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- How come the pound keeps rising? "Sterling hit a two-month high versus the euro [this morning]," says Reuters.- And the newswire provides an answer, too - thanking "strong retail sales and house price data [that] supported expectations that the Bank of England will not cut interest rates and may even tighten by year-end."- In other words, who cares that in the first three months of this year an all-time high of 23,351 people sought individual insolvency through the courts, a 73.4% increase on the corresponding period last year and 12.9% higher than the previous quarter? Lumpus britannicus hit the shops hard in April.
Fill your boots with sterling quick - before the Old Ladies raise base rates and pull the worsted-wool rug out from under us all.- Like-for-like retail sales grew 6.8% last month, said the British Retail Consortium this morning. Time was, that would have seemed wild and excessive - stupid even, like a 4x4 jeep stuck in traffic on Kew Bridge. But "traders will not be getting carried away with these results," says Helen Dickinson, head of retail at consulting firm KPMG. Near 7% extra spending in one month is nothing to get worked up about anymore. - Of course, only one kind of cashpoint can spit out money fast enough to keep pace. And the average house-price in England & Wales rose 5.05% between January and March, says the Land Registry, up to £192,745. Sales volumes rose 37% from a year ago.- Here in boomtown, London house prices rose 6.29% in the period.
The average London home now costs £306,661. Transaction volumes were up nearly 41%. Ergo, the thinking goes, base rates will rise to head off a bubble in house prices - and that makes sterling attractive to investors searching for yield.- "The recent strength of sterling," muses Tom Tragett, your editor's expert currency contact, in a note. "It seems most unusual - leaving aside the M&A flows - especially given the extremely poor political domestic backdrop and our pretty innocuous economy. But it all makes sense if you figure that central banks are conducting 'reserve adjustments'...getting out of US dollars...and that some - mostly Middle Eastern banks - clearly favour the Betty Grable."- The Betty Grable? Cable is the name forex traders give to buying sterling when selling dollars. Geddit? But still this doesn't explain the almost phenomenal strength of the proud pound in your pocket.
Sterling has risen from $1.73 to $1.86 in the past month alone. How come? - "Greenspan's famous conundrum has all but gone," Tom notes. "Thirty-year US bond yields have surged as the price of the bond itself has dumped from 97.25 at the mid/end March to 89.50 at the close last week.
This fall in the 30-year bond price as coincided with the rise in sterling over the same period. So someone's exiting US Treasuries and piling into pounds. I reckon it's the Japanese..."- Regular readers will recall that the Bank of Japan has an open position of some several hundred billion dollars, bought when it wanted to depress the Yen and stoke Japan's runt of an export-led recovery in 2003/4. But they might not know what next-door's 'For Sale' has got to do with Japan's post office savings accounts.- "Naturally, Japan's intervention to buy dollars was stuck into US Treasurys," says Tom. "Even when yields dipped below 4%, they still paid a whole heap more than Japan's own zero-rate bank deposits. Now of course, with the Japanese economy on the up-tick, they might have decided it's time to lighten up on their dollar holdings.
The world and his dog know the greenback is due another tumble. Why play sucker and keep hanging on?"- Tom Tragett: "But the Japanese are the biggest holders of US Treasury debt in the world. So they could never be seen selling dollars and buying yen in the open market. It would be like screaming fire in a crowded pub.
The dollar/yen would collapse into free fall. And this makes their position unmanageable..."- So the only way for them to remove the risk of a dollar fall versus yen, says Tom, is to switch the position slowly into another currency. "For example, they would sell their Treasuries - and then sell the subsequent dollar receipts for, say, sterling, for want of a better protagonist.
In order for this not to show up immediately in their official reserve figures they could use Kampo - the Japanese Post Office's life insurance pot - to buy the sterling discretely in the market over a period of several weeks/months."- Take heed, warns Tom. "I am not saying that the BOJ is buying sterling - and I'm certainly not advising anyone goes long GBP/JPY just yet. But clearly someone very big is getting into the pound...and it could be that the Chinese, US, UK and Japanese have done a deal to get Tokyo out of jail when the Chinese Yuan does finally float and sink the dollar."
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Tuesday, May 09, 2006
how will usa effect interest rates and loans 9th of may 06
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Bill Bonner, from the southern shores of the Thames:"More Americans join pool of 'near poor'," runs a headline in today's International Herald Tribune.Over the weekend, Warren Buffet provided the evidence. He said that when he looked through the financial statements of lending companies he noticed that the entry for 'interest accrued but not paid' was rising.
What this means, he explained, was that people were having a hard time servicing their debt. And worse yet, the real estate casino on which they were depending is cooling off. Toll Brothers, one of the nation's largest homebuilders, says new orders fell 33% so far in the 2nd quarter.And so we return to a familiar theme, but one not quite exhausted: savings are available to serve you, debt is always your master."The debtor is slave to the lender," says the Bible.Dear readers may wonder whom we are arguing with, or what question we are answering.
It is an obvious one; you may want to neither borrower nor lender be but if you have to make a choice, it is better to be owed than to owe.That is the big difference between a trade deficit and a trade surplus. In the former, you gradually become a slave to your trading partners. The larger the deficits, the more you tend to owe them. In the latter, they gradually become slaves to you. That is what is happening with the Chinese and Japanese.
They have now become creditors of the US; they can enjoy income from their US paper while America struggles to keep up with the debt.But who will turn out to be the greater fool, the one who buys what he can't afford or the one who lends what won't be repaid?Americans, consciously or unconsciously, are betting on inflation.
They are hoping their favourite swindlers at the central bank will continue to engineer a gradual devaluation of the dollar so as to ruin their creditors rather than themselves. The dollar lost half its value during the Greenspan years alone. And now the Bush administration is adding more debt than all the other administrations in US history combined. Inflation looks like a sure bet, a 'done deal.'Commodities are rising.
Health care, education, housing, energy - everything measured in dollars that the Asians can't produce and supermarkets can't put on its shelves, is soaring. And gold is rocketing and outperforming stocks, commodities, bonds, the euro, housing - everything.How nice it would be if the empire's creditors would go gently into that good night! They must read the papers. They must see the dollar going down and gold going up.
Imagine yourself in the same situation; wouldn't you be tempted to shuck some of that green paper in favour of the yellow metal? Wouldn't you want to protect yourself?But, according to lumpen-American economic theory, the creditors just stand there, stock still, while the big inflation bus runs over them. Not only do they not sell their US bonds and dump their US dollars - they continue adding to their inventory, like collectors of Cabbage Patch dolls long after the fad has moved on.God bless 'em.
But we doubt the lenders are quite as dumb as the borrowers believe. In fact, there could come a time - any minute, in fact - when the lenders wise up. The dollar could end its gentle decline and drop like a stone. Then, the lending would cease too, the US economy would come to a halt and all those people who are finding it difficult to keep up with their payments would suddenly find it impossible. The defaults and bankruptcies would multiply. American debt may be wiped out by inflation, but Americans will probably be wiped out first.
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Bill Bonner, from the southern shores of the Thames:"More Americans join pool of 'near poor'," runs a headline in today's International Herald Tribune.Over the weekend, Warren Buffet provided the evidence. He said that when he looked through the financial statements of lending companies he noticed that the entry for 'interest accrued but not paid' was rising.
What this means, he explained, was that people were having a hard time servicing their debt. And worse yet, the real estate casino on which they were depending is cooling off. Toll Brothers, one of the nation's largest homebuilders, says new orders fell 33% so far in the 2nd quarter.And so we return to a familiar theme, but one not quite exhausted: savings are available to serve you, debt is always your master."The debtor is slave to the lender," says the Bible.Dear readers may wonder whom we are arguing with, or what question we are answering.
It is an obvious one; you may want to neither borrower nor lender be but if you have to make a choice, it is better to be owed than to owe.That is the big difference between a trade deficit and a trade surplus. In the former, you gradually become a slave to your trading partners. The larger the deficits, the more you tend to owe them. In the latter, they gradually become slaves to you. That is what is happening with the Chinese and Japanese.
They have now become creditors of the US; they can enjoy income from their US paper while America struggles to keep up with the debt.But who will turn out to be the greater fool, the one who buys what he can't afford or the one who lends what won't be repaid?Americans, consciously or unconsciously, are betting on inflation.
They are hoping their favourite swindlers at the central bank will continue to engineer a gradual devaluation of the dollar so as to ruin their creditors rather than themselves. The dollar lost half its value during the Greenspan years alone. And now the Bush administration is adding more debt than all the other administrations in US history combined. Inflation looks like a sure bet, a 'done deal.'Commodities are rising.
Health care, education, housing, energy - everything measured in dollars that the Asians can't produce and supermarkets can't put on its shelves, is soaring. And gold is rocketing and outperforming stocks, commodities, bonds, the euro, housing - everything.How nice it would be if the empire's creditors would go gently into that good night! They must read the papers. They must see the dollar going down and gold going up.
Imagine yourself in the same situation; wouldn't you be tempted to shuck some of that green paper in favour of the yellow metal? Wouldn't you want to protect yourself?But, according to lumpen-American economic theory, the creditors just stand there, stock still, while the big inflation bus runs over them. Not only do they not sell their US bonds and dump their US dollars - they continue adding to their inventory, like collectors of Cabbage Patch dolls long after the fad has moved on.God bless 'em.
But we doubt the lenders are quite as dumb as the borrowers believe. In fact, there could come a time - any minute, in fact - when the lenders wise up. The dollar could end its gentle decline and drop like a stone. Then, the lending would cease too, the US economy would come to a halt and all those people who are finding it difficult to keep up with their payments would suddenly find it impossible. The defaults and bankruptcies would multiply. American debt may be wiped out by inflation, but Americans will probably be wiped out first.
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uk interest rates looking to rise
here at www.factsonloans.com we give a free view on uk interest rates, saving rates
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The pound has risen sharply against the dollar in recent weeks. The latest data on inflation supported gains, as it became even more likely that UK interest rates will rise this year.
Data on producer prices showed that manufacturers are still coming under pressure from sharp rises in energy and materials costs. But the numbers for February suggests they are increasingly having more success at raising the prices they charge their customers.
Raw materials bills rose at the fastest pace in nine months during April, up 15.7% on the same time last year. But prices charged were also higher, up 2.4% on the same time last year. It’s the fourth month in a row that output prices have gone up.
Money markets are now pricing in another quarter point hike in UK interest rates before the end of the year. Alan Clarke at BNP Paribas expects the Bank of England “to signal that it is moving towards a hike in this week’s Inflation Report,” which is due out tomorrow.
Growing expectations of further rate hikes have pushed the pound to its highest levels in nearly a year against the dollar. The pound now buys more than $1.85, compared to less than $1.75 just a month ago.
But this isn’t just about the pound. The dollar is falling against all the major currencies. A single dollar is now worth less than 112 yen, compared to more than 117 yen last month, and it has fallen 4% against the euro in the same time period. And of course, gold – the ultimate reserve currency – has been hitting fresh 25-year highs on an almost daily basis since the start of the year.
Federal Reserve chief Ben Bernanke sparked the latest dive in the dollar by giving the market the impression that the next US interest rate rise, due on Wednesday, is likely to be the last for a while. A weak report on new jobs for April compounded this view, sending stocks soaring, but driving the dollar down.
But even if the Fed hasn’t finished with rate hikes, it’s going to be tougher to support the currency simply by raising interest rates.
When interest rates are low and stable across the world, currency traders can make apparently easy money by borrowing in low interest-rate currencies and investing in high-rate ones.
But when interest rates start to rise in tandem across the world, this“carry trade” becomes much more dangerous. The exchange rate can suddenly move against unwary investors as markets start to focus more on economic fundamentals – like trade deficits – and less on interest rate differentials
pass our website on to friends and family , that want to check out money rates
www.factsonloans.com
read this information
The pound has risen sharply against the dollar in recent weeks. The latest data on inflation supported gains, as it became even more likely that UK interest rates will rise this year.
Data on producer prices showed that manufacturers are still coming under pressure from sharp rises in energy and materials costs. But the numbers for February suggests they are increasingly having more success at raising the prices they charge their customers.
Raw materials bills rose at the fastest pace in nine months during April, up 15.7% on the same time last year. But prices charged were also higher, up 2.4% on the same time last year. It’s the fourth month in a row that output prices have gone up.
Money markets are now pricing in another quarter point hike in UK interest rates before the end of the year. Alan Clarke at BNP Paribas expects the Bank of England “to signal that it is moving towards a hike in this week’s Inflation Report,” which is due out tomorrow.
Growing expectations of further rate hikes have pushed the pound to its highest levels in nearly a year against the dollar. The pound now buys more than $1.85, compared to less than $1.75 just a month ago.
But this isn’t just about the pound. The dollar is falling against all the major currencies. A single dollar is now worth less than 112 yen, compared to more than 117 yen last month, and it has fallen 4% against the euro in the same time period. And of course, gold – the ultimate reserve currency – has been hitting fresh 25-year highs on an almost daily basis since the start of the year.
Federal Reserve chief Ben Bernanke sparked the latest dive in the dollar by giving the market the impression that the next US interest rate rise, due on Wednesday, is likely to be the last for a while. A weak report on new jobs for April compounded this view, sending stocks soaring, but driving the dollar down.
But even if the Fed hasn’t finished with rate hikes, it’s going to be tougher to support the currency simply by raising interest rates.
When interest rates are low and stable across the world, currency traders can make apparently easy money by borrowing in low interest-rate currencies and investing in high-rate ones.
But when interest rates start to rise in tandem across the world, this“carry trade” becomes much more dangerous. The exchange rate can suddenly move against unwary investors as markets start to focus more on economic fundamentals – like trade deficits – and less on interest rate differentials
pass our website on to friends and family , that want to check out money rates
www.factsonloans.com
Thursday, May 04, 2006
loan interest goes up down under, will uk be next
loan interest rate are going up in aussie will the uk follow
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Australia ’s central bank has hiked the country’s key interest rate to 5.75%. The move was the first change in 14 months, and left the rate at its highest since February 2001.
The move took analysts by surprise. Shane Oliver at Sydney-based AMP Capital Markets described the move as “a knock on the head” for retail sales and the housing market, which have been steadily recovering from a stagnant 2005.
So why the shock move? “The board judged that inflationary risks had increased sufficiently to warrant an increase,” said Reserve Bank of Australia Governor Ian Macfarlane. Consumer prices are currently rising in Australia at a rate of 3% a year, while underlying inflation has hit 2.75% - far ahead of the bank’s expectations.
Property firms and retailers bemoaned the move. They say they are already suffering the effects of high petrol prices on consumer demand. But if consumers are really feeling the pain that badly, it’s not showing up in borrowing figures. Loans to buy houses jumped by 13% in the year to March, and retail sales rose by 0.7% in February, far stronger than expected.
Of course, unlike the UK, Australia has the benefit of a strong export sector. The country supplies 43% of China’s iron ore and almost as much of its coal. Rising commodity prices suggest “a strengthening in the outlook for Australia’s export earnings, with consequent expansionary effects on incomes and spending,” said Mr Macfarlane.
But that doesn’t mean the UK won’t have to hike rates. The higher that global interest rates rise, the more difficult it is for other countries to maintain low rates. Generally, countries with lower interest rates will have weaker currencies – and a weak currency means imported inflation.
The dollar’s recent dive illustrates this point nicely. The greenback has fallen sharply against both the euro and the pound since recent comments by Fed chief Ben Bernanke were taken to mean that US interest rate hikes will end soon. Despite claims that the media had misunderstood what he said, the dollar’s decline has continued.
In fact, as one Money Morning reader points out, confidence in the US currency is so low that “even the Russians are putting the boot in.” An article in the Moscow Times points out that Finance Minister Alexei Kudrin has already declared the dollar as “unreliable as a reserve currency.”
What does this all add up to? When people are losing faith in the dollar, that means they are losing faith in paper money in general. We don’t imagine that the ruble will ever end up as the world’s reserve currency, for example.
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Australia ’s central bank has hiked the country’s key interest rate to 5.75%. The move was the first change in 14 months, and left the rate at its highest since February 2001.
The move took analysts by surprise. Shane Oliver at Sydney-based AMP Capital Markets described the move as “a knock on the head” for retail sales and the housing market, which have been steadily recovering from a stagnant 2005.
So why the shock move? “The board judged that inflationary risks had increased sufficiently to warrant an increase,” said Reserve Bank of Australia Governor Ian Macfarlane. Consumer prices are currently rising in Australia at a rate of 3% a year, while underlying inflation has hit 2.75% - far ahead of the bank’s expectations.
Property firms and retailers bemoaned the move. They say they are already suffering the effects of high petrol prices on consumer demand. But if consumers are really feeling the pain that badly, it’s not showing up in borrowing figures. Loans to buy houses jumped by 13% in the year to March, and retail sales rose by 0.7% in February, far stronger than expected.
Of course, unlike the UK, Australia has the benefit of a strong export sector. The country supplies 43% of China’s iron ore and almost as much of its coal. Rising commodity prices suggest “a strengthening in the outlook for Australia’s export earnings, with consequent expansionary effects on incomes and spending,” said Mr Macfarlane.
But that doesn’t mean the UK won’t have to hike rates. The higher that global interest rates rise, the more difficult it is for other countries to maintain low rates. Generally, countries with lower interest rates will have weaker currencies – and a weak currency means imported inflation.
The dollar’s recent dive illustrates this point nicely. The greenback has fallen sharply against both the euro and the pound since recent comments by Fed chief Ben Bernanke were taken to mean that US interest rate hikes will end soon. Despite claims that the media had misunderstood what he said, the dollar’s decline has continued.
In fact, as one Money Morning reader points out, confidence in the US currency is so low that “even the Russians are putting the boot in.” An article in the Moscow Times points out that Finance Minister Alexei Kudrin has already declared the dollar as “unreliable as a reserve currency.”
What does this all add up to? When people are losing faith in the dollar, that means they are losing faith in paper money in general. We don’t imagine that the ruble will ever end up as the world’s reserve currency, for example.
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free newsletter on loans interest, credit card rates , interest at banks click on www.factsonloans.com