Forex Reader

– By Pushpa Sathish, Staff Writer

The stocks of two countries on opposite ends of the globe fell, with two different effects on each one’s currency. While Brazil’s real weakened following the fall of stocks, the Japanese yen appreciated even as stocks of leading organizations like Honda Motor Co., Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Sony Corp. fell.

Significant dollar purchases by the country’s central bank and large remittances of the greenback overseas by investors have led to the fall of the real. It’s a different tale on the Asian archipelago – the yen rose following the Japanese government’s move to lower its evaluation of the nation’s economy for the first time in two years.

Amidst speculation that a weakening US economy will drive the Federal Reserve to slash interest rates, the yen increased to 116.04 against the dollar on November 25, while the real dropped to 2.170.

– By Pushpa Sathish, Staff Writer

Japan’s foreign exchange reserves may have risen to a record $885.55 billion for the eighth consecutive month (October), but it still has a long way to go before it catches up with China and regains its place as the leading holder of foreign exchange. China has raced ahead to $987.9 billion (or is it $1 trillion) since it overtook Japan in the rankings earlier this year.

Countries that are involved in trade deals with Japan have the same cause for concern as they do when dealing with China – the fear that the authorities will interfere in the currency market and stop any rise in the value of the yen. Japan’s forex reserves are of particular interest to, and are monitored by the global bond and currency markets.  Forbes reports:

At the end of last month, Japan’s foreign currency reserves stood at $865.58 billion, IMF reserves at $2.05 billion, SDRs at $2.73 billion, gold at $14.85 billion, and other foreign currency assets of $334 million.

– By Pushpa Sathish, Staff Writer

The strong showing of the peso against the dollar is expected to push up the Q3 net income of the Philippine Long Distance Telephone Co. (PLDT). The third quarter results, which are due out on November 7, are expected to be significantly greater than the $134.6 million registered in the second. With the seven percent gain against the dollar from June to the end of September, the peso has gained at least six percent this year, hitting four-year highs early this month. PLDT is the Philippines’ most valuable firm and Asia’s eighth-largest mobile phone operator.

Have you heard of the latest nuclear test conducted by North Korea? Do you know what the consequences of such tests in Forex are across the globe? Read on to know the details!

News from North Korea promulgated the secure nuclear test conducted by North Korea on October 9, 2006. With this announcement, the markets in Japan and South Korea, the immediate neighbors of North Korea have become susceptible to enormous instability.

As a consequence of this, the yen value plummeted and a dollar was sold at 119.12 yen compared to the value of 118.97 when markets closed last week. With the latest news from US regarding the drop in the unemployment rates the dollar value is expected to still muster up this week.

Click here to read one of our previous blog on the steady increase of the foreign exchange reserves in Korea.

In contrast to its fellow Asian country, Korea has registered an increase in its foreign exchange reserves for the third straight month. The country’s central bank, the Bank of Korea, attributes the rise to higher profits from investments. At the end of September, Korea’s forex holdings were worth $228 billion, an improvement of over $1billion from August’s standing. Korea stands fifth in the global list of top forex holders behind China, Japan, Taiwan, and Russia. As much as 80 percent of the foreign reserves are in securities and 19 percent in deposits. 

Following an upswing of $940 million in its foreign exchange holdings for the week ended September 22, India’s gold reserves, SDRs, foreign currency assets, and forex reserves decreased by $1.177 billion during the week ended September 29. With this decline, the forex reserves stood at $165.305 billion. India stands at the sixth position in global forex holdings. The Hindu reports:

Foreign currency assets decreased by USD 835 million to USD 158.340 billion during the seven-day-period ended September 29, 2006, according to figures released by the Reserve Bank of India (RBI). Foreign currency assets in dollars include the effect of revaluation of non-US currencies such as Euro, Sterling, Yen held in reserves.

Britain has decided to urge the International Monetary Fund to set a timetable to make its new surveillance framework fully operational. British Treasury Minister Ed Balls is slated to talk on the imbalances that pose a risk to the global economy. Top financial policymakers are scheduled to meet this week in Singapore. They will discuss how to boost the IMF’s surveillance of exchange rate policies of emerging economies such as China. The UK officials demand that the IMF’s ministerial body should set an annual surveillance remit, which would become a practical charter for multilateralism. .

Read my previous post titled “China Must Modify Policies on Foreign Investment” to know about China’s foreign investment policy that has an impact on forex trading.

Recently, I had written a post titled “Japan’s Forex Reserves Hit a Record High” about the rising forex reserves in Japan. Japan’s foreign exchange reserves rose to a new record of $878.75 billion for the sixth straight month at the end of August. The forex reserves were $871.94 billion in July.

Japan’s forex reserves remain the second largest in the world, which is next to China only. Foreign exchange reserves consist of securities and deposits denominated in foreign currencies, plus IMF reserves and gold. Forex activities may have a significant impact on currency exchange rates and global bond markets. Hence, Japanese government is taking serious measures to protect its economy.

A boom in foreign currency lending is a growing risk to banks and economies in central and south-east Europe. The Standard & Poor report gave its caution to Hungary for its combination of high forex lending particularly to unhedged consumers and small businesses high exchange rate volatility and a looming economic slowdown. The agency said that no ratings downgrades were imminent for any of the region’s banks due to their foreign currency loan exposure.

The report also warned that any strong currency depreciation or an economic recession could bring about a more severe scenario. Hungary has gone through economic recession over the past few years. Recently, it has introduced a budget austerity program to restore fiscal order. Besides Hungary, Romania, Croatia and Poland have been identified as vulnerable against foreign currency lending.

Read my previous post titled “MNCs Found Guilty of Violating Forex Standards” to know about recent activities associated with forex.

In an older post titled “China’s FOREX Reserve Rises“, I had provided information on the rising forex reserves in China. According to the market requirements, China must readjust some of its past policies on the introduction of foreign investment and financing and on the use of capital imported from overseas since significant changes have taken place in both the world economy and Chinese economy. China’s forex reserves increased substantially over the years. It has now approached nearly one trillion dollars. In such circumstances, the emphasis must be given on the introduction of technology and management.

The policy of opening to the outside world should not be confined to the use of foreign capital alone. Since there is no fund shortage for economic growth in China, all those funds that are unfavorable for importing the advanced technologies and management should be blocked. If we analyze China’s foreign trade policy, there is little doubt that restrictions should be imposed upon the export of products that warrants pollution and high-energy consumption.