Policy Interest rates may increase again in May
After a move to increase its overnight policy rate (OPR) by 25 basis points to 2.25% on the first week of March, Bank Negara Malaysia is likely to raise it again at its next meeting held in May. Many expect an even bigger increase in the OPR to 2.5%-3.0%. The central bank has stated that the recent increase in rates was to normalise policy and address the issue of financial imbalances as stronger economic growth for the fourth quarter last year showed economic recovery was firmly established.
Yuan reform gradual and controlled
China's Commerce Minister Chen Deming has stated that China will continue to reform its exchange rate policy in a gradual and controlled manner, expressing that all of its financial policies, including the yuan's position, were part of China's stimulus package to support the economy during the global financial crisis. During the middle of 2008, China pegged its exchange rate to around yuan 6.83 per dollar to preserve exporters' competitiveness. However recently the U.S and Europe have been putting intense pressure on China to change its policy but Chen insists on keeping the yuan stable as global recovery remains hesitant.
MAS forecasts possible economy growth
According to the Monetary Authority of Singapore (MAS) Singapore's GDP may expand 6.5% in 2010 compared with the previous 5.5% forecast. The boost will come from the manufacturing, and construction as well as private consumption. Electronics shipments are surging after almost three years, exports may jump 12.3%, and by the end of this year the unemployment rate may be down to 2%. Inflation is forecasted to average 2-3% and furthermore there is a possibility of the Singapore dollar strengthening to S$1.35 versus the greenback.
Third consecutive drop in Japanese bank lending
In February, outstanding loans by Japanese banks fell 1.6% from a year earlier, marking a continuing fall after a 1.7% decline in January. Outstanding loans by city banks fell 3.3% after previously dropping 3.4%. A recovery in exports may be inadequate to boost investments as Japanese companies have cut spending 18.5% in the three months ended 31st of December, an 11th quarterly decline. Business spending remains weak, as a third of factory capacity sits idle with companies discouraged by the nation's worst post-war recession.
Britain's trade gap widens
Recent UK industry data have shown that UK's trade deficit with the world has widened to its biggest since January August 2008, following the sharpest drop of 6.9% in exports in over three years. The goods trade gap extended to GBP7.987b (US$12b) from GBP7.010b (US$10.536b) in December, the trade gap with non-EU countries unexpectedly stretched to GBP4.834b (US$7.265b)from GBP3.428b (US$5.152b) which is the biggest deficit since last January. After the data was released the pound at one point lost 1.5 cents to trade at US$1.48.
Talks of the creation of an International Monetary Fund (IMF)-style body in the euro zone that would help bankruptcy-threatened states are ongoing. There is rising support from politicians such as German Chancellor Angela Merkel who believe that the EMF is needed for Europe to sort out their own troubles without outside interference. But experts are questioning the usefulness of such a fund in preventing future crises and ultimately burdening countries with solid public finances.
Inflation concerns are being trumped by worries about a continued rise in the franc as the Swiss National Bank could start setting the stage for rising interest rates. Though a rise from its current 0.25% interest rate does seem premature, the SNB looks set to stick to its policy of currency intervention as it seeks to balance more optimism on growth with risks from a strong currency. The SNB said that it was committed to fight an excessive rise in the Swiss franc against the euro.
RBI propose new base rate
The Reserve Bank of India (RBI) has proposed a new base rate which will replace the benchmark prime lending rate (PLR) from the 1st of July. The new base rate would be the new reference rate for determining lending rates for banks. Deepak Mohanty, the Executive Director of RBI said that this would be in more transparency to the loan pricing process for customers and also make the system more flexible. Under the base rate system banks would not be allowed to give loans below the base rate to anyone.
Ringgit to US$
Close 10 March 2010 : 3.3210
3.4440 30-day low
US$ to GBP
Close 10 March 2010 : 1.4933
1.6247 30-day low
Indian Rupee to US$
Close 10 March 2010 : 45.382
46.810 30-day low
Swiss Franc to US$
Close 10 March 2010 : 1.0740
1.08481 30-day low
US$ to Euro
Close 10 March 2010 : 1.361
1.3999 30-day low
Yuan to US$
Close 10 March 2010 : 6.8258
6.8346 30-day low
S$ to US$
Close 10 March 2010 : 1.3986
1.4224 30-day low
Yen to US$
Close 10 March 2010 : 90.492
30-day high 91.848 30-day low 88.425