Dollar falls against yen, Fed minutes in focus

A money changer holds stacks of US dollar notes in Jakarta, August 29, 2013.

The dollar weakened on Monday against the Japanese yen as investors continued to digest last week’s strong U.S. employment report and speculated about when the Federal Reserve is likely to begin raising U.S. interest rates.

The yen gained as long-dated U.S. Treasuries rallied, stemming a week-long bond selloff heading into Thursday's employment report, which showed nonfarm payrolls increased by 288,000 jobs last month and the unemployment rate fell to 6.1 percent from 6.3 percent in May.

The next major focus will be the release on Wednesday of minutes from the Fed’s June meeting, which will be scoured for signs about when central bank members see an interest rate increase as likely.

“The discussion won’t reflect the strong bounce in nonfarm payrolls, but will serve as a reference as to what the internal debate is in the FOMC regarding the first rate hike,” said Martin Schwerdtfeger, a foreign exchange strategist at TD Securities in Toronto.

Goldman Sachs economists on Monday brought forward their expectations of the first rate increase to the third quarter of 2015 from the first quarter of 2016, following similar actions from some other banks last week.

The dollar fell 0.27 percent against the yen to 101.84 yen, down from 102.10 yen late on Friday.

The dollar also slipped 0.01 percent against the euro to $1.3604. It had strengthened to $1.3577 earlier on Monday after data showed German industrial output fell 1.8 percent on the month in May, its biggest drop in more than two years.

The weak German data kept alive expectations the European Central Bank may need to loosen monetary policy further in coming months in the face of disinflationary pressures and subdued economic growth.

The dollar index, which tracks the greenback against a broad basket of currencies, was unchanged at 80.220, down from an earlier high of 80.359, the highest in a week-and-a-half.

Source:

www.reuters.com

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Asian Stocks Mixed After US Growth Slowdown

Asian stocks were mixed Thursday with most markets closed for a holiday after U.S. economic growth slowed and the Federal Reserve promised to keep interest rates low.

Oil edged down to stay below $99 per barrel on expectation of weaker U.S. demand and reports of higher supplies.

Tokyo's Nikkei 225 index gained 0.4 percent to 14,360.27 points and Malaysia added 0.7 percent to 1,871.52. Sydney's S&P ASX 200 shed 0.4 percent to 5,467.10 while New Zealand was off 0.4 percent at 5,557.59.

Markets in China, Hong Kong, South Korea and Taiwan were closed for the labor day holiday.

Investors were encouraged by the Fed's pledge Wednesday following a policy meeting to keep short-term interest rates low to support the economy "for a considerable time" after its bond purchases end, likely late this year.

"The accommodative stance is certainly going to maintain the current upswings in consumer sentiment and spending," said Evan Lucas of IG Markets in a report.

In China, a survey of manufacturers by the state-sanctioned Federation of Logistics and Purchasing showed April activity growth was weak, adding to signs the world's second-largest economy is cooling further after growth dipped to 7.4 percent in the three months ending in March.

In a sign of confidence in the U.S. economy, the Fed said it would go ahead with plans to reduce bond purchases by $10 billion this month. Such purchases were aimed at encouraging investment by pushing down long-term interest rates and have helped to buoy stock markets.

U.S. government data showed economic growth slowed to a 0.1 percent annualized rate in the January-March period from 2.6 percent in the previous quarter.

That was the weakest growth since late 2012 and was largely put down to the winter storms that hit North America during the period. But it disappointed economists who expected a more modest slowdown to 1.1 percent.

A hiring survey by the ADP payrolls processor said the U.S. economy added 220,000 jobs in April, up from 209,000 in March and the most since November. Official government figures are due Friday.

On Thursday, Britain's FTSE 100 and Germany's DAX each added 0.2 percent while France's CAC-40 dropped 0.2 percent.

On Wall Street, the Dow Jones industrial average and the broader Standard & Poor's 500 both edged up 0.1 percent.

Crude for June delivery shed another 7 cents to $99.67 per barrel in electronic trading on the New York Mercantile Exchange.

On Wednesday, the contract fell $1.54 per barrel to $99.74 after U.S. and European Union sanctions imposed on Russian officials, businesspeople and companies over the Ukraine crisis were less severe than traders feared. Markets had been on edge that sanctions might disrupt Russian oil supplies.

In currency markets, the dollar was unchanged at 102.25 yen and the euro was flat at $1.387.

Source:

abcnews.go.com

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Big banks to get higher capital requirement

Increase in leverage ratios means biggest banks will have to add $68 billion to level

WASHINGTON—The nation’s eight largest banks will have to add about $68 billion in additional capital to meet rules approved Tuesday intended to help banks weather losses during periods of market stress, federal regulators said.

The so-called “leverage ratio” approved by the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp. will mean the largest banks, including Citigroup Inc. and Goldman Sachs Group Inc., will be required to maintain well above the global minimum levels of capital held against all assets on their books.

Reuters

Federal Reserve Chair Janet Yellen talks at a news conference following the March Federal Open Market Committee meeting while at the Board of Governors of the Federal Reserve Sysytem in Washington, March 19, 2014.

The requirement would be more aggressive than levels set by global regulators as U.S. agencies ratchet up pressure on large, complex banks to ensure they can survive periods of turmoil without a government rescue.

“The final rule is an important part of the Board’s package of enhanced prudential standards for the most systemic U.S. banking firms—a package that is designed to materially reduce the probability of failure of these firms and to materially reduce the damage that would be done to our financial system if one of these firms were to fail,” Federal Reserve Chairwoman Janet Yellen said.

The eight bank holding companies would have to hold loss-absorbing capital worth more than 5% of their assets to avoid limits on rewarding shareholders and paying bonuses, and their FDIC-insured bank subsidiaries would have to keep a minimum leverage ratio of at least 6% or face corrective actions. That is higher than the 3% agreed upon under global standards, which U.S. regulators have seen as not tough enough.

Source:

www.marketwatch.com

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Freddie Mac: Mortgage rates on 30-year loan rise from 4.28% to 4.37%

Mortgage rates rose early this week, according to bailed-out home finance giant Freddie Mac. File photo shows workers building housing in Berkeley, Calif. (Getty Images / July 17, 2013)

Mortgage rates edged higher early this week, with Freddie Mac’s survey showing lenders offering 30-year fixed-rate loans to solid borrowers at 4.37%, up from 4.28% a week earlier.

The average rate for a 15-year fixed home loan rose from 3.32% to 3.38%, according to Thursday's report, and the start rate also rose for variable-rate loans with an initial five years at a fixed rate.

Analysts said a positive report on employment late last week contributed to the trend. The economy added a better-than-expected 175,000 jobs in February despite harsh weather, the government said, and figures for the two previous months each were revised upward by 25,000.

Quiz: How much do you know about mortgage rates?

An improving economy would mean less pressure on the Federal Reserve to keep rates low and an increased chance of rising inflation. To compensate, lenders and investors in mortgage backed securities such as those issued by Freddie Mac would tend to demand higher rates.

Freddie Mac’s weekly rates survey, conducted since 1971, asks lenders about the terms they are offering to creditworthy borrowers with 20% down payments or equivalent home equity if they are refinancing.  

The borrowers would pay less than 1% to lenders in upfront fees and discount points. Paying additional points can lower the mortgage rate, while zero-cost loans are available if the borrower accepts a higher rate.

News Source: www.latimes.com

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