interest rate

According to the recent stats the slowdown in China’s economy was less sharp than predicted and Beijing reports that corralling inflation remained its top priority even though a "complex and volatile" global economy clouded the outlook.

Wednesday China reported that second-quarter gross domestic product increased by 9.5% rate from the same period a year ago, outdoing the forecast 9.4% growth. However, it is still considered a slow pace since the Q3 of 2009.

On Wednesday the US Federal Reserve cut its forecast for the economic growth while it didn’t suggest any further monetary easing saying the recovery would eventually pick up through 2012.

Ben Bernanke said that while such factors as high commodity prices which impact the economy should be fleeting, still the recovery would feature some weakness.

"Part of the slowdown is temporary and part of it may be longer lasting," Bernanke told a news conference after a two-day Fed policy meeting.

Last week officials of the Federal Reserve were holding intense talks on developing exit strategies. According to the sources familiar with the matter the policymakers divided over to sell billions of dollars assets first or raise the interest rate.

The discussion was more robust than described by the Fed Chairman Ben Bernanke at the news conference on April 27. At that time Bernanke said the committee "continued its ongoing discussion of the available tools for removing policy accommodation…”

A new poll of economists conducted by Reuters showed that experts predict US inflation to rise higher than expected previously. However, they believe the recovery won’t be hampered because interest rates will be held down until early next year.

A top International Monetary Fund official warned this week that overheating is threatening to the emerging economies that powered the global recovery because of the too fast growth.

Emerging markets like China and Brazil made every effort to contain inflation and seize heavy flows of investments. IMF’s first deputy managing director, John Lipsky said that the fund is increasingly concerned about the excessive growth.

As China announced interest rate increase speculations arose that it would help curb inflation which led most Asian stocks to rise.

In early deals in Asia the US currency rose up against most majors as the Federal Reserve decided to maintain interest rates near zero.

The dollar, which closed yesterday's trading at 83.70 against the yen rose to a 2-day high of 83.97 in early Asian deals on Wednesday. If the dollar gains further, it may find resistance around the 84.3 level.

During early Asian session on Wednesday, the dollar climbed to a 2-day high of 1.3338 against the euro. The next upside target level for the dollar is seen at 1.318. At yesterday's close, the euro-dollar pair was quoted at 1.3373.

Gold dropped over 1% on stronger dollar as well as talk about euro zone sovereign debt at the Seoul G20 summit and speculation China may again hike interest rates to wrestle inflation.

Spot gold lost as much as 1.7 percent to $1,385.77 an ounce, and recovered slightly to $1,389.17 by 0401 GMT.

"Everyone is watching the G20, and gold is chasing the dollar," said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers in Hong Kong, "We can see some consolidation from here, in a range of $40 dollars below $1,420."

On concerns of adverse impact of the US Federal Reserve’s further steps to more ease its monetary policy on the global economy Singapore let its currency rise sending Asian stocks and copper to two-year peaks and gold to a record high. This resulted in a sharp decline of dollar price against a basket of currencies which heated global currency tensions that have sparked a war of words among policymakers. The dollar dropped to a new 15-year low against the yen.

As the European Central Bank is scheduled to announce its decision on interest rates the euro slid versus its major rivals.

The central bank is widely expected to keep rates on hold at 1%. Ahead of this announcement the European common currency declined against the US dollar to near 1.3983 and dropped against other majors. It also now trades at 115.14 versus the yen and 1.3417 against the Swiss franc.
 

The Swiss franc extended its Thursday decline in early Asian deals today, sliding further versus its US, UK and euro zone counterparts as investors sold the franc after the Swiss National Bank kept interest rates on hold yesterday and cut its inflation forecast. The franc thus tumbled to near a 1-month low against the euro, 18-day low against the pound and a 4-day low against the dollar.

The UK pound jumped up against majors during early European deals after the release of the minutes of the Bank of England's August meeting showed at 4:30 am ET that eight members voted to retain the interest rate at a record low of 0.5%, while Andrew Sentance sought a 25 basis point hike.

Most members thought that the current level of Bank rate and stock of asset purchases financed by the issuance of central bank reserves remained appropriate to balance the risks to the inflation outlook in the medium term.

The US currency reflected mixed presence across the board in Early European session today. The dollar plunged in afternoon New York deals yesterday as the Federal Reserve's Federal Open Market Committee announced that it voted to keep interest rates at near-zero levels.

Thursday in Singapore, bullion prices moved down after reaching a 2-week high earlier this week, extending losses from the previous session when strong US home sales data stirred up selling by speculators. However, an increase in ETF holdings to another record suggested demand from investors remained firm.