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China Reserves: Bloomberg
reports that China’s
foreign-exchange reserves, the world’s largest, may have
climbed to a record $2.5trn, adding fuel to complaints
that the nation’s currency intervention is undermining the
global economic recovery.
Currency holdings rose about $48bn in the third
quarter, according to the median estimate in a Bloomberg
survey of eight economists. That would compare with a
$7bn gain in the previous three months, the smallest
increase in 11 years. The central bank may release the
number this week, Bloomberg said.
The Wall Street Journal reported on Saturday that Asia’s forex reserves
climbed 3.1% to a record in September as the region’s central banks
bought dollars aggressively to temper the rise in their own
currencies: Reserves reported by 11 key Asian central banks,
excluding China’s, rose to $2.963trn at the end of September
from $2.875trn at the end of August, as compiled by Dow Jones
SEE: Currency report in Box below.
Bank Funding: Data released on Friday showed how dependent Irish banks are on funding from the European Central Bank.
The outstanding borrowing from the ECB from the end of August to September
24th, rose by more than €24bn to just over €119bn - - a
week before the State two-year banking guarantee expired.
institutions accounted for €68bn of the €119bn and foreign banks
at the IFSC offshore centre had borrowed €51bn.
Economic View: Time to end talks about talks and get on with it;
Goodbody's chief economist, Dermot O’Leary, said - -"They say that a
week is a long time in politics, but the process of getting domestic political
parties to come together in the national interest to thrash out an agreement on
the upcoming four-year budget plan seems to be taking an age. Importantly, all
parties are now in agreement that Ireland must come up with a plan that will
reduce the budget deficit to 3% of GDP by 2014, in line with the target set out
with the European Commission.
However, to agree a common approach on how to get there and thus convince
international markets that Ireland can realistically meet these targets,
cross-party talks are a must.
With the latest reports suggesting that the four-year plan will be
announced in the second week of November, time is of the essence. While
Opposition parties would favour an immediate General Election, they are willing
to attend talks with the Government. On the Government side, the Green Party,
the junior coalition partner, is the one that seems most intent on getting all
of the political parties around the table, although the Finance Minister,
speaking in Washington yesterday (and who is speaking to investors in New York
today) was quite open to the idea of discussions, without going as far as saying
that a national government should be formed.
Now is the time to end talks about talks and get together with the aim of
showing sceptical bond markets that Ireland can restore stability to the public
finances on its own."
David Blanchflower, former member of the monetary policy committee, and Fred Bergsten, director of the Peterson Institute for International Economics joined CNBC to discuss currencies at the end of the first day of the IMF/G7 meeting:
CSO issues a timely reminder of Ireland's attractiveness to
investors; Davy economist, Aidan Corcoran, commented - -"Data
released by the CSO on Friday show investment in
Ireland by foreign investors increasing by over €30bn to €169bn in
2009 after showing little change in 2008. Some of this move may be
due to Ireland's 12.5% corporation tax, a policy that is always
contentious and would not survive should the Irish government have
recourse to the European Financial Stability Fund or the IMF. We
consider this to be an unlikely outcome, meaning the low corporation
tax will be around to aid the struggling recovery. Increasing
competitiveness will also support continued foreign investment in
the coming years, providing some compensation for painful wage cuts.
Negative net factor income, arising partly from repatriation of
profits by multinational corporations with investments in Ireland,
is one consequence of Ireland's open door policy. Net factor income
in Q2 alone was €7.7bn, representing a significant drag on national
income growth. While it is unfortunate to watch much of the profits
of Irish resident operations fly abroad, there is no doubt that the
net effect of Ireland's openness to foreign investment is positive.
The investor-friendly environment developed since the 1960s will
continue to represent a significant upside to Irish growth
prospects, particularly as Irish labour and other factor prices
retrace some of the inflation seen during the Celtic Tiger years."
A consumer-led recovery in the US will take months - if not years, to achieve, believes Tai Hui, regional head of economic research, SE Asia at Standard Chartered Bank. He shares his outlook, with CNBC's Karen Tso & Sri Jegarajah:
The MSCI Asia
Pacific Index ex Japan rose 0.9% Monday.
Tokyo market was closed and China's Shanghai Composite added 2.49%; Australia's S&P/ASX 200 Index
climbed 0.34% as did India's Sensex.
spot price of an oz of gold is trading in New York at $1,349.50, up $2.50 from
Financials: No “aggressive moves on Irish senior bonds"; Goodbody's Eamonn Hughes
commented - - "At the IMF conference over the weekend, the Irish Central Bank governor
indicated that the Irish government is “not intending any kind of aggressive
action to be taken against senior bondholders” in Anglo Irish and Irish
Nationwide. However, as previously flagged, 'they are interested in arrangements
that could be made in regard to subordinated debt holders. I don’t think the
other matter arises at all.'
Prices of senior debt have drifted in the past
fortnight after the announcement of the updated PCAR arrangements for the
banking system on concern that the Irish government may impose haircuts on
senior bondholders. However, it appears the Governor is setting the record
straight on the position of the State on the matter. Elsewhere, we note that ECB
borrowings attributed to Ireland from ECB data on Friday rose from €95bn to
€119bn. The previous months figure of €95bn compares to Irish Central Bank data
for August of c€65bn to the domestically covered banks.
Therefore, while the
full increase is unlikely to be fully attributable to the main domestic banks,
it still shows a material uplift on ECB drawings at the end of September. Having
said that, with circa €32bn of term funding having rolled in September, it is no
surprise that a large chunk will have found its way into ECB drawings. While
helpful on the margin in the very short term, the banks will need to term out
higher levels of their wholesale funding in due course. The data for the
September drawings of the main domestic banks will be published at month end by
the domestic Central Bank."