Chinese Central Bank Sees CPI Exceeding Government Target

Wednesday, August 29, 2007 6:54:29 AM - China's consumer price index - CPI is likely to exceed the government's target of 3.0% for the year 2007, People's Bank of China deputy governor Su Ning said Wednesday in a press conference in Beijing. "According to our analysis, although more measures have been taken to control the inflation, the (increase in the CPI) this year will likely be above 3%," he said.Food Prices Push CPISu said an 8.6% hike in food prices accounted for 80% of the increase in the consumer price index CPI during the seven months till the end of July."But we believe that once food prices are brought under control, the inflationary pressure will also be under control," he added.The National Bureau of Statistics said on August 13, that consumer price index rose 5.6% in July from last year, fuelled by higher food prices, particularly pork prices. This marked the highest monthly inflation rate since February 1997.Prices in urban area rose 5.3% in July from the previous year, while rural area recorded a 6.3% increase over the same period.Citing better control on credit and stabilizing inflation expectation, the Peoples Bank of China lifted the benchmark interest rates on August 21. The 1-year lending rate was raised by 18 basis points to 7.02%, while the 1-year deposit rate was lifted by 27 basis points to 3.60%.This marked the sixth increase since April 2006 and the fourth this year. The bank has also raised commercial banks' reserve requirements eight times since June 2006 in an effort to contain the widening credit growth.The central bank's recent move followed a 0.27 basis point increase made on July 21. The shortened time interval between the rate hikes came amid rising concern within the government over the expansion of credit growth and the spread of food inflation.Although the reason for the jump in headline CPI was attributed to pork supply shocks, there is also demand-side pressure growing in a rapidly growing economy, with the growth in aggregate money supply also staying at higher levels. This apart, the recent comments from the central bank deputy governor pointed to further tightening measures by the apex bank in the short-term.

Forex Top Story

Japanese Yen Rises Against Other Major Currencies

Tuesday, August 14, 2007 1:00:52 PM - The yen saw strength against the other majors on Tuesday in New York. The Japanese currency moved to a multi-month high against both the euro and sterling. It bounced back against the dollar after an early drop. Trading took place following the release of data indicating Japan's input price index for the manufacturing industry rose 0.5% in July from the previous month, according to a preliminary report released by the Bank of Japan on Tuesday.The Japanese yen was little-moved against the dollar on Tuesday in New York after rebounding from an early drop. The yen fell sharply in the early morning and then added further losses in the mid-morning. It rebounded starting at around 9 a.m. ET and eventually got as high as 117.73 at 11 a.m. ET. It edged back in the late morning and then climbed again in the early afternoon. The pair traded at 118.03 at 12:45 p.m. ET. The yen rallied against the euro in morning trading Tuesday in New York and reached its highest level in nearly four months. The Japanese currency climbed to as high as 159.88 at 4 a.m. It edged back lower for the next several hours, but then rallied again at around 10 a.m. ET and got as high as 159.74 at 11 a.m. ET. It moved back to 160.24 by 12:50 p.m. ET.The yen advanced against the sterling on Tuesday in New York and reached its highest level in nearly four months. The Japanese currency rose in early-morning trading and then saw sharper gains at around 10 a.m. ET. The yen got as high as 235.36 at 11 a.m. ET. The pair moved at 235.97 about two hours later.

Sterling Weaker After Release Of Inflation Rate Data

Tuesday, August 14, 2007 11:47:16 AM - The sterling saw weakness against the other majors on Tuesday in New York as traders considered data showing the UK annual inflation rate sharply dropped in July, falling below the central bank target, official data revealed Tuesday, dampening expectations of another interest rate hike from the central bank. The sterling moved to multi-month low against the yen, a multi-week low against the dollar and a six-day low against the euro. The pound dropped against the dollar in trading on Tuesday in New York and reached its lowest level in more than six weeks. The sterling slipped to as low as 1.9979 at 5:15 a.m. ET. It rebounded slightly but then slipped back towards the low in the later morning. The two moved at 1.9992 at 11:05 a.m. ET. Traders considered data from the U.S. Labor Department showing that the producer price index rose 0.6 percent in July following a 0.2 percent decrease in June.The sterling dropped against the euro on Tuesday in New York. The British currency posted sharp losses at around 4:30 a.m. ET before leveling off. It edged to a six-day low of 0.6796 at 6 a.m. ET. The pair moved at 0.6788 at 11:25 a.m. Investors mulled Euro zone GDP data, which was released on Tuesday. On an annual basis, the economy grew 2.5% in the second quarter, following 3.1% growth in the previous quarter. The pound fell against the yen on Tuesday in New York and reached its lowest level in nearly four months. The British currency fell in early-morning trading and then saw sharper losses at around 10 a.m. ET. The sterling got as low as 235.36 at 11 a.m. ET. The pair moved at 235.95 about 40 minutes later. Trading took place following the release of data indicating Japan's input price index for the manufacturing industry rose 0.5% in July from the previous month, according to a preliminary report released by the Bank of Japan on Tuesday.

Asian Economic News

Australia Business Conditions Upbeat; Confidence Edgy- NAB July Survey 8/14/2007 4:13:18 AM

Australian business conditions, hit a new record high in July even as business confidence eased a bit given recent uncertainties, the National Australia Bank - NAB's latest survey indicated Tuesday. The National Australia Bank said, that the NAB index for business conditions rose 4.0 points in July to 20 points from the prior month, while the business confidence index fell 3.0 points to 12.0 over the same period.According to the survey, business conditions are pushed ahead in July mainly by surging levels of sales and profitability.The sub index for trading reached a new record high, putting on seven points to 31, while the gauge for profitability stayed at 20, up seven points from the prior month. However, despite the record readings for business sales and profitability, forward orders continued to decline. Conditions in the wholesale, transport and construction sectors showed strong improvements in the latest month.Meanwhile, the index for export sales fell to minus seven, down from zero a month earlier, while employment index fell one point to 10 over the same period. The report pointed out that in July, wages increased 1.1% at a seasonally adjusted basis, while quarterly wages growth was stable in the year to July at 5.1%. Capacity utilization stretched to 83.3% in July, up from 83.1% in the prior month.Differences in regional performance and confidence levels continued in July. Overall, the main upward movements in business conditions have been in Victoria and South Australia, reflecting the wealth effects from faster house prices, the report said.Business Confidence EdgyThe report said that the prevailing uncertainty in the financial markets and a combination of concerns about the US economy, commodity price expectations for mining and interest rate rise fears have impacted the fall in business confidence in July.However NAB said that even with a 3.0-point fall to +12 points in July, business confidence remained at a strong level.The falling confidence in Western Australia was the key downward driver on a state-by-state basis, the report said.Growth Outlook Little ChangedThe NAB said overall, the Survey was consistent with non-farm GDP growth of 3.5% in the year to July, with domestic demand logging 4.5% growth.The bank said the recent factors pointing to a weaker GDP outcome in the second quarter are more indicative of statistical volatility in the quarterly GDP estimates than any fundamental weakening. The bank cited a stronger base of the first quarter resulting in much variance while comparing the data.NAB's global forecasts little changed in July, but a US slowdown was cited a real and significant risk of moderate recession.Australian GDP forecasts unchanged at 4% in 2007 and 3.75% in 2008, the report said.The core inflation is expected to reach 3% in early 2008 before moving down to around 2.6% by end 2008, the NAB said. The purchase cost inflation continues to slow, with the annual rate down to 3.5% in the year to July, compared to around 4.5% last year.Retail price inflation accelerated somewhat in July, increasing by 0.8% compared to 0.2% growth in the previous quarter, the report said.

Chinese Retail Sales Growth Tops Expectations In July 8/14/2007 2:10:08 AM

Chinese retail sales growth came in better than expected in July, official data showed Tuesday.Retail sales grew 16.4% annually in July, following a 16% growth in June, the National Bureau of Statistics said. This was the largest growth since May 2004. Economists were looking for an annual growth of 16.2%. Total retail sales amounted to 699.8 billion yuan. Retail sales in urban areas advanced 16.7%, while in rural areas, retail sales grew 15.8%. Retail sales in urban area amounted to 476.2 billion yuan and rural retail sales totaled 223.6 billion yuan. Total sales of wholesale and retail sectors improved 16.5% to 592.4 billion yuan. Retail sales in hotel and catering industry totaled 92.3 billion yuan, up 18.0%. Clothing sales were up 24.9%. Sales of grain and oil rose 45%. Meat, poultry and egg sales surged 51.4%. Telecommunications equipment sales improved 6.1% and auto sales increased 42.7%. Household appliances sales gained 18%, while sales of furniture rose 31.9%. During January to July, total retail sales amounted to 4.9042 trillion yuan, up 15.5%. A report released on Monday showed that annual inflation accelerated to 5.6% in July, the highest annual inflation rate in ten years. The inflation rate increased from 4.4% increase in June.Last week, government data revealed that the trade surplus surged 67.0% from last year to US$24.4 billion in July. However, the report showed that the surplus fell 10.4% over the prior month, when it reached a record high of $26.9 billion.

Japan Input, Output Prices Slow In July

8/14/2007 5:29:27 AM Japan's input price index for the manufacturing industry rose 0.5% in July from the previous month, a preliminary report released by the Bank of Japan said Tuesday. In June the index gained a revised 0.6%. Annually, the index gained 5.3% in July, down from a revised increase of 6.2% in June.The report said that the output price index increased 0.4% in July on a monthly basis, the same pace in the prior month. On a yearly basis, the index rose 3%, down from 3.3% growth in June. The report added that almost all sectors recorded increases in input prices on a monthly basis, pushing the index up. Prices of iron & steel and non-ferrous metals led the increase, with 1.3% growth each in July. Input prices of petroleum and coal products rose 1.1% from the prior month. However, prices of food products declined.The monthly increase of output price index was fueled by higher prices of petroleum & coal products, rising 2.7% in July. However, output prices of textile products declined 1.2%. Prices of electrical machinery, transportation equipment and precision instruments fell from the prior month.On a yearly basis, iron and steel sector showed the highest rate of 12.4% growth in July. In contrast, prices electrical machinery slipped 0.5%. Japan's output/input prices of manufacturing industries declined 0.1% in July from the previous month. In June, the output/input ratio index dropped a revised 0.1%. Annually, the index slipped 1.9% in July following a revised fall of 2.4% in June.

Sri Lankan Central Bank Leaves Interest Rate Steady At 10.5% []

8/14/2007 6:34:04 AM The Central Bank of Sri Lanka left its benchmark repurchase rate steady at 10.5%, the bank's communication department said Tuesday. Inflation Off Its PeakAn accompanying statement said that inflation, which was easing in recent months, rose in July, due to the revisions in administered prices.The bank said the Colombo Consumer Price Index -CCPI rose 17.6% on a point-to-point basis in July, compared to a 13.0% increase in the previous month. This has taken the annual average CCPI to 17.2% up from 17.0% a year ago. The three interest rate hikes since September 2006 by the central bank brought down the annual inflation from its decade high of 20.5% registered in January.The bank observed that the country's external sector performed well during the first half year reflecting both higher trade and financial inflows. Export earnings grew 12.9% in June to US$675 million, the highest monthly value in 2007, while imports declined 11.5%. Remittances from Sri Lankan overseas workers, the second highest foreign exchange earner to the country, increased 18.0% to US$1.3 billion in the first half year. This helped to finance over 80% of the trade deficit, the report said.Tight Policy OutlookThe bank said that external trade resulted in a cumulative surplus of US$161 million till July, while the gross official reserves amounted to US$2.7 billion. The central bank expected the external sector to continue do well with increased inflows to the government as well as to the private sector, following the recent upward revision of Sri Lanka's credit rating outlook to ‘Stable' from ‘Negative' by Standard & Poor's.The tight monetary policy, the bank thought will continue to subside the demand driven inflation and would also help achieve the reserve money targets by the end of the year.

Whats is On FOREX

FOREX.com is a registered Futures Commission Merchant and a division of GAIN Capital Group. A pioneer in online foreign exchange, GAIN Capital Group provides forex trading & asset management services to institutional investors and professional money managers in over 140 countries.At FOREX.com, individual forex traders can take advantage of the market expertise and financial strength of GAIN Capital Group and access an institutional currency trading platform, FOREXTrader, along with powerful real-time forex charts, professional forex market research, and a suite of advanced forex trading tools. For traders new to the forex market, FOREX.com offers forex training programs, forex minis, and information about trading the forex market.