Forex Investors price in 50 basis point cut

Jon — Tue, 29 Jan 2008 06:33:35 +0000

Gold has slipped a little lower as market players anticipate the Fed’s upcoming interest rate decision. Yesterday’s rally above $930 USD has no doubt caused some profit taking, with other investors positioning themselves in case the anticipated 50 basis point cut from the Fed does not eventuate. Investors remain uncertain as to how much assistance the US central bank will offer the struggling stock market.

Forex investors have already priced in a 50 basis point cut to the value of the USD. Investors expect a 50 basis point cut will see an increase in the value of gold, while a lesser rate cut could see a correction in the price of precious metals.

With economic data today pointing towards a slowing economy with growth in private sector unemployment, there is concern that the 50 basis point cut stock market investors are hoping for may not happen.

While a falling stock market has been proven to consistently boost the value of gold, the precious metal could find itself under pressure as investors and funds are forced to close profitable positions to cover losses elsewhere.

Silver hit a 27 year high yesterday at $16.79 per ounce, with some investors cashing in on profits.

It is expected the Fed will announce its interest rate decision around 7:15 pm GMT.

Tokyo urges Bank of Japan to stick with zero interest rates

Jon — Mon, 12 Jun 2006 06:50:05 +0000

Japan’s government has urged the central bank to maintain zero interest rates to allow the economy to recover as fears of a slowdown in US growth battered global stock markets.

“We hope the Bank of Japan will support the economy with its monetary policies,” Chief Cabinet Secretary Shinzo Abe told reporters.

“We want the bank to do so by continuing with the zero interest rate policy,” said Abe, the government’s top spokesman.

Top cabinet members including Prime Minister Junichiro Koizumi sought to reassure investors that Japan’s economy is in solid shape after the Nikkei index fell over three percent Thursday — its biggest one-day loss this year.
“The Japanese economy is on a recovery path,” Koizumi said.

Kaoru Yosano, state minister in charge of economic and fiscal policy, also said the nation should not become pessimistic over stock prices.
“The time of volatility will last for some time but the market will start reflecting the fundamentals of the Japanese economy after that,” he said.

Following the government’s call, BoJ deputy governor Kazumasa Iwata said the central bank was not accelerating the process of draining excess cash from the banking system following the end to its ultra-loose monetary policy.

At the same time he indicated that the BoJ would continue to move toward an end to its zero interest rate policy despite the stock market plunge.
“We have not changed our view that interest rate levels will be gradually adjusted as the nation’s economy is shifting to a normal state from deflation despite the current movement of asset prices,” Iwata told a news conference in the city of Akita, as quoted by Kyodo News.

In an earlier speech Iwata dismissed concerns about falling stock markets, saying: “As investors’ position adjustments calm down, the stock and bond markets will recover stability.”

SOURCE AFP

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Forex Investors price in 50 basis point cut

Tokyo urges Bank of Japan to stick with zero interest rates