Foreign Exchange and currency Blog by piagi FX

Piagi Rates page & an Insite into Turkey

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Today piagi highlights Turkey's surge in foreign property investment.

Piagi are seeing that Turkey’s property sector has surpassed growth expectations due to a sharp rise in purchases by overseas buyers.

In a report from one of Turkey’s leading industry associations. The Association of Real Estate Investment Companies (GYODER) stated that property sales to foreign nationals have risen to such an extent that they are now approaching pre-crisis levels.

GYODER chairman Işık Gökkaya comments:

“Between 2006 and 2008, property sales to foreign nationals stood at $3 billion.  In 2009, the figure retreated by $1.8 billion. But in 2010, such sales rose to $2.5 billion”.

Citing a recent report by PricewaterhouseCoopers and the Urban Land Institute Gökkaya told delegates at a recent conference that he expected sales to foreigners to double in the near future.

“In 2010, real estate sales to foreign nationals rose by 40 percent, reaching $2.5 billion. Foreigners’ interest in and appetite for Turkish property continues to increase. If the reciprocity problem is solved, we think the figure may double.”

Reciprocity is a requirement that a foreign national is allowed to buy property in Turkey only if Turkish citizens are allowed to buy property in the person’s home country.

And as always, please contact any of our foreign currency specialists here at Piagi with any additional questions you may have.  We're ready to help you navigate the current volatile market conditions.  When you think about your ForEx needs, think Piagi.

Piagi and market news

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piagi offers you all a great day

today we comment on the sluggish start to the foreign exchange markets after the weekends escalation of events in Libya which does little to solve the immediate issue but adds to the uncertainty into the bargain.

 
The big news of the day was the story AT+T would acquire T-mobile from Deutsche Telekom for $39bn but resting supply capping the rallies ahead of the November post QE2 highs of 1.4285 for the moment - while 1.4050 holds on a closing basis the upside looks ok near term.

Since the open we have seen the following:

Aud/$ leveraged supply - we sold a chunk between 1.0025/35 pretty easily as supply in eur/aud from Europeans helped create counter demand.

Eur/$ we have seen model and corporate supply off the 1.4180 highs - some dip demand below 1.4150 on the books from leveraged players.

$/yen steady supply from models at the open but rumoured resting bids below 80.80 is the story on the street - the element of surprise back with the central banks after the much flagged centre opening interests of last Friday.

Cable meeting corporate supply 1.6250/75 here retail in the mix also - closing break of 1.6275 opens the March highs of 1.6350 - the Budget the obvious highlight on Wednesday - fuel tax the key issue with little room for any give aways given fiscal consolidation requirements
A dead day ahead data wise - ECOFIN meeting re the ESM and Trichet speaking later this afternoon the main highlights of what could be a very long session and we are not expecting any big movements

have a great day

Piagi Reports on the Greman Lower House of Parliament

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The German Lower House approves parliamentary motion on the ESM Yesterday the Lower House (Bundestag) of the German parliament approved a motion on the European Stability Mechanism (ESM) based on a draft circulated in late February by the parliamentary faction of the ruling government coalition composed of the Conservatives (CDU/CSU) and Liberal Party (FDP). The motion which was made public on 23 February and voted upon yesterday aims to ensure that the German parliament remains closely informed about decisions made by  the Eurogroup and EU council with respect to the permanent crisis resolution mechanism, ie the ESM. That said, the motion does not deal with the EFSF at all, as only the setup of the ESM would require limited Treaty modification in that Art.136 TFEU would need to revised. For that reason, only the ESM (rather than the EFSF) requires parliamentary approval. In this context, the particular focus of the motion is to ensure that the costs resulting from the setup and operational (lending) activities of the ESM will be split between euro area member governments according to "fixed capital shares", which we believe is an implicit reference to member countries' capital stakes in the ECB. In other words, costs related to the ESM would most likely be split among member countries on the basis of those capital stakes (the motion talks in this context about "intergovernmental capital stakes")

However, the motion also stipulates that the ESM "must not contain any commonly financed or guaranteed debt purchasing programs" and, furthermore, the ESM should be "one element of a more comprehensive framework which safeguards prudent and sustainable public budgets through an enhanced Stability and Growth Pact".

While the motion is thus at odds with the 11 March agreement of euro area heads of state to allow EFSF and ESM purchases of sovereign debt issued by a member state government through a primary market auction in exceptional circumstances and only if a programme and conditionality were in place, the Lower House is not entitled to vote on this feature. It shall only be informed accordingly. In other words, the motion is not binding for the government in this respect.

That said, in theory MPs of the Lower House could now decide to not support the modification of Art. 136 TFEU to allow for the setup of the ESM by mid-2013 in response to the government's 11 March decision to agree on EFSF/ESM bond purchases. But we would argue that this scenario would be of very low likelihood, as it would probably cause a government crisis in Germany and put the implementation of the EU's crisis resolution mechanism into question.

As to the EFSF, given that it is an SPV and based on international (UK) law, the only issue that will need parliamentary approval by the Lower House will be the already agreed upsizing of the effective lending capacity to EUR440bn. Again, we highly doubt that the adoption of yesterday's motion would throw into question parliamentary support for the upsizing of the EFSF. In fact, both the leader of the FDP (G Westerwelle) and the deputy head of the parliamentary faction of the Conservatives (M Meister) have already signalled that this approval would be granted by the respective groups of MPs of the ruling government coalition.

Piagi not that this is the 4th week in a row that the Pound has dropped against the Euro in the Foreign exchage market currently trading @ 1.1450 a 4 week low

lets see what next week brings as they say what goes up must come down

have a great weekend and we hope you all enjoyed a happy and Safe St Pactricks Day

Piagi discusses European Debt Crisis as Euro Tumbles

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The Euro fell against the dollar as the bonds of Europe’s most highly indebted countries declined. Concern continues to build that leaders won’t agree to a real solution to its debt crisis.

As Bloomberg noted, Europe’s common currency retreated from close to the strongest level in nine months against the yen. Financing costs rose as Greecee sold 1.625 billion euros ($2.3 billion) of treasury bills, a day after having its credit rating cut by Moody’s Investors Service.  A dangerous sign of trouble. The Norwegian krone declined against 15 of its 16 most-actively traded peers as oil fell for the first time in three days. The franc dropped as higher stocks curbed demand for Switzerland’s currency as a haven.

“There is a risk that events in the euro zone will tilt the balance” for the currency, said Neil Mellor, a London-based strategist at Bank of New York Mellon Corp. “I wouldn’t want to be particularly long the euro at the moment.” A long position is a bet that the price of a currency or security will rise.

Conversely, the Dollar Index climbed for a second day, gaining 0.4 percent to 76.800.

The euro, which has risen 4 percent against the dollar this year, has been unable to extend its growth beyond $1.40 as European Union leaders battle over how to deal with the debt crisis that forced Ireland and Greece to seek financial aid last year. Leaders are due to meet in Brussels later this month.

Austria is against reducing the conditions of bailouts sought by Ireland and Greece, Chancellor Werner Faymann told reporters today in Vienna. The nation’s Finance Minister Josef Proell said he didn’t see “pressure from other EU countries” for a change.

Enda Kenny, Ireland’s incoming prime minister, said this week he wanted an extension on rescue loans and repeated a call for lower interest rates on the aid that was granted in November. German Chancellor Angela Merkel rebuffed the plea.

Norway’s krone depreciated by 0.5 percent to 5.5772 per dollar and was 0.2 percent weaker at 7.7663 against the euro.

The euro stayed lower against the dollar even as a report showed German factory orders increased more than economists forecast in January, strengthening the case for the ECB to start raising rates from a record low.

The Swiss franc depreciated 0.1 percent to 1.2961 per euro and was 0.6 percent weaker at 93.21 centimes per dollar.

Crude oil traded in New York fell 0.5 percent today as the Organization of Petroleum Exporting Countries discussed the possibility of boosting output, easing concern that supply shortages may be prolonged. It reached $106.95 yesterday, the most since September 2008.

Here at Piagi FX, our experts are ready to help you navigate the bumpy Foreign Exchange markets in the months and years to come.  Please feel free to contact one of our traders for more information or any questions you may have.

Piagi Comments on Euro Dollar

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Good afternoon everybody,

We have seen today that foreign exchange currency pair Euro/$ finally taking out the 1.3860.65 highs but continues to meet corporate supply into 1.3900 - dips remain shallow as Middle Eastern tensions persist and the yield picture becomes more and more euro supportive -

The German Schatz-US 2yr spread has widened out further to 88bp endorsing an eventual break to the topside - see attached . 

Here at Piagi we feel the big question is going into tomorrow's ECB wether Trichet will throw any curve balls or not.

ECB members have continued to come out with uber-hawkish rhetoric as of lately - and the curves have clearly priced in with 25bp by July and another 25bp about priced in for October. 

Clearly some unfinished business with respect to the ESM/EFSF in addition to fate for Portugal as overhang issues - but at the moment - Bernanke and the FED still seem to be a bit further away from removing their ultra-accomodative stance.  Granted when they do move it could be swift - but maybe have to be a bit more patient to take that side as of yet?

$ short positioning has been well advertised by CFTC - but looking across my client base not withstanding a few selective shorts vs CAD or AUD - I don't really see any significant positions on the books. 

Tried to fade these moves before - and some signs of structural flow on the other side but just feels like we can break this range and test higher and we are starting to see clients raising bids as they start to chase a move that is showing signs of breaking out.

Could be a very interesting next 48 hours

piagi foreign exchange report and rates page

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Sterling and the Euro made gains against the Greenback early this morning as comments by European Central Bank officials and Bank of England minutes were seen increasing the chances of Eurozone and UK interest rate rises.

Interest rate speculation took center stage, pushing aside concerns about political tensions in North Africa and the Middle East for now, though analysts said the dollar could see renewed safe-haven demand if unrest in the region spreads further and oil prices continue to spike.

ECB officials Yves Mersch and Nout Wellink said on Tuesday the ECB was ready to fight inflation by raising rates when needed, prompting rate futures to price in a 25 basis point hike in August.

Meanwhile, a BoE rate hike in the coming months looked more likely after minutes to the February policy meeting contained two mild surprises. First, BoE Chief Economist Spencer Dale joined Messrs Sentance and Weale in voting for a rise in Bank Rate. Second, Mr Sentance thought a 50bp hike was appropriate, having previously voted for a 25bp increase.

The overall sense from the minutes is that the MPC is inching its way towards starting to raise rates, but a move remains dependent on the strength of the incoming data and could yet be derailed by bad news.

ECB President Jean-Claude Trichet is due to speak later on Wednesday and market players will be looking to see whether he adds to the hawkish tone of Mersch and Wellink.

The Euro was up 0.4 percent again the US Dollar $1.3711. Market players said the Euro was supported by earlier buying by Asian central banks and by real money selling of dollars following a drop in U.S. Treasury yields the previous day. However, some traders said the single currency could succumb to profit taking, with Asian central banks also reported leaving offers at $1.3740-50.

Sterling was up 0.5 percent at $1.6217 though it was off a high of $1.6275 just after the BoE minutes, with traders wary of pushing the currency too much higher due to concerns about a fragile UK economy.

Points of interest

15.00 US Existing Home sales Last 5.28 mio Exp 5.25 Mio

17.30 US Hoenig (FOMC Non-voter) Speaking on the economic outlook

18.30 US Plosser (FOMC Voter) Speaking on the economic outlook

piagi foreign exchange report and rates page

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The euro slipped on Monday as worries stemming from rising tensions in the Middle East dented risk sentiment, although it was underpinned by hawkish comments from European Central Bank officials and robust euro-zone data. With the upcoming Irish general election on Friday likely to see a party which is openly calling for a renegotiation of the bailout agreement come to power, analysts say there is a risk that the euro could come under pressure. Although this was yet to affect bond spreads, political uncertainty is seen as negative for the single currency.

The euro zone is enjoying better-than-expected growth and warned rises in food and fuel prices may be becoming a permanent phenomenon. German IFO which is a measure of business morale rose to a record high, a survey from an influential think-tank showed; suggesting growth in the euro zone's largest economy is gathering pace. It came after figures showed activity in the euro zone's private sector grew more quickly than expected this month.

Some analysts said U.S. bond yields will also be a key factor for the euro/dollar. Yields have dipped since hitting a peak earlier this month as expectations of an early rate hike by the Federal Reserve receded. If they fall further that could put the dollar under more pressure. U.S. financial markets were closed for a holiday on yesterday. The increase in violence in Libya and the Middle East has pushed Brent crude prices to a 2-1/2 year high, which should be dollar positive but investors have tended to sell the dollar throughout the crisis due to worries over fallout for U.S. foreign policy.

"The evidence from the last three great Middle-East related oil price shocks suggests that this (a lack of dollar gains) need not necessarily be the case (going forward)," Simon Derrick, head of currency research at Bank of New York Mellon, wrote in a note. "Indeed, there is good evidence to suggest that unless the U.S. is actually caught up in events on the ground, then the dollar could even represent a safe haven of sorts."

This morning we have seen the release of the UK's public sector spending surplus, which was better than expected in January. Public sector net borrowing (PSNB), excluding the temporary effects of financial interventions, was -£3.7bn. The overall buoyant outturn was due to a jump in tax receipts which is normal for January. GBPEUR trading up through 1.18 and GBPUSD dropped of trading at 1.61 level after some profit taking on the back of this data.

KEY DATA TODAY

14.00 US Case Shiller Composite 20 House price index Last -0.5 M/M -1.6 Y/Y Exp -0.5 M/M -2.6 Y/Y

15.00 US Consumer Confidence Last 60.6 Exp 66.5 Street Exp 63.5

17.00 UK Posen speaking at Oxonia Economic policy institute

18.00 US Kocherlakota speaking ( same speech as Feb 11 but with updated forecasts)

23.50 JP Trade Surplus Last 725.9 Bio Exp -340.30 Bio

23.50 JP Corporate Service Price Index Last -1.3 Exp -1.3

piagi foreign exchange report and rates page

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Sluggish day head with the US celebrating presidents day. morning up date so far.

This morning we saw the release of February IFO survey -  German business confidence which showed a surprise result  again on the upside and confirm this morning's stronger-than-expected "flash" manufacturing survey results for February.

Bank of Spain comments. 

*CAJAS `POTENTIALLY PROBLEMATIC' INVESTMENT IS EU100 BLN This has been ignored by the the retail sector ... but worth keeping an eye on for further developments.

GBP contiunes to rise against the EUR even after this positive data from German and hawkish comments from Spain amid speculations that the MPC will look to raise interest rate to combat the rising inflation in the UK.

Have seen decent supply eur/yen against 114.00 years highs and leveraged $/yen supply this morning.

Eur/$ stalling in tandem above 1.3700 a real supply and demand day ahead.

Cable looks like the lull before the storm ahead of Wednesdays MPC minutes and Fridays GDP number - seen leveraged protection buying of sterling downside ahead of the upcoming events
Real money fading the rallies in the cross this morning.

A long afternoon in prospect few interesting speakers to eye an on.

17.00 EU Stark Speaking on Banking after the crisis
17.30 EU Nowotny Speaking

piagi foreign exchange report and rates page

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Today we have seen some high levels of volatility as world stocks have come off from early highs and oil retreated after China raised bank required reserves to a record, prompting worries that tightening efforts aimed at battling inflation could slow down global growth and curb demand for commodities.

Rising inflation, meanwhile, was underlined by German producer prices for January exceeding forecasts to post their strongest year-on-year rise since October 2008, up 5.7 percent. The euro (EUR) edged higher against the dollar after a senior European Central Bank official was quoted by a media report as saying that interest rates could be raised.

Oil prices and their impact on global inflation have remained in focus as protesters in Bahrain and Libya bury people killed in recent clashes. In Libya's eastern city of Benghazi early on Friday, thousands of anti-government protesters crowded on to the streets, a day after demonstrations led to skirmishes with security forces in which more than 20 people may have been killed. Tension between Israel and Iran also continued over the latter's plans to send navy ships through the Suez Canal, a move that Israel has called a "provocation".

This has impacted the Greenback (USD) and we have seen dollars being sold aggressively due to Middle East uncertainty. GBPUSD is currently trading through 1.62, which is a 3 and half month high against the Great British Pound (GBP). 

piagi sees this an excellent time to look the sell the USD as continued Middle East drama will drive oil prices high and weaken the USD.

Sterling GBP rose on market talk that another member of the Bank of England's Monetary Policy Committee had moved into the hawks' camp by voting for a rate rise in February. Minutes of the February interest rate decision meeting, at which the bank left rates on hold at a record low of 0.5 percent despite rising inflation, are due for release this coming Wednesday.

Concerns Portugal may need a bailout increase again at the earliest date by April, dominated euro zone sovereign bond markets, with the yield on the country's five-year debt hitting a euro-era peak for a second session running. This will continue to weaken the Euro and once again the National debt of Euro Zone countries raises its ugly head again.