South Pacific Dollars Appreciate Prior as Speculation of China Stimulus Rises

By (Dublin) – The Australian dollar advanced against most of its major counterparts as speculation of additional stimulus from Chinese government rose. The Aussie appreciated as China’s export prospects rose. The New Zealand dollar increased against the US dollar after the central bank in China injected $58 billion in the economy pushing the Kiwi to its fourth weekly gain. China, which is Australia’s biggest trade partner and New Zealand’s second largest trade partner, has pledged to increase stimulus to support growth in the country. The demand for south pacific currencies also rose after Spain announced its fifth austerity package hence reducing concerns that it may fail to meet austerity requirements.

The People’s Republic of China has experienced deteriorating economic growth in the recent times forcing Fitch Rating company to lower their forecast for the country. Fitch has indicated that the Chinese economy will grow by 7.8 percent lower than the 8 percent it had indicated earlier. Investors are now looking at the manufacturing and purchasing managers Index to be released on October 1 in China to see if there are any signs of renewed growth. The data is expected to increase pressure on Chinese Premier Wen Jiabao to boost growth in the country ahead of power transfer which will be done this year.

According to Matthew Stanley, the Head of Asia Pacific Sales in Sydney at Velocity Trade Ltd, the figures from China signal to the need for the government to make additional stimulus to spur growth. He added that the news from Spain will support the south pacific dollars during the next trading session. The Australian dollar has increased by 0.2 percent against the dollar to trade at $1.0458 at the close of trading in Sydney after it climbed by 0.7 percent yesterday when it traded at $1.0442. The Aussie is set to increase by 1.3 percent since August and a 2.2 percent for the third quarter. The New Zealand currency increased by 0.3 percent against the dollar to exchange at 83.41 US cents from yesterday. The currency is projected to increase by 3.8 percent this month and 4.1 percent increase in the third quarter.

Disclaimer is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at are those of the individual authors and do not necessarily represent the opinion of or its management. 

Article provided by is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter:

Market Review 28.9.12

Source: ForexYard


The euro bounced back from a two-week low against the US dollar yesterday, after Spain unveiled a new budget which some viewed as the next step before officially requesting a bailout from the European Central Bank. The EUR/USD advanced more than 30 pips during Asian trading to reach as high as 1.2941 before staging a downward correction and dropping to its current level of 1.2925. Both crude oil and gold saw gains from the news as well. In the last 24 hours, crude has gained more than $2 a barrel while gold has advanced over $25 an ounce.

Main News for Today

Canadian GDP- 12:30 GMT
• The Canadian dollar has steadily gained on the USD for the last several days
• Should today’s news come in above the forecasted 0.1%, the USD/CAD could see additional downward movement before markets close for the week

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Why This Crisis Still Has a Long Way to Run


When is a cut not a cut?

When it’s an increase.

Sorry to be cryptic, but we laugh when we see presidents, prime ministers and finance ministers talk about ‘austerity’ and ‘slashing budgets’.

Because just like central bank money printing, the markets get excited for about three minutes before they realise what even an idiot can see…

Cut spending isn’t what governments do. For governments, spending only ever goes one way. That’s up.

And that’s why we always turn to one tried and tested asset class in times like these. You know what we’re talking about, but read on anyway…

This morning the papers are going batty on the news that, ‘Spain unveils austerity budget as political turmoil mounts’. So says the Australian newspaper.

According to the Wall Street Journal:

‘The Spanish government presented 13 billion euros ($16 billion) of spending cuts and tax increases for 2013 and said it will place new limits on early retirements as political turmoil heightens investor concerns over Prime Minister Mariano Rajoy’s ability to slash a towering budget deficit and stabilise one of Europe’s largest ailing economies.’

We wish Spain luck. Especially considering the following post to the UK Daily Telegraph‘s blog covering the Spanish budget overnight:

‘Spanish government sees unemployment bottoming out and has predicted an average rate of 24.3pc [per cent] for next year.’

The same blog also reveals:

‘Spanish deficit targets: 6.3pc in 2012, 4.5pc in 2013, 2.8pc in 2014, 1.9pc in 2015.

‘These cuts are aimed at chopping €40bn off Spain’s budget deficit next year.’

Here’s a bit of free advice for Spanish Prime Minister, Mario Rajoy. When your government is announcing welfare cuts, it’s probably best not to be photographed chomping on a cigar in New York:


But before you start getting too excited about so-called spending cuts, and the positive impact it could have on the world economy, just remember this: when governments cut spending, it doesn’t mean they cut spending.

Not as Good as the Treasurer Claims

It was a bit like the smoke and mirrors from Aussie Treasurer, Wayne Swan. Last week he spun the argument that the Aussie federal budget was $661 million better off than predicted.

The mainstream press fell for it hook, line and sinker. What a great Treasurer they said. What a good boy.

What they didn’t focus on (just as the Treasurer hoped), was that last year the government spent $43.7 billion more than it raised in taxes.

To cover the shortfall the government had to issue more bonds…in other words go further into debt. And with commodity prices collapsing, the Aussie budget position is set to get worse.

It’s the same for Spain. Just because it reduces the budget deficit doesn’t mean the economy or debt position is any better. Last year Spain’s budget deficit was 8.5% of GDP, or about €97.8 billion.

So even if Spain cuts spending by €40 billion, it’s still spending €57.8 billion more than it takes in with taxes.

And that’s assuming the Spanish economy doesn’t get worse, which it probably will given the proposed tax increases.

What we’re getting at is this: it’s nearly five years since the world economy started to fall apart.

The US Federal Reserve has virtually admitted that it’s out of ideas. The only solution it’s got is to print money…even though that’s never worked before.

The Eurozone thinks it can fix its spending problems by keeping on spending and creating a bigger debt problem instead.

And China thinks it can stop its economy from crashing by building more roads, buildings and railways…that no-one can afford to use.

And as for all those in the mainstream media who love the Chinese economy, and fall over themselves to praise it, just remember what we’ve said about China for the past four years – it’s a brutal economy and leadership that sees the Chinese people as a means to stay in power and line their own pockets.

How Chinese Infrastructure Projects Work

Take this news story from the New York Daily News that you won’t read in the compliant, China-loving Aussie press:

‘Stomach-churning photos have surfaced allegedly showing the moment a Chinese protester was crushed by a steamroller while trying to stop government officials from relocating his village to make way for a commercial development.

‘A local government official allegedly ordered the trucks forward, and the man was flattened beneath one six-wheeled hulking behemoth, the report said.’

How are you enjoying your iPhone now? And anything else that’s ‘Made in China’.

All this tells us that those in power are getting desperate. They’ll do anything to make sure the economy doesn’t collapse on their watch.

That means pretending to cut budgets while increasing debts, it means printing money as a last resort, and it means crushing people to death in order to erect a new building paid for with government stimulus money.

Add all this together and it should explain why one particular ‘fear gauge’ (gold) is rocketing back towards record levels.

Even mainstream analysts are getting back on board the gold bandwagon. In the old days (five years ago) we would have worried about the mainstream backing gold. We would have seen it as a sign of a market top.

But not now.

The Best Way to Protect Your Wealth

Now the economy is so bad, the mainstream is finally waking up to reality. As the New York Post reports:

‘Gold has had a good summer, rising more than 9 percent, but that move may be just the start, according to a bullish Citi precious metal analyst.

‘Tom Fitzpatrick believes autumn will be golden in the beginning of a run-up that he says will culminate with the yellow metal hitting $2,500 an ounce in the first quarter of next year. The price now stands at $1,736.’

That report is actually two weeks old. Today gold is at USD$1,776.

But despite the recent gold rally, we’re still happy buyers. And we’ll stay a happy buyer until governments and central bankers understand the solution to the current financial mess isn’t to print money, go into debt, or raise taxes.

Unfortunately, that day appears to be a long way off. We’ll give you more reasons to buy gold in tomorrow’s Money Weekend.


Related Articles

How to Make Money from the End of the Mining Boom

We Buy Gold Because We Don’t Trust Them Not to Meddle

The Mission Creep Destroying Wealth Around the World

Why This Crisis Still Has a Long Way to Run

The Big Oil and Gas Boom in the USA


The USA has had a rather rocky relationship with oil. In the 19th century, the discovery of massive reserves of oil set America on course to become a hugely powerful nation. Cities started to flourish. And vast suburbs sprung up as the country adapted to cheap car travel.

More recently, America has had to curb its consumption. The era of gluttonous oil consumption came to an end as the USA became dependent upon imported oil.

The USA began to feel the strain of rising oil prices. When oil spiked during the financial crisis, Americans left their car at home. And industrial oil consumption collapsed.

But now, thanks to two new commercially deployed drilling techniques, the USA is set to free up an abundance of trapped gas and oil. And that could help the US economy back on its feet.

Because, while the glamour boys of the oil industry are heading off to deep waters, and plunging hundreds of millions of dollars down exploratory holes with very uncertain results, plenty of other oil men prefer a low risk play that offers a fast pay-back.

I met one of them last week. Matt Lofgran is chief executive of Nostra Terra Oil & Gas (AIM: NTOG), and before long he was scrawling figures on a piece of rough paper – figures that show just why he is joining the rush for US on-shore assets.

‘An Energy Renaissance’ in America

Make no mistake – America’s energy security has taken a dramatic swing for the better. Goldman Sachs has predicted that America will soon regain its title as the world’s largest oil producer, knocking Russia and Saudi Arabia off the top of the tree.

As I mentioned earlier, this is not down to the USA suddenly stumbling upon new oil fields. No, the real reason is that the ever inventive oil industry has found a way of extracting some of the oil that is known to exist but which has not previously been accessible.

‘America’s renaissance,’ says Goldman Sachs, ‘is down to hydraulic fracturing, or “fracking”. A process that has already significantly changed the gas industry and has been adapted to oil.’

To recap, ‘fracking’ and horizontal drilling are techniques which involve the cracking of rock strata from underground that allows trapped gas or oil to flow freely. Without doubt these methods have significantly changed the gas industry, although not to everybody’s benefit.

The price of gas in the USA has tumbled from over $10/mmbtu to $2.80/mmbtu. This is great news for consumers and is likely to trigger a switch from coal-fired to gas-fired power plants.

But it is not, of course, so good for gas producers and some of these are now in financial difficulties and are off-loading assets at distressed prices.

Targeting a High Oil Price

That sounds like an opportunity for someone, but the easier play today is to apply this same fracking technology to oil rather than gas fields. Although you may think that the gas price and the oil price should move in tandem, in fact they do not. Logistical and other considerations mean that while there is effectively a world price for oil, gas prices are set locally.

Today, the price of gas in the USA is low, but the price of oil is still high so it makes sense to target the latter. Throughout North America from the Red Earth and Swan Hills fields of Alberta, to the Woodbine and Eagleford properties of Texas, old fields are being reworked with the new techniques of fracking and horizontal drilling.

To get an idea of how profitable this can be, Lofgran referred me to the website of SandRidge Energy (NYSE:SD) which has licences in Texas and Oklahoma.

In its ‘Operational Guidance’ Sandridge quotes lifting costs of $15-$17 per barrel of oil; ‘DD & A’ (depreciation, depletion and amortisation) costs of $18.25-$20.20 per barrel; ‘General and Administration’ costs of $5.85-$6.50 per barrel; production taxes of $1.75-$1.95 per barrel; and interest expense of $8.70-$9.60 per barrel.

Add up the mid-point of those numbers and you get a figure of $58.575 per barrel, all in, which leaves a healthy profit margin on each barrel sold for $90 plus.

For separate projects, Sandridge quotes Internal Rates of Return of 62% and 82%, which look highly attractive under any circumstances but especially for what is essentially quite a low risk play.

There Could Be a Stampede

Of course there are a few reasons for caution. Where there is a stampede into a sure thing you can bet that eventually some will overpay for their entry ticket. Depletion, the rate at which the flow of oil subsides, is not entirely predictable. And if the USA finds too much oil, it could just throw the whole world market into imbalance and sink the oil price.

But for the time being the outlook is rosy.

Tom Bulford
Contributing Writer, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek

From the Archives…

In Defence and Praise of ‘Cranks and Crazies’
21-09-2012 – Kris Sayce

We Buy Gold Because We Don’t Trust Them Not to Meddle
20-09-2012 – Kris Sayce

Why Share Trading is ‘Mental’
19-09-2012 – Murray Dawes

A Bear Market Where You Least Expect
18-09-2012 – Greg Canavan

Questionable Easing 3
17-09-2012 – Dr. Alex Cowie

The Big Oil and Gas Boom in the USA

USDCHF may be forming a cycle top at 0.9417

USDCHF may be forming a cycle top at 0.9417 on 4-hour chart. Key support is now at 0.9325, a breakdown below this level will indicate that the rise from 0.9239 has completed, and the longer term downtrend from 0.9971 (Jul 24 high) has resumed, then further decline towards 0.9000 could be seen. On the other side, as long as 0.9325 support holds, the pair remains in short term uptrend from 0.9239, one more rise to 0.9500 area is still possible.


Forex Signals

Central Bank News Link List – Sept 28, 2012: China underestimated global slowdown, key to rates

By Central Bank News
Here’s today’s Central Bank News link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.

Dominican Republic holds rate, eyes economic rebound

By Central Bank News
    The Central Bank of the Dominican Republic kept its monetary policy rate unchanged at 5.0 percent as domestic demand remains below its long-term trend, but the bank expects a rebound in private credit and economic activity as market interest rates decline following two interest rate cuts earlier this year.
    The central bank cut rates in June and August for a total reduction of 125 basis points and the bank said this easing, along with a reorganization of public finances and a new agreement with the International Monetary Fund (IMF), “would help improve the macro economic conditions in the coming quarters.”
    The central bank said in a statement that the decision to keep the rate steady also took into account the latest projections that call for inflation to fall below the lower limit of the bank’s 2012 target, but within the bank’s 2013 target range of 5.0 percent plus/minus one percentage point. The bank has a 5.5 percent inflation target for 2012, also with a 1.0 percentage point range.

    In August inflation in the Dominican Republic rose to an annual rate of 2.16 percent from July’s 1.6 percent, the central bank said.
    “Forecasting models do not show significant inflationary pressures over the monetary policy horizon,” the central bank said in a statement.
    It also said that capital flows to emerging economies were on the rise following the latest policy move by the U.S. Federal Reserve that has “sent a signal of moderate growth and low inflation pressures, which is reflected in a deprecation of the dollar and moderating oil prices.”
    In added there was the prospect of recession in the euro area for the rest of the year and part of 2013.

Two-Week Low “Just What Gold Needed”, Long-Term Uptrend Seen Safe Above $1712

London Gold Market Report
from Adrian Ash
Thurs 27 Sept, 07:15 EST

WHOLESALE-MARKET prices to buy gold eased $5 in London on Thursday after an overnight rally to $1760 per ounce.

The Euro currency also eased lower after rallying to $1.29 – some 2¢ below the 5-month high hit a fortnight ago – as Spain was set to unveil its latest government budget cuts and Italy’s economy minister said Rome has no plans to request bail-out help.

Asian and European stock markets rose and major-economy “safe haven” bonds ticked lower.

US crude oil rallied back above $90 per barrel. Silver prices held in a tight range above$34.00 per ounce.

“Wednesday trading was dominated by a strong US Dollar,” says a note from German universal bank Commerzbank. “It pushed [all] precious metals lower.”

Although prices to buy gold “recovered almost all of [their] losses on Wednesday,” says the latest technical analysis from London market-maker Scotia Mocatta’s New York team, “gold broke through the bottom of the recent range on an intraday basis.

“This is near term bearish, but…we could retreat to $1712 without damaging the longer term uptrend. We believe that gold will try to test this level.”

“Gold [on Wednesday] finally had a decent flushout,” says the Asian office of Swiss refiner and finance group MKS.

Yesterday’s “rebound off [2-week] lows suggests there are still players waiting to buy gold on the dips.

“This was a healthy correction to clean out weak positioning, and long term probably just what the market needed.”

On the supply side today, Bloomberg News reports that 39% of gold mining output in South Africa – the world’s former #1 producer – has been closed after fresh wildcat strikes hit gold majors AngloGold and Goldfields.

New wage demands handed to managers at Anglo yesterday ask for 16,000 to 18,500 Rand per month. Rock drill operators currently average some 10,000 Rand according to local press – equivalent to US$1200.

The world’s third largest gold mining firm, Anglo has now suspended at all of its South African operations according to the Independent Online.

Over in platinum – where South Africa remains the world’s #1 producer, and where this year’s “strike season” first broke – the CEO of Anglo American Platinum said Wednesday that Amplats “will not negotiate” with workers on illegal strike at its key Rustenburg operation.

Last week, wildcat strikers won a 22% raise from platinum producer Lonmin, whose Marikana mine saw 34 workers killed by police in rioting this month.

“There’s no question it has caused massive damage to us and incredible damage to South Africa’s mining sector,” says Albert Wocke, associate professor at University of Pretoria’s Gordon Institute of Business Science.

With formal unions, all closely tied to the ruling ANC party, cut out of Lonmin’s negotiations, “The government needs to step up and reassure investors,” says Wocke.

“We have got an unstable, almost unpredictable regulatory regime.”

Political analyst William Gumede, also speaking to the LA Times, warns that “The biggest red flag is that people might actually start losing their trust in democracy as a protective mechanism.”

After the deaths at Marikana , “I think the police will feel constrained,” Gumede adds, “in how they deal with these strikes now.”

Meantime in Europe, the Spanish government was widely expected to announce sharp new cuts to its 2013 budget, ignoring protests earlier this week and striving to avoid tighter demands from international lenders if – or when – Madrid makes a formal request for help.

“Italy is doing, I believe, a very good job in reforming its economy and without the need for any extra help,” said Rome’s economy economy Vittorio Grilli last night, after meeting with Germany’s central bank president Jens Weidmann.

“At this point, it is not within any plan of the Italian government to apply for any programme. We are solving Italian problems within our government mandate.”

Reuters meantime reports that “tensions have risen in recent weeks” between Greece’s three official-sector lenders.

After the European Central Bank last week moved to start buying more weak-Eurozone debt in the bond markets, “The problem is between the IMF and the European Union,” says an anonymous Greek official, blaming the International Monetary Fund for wanting to impose harsher budget cuts on Athens to try and reduce its debt burden more quickly.

Adrian Ash

Gold price chart, no delay   |   Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


Aussie Bounces Back on China Speculation

The Australian dollar made gains this morning on the back of speculation that the recent round of stimulus in China could have positive effects on the Australian economy.  It is hoped the package would boost exports for the world’s largest mining country due to China’s reliance on metals for its manufacturing sector, which has now seen five consecutive months of decline.

“It’s early days yet but the speculation will only have positive effects on the Australian dollar. Realistically this could very well cushion the recent blow to Aussie mining, which has only just exited a boom” said Marcus Holland, Editor at

The Aussie was up by 0.25% on the news, sitting at $1.0397 at 8:16am in London. Just 24 hours earlier the dollar had been at a two-week low of $1.0329. Earlier in the morning it had peaked at $1.0428 before contracting.

After gaining 0.4% on the yen, AUD pared its earlier rise to decline by 0.23% at 80.8054 yen per dollar.

China also hits US dollar

Elsewhere the US dollar fell against a large majority of the global economy’s most traded currencies. As Asian markets rallied on the back of Chinese stimulus, demand for the dollar fell, encouraging investors to become less focused on risk aversion.

While the unprecedented £94bn stimulus package announced on September 7th was enough to cause the Shanghai Composite Index to jump by more than 3.5% and increase prospects for manufacturers of steel.  It is widely believed that the next package would have a much broader range of effects. Many analysts suspect that it will be announced shortly after the Chinese National Day, which falls on the 1st of October.

The US dollar fell 0.15% against the Pound, 0.21% against the Canadian dollar and 0.05% against the yen in what proved to be a disappointing morning for the world’s most prominent currency.

USD has enjoyed strong growth of late as investors across the globe look for a safe haven amid concerns for the stability of the euro. The European debt crisis has been an on-going threat to investors who look to the US dollar and more recently the Swedish krona, in times of widespread decline as a method of wealth protection.

The People’s Bank of China is not known for its subtle approach to financial issues, with their “weekend policy adjustments” becoming something of a running joke among market insiders and currency traders alike.

In 2010 the central bank announced a 4 trillion Yuan round of stimulus focused on the infrastructure of the nation, with a portion set aside for “social welfare”. The total package, which translated to around $585bn was on par with a move made by the US Federal Reserve around the same time, yet the Chinese economy was two thirds smaller than its American counterpart.

Marcus Holland added “Such drastic actions from the People’s Bank of China in the past, or perhaps even over reactions, have given investors’ confidence that the next stimulus package will come and it will be big. That is bound to have a dramatic effect in both Asian markets and the countries it imports from”.