixed income flows were extremely strong in August, with foreign accounts buying $72.4 billion in US fixed income securities, reflecting the strongest monthly pace of purchases since January,” said TD Securities.

“Aside from positioning for the QE3 announcement, the strong purchase data is consistent with strong ongoing demand for safe-haven assets despite some recent improvement in the European situation,” added the bank.

Via – CNBC

September 24, 2012

German Bund Yield Approaches One-Week Low Amid Euro-Area Discord

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German 10-year government bonds yields approached the lowest in more than a week amid renewed discord among European leaders over ways to bring an end to the region’s debt crisis.

Bunds held their rally from last week, when the yield dropped 11 basis points, the most in a month. German Chancellor Angela Merkel and French President Francois Hollande clashed on a timetable for starting joint oversight of Europe’s banks, underlining tension between the two countries. Two-year notes slipped before a report economists said will show German business confidence climbed for the first time in six months in September. Italian and Spanish bonds dropped.

“Any time anyone with different priorities starts to get together and really drill down to what needs to be done, you end up with these differences of opinion, which just remind everyone how far we are away from a solution,”said John Wraith, a fixed- income strategist at Bank of America Merrill Lynch in London. “The bund remains the intra-euro-zone safe haven asset of choice.”

Germany’s 10-year yield fell one basis point, or 0.01 percentage point, to 1.59 percent at 8:15 a.m. London time. It dropped to 1.56 percent on Sept. 20, the least since Sept. 13. The 1.5 percent bond due in September 2022 rose 0.08, or 80 euro cents per 1,000-euro ($1,296) face amount, to 99.2.

The two-year note yield climbed almost two basis points to 0.05 percent.

Via – Bloomberg

German deputy minister says ESM leverage being discussed

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German Deputy Finance Minister Steffen Kampeter said on Monday there is a discussion going on in Europe about leveraging the new permanent bailout scheme for the euro zone – and he promised that Germany’s parliament would be consulted.

“If Europe decided to leverage the ESM (European Stability Mechanism) – and this discussion is going on – we would of course involve the German Bundestag (parliament’s lower house),” Kampeter told Reuters.

Germany’s Constitutional Court made consulting the Bundestag on any changes to the ESM a condition for giving its approval to the fund’s ratification in a ruling earlier this month. Kampeter called such a step a “political and legal necessity”.

Spiegel magazine reported in its latest edition that the euro zone wanted to leverage the ESM for a total capacity of more than 2 trillion euros, in a similar arrangement to that involving its predecessor, the European Financial Stability Facility (EFSF).

Via – Reuters

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European Leaders Struggle to Overcome Fresh Crisis Stalemate

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European leaders are struggling to overcome a crisis-fighting stalemate as they face discord over a banking union, Greece’s ongoing debate on how to meet bailout commitments and foot-dragging by Spain and Italy on financial aid requests.

Chancellor Angela Merkel and President Francois Hollande underlined Franco-German disagreement over the weekend as they clashed on a timetable to introduce joint oversight of the region’s banking sector, with Merkel rebuffing Hollande’s appeal to activate it “the earlier, the better.”
Enlarge image European Leaders Struggle to Overcome New Crisis Stalemate

German Chancellor Angela Merkel, right, and French President Francois Hollande attend a press conference at Ludwigsburg Palace on Saturday.

Financial markets “that are watching Europe want to see results,” Merkel said at the meeting on Sept. 22 near Ludwigsburg, Germany, celebrating the two nations’ reconciliation after World War II. Still, “it has to be thorough, the quality has to be good and then we’ll see how long it takes,” she said.

Markets that surged this month on the back of a European Central Bank rescue plan and clarity over bailout funding may not offer European leaders the time they need as an easing in market pressure raises the risk of policy complacency. Deadlock over the banking union could delay until next year a key building block in resolving the crisis, compounding turmoil that’s so far engulfed five of the euro area’s 17 nations.

Via – Bloomberg

August 28, 2012

Merkel in China to Strengthen Euro Outlook

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German leader Angela Merkel is due for a trip to China as part of a German blue chip contingent. Given how the last weeks have played out in the markets, she will also take the opportunity to reassure Chinese leaders on the strength of the euro, and the positive outlook for the eurozone currently facing a crisis.

Two topics that are sure to come up are Spain and Greece. One is a pending item as Spain is yet to formally ask for a bailout, but sources have mentioned it is due any day as more provinces declare bankruptcy. Greece in the other hand has not meet the terms of the agreement which saw it receive bailout funds, but its waiting on a report by the Troika of IMF, ECB and European Council before the talks renew.

Germany’s Angela Merkel makes her second trip to China in half a year this week, hoping to strengthen booming trade ties and obtain assurances from Beijing that it will support the fragile euro zone by buying the bonds of its stricken southern members.

The relationship between the world’s top two exporters went through a decidedly chilly phase after Merkel received the Dalai Lama in Berlin in 2007, but she has toned down her criticism of China’s human rights record in recent years and shifted her focus to economic links.

In a sign of how much ties have improved, Merkel will be taking seven ministers with her for full-fledged consultations between the two governments, a format the countries launched last year and until recently was reserved for Berlin’s closest European partners.

The trip is the sixth to China since Merkel took office in 2005. She was in Beijing as recently as February, then hosted Chinese premier Wen Jiabao at the Hanover trade fair in April.

via Bloomberg

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July 7, 2011

ECB Raises Interest Rates; BofE Holds Line

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The euro was boosted today by news that the European Central Bank (ECB) was lifting the benchmark interest rate by 25 basis points to 1.5 percent. The move was not unexpected as inflation was last recorded at 2.7 percent – well above the ECB’s target rate of 2 percent.

The Bank of England on the other hand, voted to maintain UK rates at the current record low rate of 0.5 percent. The growing interest rate gap between the two currencies could see investors favoring the euro over the pound.

Source: BBC News

January 11, 2011

Pressure Mounts on Portugal to Address Debt

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Here we go again. Just two weeks into the new year and pressure is mounting on Portugal to secure additional funding now before it is forced to accept an emergency bail-out. For its part, Portugal denies that it needs any outside help and is attempting to raise funds through the sale of government bonds.

Unfortunately, buyers are demanding higher returns in exchange for the increased risk and Portugal has been forced to increase the yield on ten-year notes to more than seven percent in order to attract buyers. This represents a premium of roughly 380 basis points over ten-years bonds issued by Germany and is simply not sustainable.

We have, of course, seen this movie before. First it was Greece and then – less than three months ago – it was Ireland telling everyone that would listen that everything was fine and that there was no crisis. The government kept repeating the line right up until late November when it agreed to take nearly $90 billion in an emergency bailout. As part of the deal, it also promised to slash spending and raise taxes to bring the country’s deficit back to Eurozone guidelines of three percent of GDP.

Those calling for Portugal to arrange for loans through the EU and the IMF now want the deal done before Portugal slides further towards insolvency. There is a fine line between a preventative action and an act of desperation, but the difference in perception between the two is immense. Either way, the euro will weaken and the longer action is delayed, the greater the potential impact on the euro.

Containing negative fallout from Portugal is also seen as critical for preventing the debt contagion from spreading to other countries. Already, Spain is being touted as the next victim casting a chill over the entire region as Spain makes up about 10 percent of the Eurozone economy. Greece, Ireland, and Portugal combined make up only about 6 percent.

Some analysts have even suggested that while Europe can provide sufficient funds to prevent Portugal from collapsing, Spain’s economy is beyond the EU’s capacity to re-inflate. What happens should that occur is anybody’s guess, but it does bring into question the ability of the euro to continue as a viable currency.

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