JUST before the Fourth of July weekend, Paul A. Volcker packed his fishing gear and set off for his annual outing to the Canadian wilds to cast for Atlantic salmon.
Fred R. Conrad/The New York Times
Paul Volcker, a White House adviser and former Fed chairman, is worried that Congress may not do enough to prevent financial crises.
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Weekend Business Podcast: Jeff Sommer with Tim O’Brien and Louis Uchitelle on Paul Volcker’s disappointment.
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Fred R. Conrad/The New York Times
Paul Volcker in his office with his wife, Anke Dening. He helped to write part of the current financial overhaul bill.
He left behind a group of legislators in Washington still trying to nail down a controversial attempt to overhaul the nation’s financial regulations in the wake of the country’s most serious economic crisis since the Great Depression.
A well-regarded lion of the regulatory world, Mr. Volcker had endorsed the legislation before he went fishing, but unenthusiastically. If he were a teacher, and not a senior White House adviser and the towering former chairman of the Federal Reserve, he says, he would have given the new rules just an ordinary B — not even a B-plus.
“There is a certain circularity in all this business,” he concedes. “You have a crisis, followed by some kind of reform, for better or worse, and things go well for a while, and then you have another crisis.”
As the financial overhaul took final shape recently, he worked the phone from his Manhattan office and made periodic visits to Washington, trying to persuade members of Congress to make the legislation more far-reaching. “Constructive advice,” he calls it, emphasizing that he never engaged in lobbying.
For all of what he describes as the overhaul’s strengths — particularly the limits placed on banks’ trading activities — he still feels that the legislation doesn’t go far enough in curbing potentially problematic bank activities like investing in hedge funds.
Like few other policy giants of his generation, Mr. Volcker has been a pivotal figure in the regulatory universe for decades, and as he looks back at his long, storied career he confesses to some regrets, in particular for failing to speak out more forcefully about the dangers of a seismic wave of financial deregulation that began in the 1970s and reached full force in the late 1990s.
Despite his recent efforts to ensure that the financial legislation might correct what he regards as some of the mistakes of the deregulatory years, he’s concerned that it still gives banks too much wiggle room to repeat the behavior that threw the nation into crisis in the first place.
Some analysts share Mr. Volcker’s worries that the proposed changes may ultimately not be enough.
“It could be we will look back in 10 years and say, ‘Wow, Volcker really changed the tone of the debate and the outcome,’ ” says Simon Johnson, an economist at the Massachusetts Institute of Technology and a historian of financial crises and regulation. “But I kind of worry that is not going to happen.”
Hear, hear, says Mr. Volcker.
“People are nervous about the long-term outlook, and they should be,” he says.
AMONG the tools that Mr. Volcker has been able to deploy when regulatory debates heat up is the public support he enjoys in financial and political circles.
He earned that esteem over many years, and is famously credited for making tough-minded choices to tame runaway inflation as Fed chairman from 1979 to 1987, when he served under Presidents Jimmy Carter and Ronald Reagan.
At the age of 82, Mr. Volcker is from a generation of Wall Street personalities who accepted strict financial regulation as a fact of life through much of their careers. In his recent push for more stringent financial regulations than he believed Congress — and the Obama administration, for that matter — were inclined to approve, he lined up public support for a tougher crackdown from other well-known financiers who are roughly his age, including George Soros, Nicholas F. Brady, William H. Donaldson and John C. Bogle.
His most visible contribution to the current regulatory overhaul effort is what has come to be known as the Volcker rule, which in its initial form would have banned commercial banks from engaging in what Wall Street calls proprietary trading — that is, risking their own funds to speculate on potentially volatile products like mortgage-backed securities and credit-default swaps.
Such bets added considerable tinder to the financial conflagration that erupted in 2008. Many went horribly awry, and the federal government used taxpayer money to bail out banks, Wall Street firms and even a major insurer.
“I did not realize that the speculative trading by commercial banks had gotten as far out of hand as it had,” says Mr. Volcker, explaining why he first proposed the rule 18 months ago.
Congressional handicappers and Wall Street originally gave the Volcker rule a slim chance of becoming part of the overhaul bill — until, in fact, it got solidly on track to do just that.
Mr. Volcker thinks that Congress has watered down his trading rule — more on that later — but rather than roar in protest, he has resigned himself to the present shape of the Volcker rule as well as the overall legislation.
“The success of this approach is going to be heavily dependent on how aggressively and intelligently it is implemented,” he says, emphasizing that a new, 10-member regulatory council authorized by the bill will have to be vigilant and tough to prevent the nation’s giant banks and investment houses from pulling America into yet another devastating credit crisis. “It is not just a question of defining what needs to be done, but carrying it out in practice, day by day, bank by bank.”
The 2,400-page financial overhaul legislation, already passed by the House, is coming up for a vote in the Senate this week.
The Obama administration says it is now satisfied with the broader legislation, and in particular with the Volcker rule in its amended form.
“The Volcker rule was designed to make sure that banks could not engage in proprietary trading or create risks to the system through their investments in hedge funds or private equity,” says Neal S. Wolin, the deputy Treasury secretary. “We accomplished that.”
Some members of Congress who have backed the bill still say that it is not as restrictive as they would like, but that a more sweeping bill — one that also hewed to Mr. Volcker’s original conception — wouldn’t make it through the Senate, where the vote is expected to be close.
Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, subscribes to that view. He says that there are stronger measures he would have preferred to see in the bill, including the original version of the Volcker rule, but that political reality dictated otherwise.
“I would give the present bill an A-minus,” Mr. Frank says, “when you consider that six months ago people were saying the Volcker rule had no chance.”
Mr. Frank is quick to point out that Mr. Volcker signed off on the compromises that got the Volcker rule into the bill. Mr. Volcker doesn’t dispute that.
“The thing went from what is best to what could be passed,” he says.
Saturday, July 10, 2010
Sri Lanka Unexpectedly Cuts Interest Rates After EU Denies Trade Benefits
Sri Lanka’s central bank unexpectedly cut its benchmark interest rates for the first time in eight months to support economic growth after the European Union withdrew trade concessions this week.
The Central Bank of Sri Lanka reduced the reverse repurchase and repurchase rates by a quarter-point to 9.5 percent and 7.25 percent, respectively, according to a statement on the Colombo-based bank’s website today. Only one of four economists surveyed by Bloomberg News predicted the decision.
Governor Ajith Nivard Cabraal has room to keep borrowing costs low as higher farm output helped slow inflation for a fourth month in June. The EU on July 5 announced it will temporarily deny preferential trade access to Sri Lanka from Aug. 15, saying the country failed to respond to European pleas to improve its human rights record. Exports make up about a fifth of Sri Lanka’s $41 billion economy.
“The government wants to step up growth as risks to exports emerge,” said Saminda Weerasinghe, a research manager at Acuity Stockbrokers Pvt. in Colombo. “Inflation is under control and that helps boost consumer demand.”
The monetary policy decision was announced after the nation’s financial markets closed. The benchmark Colombo All- Share Index fell 0.4 percent to 4,505.69 today. It has climbed 33 percent this year and is the best performer after Mongolia and Bangladesh in the Asia Pacific. The Sri Lankan rupee was little changed at 113.43 against the dollar.
Bucks Trend
Cabraal’s move contrasts with his counterparts in South Korea, India, Malaysia and Taiwan, who have raised rates in recent weeks as Asia leads the global economic recovery.
Acuity’s Weerasinghe said Sri Lanka needs low borrowing costs to rebuild the nation’s war-torn northern and eastern parts after the Liberation Tigers of Tamil Eelam rebels were defeated in May 2009, ending a 26-year separatist struggle.
Land recovered from the Tamil Tigers-controlled areas has enabled farmers to expand cultivation, helping drive down the inflation rate to less than half the average pace of the five years through 2009.
Paddy production in the September-to-March season rose 9 percent to an unprecedented 2.6 million tons, according to the statistics department.
Consumer prices in the capital, Colombo, rose 4.8 percent in June from a year earlier after a 5.3 percent gain in May.
“Going forward, inflation is expected to remain subdued, at single digit levels, during the remainder of the year,” the central bank said today.
Sri Lanka is aiming to accelerate growth to 7 percent in 2010, the fastest pace since 2006, to cut poverty in a country where the World Bank estimates almost half the population lives on less than $2 a day.
Prospects of faster growth are attracting overseas companies to Sri Lanka.
HSBC Holdings Plc, earlier this year, opened the first branch by any foreign bank in Jaffna, the former stronghold of the Tamil Tigers. Minor International Pcl, Thailand’s biggest hotel operator, announced plans in May to invest in Sri Lanka to tap growing leisure and business travelers.
The Central Bank of Sri Lanka reduced the reverse repurchase and repurchase rates by a quarter-point to 9.5 percent and 7.25 percent, respectively, according to a statement on the Colombo-based bank’s website today. Only one of four economists surveyed by Bloomberg News predicted the decision.
Governor Ajith Nivard Cabraal has room to keep borrowing costs low as higher farm output helped slow inflation for a fourth month in June. The EU on July 5 announced it will temporarily deny preferential trade access to Sri Lanka from Aug. 15, saying the country failed to respond to European pleas to improve its human rights record. Exports make up about a fifth of Sri Lanka’s $41 billion economy.
“The government wants to step up growth as risks to exports emerge,” said Saminda Weerasinghe, a research manager at Acuity Stockbrokers Pvt. in Colombo. “Inflation is under control and that helps boost consumer demand.”
The monetary policy decision was announced after the nation’s financial markets closed. The benchmark Colombo All- Share Index fell 0.4 percent to 4,505.69 today. It has climbed 33 percent this year and is the best performer after Mongolia and Bangladesh in the Asia Pacific. The Sri Lankan rupee was little changed at 113.43 against the dollar.
Bucks Trend
Cabraal’s move contrasts with his counterparts in South Korea, India, Malaysia and Taiwan, who have raised rates in recent weeks as Asia leads the global economic recovery.
Acuity’s Weerasinghe said Sri Lanka needs low borrowing costs to rebuild the nation’s war-torn northern and eastern parts after the Liberation Tigers of Tamil Eelam rebels were defeated in May 2009, ending a 26-year separatist struggle.
Land recovered from the Tamil Tigers-controlled areas has enabled farmers to expand cultivation, helping drive down the inflation rate to less than half the average pace of the five years through 2009.
Paddy production in the September-to-March season rose 9 percent to an unprecedented 2.6 million tons, according to the statistics department.
Consumer prices in the capital, Colombo, rose 4.8 percent in June from a year earlier after a 5.3 percent gain in May.
“Going forward, inflation is expected to remain subdued, at single digit levels, during the remainder of the year,” the central bank said today.
Sri Lanka is aiming to accelerate growth to 7 percent in 2010, the fastest pace since 2006, to cut poverty in a country where the World Bank estimates almost half the population lives on less than $2 a day.
Prospects of faster growth are attracting overseas companies to Sri Lanka.
HSBC Holdings Plc, earlier this year, opened the first branch by any foreign bank in Jaffna, the former stronghold of the Tamil Tigers. Minor International Pcl, Thailand’s biggest hotel operator, announced plans in May to invest in Sri Lanka to tap growing leisure and business travelers.
Petraeus flies in to Kandahar
General David Petraeus, the new head of Nato forces in Afghanistan, flew to the southern city of Kandahar on Friday for briefings with US officers leading an operation to stop infiltration by insurgents.
Gen Petraeus’ decision to visit Kandahar less than a week after assuming command of international forces in Afghanistan underscores the importance US commanders attach to their campaign to secure the country’s second-biggest city.
Some 700 US troops have fanned out across the city in the past few weeks to set up 13 check-points on major roads which they man jointly with 600 officers from the mobile Afghan National Civil Order Police.
The deployment of US forces into Kandahar over the past few weeks represents a key element in the strategy devised by General Stanley McChrystal, Gen Petraeus’ predecessor, to roll back growing Taliban influence.
Kandahar is regarded as the movement’s centre of physical and spiritual gravity and Nato commanders see ending a campaign of suicide bombings, assassination and intimidation as vital to proving that the insurgency can be contained before US troops start to withdraw in a year’s time.
Gen Petraeus inherited the task of securing Kandahar after Gen McChrystal was forced to resign following the publication of disparaging remarks made by him and his aides about Obama administration officials. Gen Petraeus said at a change-of-command ceremony in Kabul on Sunday that the war was at a “critical moment.”
An escort of four Black Hawk helicopters deposited Gen Petraeus at a US outpost built in the past two weeks on the northern edge of the city. He rode in a convoy of armoured vehicles across a patch of desert to a newly-built check-point made with concrete blast walls and razor wire and manned by US and Afghan forces.
Guarding a pass between rocky outcrops linking Kandahar with the northern district of Arghandab, a centre of Taliban activity, the check-point is among the first to become operational.
The operation has thrust US forces of the 82nd Airborne Division into a highly visible role in the deeply conservative city of some 800,000 people, where the Taliban movement began its ascent to power in the mid-1990s. Taliban leaders have sought to regain their influence over the city by directing attacks from sanctuaries across the border in Pakistan, where the security establishment has a long history of support for the movement.
The three-week-old mission into Kandahar forms the vanguard of a wider campaign that is shaping up to be the biggest US operation of the nine-year war. Thousands of US troops deployed under the troop surge ordered by Barack Obama, the US president, in December are due to target insurgent strongholds scattered in rural areas to the north and west of Kandahar later this year.
After concentrating much of the additional forces sent to Afghanistan by Mr Obama in the past year in neighbouring Helmand Province, US commanders hope the Kandahar operation will mark a turning point in the war. An increased sense of security in Kandahar would also provide ammunition for US generals struggling to convince voters in Nato countries that the mounting cost in lives of the campaign can eventually translate into a peaceful future for Afghanistan.
The strategy faces huge challenges in a province where widespread disenchantment with the government of Hamid Karzai, Afghanistan’s president, has fuelled sympathy for the insurgents among disenfranchised communities.
Although US special forces maintain a significant base on the outskirts of Kandahar, and a unit of American military police are working to train the city’s police, the rise of check-points manned by American troops is a new sight.
Children routinely pelt US armoured vehicles rumbling through the city with rocks, though some residents have extended a cautious welcome to soldiers arriving in their neighbourhoods. Warier residents fear their presence will encourage insurgents to stage suicide bombings or plant explosives nearby, but US officers hope to win the population over by proving they can reduce the number of attacks.
Gen Petraeus’ decision to visit Kandahar less than a week after assuming command of international forces in Afghanistan underscores the importance US commanders attach to their campaign to secure the country’s second-biggest city.
Some 700 US troops have fanned out across the city in the past few weeks to set up 13 check-points on major roads which they man jointly with 600 officers from the mobile Afghan National Civil Order Police.
The deployment of US forces into Kandahar over the past few weeks represents a key element in the strategy devised by General Stanley McChrystal, Gen Petraeus’ predecessor, to roll back growing Taliban influence.
Kandahar is regarded as the movement’s centre of physical and spiritual gravity and Nato commanders see ending a campaign of suicide bombings, assassination and intimidation as vital to proving that the insurgency can be contained before US troops start to withdraw in a year’s time.
Gen Petraeus inherited the task of securing Kandahar after Gen McChrystal was forced to resign following the publication of disparaging remarks made by him and his aides about Obama administration officials. Gen Petraeus said at a change-of-command ceremony in Kabul on Sunday that the war was at a “critical moment.”
An escort of four Black Hawk helicopters deposited Gen Petraeus at a US outpost built in the past two weeks on the northern edge of the city. He rode in a convoy of armoured vehicles across a patch of desert to a newly-built check-point made with concrete blast walls and razor wire and manned by US and Afghan forces.
Guarding a pass between rocky outcrops linking Kandahar with the northern district of Arghandab, a centre of Taliban activity, the check-point is among the first to become operational.
The operation has thrust US forces of the 82nd Airborne Division into a highly visible role in the deeply conservative city of some 800,000 people, where the Taliban movement began its ascent to power in the mid-1990s. Taliban leaders have sought to regain their influence over the city by directing attacks from sanctuaries across the border in Pakistan, where the security establishment has a long history of support for the movement.
The three-week-old mission into Kandahar forms the vanguard of a wider campaign that is shaping up to be the biggest US operation of the nine-year war. Thousands of US troops deployed under the troop surge ordered by Barack Obama, the US president, in December are due to target insurgent strongholds scattered in rural areas to the north and west of Kandahar later this year.
After concentrating much of the additional forces sent to Afghanistan by Mr Obama in the past year in neighbouring Helmand Province, US commanders hope the Kandahar operation will mark a turning point in the war. An increased sense of security in Kandahar would also provide ammunition for US generals struggling to convince voters in Nato countries that the mounting cost in lives of the campaign can eventually translate into a peaceful future for Afghanistan.
The strategy faces huge challenges in a province where widespread disenchantment with the government of Hamid Karzai, Afghanistan’s president, has fuelled sympathy for the insurgents among disenfranchised communities.
Although US special forces maintain a significant base on the outskirts of Kandahar, and a unit of American military police are working to train the city’s police, the rise of check-points manned by American troops is a new sight.
Children routinely pelt US armoured vehicles rumbling through the city with rocks, though some residents have extended a cautious welcome to soldiers arriving in their neighbourhoods. Warier residents fear their presence will encourage insurgents to stage suicide bombings or plant explosives nearby, but US officers hope to win the population over by proving they can reduce the number of attacks.
Friday, July 9, 2010
Suicide blast kills dozens in Pakistan
PESHAWAR, Pakistan, July 9 – A suicide bomber on a motorbike killed up to 45 people and wounded dozens in an attack outside the office of a senior government official in Pakistan’s northwest on Friday, government and hospital officials said. The bomber struck when people were gathered around the office in the Mohmand ethnic Pashtun tribal region on the Afghan border, where security forces have stepped up attacks on Taliban militants in recent weeks.
“There were two blasts. The first one was small but the second was a big one. Up to 45 people have been killed,” Rasool Khan, the region’s assistant political agent, told Reuters. The attack took place outside his office.
An administration official, Mehraj Khan, had earlier described the incident as a suicide attack, but there were no details available on how the second blast happened.
Hospital officials said nearly 80 people were being treated for multiple wounds, while government officials put the number of wounded at about 40.
Among the wounded were several internally displaced people, who were collecting relief goods near the blast site.
Thousands of people have been uprooted by the militant violence and security forces’ operations in the northwestern region.
“I was standing about 200 yards away from the office when I heard the blast. I don’t know how it happened but I could see several bodies lying on the ground after the explosion and people running in all directions,” said Riaz Hussain, a witness.
Television footage showed victims being pulled out of the debris. The blast also damaged several cars and about 30 shops, witnesses said.
A security official at the scene said the blast also damaged a nearby prison wall and several inmates had escaped.
Pakistan launched two major offensives in the northwest last year against homegrown Taliban militants who have killed hundreds of people in retaliatory attacks across Pakistan, mostly in the northwest, but also in major cities.
Two suicide bombers killed at least 42 people in an attack on Pakistan’s most important Sufi shrine in the eastern city of Lahore last week.
The Pakistani Taliban, allies of the Afghan Taliban, have lost ground in army offensives over the past year.
They were pushed out of the Swat valley, northwest of Islamabad, and in October the army began an offensive in the militants’ South Waziristan bastion on the Afghan border.
The offensive was extended to Orakzai in March as many of the militants who fled the South Waziristan operation took refuge there and in Mohmand. Hundreds of militants have since been killed in airstrikes in the two regions.
Jet fighters killed about a dozen militants in attacks in Orakzai on Friday, security officials said. There was no independent verification of the casualties as militants often dispute and reject official figures.
“There were two blasts. The first one was small but the second was a big one. Up to 45 people have been killed,” Rasool Khan, the region’s assistant political agent, told Reuters. The attack took place outside his office.
An administration official, Mehraj Khan, had earlier described the incident as a suicide attack, but there were no details available on how the second blast happened.
Hospital officials said nearly 80 people were being treated for multiple wounds, while government officials put the number of wounded at about 40.
Among the wounded were several internally displaced people, who were collecting relief goods near the blast site.
Thousands of people have been uprooted by the militant violence and security forces’ operations in the northwestern region.
“I was standing about 200 yards away from the office when I heard the blast. I don’t know how it happened but I could see several bodies lying on the ground after the explosion and people running in all directions,” said Riaz Hussain, a witness.
Television footage showed victims being pulled out of the debris. The blast also damaged several cars and about 30 shops, witnesses said.
A security official at the scene said the blast also damaged a nearby prison wall and several inmates had escaped.
Pakistan launched two major offensives in the northwest last year against homegrown Taliban militants who have killed hundreds of people in retaliatory attacks across Pakistan, mostly in the northwest, but also in major cities.
Two suicide bombers killed at least 42 people in an attack on Pakistan’s most important Sufi shrine in the eastern city of Lahore last week.
The Pakistani Taliban, allies of the Afghan Taliban, have lost ground in army offensives over the past year.
They were pushed out of the Swat valley, northwest of Islamabad, and in October the army began an offensive in the militants’ South Waziristan bastion on the Afghan border.
The offensive was extended to Orakzai in March as many of the militants who fled the South Waziristan operation took refuge there and in Mohmand. Hundreds of militants have since been killed in airstrikes in the two regions.
Jet fighters killed about a dozen militants in attacks in Orakzai on Friday, security officials said. There was no independent verification of the casualties as militants often dispute and reject official figures.
Asia Currencies Rally This Week, Led by Won, on Rate Increases
July 10 (Bloomberg) -- Asian currencies gained this week as signs economic expansion is gathering momentum prompted central bankers in South Korea and Malaysia to increase borrowing costs, underpinning fund inflows into the region.
The won climbed to a two-week high after the Bank of Korea unexpectedly yesterday raised interest rates for the first time since August 2008, and said the economy will see “solid growth” in coming months. The ringgit strengthened for a second day after Bank Negara Malaysia on July 8 lifted its overnight rate for the third time in 2010.
“The knee-jerk reaction has been to buy up the won and we still like Asian currencies,” said Thio Chin Loo, a senior currency strategist at BNP Paribas SA in Singapore. “They’ve been upgrading growth forecasts and they did hint as well before this about inflation picking up.”
The won appreciated 2.8 percent to 1,195.85 per dollar in Seoul from July 2, according to data compiled by Bloomberg. The ringgit strengthened 0.9 percent to 3.1965, Taiwan’s dollar climbed 0.5 percent to NT$32.125 and the Philippine peso rose 0.8 percent to 46.165.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, gained 0.6 percent from July 2. The MSCI Asia-Pacific Index of shares climbed 4 percent, its best week in seven months.
Rate Outlook
South Korea’s central bank boosted the seven-day repurchase rate to 2.25 percent from a record-low 2 percent, a move forecast by four of 14 economists surveyed by Bloomberg News. The rest predicted borrowing costs would be kept unchanged for a 17th month.
The finance ministry on June 24 raised its 2010 economic growth forecast to 5.8 percent, from a December projection of 5 percent, and said the nation needs to “normalize” fiscal and monetary policies.
Asian currencies were also supported this week after the International Monetary Fund raised its projection for global growth and U.S. data helped shore up confidence a recovery in the world’s largest economy will be sustained.
The IMF predicted a 4.6 percent expansion, the biggest gain since 2007. A U.S. report this week suggested retailers’ sales climbed in the February-June period at the fastest pace in four years and the government on July 8 said initial jobless claims decreased by 21,000 to 454,000 in the week ended July 3, lower than the median economist estimate in a Bloomberg survey.
‘Robust’ Growth
Bank Negara Malaysia lifted its overnight rate to 2.75 percent from 2.5 percent on July 8, saying recent trends in industrial production, financing activity, the labor market and exports showed growth “remained robust in the second quarter.” The ringgit has gained 7.2 percent this year, Asia’s best performance.
“The increase is justified with a background of strong economic growth,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd. in Kuala Lumpur. “This move will likely attract more foreign funds and support the ringgit.”
The local economy expanded 10.1 percent in the first quarter, the fastest pace in a decade. Government reports this month showed factory output and exports rose for a sixth month. The monetary policy stance remains supportive of growth, the central bank said.
The baht gained 0.3 percent this week to 32.33 per dollar as 11 of 17 economists surveyed by Bloomberg forecast the Bank of Thailand will raise its policy rate by a quarter point to 1.5 percent at a July 14 review. The Philippine central bank will decide on interest rates the following day.
The Singapore’s dollar gained 1.1 percent to S$1.3781 against its U.S. counterpart as analysts forecast the city- state’s economic growth accelerated in the second quarter, according to a Bloomberg survey. The government will report its preliminary estimate on July 14.
Elsewhere, China’s yuan was little changed from July 2 at 6.7735 and the Indonesian rupiah edged up 0.2 percent to 9,043. Vietnam’s dong held at 19,085, halting the biggest slide in four months last week. India’s rupee strengthened 0.3 percent to 46.665.
The won climbed to a two-week high after the Bank of Korea unexpectedly yesterday raised interest rates for the first time since August 2008, and said the economy will see “solid growth” in coming months. The ringgit strengthened for a second day after Bank Negara Malaysia on July 8 lifted its overnight rate for the third time in 2010.
“The knee-jerk reaction has been to buy up the won and we still like Asian currencies,” said Thio Chin Loo, a senior currency strategist at BNP Paribas SA in Singapore. “They’ve been upgrading growth forecasts and they did hint as well before this about inflation picking up.”
The won appreciated 2.8 percent to 1,195.85 per dollar in Seoul from July 2, according to data compiled by Bloomberg. The ringgit strengthened 0.9 percent to 3.1965, Taiwan’s dollar climbed 0.5 percent to NT$32.125 and the Philippine peso rose 0.8 percent to 46.165.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, gained 0.6 percent from July 2. The MSCI Asia-Pacific Index of shares climbed 4 percent, its best week in seven months.
Rate Outlook
South Korea’s central bank boosted the seven-day repurchase rate to 2.25 percent from a record-low 2 percent, a move forecast by four of 14 economists surveyed by Bloomberg News. The rest predicted borrowing costs would be kept unchanged for a 17th month.
The finance ministry on June 24 raised its 2010 economic growth forecast to 5.8 percent, from a December projection of 5 percent, and said the nation needs to “normalize” fiscal and monetary policies.
Asian currencies were also supported this week after the International Monetary Fund raised its projection for global growth and U.S. data helped shore up confidence a recovery in the world’s largest economy will be sustained.
The IMF predicted a 4.6 percent expansion, the biggest gain since 2007. A U.S. report this week suggested retailers’ sales climbed in the February-June period at the fastest pace in four years and the government on July 8 said initial jobless claims decreased by 21,000 to 454,000 in the week ended July 3, lower than the median economist estimate in a Bloomberg survey.
‘Robust’ Growth
Bank Negara Malaysia lifted its overnight rate to 2.75 percent from 2.5 percent on July 8, saying recent trends in industrial production, financing activity, the labor market and exports showed growth “remained robust in the second quarter.” The ringgit has gained 7.2 percent this year, Asia’s best performance.
“The increase is justified with a background of strong economic growth,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd. in Kuala Lumpur. “This move will likely attract more foreign funds and support the ringgit.”
The local economy expanded 10.1 percent in the first quarter, the fastest pace in a decade. Government reports this month showed factory output and exports rose for a sixth month. The monetary policy stance remains supportive of growth, the central bank said.
The baht gained 0.3 percent this week to 32.33 per dollar as 11 of 17 economists surveyed by Bloomberg forecast the Bank of Thailand will raise its policy rate by a quarter point to 1.5 percent at a July 14 review. The Philippine central bank will decide on interest rates the following day.
The Singapore’s dollar gained 1.1 percent to S$1.3781 against its U.S. counterpart as analysts forecast the city- state’s economic growth accelerated in the second quarter, according to a Bloomberg survey. The government will report its preliminary estimate on July 14.
Elsewhere, China’s yuan was little changed from July 2 at 6.7735 and the Indonesian rupiah edged up 0.2 percent to 9,043. Vietnam’s dong held at 19,085, halting the biggest slide in four months last week. India’s rupee strengthened 0.3 percent to 46.665.
Google Wins Lifeline to Keeping Operating in China, for Now
July 10 (Bloomberg) -- Google Inc.’s victory in China -- by winning permission to keep delivering search results there -- may prove short-lived.
The company was surprised by how quickly China renewed Google’s Internet-services license, Chief Executive Officer Eric Schmidt said yesterday in an interview. There were no formal negotiations between Google and Chinese officials over the decision, a person familiar with the matter said.
Getting the go-ahead gives Google a chance to win search share lost to market leader Baidu Inc. and woo advertisers put off by the company’s half-year dispute with the government. Some Google operations were in jeopardy as it balked at censorship rules that require companies to filter Web content.
China renewed the license through 2012, and officials will revisit the decision annually. China’s government can still use its authority to yank the license if it deems Google’s compliance wanting, said Sandeep Aggarwal, an analyst at Caris & Co. in San Francisco.
“Google remains at risk at China,” Aggarwal said. “Chinese regulators gave them a back door.”
Google, owner of the world’s most popular search engine, went public with its dispute in January, saying it was no longer willing to comply with China’s filtering regulations.
“We look forward to continuing to provide Web search and local products to our users in China,” the company said on its blog yesterday. Spokeswoman Jessica Powell declined to say whether China had imposed any conditions on renewing the permit.
Complicating Search
Google, based in Mountain View, California, won approval after changing the way it handled search requests. After closing its Chinese search engine in March, it had been automatically redirecting users to its unfiltered site in Hong Kong. To allay officials’ concerns, Google added an extra hurdle for Chinese Web surfers, directing them to a landing page that in turn pointed them to the Hong Kong site.
That change comes at a price, said Gene Munster, an analyst at Piper Jaffray Cos.
“The landing page strategy for Google.cn adds one more complication to Google’s user experience in China,” Munster said in a research note yesterday. “Every step added to the search process will ultimately cause Google to lose some users.”
China also made concessions. Letting Google keep operating may help the government show it’s open to outside competition, said Scott Kessler, head of technology equity research at Standard & Poor’s, who rates Google “strong buy.”
Risks for China
“There were definitely risks if Google were to be unceremoniously dismissed from a country lock, stock and barrel,” said Kessler, who’s based in New York. “Then, you’d have Baidu as the sole, dominant player there with the likelihood of continued gains in market share.”
Google’s Schmidt, who was in Sun Valley, Idaho, for a conference with media executives, said in an interview he learned of the renewal decision early yesterday.
“This is the outcome we were hoping for, we just didn’t expect a decision this soon,” Schmidt said. “Literally, the good news came overnight.”
Wang Lijian, spokesman at the Ministry of Industry and Information Technology, said the government is likely to post a statement on its website.
China’s decision may also constitute a nod to the Chinese people who voiced support for the company, partly through lighting candles outside Google offices, said Heath Terry, who rates Google “outperform” at FBR Capital Markets in New York.
Holding Vigil
“It signifies the importance of Google to China -- from the candlelight vigils outside of the headquarters to the sheer usage numbers of Google in China,” he said. “Google is important to the Chinese people and I think the government heard that.”
Google’s decision to end self-censorship has cost the company partnerships with China Unicom (Hong Kong) Ltd. and Tom Online Inc., and lifted sales at Baidu.
“Google doesn’t really want to leave China, because it’s a very big market and there is a lot of potential for them,” Bruno Lippens, a fund manager at Pictet Asset Management SA in Geneva, said before the renewal. “It goes much broader than just business issues. It’s about cultural differences and fundamental beliefs like freedom of speech and privacy.”
Google rose $10.93, or 2.4 percent, to $467.49 on the Nasdaq Stock Market yesterday. The shares have declined 25 percent this year.
Google resubmitted a license renewal application last week. The company had said in January it would stop censoring content and threatened to exit the Chinese market after cyber attacks originating from the nation targeted its systems.
‘Sophisticated’ Attacks
The “highly sophisticated” attacks were aimed at obtaining proprietary information and personal data belonging to human-rights activists who use the company’s Gmail e-mail service, it said.
Since it began redirecting Chinese users, Google’s search results have been screened by China’s so-called Great Firewall, a government monitoring system that blocks overseas services such as Facebook Inc. and Google’s YouTube.
The firewall limits Chinese Web users’ access to information on topics ranging from Tibet’s independence movement to the 1989 crackdown on protesters in Tiananmen Square.
Google’s market share in China fell to 30.9 percent in the first quarter from 35.6 percent three months prior, according to data from research firm Analysys International. Baidu’s share increased to a record 64 percent from 58.4 percent, according to Analysys. Baidu fell $1.23, or 1.7 percent, to $71.20 yesterday.
Biggest Web Market
Bank of America Corp.’s Merrill Lynch estimated in April Google would generate $160 million in sales this year from China. That’s less than 1 percent of the company’s projected total revenue this year, according to the average of 29 analyst estimates compiled by Bloomberg. It earned sales of about $335 million from China in 2009, according to Analysys.
China had 384 million Internet users at the end of 2009, the government estimates. That’s more than the total U.S. population, and according to EMarketer Inc., it may grow to 840 million by 2013.
Baidu in April said it benefited from Google’s “semi- exit.” The Chinese company expects “healthy” growth in customers and average spending by clients will continue, Baidu CEO Robin Li said in a conference call in April.
Google’s advertisers in China may have cut their spending by as much as 30 percent on average, and shifted their business mostly to Baidu, Credit Suisse Group AG analyst Wallace Cheung wrote in an April report. This has let Baidu charge higher prices, according to Cheung.
The license renewal comes after the U.S. said China took a “significant step” last month when it ended the yuan’s peg to the dollar and allowed markets to drive the currency higher. It’s not yet clear whether China’s policy shift will correct the yuan’s undervaluation, the U.S. Treasury Department said.
The company was surprised by how quickly China renewed Google’s Internet-services license, Chief Executive Officer Eric Schmidt said yesterday in an interview. There were no formal negotiations between Google and Chinese officials over the decision, a person familiar with the matter said.
Getting the go-ahead gives Google a chance to win search share lost to market leader Baidu Inc. and woo advertisers put off by the company’s half-year dispute with the government. Some Google operations were in jeopardy as it balked at censorship rules that require companies to filter Web content.
China renewed the license through 2012, and officials will revisit the decision annually. China’s government can still use its authority to yank the license if it deems Google’s compliance wanting, said Sandeep Aggarwal, an analyst at Caris & Co. in San Francisco.
“Google remains at risk at China,” Aggarwal said. “Chinese regulators gave them a back door.”
Google, owner of the world’s most popular search engine, went public with its dispute in January, saying it was no longer willing to comply with China’s filtering regulations.
“We look forward to continuing to provide Web search and local products to our users in China,” the company said on its blog yesterday. Spokeswoman Jessica Powell declined to say whether China had imposed any conditions on renewing the permit.
Complicating Search
Google, based in Mountain View, California, won approval after changing the way it handled search requests. After closing its Chinese search engine in March, it had been automatically redirecting users to its unfiltered site in Hong Kong. To allay officials’ concerns, Google added an extra hurdle for Chinese Web surfers, directing them to a landing page that in turn pointed them to the Hong Kong site.
That change comes at a price, said Gene Munster, an analyst at Piper Jaffray Cos.
“The landing page strategy for Google.cn adds one more complication to Google’s user experience in China,” Munster said in a research note yesterday. “Every step added to the search process will ultimately cause Google to lose some users.”
China also made concessions. Letting Google keep operating may help the government show it’s open to outside competition, said Scott Kessler, head of technology equity research at Standard & Poor’s, who rates Google “strong buy.”
Risks for China
“There were definitely risks if Google were to be unceremoniously dismissed from a country lock, stock and barrel,” said Kessler, who’s based in New York. “Then, you’d have Baidu as the sole, dominant player there with the likelihood of continued gains in market share.”
Google’s Schmidt, who was in Sun Valley, Idaho, for a conference with media executives, said in an interview he learned of the renewal decision early yesterday.
“This is the outcome we were hoping for, we just didn’t expect a decision this soon,” Schmidt said. “Literally, the good news came overnight.”
Wang Lijian, spokesman at the Ministry of Industry and Information Technology, said the government is likely to post a statement on its website.
China’s decision may also constitute a nod to the Chinese people who voiced support for the company, partly through lighting candles outside Google offices, said Heath Terry, who rates Google “outperform” at FBR Capital Markets in New York.
Holding Vigil
“It signifies the importance of Google to China -- from the candlelight vigils outside of the headquarters to the sheer usage numbers of Google in China,” he said. “Google is important to the Chinese people and I think the government heard that.”
Google’s decision to end self-censorship has cost the company partnerships with China Unicom (Hong Kong) Ltd. and Tom Online Inc., and lifted sales at Baidu.
“Google doesn’t really want to leave China, because it’s a very big market and there is a lot of potential for them,” Bruno Lippens, a fund manager at Pictet Asset Management SA in Geneva, said before the renewal. “It goes much broader than just business issues. It’s about cultural differences and fundamental beliefs like freedom of speech and privacy.”
Google rose $10.93, or 2.4 percent, to $467.49 on the Nasdaq Stock Market yesterday. The shares have declined 25 percent this year.
Google resubmitted a license renewal application last week. The company had said in January it would stop censoring content and threatened to exit the Chinese market after cyber attacks originating from the nation targeted its systems.
‘Sophisticated’ Attacks
The “highly sophisticated” attacks were aimed at obtaining proprietary information and personal data belonging to human-rights activists who use the company’s Gmail e-mail service, it said.
Since it began redirecting Chinese users, Google’s search results have been screened by China’s so-called Great Firewall, a government monitoring system that blocks overseas services such as Facebook Inc. and Google’s YouTube.
The firewall limits Chinese Web users’ access to information on topics ranging from Tibet’s independence movement to the 1989 crackdown on protesters in Tiananmen Square.
Google’s market share in China fell to 30.9 percent in the first quarter from 35.6 percent three months prior, according to data from research firm Analysys International. Baidu’s share increased to a record 64 percent from 58.4 percent, according to Analysys. Baidu fell $1.23, or 1.7 percent, to $71.20 yesterday.
Biggest Web Market
Bank of America Corp.’s Merrill Lynch estimated in April Google would generate $160 million in sales this year from China. That’s less than 1 percent of the company’s projected total revenue this year, according to the average of 29 analyst estimates compiled by Bloomberg. It earned sales of about $335 million from China in 2009, according to Analysys.
China had 384 million Internet users at the end of 2009, the government estimates. That’s more than the total U.S. population, and according to EMarketer Inc., it may grow to 840 million by 2013.
Baidu in April said it benefited from Google’s “semi- exit.” The Chinese company expects “healthy” growth in customers and average spending by clients will continue, Baidu CEO Robin Li said in a conference call in April.
Google’s advertisers in China may have cut their spending by as much as 30 percent on average, and shifted their business mostly to Baidu, Credit Suisse Group AG analyst Wallace Cheung wrote in an April report. This has let Baidu charge higher prices, according to Cheung.
The license renewal comes after the U.S. said China took a “significant step” last month when it ended the yuan’s peg to the dollar and allowed markets to drive the currency higher. It’s not yet clear whether China’s policy shift will correct the yuan’s undervaluation, the U.S. Treasury Department said.
Thursday, July 8, 2010
Japan Polls Say Kan May Lose Upper House Control in Election
Japanese politicians crisscrossed the country ahead of this weekend’s election as polls showed Prime Minister Naoto Kan may fail in his bid to retain control of both houses of parliament, hindering his ability to pass legislation.
Many voters are undecided about who to support in the July 11 contest for half the 242 seats in the upper house. The electorate is divided over Kan’s suggestion to raise the national sales tax, and his Democratic Party of Japan’s first 10 months in office were marred by the departure of his predecessor after campaign finance scandals and a dispute with the U.S.
“This is a very difficult election,” said Yu Miyasaka, a 23-year-old university student watching a campaign speech in Tokyo two days ago. “I haven’t decided who to vote for.”
Three newspaper polls published today said the ruling coalition may fall short of keeping the 56 seats needed to maintain its majority in the chamber. The main opposition Liberal Democratic Party, ousted from power last August in elections for the more powerful lower house, and the new Your Party are likely to gain, the surveys showed.
Kan has said his primary goal is to keep all of the DPJ’s 54 seats. The Asahi newspaper said the Democrats may win fewer than 50 seats. The LDP may increase their seats from 38 to about 44, while Your Party may go from zero to 11. Between 30 and 40 percent of voters haven’t made up their mind, the Asahi said.
Coalition Woes
The paper said coalition partner People’s New Party may not win any of the three seats it is contesting, which would hamper the government’s ability to get legislation smoothly through parliament. The Asahi interviewed 49,653 people on July 6-7 and didn’t provide a margin of error.
Kan has called for a debate on whether to as much as double the 5 percent consumption tax, stressing that Japan must confront a debt amounting to $80,000 per person to avoid the kind of fiscal crisis that has made Europe a riskier bet for investors. While saying any rise in the tax is “at least two to three years off,” he casts the debate in terms of the need to pay for Japan’s rising social welfare costs.
“More voters are puzzled about which party to choose this time compared with last year,” said Airo Hino, associate professor of political science at Tokyo’s Waseda University. “Voters are ambivalent, making results unpredictable and possibly destabilizing Japanese politics as the ruling bloc may fail to win a majority.”
Hatoyama’s Resignation
The DPJ under Yukio Hatoyama last August defeated the LDP in the lower house, ending more than 50 years of almost unbroken control. Hatoyama quickly ran into trouble and resigned on June 2 over his broken promise to relocate a U.S. military base from Okinawa as well as campaign finance scandals involving him and chief party strategist Ichiro Ozawa.
Hatoyama shifted spending from public works to households, passing legislation to give households a monthly stipend of 13,000 yen ($147) per child and eliminating public high school fees.
“Do you want political stability or political confusion,” Kan said at a July 3 campaign stop northwest of Tokyo. “If the opposition wins many seats, then the two chambers of parliament will be divided and political confusion will continue, and this is not good for Japan.”
His approval rating dropped to 43 percent from 66 percent after he took office on June 8, the Mainichi newspaper said today. Thirty-six percent of those surveyed said they’ll vote for the DPJ while 17 percent chose the LDP and 15 percent picked Your Party. The newspaper polled 1,072 people on July 7-8 and didn’t provide a margin of error.
While the world’s second-biggest economy continues to recover from recession, it is still grappling with 12 years of deflation, and the unemployment rate reached a five-month high of 5.2 percent in May. The Nikkei 225 Stock Average is down 9.6 percent this year.
Many voters are undecided about who to support in the July 11 contest for half the 242 seats in the upper house. The electorate is divided over Kan’s suggestion to raise the national sales tax, and his Democratic Party of Japan’s first 10 months in office were marred by the departure of his predecessor after campaign finance scandals and a dispute with the U.S.
“This is a very difficult election,” said Yu Miyasaka, a 23-year-old university student watching a campaign speech in Tokyo two days ago. “I haven’t decided who to vote for.”
Three newspaper polls published today said the ruling coalition may fall short of keeping the 56 seats needed to maintain its majority in the chamber. The main opposition Liberal Democratic Party, ousted from power last August in elections for the more powerful lower house, and the new Your Party are likely to gain, the surveys showed.
Kan has said his primary goal is to keep all of the DPJ’s 54 seats. The Asahi newspaper said the Democrats may win fewer than 50 seats. The LDP may increase their seats from 38 to about 44, while Your Party may go from zero to 11. Between 30 and 40 percent of voters haven’t made up their mind, the Asahi said.
Coalition Woes
The paper said coalition partner People’s New Party may not win any of the three seats it is contesting, which would hamper the government’s ability to get legislation smoothly through parliament. The Asahi interviewed 49,653 people on July 6-7 and didn’t provide a margin of error.
Kan has called for a debate on whether to as much as double the 5 percent consumption tax, stressing that Japan must confront a debt amounting to $80,000 per person to avoid the kind of fiscal crisis that has made Europe a riskier bet for investors. While saying any rise in the tax is “at least two to three years off,” he casts the debate in terms of the need to pay for Japan’s rising social welfare costs.
“More voters are puzzled about which party to choose this time compared with last year,” said Airo Hino, associate professor of political science at Tokyo’s Waseda University. “Voters are ambivalent, making results unpredictable and possibly destabilizing Japanese politics as the ruling bloc may fail to win a majority.”
Hatoyama’s Resignation
The DPJ under Yukio Hatoyama last August defeated the LDP in the lower house, ending more than 50 years of almost unbroken control. Hatoyama quickly ran into trouble and resigned on June 2 over his broken promise to relocate a U.S. military base from Okinawa as well as campaign finance scandals involving him and chief party strategist Ichiro Ozawa.
Hatoyama shifted spending from public works to households, passing legislation to give households a monthly stipend of 13,000 yen ($147) per child and eliminating public high school fees.
“Do you want political stability or political confusion,” Kan said at a July 3 campaign stop northwest of Tokyo. “If the opposition wins many seats, then the two chambers of parliament will be divided and political confusion will continue, and this is not good for Japan.”
His approval rating dropped to 43 percent from 66 percent after he took office on June 8, the Mainichi newspaper said today. Thirty-six percent of those surveyed said they’ll vote for the DPJ while 17 percent chose the LDP and 15 percent picked Your Party. The newspaper polled 1,072 people on July 7-8 and didn’t provide a margin of error.
While the world’s second-biggest economy continues to recover from recession, it is still grappling with 12 years of deflation, and the unemployment rate reached a five-month high of 5.2 percent in May. The Nikkei 225 Stock Average is down 9.6 percent this year.
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