The dollar may fall below 75 yen next year as it becomes the world’s “weakest currency” due to the Federal Reserve’s monetary-easing program, according to JPMorgan & Chase Co.
The U.S. central bank, along with those in Japan and Europe, will keep interest rates at record lows in 2011 as they seek to boost economic growth, said Tohru Sasaki, head of Japanese rates and foreign-exchange research at the second-largest U.S. bank by assets. U.S. policy makers may take additional easing steps following the $600 billion bond-purchase program announced this month depending on inflation and the labor market, he said.
“The U.S. has the world’s largest current-account deficit but keeps interest rates at virtually zero,” Sasaki said at a forum in Tokyo yesterday. “The dollar can’t avoid the status as the weakest currency.”
The Fed said on Nov. 3 it will buy $75 billion of Treasuries a month through June to cap borrowing costs. The central bank has kept its benchmark rate in a range of zero to 0.25 percent since December 2008. The Bank of Japan on Oct. 5 cut its key rate to a range of zero to 0.1 percent and set up a 5 trillion yen ($59.9 billion) asset-purchase fund.
The dollar traded at 83.38 yen as of 12:04 p.m. in Tokyo after falling to a 15-year low of 80.22 on Nov. 1. The greenback declined to post-World War II low of 79.75 yen in April 1995. The U.S. currency has declined against 12 of its 16 most-traded counterparts this year, according to data compiled by Bloomberg.
Tightening Unnecessary
There’s no need for any monetary tightening in the U.S. as even prolonged easing won’t heighten inflationary pressures with the balance sheets of banks and households still hurting from the fallout of the global financial crisis, Sasaki said.
Ten-year Treasury yields may decline to around 2.25 percent over the next year, and their premium over similar-maturity Japanese yields won’t widen, he said. The benchmark 10-year Treasury yielded 2.89 percent today.
The world economy is likely to expand 3 percent next year amid the extra liquidity provided by central banks, “repeating a pattern from early 2002 to the end of 2004” when improving risk appetite boosted stocks and commodities and the dollar fell 25 percent against the yen, Sasaki said.
With monetary easing in the U.S., Japan and Europe likely to bolster the global recovery and increase demand for yield, the yen is poised to weaken against other currencies beside the dollar to levels last seen in early 2007, Sasaki said.
Japan will refrain from selling the yen even if it strengthens against the dollar, following international criticism of foreign-exchange intervention, he said. The nation intervened in the currency markets for the first time in six years on Sept. 15 when the yen climbed to a 15-year high.
Every month, JPMorgan Chase dispatches a researcher to several supermarkets in Virginia. The task is to comparison shop for 31 items.
In July, the firm’s personal shopper came back with a stunning report: Wal-Mart had raised its prices 5.8% during the previous month. More significantly, its prices were approaching the levels of competing stores run by Kroger and Safeway. The “low-price leader” still holds its title, but by a noticeably slimmer margin.
Within this tale lie several lessons you can put to work to make money. And it’s best to get started soon, because if you think your grocery bill is already high, you ain’t seen nothing yet. In fact, we could be just one supply shock away from a full-blown food crisis that would make the price spikes of 2008 look like a happy memory.
Fact is, the food crisis of 2008 never really went away.
True, food riots didn’t break out in poor countries during 2009 and warehouse stores like Costco didn’t ration 20-pound bags of rice…but supply remained tight.
Prices for basic foodstuffs like corn and wheat remain below their 2008 highs. But they’re a lot higher than they were before “the food crisis of 2008” took hold. Here’s what’s happened to some key farm commodities so far in 2010…
What was a slow and steady increase much of the year has gone into overdrive since late summer. Blame it on two factors…
Reality Trac reported that foreclosures are up 16 percent so far this year. Combine that with the roller coaster unemployment numbers that are up again this week and you have to wonder are we really making our way out of this economic slump?
As most banks refused to cooperate with the president’s first foreclosure plan that left many homeowners high-and-dry, he revamped the program last month. However, according to Huffington Post, “Obama Foreclosure Plan Makes it Harder For Banks To Reduce Principal For Underwater Homeowners”. Consequently, many homeowner who are underemployed or laid off and can’t keep up with their ballooning mortgage are forced to walk away from their homes. On some rather extreme cases some home owners have resulted to suicide to escape the tragedy of losing the only home they’ve ever known.
One less extreme but yet very determined homeowner bulldozed his home to keep the bank from foreclosing on it.
Oh yes, back to the unemployment debacle. According to CNN , the private sector dropped 24,000 workers in February and another 23,000 in March. The article went on to say:
The service sector reported an increase of 28,000 jobs in March, marking the second consecutive monthly increase and the highest job growth since March of 2008.
However, that growth was offset by a loss of 51,000 jobs in the goods-producing sector and a drop of 9,000 manufacturing jobs.
Large businesses, those with 500 or more workers, saw employment decline by 7,000 jobs, while small-size businesses with fewer than 50 workers had a drop of 12,000 workers.
Employment among medium-size businesses, defined as those with between 50 and 499 workers, declined by 4,000.
The Dow is above 11,000 and JP Morgan profits are up 55% this year, mean while retail banks are still taking heavy losses. So there’s a recovery for whom, besides the big wall street banksters?
Source: Seattle Times
Bank of America, JPMorgan Chase and Wells Fargo may have to set aside an additional $30 billion to cover possible losses on home-equity loans, an amount almost equal to analysts’ estimates of profit at the three banks this year.
The cost of these reserves was calculated by CreditSights, a New York-based research firm.
Recognizing the home-equity-loan losses is unfinished business from the housing bubble, CreditSights said in a March 29 report.
Potential writedowns on the loans are casting a shadow over earnings, as analysts try to determine how much, and how quickly, loan-loss expenses will decline from the industrywide peak reached in June 2009.
Banks led by New York-based JPMorgan begin reporting first-quarter results this week.
“While a lot of people are looking for dramatic improvement in the short term, one area that still has to be worked through in a material way is home equity,” said Baylor Lancaster, senior bank analyst at CreditSights in Miami.
The process will take months, and write-offs won’t hit financial statements until later this year, Lancaster said.
“The banks are saying that they can work through it,” Lancaster said. “Our view is that it may be bigger than they are letting on.”
Action in Washington could spur banks to act. Rep. Barney Frank, chairman of the House Financial Services Committee, is scheduled to hold a hearing Tuesday on how second-lien loans are getting in the way of reworking homeowners’ debts and easing the foreclosure crisis.
The Massachusetts Democrat sent a letter March 4 asking banks to recognize more losses in order to clear the way for mortgage modifications.
Second-lien mortgages and most home-equity lines of credit rank behind first-lien debt, meaning they get wiped out in a foreclosure if the sale of a home doesn’t raise enough to pay off the first mortgage.
Second liens are often closed-end loans in contrast to home-equity lines of credit, which can remain open for borrowers to withdraw money when needed, much like a credit card.
In many cases, first mortgages can’t be modified or written down because lien priority dictates junior loans be erased first.
Few lenders have agreed to reduce or extinguish home-equity loans when modifying mortgages, even if a property is worth less than what’s owed, according to a report by Troubled Asset Relief Program (TARP) Special Inspector General Neil Barofsky.
The four biggest U.S. banks by assets — Bank of America, JPMorgan, Citigroup and Wells Fargo — hold about 42 percent, or $442 billion of the $1.1 trillion in second-lien mortgage loans, according to Amherst Securities Group, an Austin, Texas-based firm that analyzes home-loan assets.
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