Is the Asian Century Already Kaput?


It’s getting tasty in China.

Yesterday, the Financial Times noted:

‘Chinese listed companies have reported a sharp rise in unpaid bills during the third quarter, in one of the clearest signs yet of the toll that China’s economic slowdown is taking on corporate balance sheets.’

We wonder how that will fit in with the government’s plans for the so-called ‘Asian Century‘. Not very well we’ll wager…

Last weekend, Australian Prime Minister Julia Gillard released the long-awaited Australia in the Asian Century white paper.

The paper notes:

‘The Asian century is an Australian opportunity. As the global centre of gravity shifts to our region, the tyranny of distance is being replaced by the prospects of proximity. Australia is located in the right place at the right time – in the Asian region in the Asian century.

‘For several decades, Australian businesses, exporters and the community have grown their footprint across the region. Today, for Australia, the minerals and energy boom is the most visible, but not the only, aspect of Asia’s rise. As the century unfolds, the growth in our region will impact on almost all of our economy and society.’

It sounds impressive, right?

The argument is that Asia will become the global economic powerhouse. Therefore, because Australia is on Asia’s doorstep the Australian economy will benefit.

As impressive as it sounds, it’s also completely misguided, and we’re sorry to say, woefully wrong.

But we look at it like this: it’s like a fat man thinking he’ll lose weight if he stands next to a skinny man!

But we’re not the only one to criticise the white paper. Michael Pascoe wrote in the Age that ‘the PM has offered a statement of the obvious.’

While Clinton Dines, formerly of BHP China, told the Age, ‘With a slowdown and budget deficit looming, one suspects that Ken Henry’s efforts are doomed to go the way of his tax reforms.’

We’re happy when the mainstream criticizes government policy. Only this time, the mainstream is wrong too…

The Asian Century is Already History

The reality is when we look back at today from the future, the Asian century (in the way the government envisions it) will prove to be nothing more than an Asian decade…or two decades at the most.

If the government, businesses and investors have pinned their hopes on the Chinese Dragon and Asian Tiger, they’ll be sorely disappointed.

By attaching their hopes to Asia, they’re in danger of missing out on the real story of the next 100 years. It’s what we call the ‘Wired Century’.

This is a theme we wrote about in the latest issue of Australian Small-Cap Investigator.

The fact is, in some ways the era of backing one geographic location over another are over. So are the days of benefiting from being close to a booming nation.

Let’s be honest, Australia’s closeness to China hasn’t been as important to the Australian economy as most think. What’s more important is that Australia has the natural resources that China needs – copper, iron ore, and coal.

But Brazil has a bunch of this stuff too. So does Canada, Chile and Africa. And the last time we checked, Brazil is three times as far from China as Western Australia is from China…and that’s as the crow flies. In nautical miles the distance is even greater.

And if we’re not mistaken, the US has relied on Middle Eastern oil for years. You could hardly call them neighbours.

Distance doesn’t matter compared to having a resource in demand. The fact that Australia has a bunch of resources and is close to China is just a bonus.

In short, anyone hoping that Australia will cash in on the supposed ‘Asian Century’ is kidding themselves.

Australia Needs to Exploit the Wired Century

Yes, there are benefits of being close, but there’s something much more import. And that’s technological innovation and global trade.

This is the real benefit for Australia.

So if you’re after a clue about the future, we suggest you take in the two following excerpts. First this from the Age:

‘The rise of the internet has killed the newspaper business model, but demand for television remains enormous.

‘According to The Cross Platform Report by researcher Nielsen, United States viewers still spend around four hours a day watching TV, barely down from record highs.

‘Does this make the battered shares of Seven, Nine and Ten cheap buying for potentially-rich stocks? No.

‘Australian television broadcasters are at the very same tipping point newspapers reached a few years ago, just before their problems became near-terminal.’

And this from the London Times:

‘The world is “drowning in data” and computing companies are running out of space to store it, one of the technology sector’s best-known – and most controversial – figures has warned.

‘Mark Hurd, the president of Oracle, said that the amount of data being produced by the nine billion devices connected to the internet had grown eightfold over the past seven years, putting incredible strain on the companies that need to process and store it all.’

New technology, new business practices, and new consumer behaviour is having a big impact on the local and world economy. And that impact will only grow.

As we wrote in the latest issue of Australian Small-Cap Investigator, 16 years ago the Sayce household only had one device connected to the internet (a desktop computer).

Today, between your editor, the missus and two kids, we have 12 internet-enabled devices. And as far as we’re concerned, the world is barely 5% of the way through the technological revolution.

The Most Important Skills You Can Learn

Bottom line: forget the Asian century. Forget the nonsense about forcing kids to learn Mandarin, Japanese, Hindi and Indonesian.

Sure, those skills will be handy. But on the importance scale, they are far, far behind the most important skills any kid (or adult) could learn today. We’re talking about encouraging kids to learn more technological and web skills.

If Australia has any chance of building a successful economy over the next hundred years it won’t be through foreign languages or as the mainstream economists seem to think, by building more houses, it will be by embracing and exploiting the Wired Century.

That’s the future for Australia. But only if the government stops butting in and lets schools and businesses get on with building those skills.


From the Port Phillip Publishing Library

Special Investment Report: After the Bust

Daily Reckoning:
The Hidden Riches Accumulated by China’s Leadership

Money Morning:
Has the Australian Dollar’s Luck Just Run Out?

Pursuit of Happiness:
Tax = Theft

Australian Small-Cap Investigator:
The Power of Small Cap Stocks

Is the Asian Century Already Kaput?

How to Profit from ‘Smart Farming’ and Global Food Supplies


Here’s a good statistic for you: there are more obese people in the world than there are malnourished people – 1.5 billion versus 925 million according to the International Federation of Red Cross and Red Crescent Societies (IFRC).

Why is it good? It is interesting in itself but it also tells us that malnutrition isn’t necessary – the world produces enough food for everyone to have the calories they need to get by.

The problem is just that we haven’t got the political and logistical skills to distribute it properly.

The resulting pressure on food supplies is creating some interesting developments in global agriculture. And also some opportunities for investors.

 Where Does all the Food Go?

 We waste vast amounts of food – much of India’s grain is stored outside for example, so it spoils long before it gets to market.

We also distort the prices of food with silly initiatives such as price caps (which encourage farmers to horde, not sell) and the US Renewable Fuel Standard rules that require all petrol to be blended with corn ethanol.

Some 40% of US corn (more than the total combined output of India and Africa) is now used as fuel, which, given that the price of corn hit a high in June, surely doesn’t seem as good an idea as it once did. Why should the biofuel industry effectively get to eat before the global population?

As we get richer, we also insist on having more of it – both in volume and variety. And of course our governments refuse to recognise the problem.
That’s why food prices are so vulnerable to the weather – according to the United Nations, the three years in the past two decades in which food prices have been highest have coincided with droughts (as an aside, I might point out that they’ve also coincided with quantitative easing (QE), but that is another subject).

It is also why, as the global population grows, there is likely to be ongoing pressure on food supplies despite the apparent plenty.

The World Bank estimates that total demand for food will rise by 50% by 2030, partly thanks to the rising population and partly thanks to what analysts at Fidelity call the “meat multiplier”.

As people get richer, they want to eat more meat and meat is one of the biggest resource gobblers there is: for every 1kg of beef you want to produce, you have to feed a cow around 7kg of grain.

I suspect that food supply won’t have to rise the full 50% – some logistical improvement has to be possible and the World Bank’s population forecasts aren’t exactly infallible. But it is still a big ask for the agricultural industry.

 Four Ways to Improve Food Production

 Producing more food isn’t as easy as it should be. Industrialisation, urbanisation and desertification have all combined to reduce the amount of land available to farmers. And the failure of the Chinese to properly reform land ownership rules have prevented the rise of the kinds of agribusinesses that can create leaps in yield in their hungry country.

The key point is that more food from less land means that yields will have to go up. And what makes yields go up? The obvious answer is fertiliser – the prices of the likes of potash rose ten-fold during the 2007/8 food crisis.

But Fidelity also points to other areas of interest. There is also machinery – rising farm incomes and farm sizes mean that mechanisation rates will keep rising – and so will tractor sales.

There is ‘precision agriculture’ – the ‘integration of satellite observations, on the ground instruments and sophisticated farm machinery to apply the optimum amounts of seed, fertiliser and water for maximum efficiency’.

Then there are GM advances and biotechnology – think ‘metabolically engineered fish that mature more quickly’ (this isn’t as an attractive idea as precision agriculture, but you get the idea) and artificial meat advances which offer ‘the potential to feed millions of people in the future in a resource efficient manner’.  And without killing any pigs.

 The Best ‘Smart Farming’ Stocks

 The good news at the moment is that it looks like this year isn’t going to produce the food crisis many have been worrying about.

According to Capital Economics, the US Department of Agriculture numbers tell us that global harvests of wheat and corn will be ‘ample’, while the soybean harvest is on course to ‘recover to the high seen in the 2010/11 season’.

Browning Newsletter also suggests that we might be about to go through a period of relatively benign weather. Many models are pointing to a weaker El Niño than expected.

Winter in the US is unlikely to be colder than usual. Meanwhile, although north-eastern Brazil might be going to get more rain than it would like, ‘Argentina and southern Brazil should have good growing conditions’, something that should ‘provide a good enough grain and oilseed harvest to help bring down prices in the coming season’.

That would be nice – but it might also provide a good opportunity for investors to get into what Mirabaud calls ‘smart farming stocks’ – companies that capture ‘the drive towards higher crop yields in the emerging world and the growing food safety paranoia of consumers and regulators worldwide’.

Merryn Somerset-Webb

Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in MoneyWeek

From the Archives…

Does Excessive Government Spending Make You the World’s Best Treasurer?
26-10-2012 – Kris Sayce

Why a Return to the Gold Standard Could Actually Be Bad
25-10-2012 – Kris Sayce

A Safer Than Super Investment?
24-10-2012 – Nick Hubble

Agricultural Commodities – The Best Way to Play Rising Food Prices
23-10-2012 – Merryn Somerset Webb

Stock Market ‘Barometer’ Speaks: The Bulls Won’t Like it…
22-10-2012 – Kris Sayce

How to Profit from ‘Smart Farming’ and Global Food Supplies

The Fiscal Cliff’s Biggest Surprise Could Be a Rising US Dollar


My grandmother Mimi had a saying that was as blunt as it was uncouth. ‘When the stuff hits the fan,’ she used to say, ‘it will not be evenly distributed.’

This one came up often when she sensed that world events were about to take a turn for the worse.

You’ve heard me mention Mimi before. She was widowed at a young age and went on to become a savvy global investor long before people thought to look beyond their own backyard.

Mimi never cared what Wall Street’s “Armani Army” had to say.

Instead, she preferred to travel widely to see for herself what the real story was. Having grown up in the midst of the Great Depression, she believed that people were the ultimate indicator and that governments were the penultimate contrarian influence.

If she were still alive today, I think she’d encourage us to take a good hard look in the proverbial “mirror” especially with regard to the looming fiscal cliff making headlines the world over.

And I don’t think she’d waste any time with the doom, gloom and boom crowd either.

She was always on the hunt for opportunity when everyone else was running from chaos. Thanks to her, it’s a habit that remains firmly ingrained in me today.

Not One but Three Fiscal Cliffs

And that brings me back to the “fiscal cliff”.

In my mind, this is a misnomer. There isn’t really a singular fiscal cliff. There are actually three.

  • The massive adjustments headed our way as tax and spending cuts expire and come into effect beginning in 2013. You may know it as taxmegeddon.
  • The debt debacle and the near complete lack of any sort of credible financial consolidation plan that will affect everything from interest rates to collateral requirements and the US credit rating – again.
  • And politicians who simply don’t understand that issues 1 and 2 are already dramatically impacting the economy long before the theoretical limits of spending come into play. Profits are declining and 61% of companies that have reported through Monday October 22nd have failed to meet expectations. Hiring is slowing and top line revenue is increasingly hard to come by.

Together, they constitute a massive threat to the US economy that could push our beleaguered “recovery” to the breaking point. (And I use all the sarcasm I can muster with that because our recovery isn’t anything close to what’s needed.)

Many believe this is a moot point because Congress will get down to business in November after the Presidential Election takes place. The hope is that some sort of budget agreement will be reached and that the US economy will then be positioned for stronger growth in 2013.

Yeah and I suppose the tooth fairy will show up, too.

The IMF and CBO are both on record noting that the estimated $400 – $600 billion in impacts that will result from the combination of spending cuts and tax hikes could derail economic growth while causing a sharp contraction.

Even Helicopter Ben himself has warned of dire consequences. More importantly, dozens of reformed economists, bankers, CEOs and small business owners agree.

Any breakdown in the political infrastructure would represent a catastrophic political, social and economic failure that places literally every level of our economy at risk of further disaster.

Under these conditions, everything from our credit rating to international trading relationships faces mortal risk.

Europe could also come unglued if our banking system goes south. I know many European leaders like to believe they are independent but the reality of an internationally linked fractional banking system renders that notion pure folly in this instance.

Is There a US Dollar Rally Brewing?

Conventional wisdom, under the circumstances, is that the US dollar will become even more worthless than it is now.

I don’t think so. In fact, I expect the US dollar to strengthen significantly. Here’s why…

When the shooting started in the Middle East, bankers came running. When the fiscal crisis began, the dollar ran some more. When the European crisis broke, people couldn’t get enough dollars.

And as China has slowed, the dollar has enjoyed newfound stability. Even during last year’s Congressional debt ceiling donnybrook for example, the dollar outperformed the Euro as investors sought refuge.

History shows that bankers from Shanghai to Milan and all points in between run to the dollar when global instability raises its ugly head and the fiscal cliff or cliffs would certainly constitute instability.

And that reminds me of something else Mimi used to allude to all the time.

‘Keith,’ she would say as we enjoyed some piping hot pastrami sandwiches and cold beer together (one of her favorites), ‘much of the world may hate our guts, but when the fur starts flying they love our money.’

These days they have to. For the moment, there’s literally no alternative capable of absorbing the needed liquidity. That alone is probably worth another 10%-15% of upside for the US dollar.

As for the alternatives, the euro itself is in question and at risk of fracture and the yuan isn’t deep enough yet.

As the dollar goes higher, US-based stocks, bonds and preferreds should go along for the ride if not in terms of absolute gains, then in terms of stability. Investors factoring in dividends and bond payments, even at historically low interest rates could enjoy their own recovery.

So, too, could the Chinese who sit on an estimated $3.2 trillion in trade reserves and an estimated $1.169 trillion of which is held in US dollar denominated debt.

Many people don’t want to hear that. But understanding how a stronger US dollar would affect the markets may lead to some the most profitable decisions they’ve made since this crisis began.

Keith Fitz-Gerald
Contributing Editor, Money Morning

Publisher’s Note: This article originally appeared in Money Morning (USA)

From the Archives…

Does Excessive Government Spending Make You the World’s Best Treasurer?
26-10-2012 – Kris Sayce

Why a Return to the Gold Standard Could Actually Be Bad
25-10-2012 – Kris Sayce

A Safer Than Super Investment?
24-10-2012 – Nick Hubble

Agricultural Commodities – The Best Way to Play Rising Food Prices
23-10-2012 – Merryn Somerset Webb

Stock Market ‘Barometer’ Speaks: The Bulls Won’t Like it…
22-10-2012 – Kris Sayce

The Fiscal Cliff’s Biggest Surprise Could Be a Rising US Dollar

OTC infrastructure ready, but no regulatory certainty – FSB

By Central Bank News

    The private sector infrastructure necessary to trade, clear and record over-the-counter (OTC) derivative transactions is now ready but regulatory uncertainty is blocking everyone from using these new exchanges, according to the Financial Stability Board (FSB).
    The FSB’s fourth progress report on reforming OTC derivatives, which triggered fears of contagion during the global financial crises, showed that the United States, the European Union, Hong Kong and Japan have made further progress in meeting the goal of trading and clearing through central counter parties by end-2012.
    But agreeing on cross-border rules is lacking and the FSB urged regulators worldwide to identify and develop options to tackle the shortcomings to help meet the end-2012 commitment to central clearing.
    The financial crises revealed that OTC derivatives had contributed to the build-up of systemic risk and the global nature of these markets – where buyers and sellers are frequently located in different jurisdictions – makes globally consistent regulation essential.

    In September 2009 the Group of 20 (G20) leaders agreed that all standardized OTC derivatives contracts should be traded on exchanges or electronic trading platforms and cleared through central counter parties by end-2012 at the latest. OTC contracts should also be reported to trade repositories, a body that collects and maintains the records of all trades.
    The FSB, which coordinates international financial regulation, was asked by G20 to keep track of this reform and regularly report back. The FSB will be reporting the progress and remaining problems seen in its fourth report to G20 finance ministers in November.
    “Market infrastructure is in place and can be scaled up,” the FSB said, adding the international policy work for global clearing is substantially completed and implementation is proceeding at a national level.
    “Regulatory uncertainty remains the most significant impediment to further progress and to comprehensive use of market infrastructure,” the FSB cautioned.
    “Jurisdictions should put in place their legislation and regulation promptly and in a form flexible enough to respond to cross-border consistency and other issues that may arise. Regulators need to act by end-2012 to identify conflicts, inconsistencies and gaps in their respective national frameworks, including in the cross-border application of rules. They need to work together quickly to address the identified issues.”
    Click to read the FSB’s progress report on the implementation of OTC Derivatives Market Reform.

South Pacific Currencies Remain Strong on Building Data and Risk Appetite

By (Dublin) – The New Zealand and Australian dollars remained high against the US dollar after both south pacific countries registered better-than-expected building approvals. The Aussie advanced against most of its peers prior to a report expected to show improvement in China PMI which is a bright spot for exporters in Australia. The Aussie and kiwi’s gains were supported by demand for Asian stocks and as US stock-index futures boosted demand for higher yielding assets. In addition, traders have reduced their bets the Reserve Bank of Australia will reduce interest rates when it meets next week.

According to khoon Goh, who is the senior currency strategist at Australia & New Zealand Banking Group Ltd in Singapore, the building approvals from the two south pacific currencies were stronger than expected and the impact of interest rate cuts done by the RBA in the past year is starting to yield some results. Goh also indicated that this has boosted the Australian dollar. The two south pacific currencies strengthened after the MSCI Asia Pacific Index of shares rose by 0.9 percent. The Standard & Poor’s 500 Index futures expiring on December appreciated by 0.1 percent, as the US Securities and Exchange Commission canceled bonds and capital markets for two days due to storm Sandy. The New York Stock Exchange is expected to be opened today.

According to Goh from ANZ, the Aussie has continued to gain as a result of lower expectation of a rate cut from the RBA. He however, continued to project that the central bank may cut rates in December. The Aussie may hold its strength through tomorrow when the Chinese PMI data is released. China is Australia’s largest trading partner. Junichi Ishikawa, who is an analyst in Tokyo at IG Market Securities, indicated confirmed that investors are expecting better figure from China.

The Australian currency gained by 0.1 percent against the dollar at the close of trading yesterday to settle at $1.0375. It traded 0.1 percent stronger against the yen, exchanging at 82.60. The New Zealand dollar was selling at 82.10 US cents at the close of trading in Sydney, up from 82.08 cents the previous day.

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.
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Central Bank News Link List – Oct. 31, 2012: ECB reports ‘pronounced’ fall in demand for loans

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.

Gold “Now in Consolidation Phase”, US Markets Prepare to Open Again

London Gold Market Report
from Ben Traynor
Wednesday 31 October 2012, 07:15 EDT

WHOLESALE gold bullion prices rallied to a one-week high at $1720 an ounce Wednesday morning in London, though they still looked set to record a loss on the month, while European stocks opened higher before losing some ground and US markets prepared to re-open after being closed for two days.

Silver bullion climbed to $32.37 an ounce, also up on the week, while oil and copper ticked higher and US Treasury bonds fell.

By Wednesday lunchtime in London, gold bullion looked set to record its first monthly loss since May, with spot gold trading nearly 3% below where it started October.

“There are those who are still looking for another dip, perhaps one that offers an opportunity to jump in sub-$1700, between now and year-end,” says a note from UBS.

“The clear downtrend from earlier in the month has now been replaced by this consolidation phase. But the possibility of another attempt on the downside certainly cannot be ruled out.”

“There are a lot of event risks [for the gold market],” one trader in Singapore told newswire Reuters this morning.

“Nonfarm payrolls, the US election, a change of power in China, plus the routine policy meetings of various central banks.”

“People wonder if Romney is going to be in power and what kind of monetary policy we will have,” adds UBS analyst Dominic Schnider, adding that the Republican candidate would likely replace Ben Bernanke as chairman of the Federal Reserve.

“[Romney] is clearly not in favor of what the Fed is doing.”

A piece published by the Financial Times yesterday argued that a change in fed leadership following a Romney win would be bad for gold bullion prices, since the US dollar would strengthen.

“There’s really no clear indication that Republican presidents are better or worse for the Dollar than the Democrats,” counters a note from Standard Bank currency analyst Steve barrow this morning.

“We don’t doubt that a strong Romney win, with victory in the Senate as well, would boost the Dollar while, if Obama narrowly hangs on to the presidency and loses the Senate, it would probably produce the worst possible knee-jerk response in the Dollar. However, in terms of the longevity of these reactions we’d be somewhat skeptical.”

US markets are set to reopen Wednesday, following two days of closure caused by Superstorm Sandy.

“In the early trade I expect an overreaction regardless of the direction,” says Art Hogan, New York-based managing director at Lazard Capital Markets.

“I expect to see a lot of volume at least in the first hour.”

Wednesday marks the end of the financial year for many US mutual funds, which have been unable to trade many securities since last Friday.

“That could be the wild card, how much [trading] they have to cram in,” says Donald Selkin, chief market strategist at National Securities, which manages around $3 billion.

Eurozone finance ministers meantime, who meet today, may grant Greece extra time to meet its austerity commitments, although disagreement remains on whether to write off more Greek debt, Bloomberg reports.

“The decisive phase for Greece has started,” reckons Carsten Bzerski, Brussels-based senior economist at ING Group.

An earlier deal to restructure Greece’s debt was agreed back in February. Losses were imposed on private sector creditors with the aim of bringing Greece’s debt-to-GDP ratio down to around 120% by 2020. Since then, however, Greece has missed a series of deficit tsrgets.

“Filling the funding gap for Greece will again require some creativity,” says Bzerski.

“A possible way out, at least in the short term, could be a combination of several options, such as lowering the interest rates on the first two Greek packages and front-loading parts of the funding of the second package. This could again kick the Greek can further down the road.”

Elsewhere in Europe, German retail sales rose 1.5% month-on-month in September, significantly more than many analysts forecast, although year-on-year sales were down 3.1%, official figures published Wednesday show.

The Euro rallied against the Dollar following the release.

Here in the UK, prime minister David Cameron said Wednesday he is prepared to veto a rise in the European Union’s budget if he does not secure “a deal that is good for Britain.”

Conservative MP Mark Reckless has put forward a motion calling for a real-terms (inflation-adjusted) cut in UK contributions to the EU, and says around 40 other Conservatives support it.

“What I hope will happen,” said Reckless today, “is that the government will accept this motion and will put itself and David Cameron at the head of a united Parliament, going to Brussels to call for a cut in the budget, representing Britain, representing our constituents.”

The opposition Labour party has said it will also back the amendment.

Ben Traynor

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+

(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.


Norway keeps rate at 1.5%, delays expected rise until 2013

By Central Bank News
    Norway’s central bank kept its policy rate unchanged at 1.5 percent, as widely expected, and delayed an increase in the rate to sometime next year.
    Norges Bank, which has cut rates twice this year, said in a statement that it was keeping its rate on hold due to low inflation and low interest rates worldwide.
    “Developments in the Norwegian economy give reason to believe that inflation will gradually pick up,” the bank said in a statement, quoting Governor Oeystein Olsen.
     “The analysis in this report suggests that the key policy rate should be kept at today’s level into next year, followed by a gradual increase towards a more normal level. The forecast for the key policy rate in 2013 is slightly lower than in the June forecast,” he added.
    In its June Monetary Policy Report, the bank had forecast an increase in the policy rate by the end of this year. But at its last meeting in August, the bank said it was starting to postpone the rate rise, saying the upward shift in interest rates had been deferred, though it did not specify until when.

    Norges Bank said growth among its trading partners was weak and uncertainty was elevated, but easier policy by several central banks had helped tensions in financial markets to ease.
    Norway’s economy was growing solidly and capacity utilisation higher than normal, the bank said, adding the krone currency had appreciated
    “At the meeting, the Executive Board decided that the key policy rate should be in the interval 1% – 2% until the publication of the next Report on 14 March 2013, unless the Norwegian economy is exposed to new major shocks,” the bank added.
    Norway’s economy expanded by 1.0 percent in the second quarter from the first, for a 5 percent annual growth rate, up from 4.6 percent in the first quarter.
    The inflation rate was steady at 0.5 percent in September, below the central bank’s 2.5 percent target.

EU Finance Ministers Convene to Discuss Greece Debt Write-Down Proposition

By (Dublin) – The euro-zone finance ministers are expected to convene today where they are projected to discuss the Greece bailout plan which has left them split on the way forward. They will be discussing whether the country requires another debt write-down as political leaders in Greece squabble over the consequence of further austerity measures. The finance leaders will be seeking ways to Greece in the euro as it a faces an exit which is projected to cost several hundred billion euros according to Josef Ackerman, the Deutsche Bank Chief Executive Officer. The finance ministers will be holding a conference call at 1230hrs Brussels time and a statement is expected thereafter.

The market is watching with interest the developments in Europe as the leaders grapple with ways to fill Greece financing gap. The decision on whether to give the country another round of emergency funds to finance its debts will be made in two weeks time. However, the optimism and support gained from German Chancellor Angela Merkel will go a long way in securing the fund. However, Greek Prime Minister Antonis Samaras’ coalition government has not agreed on the steps needed to secure more funding. Carsen Brzeski, a Brussels-based senior economist at ING Group, has noted that the euro-area finance ministers will be hoping to agree on the way forward and may decide to give Greece more time to adjust. He added that the decisive phase for Greece has started.

Policy makers will be tasked with the responsibility of devising a plan that will reduce Greek debt to 120 percent of gross domestic product in eight years from the current 144 percent. If they fail to agree on the way forward, there will be another wave of speculation about Greece exit, which would be sparked in event the IMF withdraws its funding. The discussion surrounding the Greek debt crisis has left Greek financial institutions with no other option but to agree to the biggest restructuring in history. Christine Lagarde, the IMF Managing Director said that Greece will require another debt cut. However, Angela Merkel has insisted that on an ECB proposal for a buyback of Greek debt.

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.
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Market Review 31.10.12

Source: ForexYard


A positive German retail sales figure during early morning trading led to gains for higher-yielding currencies and commodities, including the euro, British pound, gold and crude oil.

The dollar was able to recoup some of its losses against the Japanese yen in overnight trading, although analysts were quick to warn that any gains could be limited, as the full impact Hurricane Sandy has had on the US economy is still not known.

Today, traders will want to note that after being closed for the last two days, US markets will be reopening today. As officials begin assessing the full impact Hurricane Sandy has had on the US economy, major fluctuations in stocks and currencies can be expected.

Main News for Today

US Crude Oil Inventories- 14:30 GMT
• The price of crude oil received a boost during early morning trading today following positive euro-zone news
• Should today’s inventory figure come in below expectations, which would signal increased demand in the US, crude could extend its bullish trend

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