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Aug. 31, 2010 | Written by Jeffrey Winograd
Forex market closely monitoring Japanese Finance Ministry – The Japanese yen continues to make small advances against the U.S. dollar despite moves made by the central government and the Bank of Japan on Aug. 30. Forex traders can’t be sure the BOJ will wait to take decisive action until the greenback hits an all-time low against the yen and are looking for clues. In this vein, Atsushi Mizuno, a former member of the central bank’s board, told an interviewer that some people will question Japanese intervention, especially if it acts alone. According to some skeptics, such intervention, absent monetary easing, will fail, he said. Mizumo attributed the continued rise of the yen to the poor performance of the U.S. economy. There would be some international acceptance on intervention if it is seen as a reaction to a foreign economy it cannot control, Mizumo said. However, words alone will not suffice, he stressed, and adding that talk of intervention without any action is counterproductive. Think strategically when sending messages to the forex market but act boldly when required, Mizumo said. Meanwhile, the head honcho of the finance ministry commented that when the time was appropriate the government will take decisive action. At press time (11:00 a.m. in New York), the USD was trading at 84.4550 JPY.
Swiss franc flexes its muscles – The Swiss franc is increasingly being seen as the safe-haven for forex traders. Today, the euro fell to a record low against the CHF, just breaking the 1.2900 level for a short period. Many analysts are saying this can be seen as a sign that investors are currently risk adverse. The U.S. dollar also demonstrated its weakness, falling to a seven-month low against the CHF. At press time (11:00 a.m. in New York), the USD was trading at 1.0151 CHF, the euro was 1.3046 CHF, and the euro was 1.2723 USD.
New reports on U.S. banks and housing market – Many U.S. banks are raking in the money and very stingy in handing it out, while a significant number are hovering on the brink of failure, according to the latest report from the Federal Deposit Insurance Corporation. Bank profits in Q2 hit $21.6 billion compared to profits of $18 billion in Q1. The number of problem banks, which are those at risk of failure, rose to 11% of the financial institutions insured by the FDIC. Problem banks, which remained unnamed, numbered 829 and held $403 billion is assets. The Q1 report said there were 775 problem banks. Total lending by all the insured banks declined by 1.4%. “Earnings remain low by historical standards, and the numbers of unprofitable institutions, problem banks, and failures remain high,” said Sheila Bair, the FDIC chairman. On the housing front, home prices rose 4.4% in Q2 compared to a year ago after having fallen by 2.8% in Q1, according to the S&P/Case-Shiller Home Price Indices. These are considered the leading measures for the U.S. residential housing market, tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions. The indices are calculated monthly. Some analysts believe that the Q2 improvement was affected by the now-defunct first-time homebuyer tax credit.
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