The dollar held steady in Asia on Wednesday, with investors sticking to the sidelines as they await the conclusion of the US Federal Reserve's policy meeting.

Tokyo - The dollar held steady in Asia on Wednesday with investors sticking to the sidelines as they await the conclusion of the US Federal Reserve's policy meeting.

The US unit was at 95.40 yen in Tokyo, against 95.37 yen in New York late on Tuesday.

The dollar-yen rate was likely to trade in a narrow range before the Fed wraps up its two-day meeting and chairman Bernanke speaks soon after, said Junichi Ishikawa, market analyst at IG Securities in Tokyo.

All eyes are on whether the US central bank gives any indication of when it will begin to reel in its $85-billion-a-month bond buying programme known as quantitative easing.

The Fed needs to “grasp the nettle to map out a path toward tapering” the programme, National Australia Bank said.

Markets were eyeing the dollar to test 96 yen during Wednesday's session, Ishikawa of IG Securities said, as the Nikkei 225 stock index rose 1.25 percent by the break with a weaker yen helping boost the Tokyo market.

“But unless the Nikkei rises even higher from current levels, the pair will likely be rangebound in the 95-yen level for the time being,” he told Dow Jones Newswires.

Currency rates hardly moved after Japan released data showing its trade deficit for May expanded a smaller-than-expected 9.5 percent from a year earlier to $10.4-billion. The figures showed exports jumped 10.1 percent from a year earlier, offering up some good news for Japan's economy.

The euro fetched $1.3394 compared with $1.3396 while it changed hands at 127.87 yen against 127.76 yen.

The euro held steady after the ZEW economic institute said German investor sentiment rose slightly in June on firming hopes for a gradual recovery in Europe's biggest economy. - AFP

South African government bonds that protect against inflation are regaining investor favour, after demand came up short at a sale last month, as the rand – close to a four-year low – threatens to speed up consumer price increases.

Jaco Visser

South African government bonds that protect against inflation are regaining investor favour, after demand came up short at a sale last month, as the rand – close to a four-year low – threatens to speed up consumer price increases.

Buyers bid for almost three times the securities maturing in 2025, 2038 and 2050 on sale, according to central bank data on June 14. The difference in yield between inflation protected debt and non-index linked securities due in five years, a gauge of investor price expectations over the period, reached 6.79 percentage points on June 11, the highest among 75 breakeven rates monitored.

The rand’s slump to the lowest level in four years last week boosted demand for linkers as inflation approaches the high end of the central bank’s 3 percent to 6 percent target range.

Investors sought to buy just 20 percent of the securities offered on May 31, a day after the rand went through R10 a dollar for the first time since March 2009, amid concern that the government will struggle to contain its fiscal deficit due to the currency’s decline, according to economists including Nedbank’s Nicky Weimar.

“There will be investors in the market wanting to use these as a rand hedge even if we don’t see significantly further rand weakness,” Sean McCalgan, the head of real-time research at ETM Analytics, said on Friday. “Even though we had the rand stabilise somewhat, we still expect to see some follow-through effects coming through into inflation in the second half of the year.”

Inflation at 5.9 percent in April was unchanged for a third month. – Bloomberg

Russia's Finance Ministry has embraced a weak-rouble policy as it seeks to revive flagging economic growth.

Moscow - Russia's Finance Ministry has embraced a weak-rouble policy as it seeks to revive flagging economic growth, but while the approach may boost fiscal revenues there is a risk that inflation could become entrenched.

Minister Anton Siluanov's call for a weaker currency follows a series of meetings chaired by President Vladimir Putin, who has pressed the government to meet spending promises made on his return to the Kremlin in May 2012 in the search for more growth.

The $2 trillion economy, the world's ninth largest, grew by just 1.6 percent year-on-year in the first quarter of this year - its slowest since 2009.

But the International Monetary Fund again urged Russia on Tuesday to keep spending in check, fight inflation and accelerate reforms aimed at creating a broader economic base rather than manipulating demand or the currency.

“There is no point in monetary or fiscal stimulus,” the International Monetary Fund's mission chief for Russia, Antonio Spilimbergo, told a news conference after an annual visit.

“The economy is running at full capacity. A weaker rouble will not boost the economy,” he added.

Moscow has made scant progress in developing a manufacturing base to diversify away from relying on its mineral wealth, weighed down by a nominal exchange rate that has remained stable while wages and the cost of living rise faster than elsewhere.

Weakening the rouble would help exporters in that battle while also encouraging domestic producers in the vast, resource-rich country to compete on price with imports.

It would also benefit the budget through the higher return from oil exports, with a one-rouble decline in the exchange rate to the dollar overall worth an estimated 190 billion roubles ($6 billion) in annual revenues.

“The Finance Ministry would accept a certain weakening of the rouble's exchange rate, but only as long as it is driven by the market and not by administrative methods,” Siluanov told Reuters.

The rouble has fallen by more than 5 percent in the year to date to 36.92 against the dollar-euro currency basket targeted by the central bank. It weakened further following Siluanov's comments.

EASING

The government last year introduced a so-called fiscal rule, capping new borrowing at 1 percent of gross domestic product, making it hard to ramp up spending in an increasingly desperate struggle to revive growth.

The central bank has held off from easing monetary policy because inflation, at 7.4 percent, remains above its 5-6 percent target range.

Putin's dovish economic adviser Elvira Nabiullina takes charge next week, possibly heralding interest rate cuts.

Siluanov said, however, that he saw no place in Russia for western-style monetary stimulus, where central banks buy up government bonds in a bid to lower the cost of credit to the wider economy.

“There is no need at the moment to implement a policy of so-called quantitative easing, as is being done in other countries, as this could stoke inflation further,” he said.

Those comments sought to put an end to a debate in Russia on widening the mandate of the Bank of Russia to add promoting economic growth to its existing task of defending the stability of the rouble.

Economists said a weaker rouble could bolster the public finances without jeopardising financial stability, as Russia's foreign debts are low.

But they doubted there would be much of a positive impact on growth.

“A weaker rouble is likely to help improve fiscal performance in 2013 and beyond, but may not be so promising for economic acceleration in general,” Julia Tsepliaeva, economist at BNP Paribas in Moscow, said in a note.

MANAGING THE WINDFALL

The Finance Ministry is laying the ground for a shift in how it handles oil export revenues - a key part of its revenue base. Energy levies account for around a half of the federal tax take.

In the past, dollar-denominated revenues would be converted into roubles in off-market operations and deposited in the ministry's budget Reserve Fund and the National Welfare Fund, which are together worth 5.4 trillion roubles ($170 billion) and are held at the central bank.

From August, these dollar revenues will be transferred directly to the central bank, obviating the need for the central bank to conduct market operations to mob up rouble liquidity.

“This is a zero-sum operation from the point of view of buying and selling currency,” Siluanov said.

“The Finance Ministry thus neutralises the effect that currently results from filling the Reserve Fund from oil and gas revenues.”

Under the new fiscal rule, the Reserve Fund effectively functions as an off-balance-sheet fiscal buffer, being topped up when oil prices are high and drawn down when they are low.

It is now worth around 4 percent of GDP.

A weaker rouble would also have the beneficial impact of unwinding its real effective appreciation - which has totalled 56 percent since 2004 - forcing up business costs and making it hard for them to compete against imports.

“Over the past 10 years the nominal exchange rate of the rouble has hardly changed, and prices have risen strongly,” said Siluanov.

“The resulting real effective appreciation of the rouble has had a negative impact on Russian exporters.” - Reuters

The dollar edged up as investors await the outcome of a US Federal Reserve meeting.

Tokyo - The dollar edged up in Asia on Tuesday as investors await the outcome of a US Federal Reserve meeting for an idea of when it will begin to reel in its massive stimulus drive.

The greenback stood at 94.83 yen in Tokyo in the afternoon, from 94.67 yen in New York late Monday.

The euro also rose to 126.66 yen from 126.52 yen, but weakened to $1.3355 from $1.3363.

The Federal Open Market Committee will issue a statement on Wednesday after a two-day policy meeting, which will be quickly followed by a briefing from the bank's chairman, Ben Bernanke.

Markets have been in turmoil for weeks on speculation the central bank will announce a tightening of its $85 billion-a-month asset-buying programme, known as quantitative easing (QE).

A Financial Times report said Bernanke would likely signal the Fed is close to tapering the purchases but would temper that with arguing a move would depend on conditions in the world's largest economy.

A mixed bag of US data recently has pointed to an uncertain recovery with many analysts predicting the Fed would hold off cutting back on QE for the time being.

“The market is sensitive,” Fabian Eliasson, head of currency sales at Mizuho Bank, told Dow Jones Newswires.

“There's just too much uncertainty about the Fed's next move.”

Euro trading was stable ahead of reports on the manufacturing sector in the recession-hit eurozone scheduled for later in the day.

The dollar was mostly stronger against other Asia-Pacific currencies Tuesday.

It firmed to Sg$1.2601 from Sg$1.2548 on Monday, to 1,130.75 South Korean won from 1,128.20 won, to 43.25 Philippine pesos from 42.93 pesos, and to 30.75 Thai baht from 30.71 baht.

The dollar also strengthened to 9,944 Indonesian rupiah from 9,900 rupiah, to 58.41 Indian rupees from 57.77 rupees, and to Tw$29.91 from Tw$29.86.

The Australian dollar slipped to 95.18 US cents from 96.16 cents while the Chinese yuan fetched 15.45 yen from 15.43 yen. - Sapa-AFP

The rand weakened for a third day before the release of data that may show South Africa’s current-account shortfall widened.

Cape Town - The rand weakened for a third day before the release of data that may show South Africa’s current-account shortfall widened.

Bond yields jumped the most in more than a week.

The deficit on the current account increased to 6.9 percent of gross domestic product in the first quarter from 6.5 percent in the previous three months, a report may show tomorrow, according to the median estimate of 15 economists in a Bloomberg survey.

A widening gap requires more foreign investment to pay for imports, flows which have slowed since the beginning of May on speculation the Federal Reserve may taper monetary easing.

“A bigger-than-expected number would clearly rattle” the rand “given the fears over a slowdown of flows to emerging markets,” John Cairns, a currency strategist at Rand Merchant Bank in Johannesburg, said in e-mailed comments.

South Africa’s currency weakened 0.4 percent to 10.0140 per dollar as of 10:19 a.m. in Johannesburg.

Yields on benchmark 10.5 percent bonds due December 2026 climbed 17 basis points, or 0.17 percentage point, to 7.95 percent, the biggest one-day increase since June 10.

Federal Reserve policy makers start a two-day meeting today amid speculation the Fed is poised to reduce bond purchases which have fueled demand for emerging-market debt.

Foreign investors sold a net 928 million rand ($93 million) of South African bonds last week, according to the JSE Ltd.

Yesterday was a public holiday in South Africa. - Bloomberg News

The dollar rose against the yen on Monday after five straight days of losses.

New York - The dollar rose against the yen after five straight days of losses on Monday as investors speculated about the Federal Reserve's direction for monetary policy on the eve of a two-day Fed meeting.

The dollar rose to 94.67 yen at around 22h00 GMT, up from 94.08 yen late on Friday.

The euro also gained against the Japanese currency, climbing to 126.52 yen from 125.55 yen.

The European currency rose to $1.3363 from $1.3340 on Friday.

The yen weakened as global equity markets rebounded from last week's losses. The turnaround in market confidence dampened the appeal of the Japanese currency, considered a safe haven in times of uncertainty.

“With only two days to go before the Federal Reserve's monetary policy announcement, the big move in equities and the reversal in currencies suggests that traders are beginning to position for FOMC,” said Kathy Lien of BK Asset Management.

The Federal Open Market Committee will issue a statement after its two-day meeting, to be quickly followed by a news conference with Ben Bernanke.

Speculation buzzed about whether the Fed will announce a tightening of its $85-billion-a-month asset-bond programme that has been supporting the rise in Wall Street equities.

A Financial Times report saying that Bernanke would likely signal the Fed is close to tapering the purchases but would temper that with arguing a move would depend on economic conditions helped to weaken the dollar.

“Most of the market players until then had expected a tapering in the fall,” said Charles St-Arnaud of Nomura.

The dollar rose to 0.9226 Swiss franc from 0.9206 franc late on Friday. But it fell against the pound, which firmed to $1.5718 from $1.5701. - Sapa-AFP

The rand pared the world’s biggest currency rally against the dollar as investors sold emerging-market currencies.

Johannesburg - The rand pared the world’s biggest currency rally against the dollar yesterday as investors sold emerging-market currencies, and ahead of US consumer sentiment data.

The rand gained 2.6 percent yesterday, making it the best performer among all those tracked by Bloomberg.

The Thomson Reuters/University of Michigan index of consumer sentiment was unchanged at its highest level since July 2007 of 84.5 this month, according to the median estimate of 70 economists surveyed by Bloomberg.

“Generally, you saw a bit of profit-taking on risk currencies and global equities overnight,” John Cairns, a currency strategist at FirstRand’s Rand Merchant Bank, said by phone from Johannesburg.

“The rand pulled back a little bit with that. Overall, the rand is still looking quite strong this morning.”

The rand, the worst performer this year against the dollar of 24 major merging-market currencies tracked by Bloomberg, was 0.3 percent weaker at 9.8743 per dollar by 11:15 a.m. in Johannesburg.

Yields on 10.5 percent rand-denominated government debt due December 2026 fell 14 basis points to 7.76 percent, the lowest in more than a week on a closing basis.

Sales at US retailers rose more than forecast in May and firings declined last week, data from the Commerce Department and Labor Department showed yesterday.

The consumer sentiment data could have an impact on the rand today, Cairns said.

Emerging-market assets were sold off since the Fed said it could start to taper down asset purchases as the US economy grow faster.

The Mexican peso lost 0.1 percent to 12.6395 per dollar after gaining 2.4 percent yesterday.

The Polish zloty weakened 0.2 percent to 3.1663 per dollar after strengthening 1.1 percent yesterday. - Bloomberg News

South Africa's rand was slightly weaker, giving back some recent gains as investors pondered a weak domestic outlook.

Johannesburg - South Africa's rand was slightly weaker in early trade on Friday, giving back some recent gains as investors pondered a weak domestic outlook and uncertainty over the future of US market stimulus.

The rand was at 10.0825 against the dollar at 09:00 SA time, 0.51 percent weaker from Thursday's close of 9.8403 in New York.

It sank to its weakest level since 2009 early on Tuesday, before staging a recovery that some said lacked solid underpin because the domestic outlook remains bleak.

“In general, it's been a good week for the rand but there still remains a number of headwinds and they stem from local factors and, probably most importantly, from global factors,” said Adriaan du Toit, sub-Sahara Africa Strategist at Citi.

The rand also remains vulnerable as investors cut their holdings of emerging markets assets on signs the US could start winding down its bond buying programme, which has been the source of dollars funding a rally in risky but high-yielding assets.

Government bonds also declined, with the yield for the 2026 issue edging up 13 basis points to 7.775 percent and that on the 2015 paper rising 7 basis points to 6.090 percent. - Reuters

President Jacob Zuma denied being responsible for the sharp decline in the value of the rand.

Cape Town - President Jacob Zuma denied on Thursday being responsible for the sharp decline in the value of the rand.

Responding to the Presidency Budget Vote debate, Zuma roasted opposition parties for linking his news briefing more than two weeks ago on the state of the economy to the depreciation of the rand, hours after he spoke.

“The fact is that markets were very volatile on the day of the media briefing on the economy,” Zuma said.

“Traders responded to news from the United States on quantitative easing, a form of very lax monetary policy in the United States. This led to the strengthening of the dollar,” said Zuma.

The rand plummeting was as a result of a stronger dollar and lower commodity prices.

Zuma conceded that labour unrest and the weak GDP would have added to the situation.

“There had been an expectation that growth would be between one and two percent. When the 0.9 percent growth figures were released, there was a sell-off of the rand,” he said.

Zuma warned opposition parties to steer clear of statements which could make matters worse.

Instead, parties should “put the country first” and work with the government to help build confidence in the economy.

The president said concerns in the mining sector, which has been hard hit by labour unrest, were being dealt with.

Deputy President Kgalema Motlanthe would meet players in the sector on Friday to discuss disputes in an attempt to bring an end to the instability.

While there appeared to be some recovery in the mining sector this year, following a tumultuous 2012, it was far from out of the woods.

“It is for this reason that we place a high premium on restoring stability in the mining sector.”

Zuma asked opposition parties to support the government's efforts to broker a peace deal between unions in the sector.

“The bottom line is that we should exercise caution when dealing with such matters, and avoid uninformed or loose talk that may exacerbate the situation.” - Sapa

South Africa's rand gained more than 1.8 percent against the dollar, pulling back from oversold levels.

Johannesburg - South Africa's rand gained more than 1.8 percent against the dollar on Thursday, pulling back from oversold levels after the recent run on the currency.

The rand hit a session high of 9.9210 per dollar compared with Wednesday's close at 10.1060. - Reuters