(BN) Dow Plunges Most Since 1987 Before Paring Losses; Euro

Dow Plunges Most Since 1987 Before Paring Losses; Euro Tumbles
2010-05-06 20:06:04.294 GMT


By Michael P. Regan and Rita Nazareth
    May 6 (Bloomberg) -- The Dow Jones Industrial Average had
its biggest intraday loss since the market crash of 1987, the
euro slid to a 14-month low and yields on Greek, Spanish and
Italian bonds surged on concern European leaders aren't doing
enough to stem the region's debt crisis. U.S. Treasuries soared.
    New York Stock Exchange spokesman Rich Adamonis said "there
were a number of erroneous trades" during the plunge. The NYSE
told CNBC that there were no system errors as speculation of
erroneous trades swirled through the market. The Nasdaq OMX
Group Inc. said it is working with other markets to review the
plunge.
    The Dow average lost as much as 998.5 points, or 9.2
percent, before paring its drop to 348.63 points at the 4 p.m.
close of trading in New York. It ended the day at 10,519.49, a
two-month low. The Standard & Poor's 500 Index fell as much as
8.6 percent, its biggest plunge since December 2008, before
trimming declines to end down 3.3 percent at 1,128.03.
    "It's panic selling," said Burt White, chief investment
officer at LPL Financial in Boston, which oversees $379 billion.
"There's concern that the European situation might cool down
global growth and freeze the credit markets."
    European Central Bank President Jean-Claude Trichet held
interest rates at a record low of 1 percent today and said the
bank didn't discuss whether to purchase government bonds to stem
the region's debt crisis, defying market speculation that he
would take such measures.
    The euro maintained losses even as Greece's parliament
approved austerity measures demanded by the European Union and
International Monetary Fund as a condition of its 110 billion
euro ($140 billion) bailout.

                      Market 'Horrified'

    "The ECB can fix this instantly by doing what the Fed has
done -- instantly providing liquidity by buying bad fixed-income
instruments and paying cash in U.S. dollars," said David
Kovacs, head of quantitative strategies at Turner Investment
Partners in Berwyn, Pennsylvania, which manages $18 billion.
"The reason the market is horrified now is Trichet said it's
not even being discussed. Smart investors are basically selling
risk assets."
    The MSCI Asia Pacific Index joined the MSCI World Index and
the Stoxx 600 Index in wiping out its advance for 2010. The Dow
and S&P 500 briefly erased their yearly gains before paring
losses.
    Bank of America Corp., Hewlett-Packard Co. and American
Express Co. tumbled more than 4.5 percent to lead declines in
the 30-stock Dow average.
    The benchmark index for U.S. stock options surged as much
as 63 percent, the most since February 2007, to 40.71 before
paring its advance to 37 percent. The VIX, as the Chicago Board
Options Exchange Volatility Index is known, measures the cost of
using options as insurance against declines in the S&P 500.

                       Treasury Yields

    Yields on benchmark 10-year Treasury notes plunged 16 basis
points to 3.377 percent on demand for assets considered the most
safe. The Dollar Index, which measures the currency against six
major trading partners, jumped as much as 1.4 percent. The yen
and Swiss franc also strengthened.
    Yields on Fannie Mae and Freddie Mac mortgage securities
that guide U.S. home-loan rates jumped the most relative to
Treasuries in almost a year.
    Spreads on Fannie Mae's current-coupon 30-year fixed-rate
mortgage bonds widened about 0.1 percentage point to 0.89
percentage point more than 10-year Treasuries as of 2:45 p.m. in
New York, the biggest jump since May 27, according to data
compiled by Bloomberg.
    The gap touched a record low of 0.59 percentage point on
March 29 as the Federal Reserve that month completed its
purchases of $1.25 trillion of agency mortgage bonds.
    "Fear is taking over, and images of Greek mobs aren't
helping," said Larry Peruzzi, equity trader at Cabrera Capital
Markets in Boston, Massachusetts, referring to televised images
of demonstrations against austerity measures in Athens. "Buyers
are stepping aside and disregarding fundamentals."

For Related News and Information:
Developed Markets View: DMMV <GO>
Emerging Markets View: EMMV <GO>
World equity valuations: WPE <GO>
World equity index monitor: WEI <GO>
Bonds and Money Markets Page: BTMM <GO>
Cross Currency Rates: FXC <GO>
World Currency Ranker: WCRS <GO>
Market map of today's trading: MXWO <Index> IMAP <GO>
Commodities Prices: GLCO <GO>

--With assistance from Mark Gilbert and Keith Jenkins in London,
Simon Kennedy in Paris, Simone Meier in Dublin, John Detrixhe,
Elizabeth Stanton, Inyoung Hwang and Michael Tsang and Mark
Shenk in New York and Pham-Duy Nguyen in Seattle. Editors: Chris
Nagi, Dan Hauck.

To contact the reporters on this story:
Michael P. Regan in New York at +1-212-617-7747 or
Mregan12@bloomberg.net;
Rita Nazareth in New York at +1-212-617-8908 or
rnazareth@bloomberg.net.

To contact the editor responsible for this story:
Chris Nagi at +1-212-617-2179 or chrisnagi@bloomberg.net.

THE ECB'S ROCK AND HARD PLACE - Article by State Street Bank

+ THE ECB'S ROCK AND HARD PLACE ++ - Article by State Street Bank

Morning,

A timely note from our strategist Lee Ferridge around the dangers the ECB
face later today if they decide to inject further stimulus via quantitative
easing -

There is much market speculation that the European Central Bank will on
Thursday announce a quantitative easing programme designed to purchase
Greek government bonds and hence, reduce both pressure on Greece and help
to fight the contagion that has gripped European markets (and those further
afield) in recent days. While it can be argued that the Fed's QE programme
of 2009 and early 2010 (and, to a lesser extent, that of the Bank of
England) proved successful in heading off the "great depression" risk
following the bursting of the credit bubble, the dilemma facing the ECB is
entirely different.

The Fed's QE programme was designed to stimulate the domestic economy
further when traditional monetary policy (i.e. interest rates) had reached
their lower bound (i.e. zero). No more stimulus could be provided at the
short-end of the curve and hence, money was printed in order to buy
government bonds and thereby reduce rates at the longer-end (which is what
QE effectively does).

However, if the ECB were to QE now, it would not be because monetary policy
had reached its lower bound, while EUR 2-yr swap rates yesterday reached
record lows. Rather any ECB QE programme would be started simply because
there are no buyers of Greek government debt – i.e. the ECB would be
monetizing the fiscal deficit; printing money to finance a fiscal policy
that has lost market credibility; the Zimbabwe scenario. Printing money to
overcome the lower bound of monetary policy and printing money in order to
fund government debt is a subtle, but extremely important distinction.
Monetising fiscal mistakes risks further undermining confidence in European
government debt, leading to even higher longer-term rates and hence, more
money printing.

Not only this, but both ECB independence and, the supposed separation of
fiscal and monetary policy would also be thrown into question by such an
announcement on Thursday. The Fed and BoE faced similar risks in 2009 but,
given the alternative of the great depression and lost decade they were
given the benefit of the doubt by the market. The ECB faces an entirely
different set of circumstances and hence, if it uses its "nuclear option"
on Thursday any relief for the euro is likely to be short-lived; a matter
of days (or even hours), rather than weeks. Of course, with no such
announcement Thursday there will be no relief for the euro; a further
widening in periphery bond spreads and a fresh euro sell-off will ensue.
The rock and the hard place – make your choice Mr Trichet. Either way, the
outlook for the euro remains bleak

SPX vs Dollar Index vs Crude Oil year to date returns

(BN) U.S. Consumer Confidence Report for April (Text)

2010-04-27 14:00:53.97 GMT


    April 27 (Bloomberg) -- Following is the text of
U.S. consumer confidence from the Conference Board.

The Conference Board Consumer Confidence Index®, which had
rebounded in March, increased further in April. The Index now
stands at 57.9 (1985=100), up from 52.3 in March. The Present
Situation Index increased to 28.6 from 25.2. The Expectations
Index improved to 77.4 from 70.4.

The Consumer Confidence Survey® is based on a representative
sample of 5,000 U.S. households. The monthly survey is
conducted for The Conference Board by TNS. TNS is the world's
largest custom research company. The cutoff date for April's
preliminary results was April 20th.

Says Lynn Franco, Director of The Conference Board Consumer
Research Center: "Consumer confidence, which had rebounded in
March, gained further ground in April. The Index is now at its
highest reading in about a year and a half (Sept. 2008, 61.4).
Consumers' concerns about current business and labor market
conditions eased again. And, their outlook regarding business
conditions and the labor market was also more positive than
last month. Looking ahead, continued job growth will be key
in sustaining positive momentum."

Consumers' appraisal of present-day conditions was more
positive in April. Those claiming conditions are "good"
increased to 9.1 percent from 8.5 percent, while those
claiming business conditions are "bad" declined to 40.2
percent from 42.1 percent. Consumers' appraisal of the labor
market also improved. Those saying jobs are "plentiful"
increased to 4.8 percent from 4.0 percent, while those saying
jobs are "hard to get" decreased to 45.0 percent from 46.3
percent.

Consumers' outlook was also brighter in April. The percentage
of consumers expecting business conditions will improve over
the next six months increased to 19.8 percent from 18.0 percent,
while those expecting conditions will worsen declined to 12.6
percent from 13.6 percent.

Consumers were also more optimistic about the job outlook. The
percentage of consumers anticipating more jobs in the months
ahead increased to 18.0 percent from 14.1 percent, while those
anticipating fewer jobs declined to 20.0 percent from 21.4
percent. The proportion of consumers anticipating an increase
in their incomes declined to 10.3 from 10.8 percent.


The next release is scheduled for Tuesday, May 25, at 10:00
AM ET.

SOURCE: The Conference Board
http://www.conference-board.org

--Editor: Alex Tanzi


To contact the reporter on this story:
Alex Tanzi in Washington at +1-202-624-1959 or
atanzi@bloomberg.net

To contact the editor responsible for this story:
Marco Babic at +65 6212-1886 or mbabic@bloomberg.net

New-home sales surge 26,9% to 411,000 pace

It was the largest percentage gain in sales since April 1963, the government said. It was the highest sales pace since July, and much stronger than the 325,000 expected by economists surveyed by Bloomberg. See our complete economic calendar and consensus forecast.

Year to date comparison: IBOV / OGX / PETROBRAS

SP FUT and SPDJMEAN

Goldman Sachs opssss

Indice Ibovespa FUTURO : Area de perigo de reversão

Pelo menos eu vejo uma neste grafico intradiario 60 min.

Sugar Medio USD/MT

Este grafico diario representa a media do preço do açucar nas praças de sao paulo, ny e londres em dolares por tonelada metrica.

Ponto de suporte importante sendo respeitado.

(BN) Obama Prods Leaders on Curbing Nuclear Terror Threat

Obama Prods Leaders on Curbing Nuclear Terror Threat (Update1)
2010-04-12 12:32:56.340 GMT


By Viola Gienger and Roger Runningen
    April 12 (Bloomberg) -- President Barack Obama, spurred by
al-Qaeda's pursuit of a nuclear bomb and the wider use of atomic
energy, opens a summit of 47 nations today aimed at keeping the
world's plutonium and uranium out of terrorists' hands.
    Obama has said he wants a pledge and a plan from the other
leaders at the two-day meeting in Washington on securing nuclear
materials within four years. To succeed, he'll have to overcome
indifference, allegations of interference, the status conferred
by atomic weapons and the financial benefits of nuclear trade,
according to analysts who follow the issue.
    "When the United States first started working to secure
nuclear materials overseas, our teams of experts found highly
radioactive materials stored in open fields without any
security," Secretary of State Hillary Clinton told an audience
at the University of Louisville in Kentucky last week. They saw
"the ingredients for nuclear bombs warehoused in facilities
without electricity, telephones or armed guards."
    The summit is the latest step in a series by Obama on one
of his foreign policy goals, laying the groundwork for someday
eliminating nuclear weapons. The meeting follows his signing of
a treaty with Russia last week to further cut their atomic
weapons and the unveiling of an administration doctrine that
reduces the role of nuclear arms in the U.S.'s defense strategy
and makes preventing nuclear terrorism a top priority.
    The possibility of a terrorist group getting a nuclear
weapon is "the single biggest threat to U.S. security" in the
near and distant future, Obama said yesterday before meeting
with South African President Jacob Zuma.
    "If there was ever a detonation in New York City, or
London, or Johannesburg, the ramifications economically,
politically, and from a security perspective would be
devastating," Obama said.

                     Bipartisan Agreement

    The goal of the summit "is getting the international
community on the path in which we are locking down that nuclear
material in a very specific time frame with a specific work
plan," Obama said.
  The summit also gives the president a chance to burnish his
foreign policy credentials after battles with Congress over a
health-care overhaul.
    "It's one of the few things Republicans and Democrats can
share the same talking points on," said Deepti Choubey, deputy
director of nuclear policy at the Washington-based Carnegie
Endowment for International Peace. "This is all about him and
his executive authority."
    The president cited nuclear terrorism as the most immediate
and extreme threat to global security in his Prague speech in
April 2009. He reiterated that in his Nuclear Posture Review
last week.

                           Terrorism

    Terrorists "can fabricate a crude nuclear device that can
destroy an American city" with just 25 kilograms (55 pounds) of
highly enriched uranium, said Joseph Cirincione, president of
the San Francisco-based Ploughshares Fund, which finances
projects on nuclear issues. "The trick is to stop them from
getting the stuff."
    Al-Qaeda, the group responsible for the Sept. 11 attack on
New York and the Pentagon, has tried repeatedly to obtain stolen
nuclear materials, said Matthew Bunn, an associate professor at
Harvard University who once worked as an adviser on U.S. nuclear
controls.
    "In 2003, they were negotiating to buy what they believed
were three nuclear devices," Bunn told reporters at a briefing
last week by the Fissile Materials Working Group, independent
experts backing Obama's effort. "The United States has never
managed to identify" a Pakistani expert referenced in a message
as helping al-Qaeda, Bunn said.

                       Gaps in Security

    Pakistan and Russia have some of the biggest risks because
of gaps in security and the potential for access by insiders who
are either corrupted or sympathetic to militant groups, he said.
    Research reactors fueled by highly enriched uranium, many
housed on university campuses with minimal security, also
present a threat.
    Groups that have sought nuclear weapons include the Aum
Shinrikyo cult that killed 12 people in a 1995 sarin gas attack
on the Tokyo subway, Bunn said. The United Nation's atomic-
energy agency has documented 18 cases of theft or loss of highly
enriched uranium or plutonium, not counting incidents that
individual countries haven't confirmed, he said.
    Earlier this year, peace activists exposed the
vulnerabilities of stockpiles when they broke into a nuclear
weapons base in Belgium.
    "The global stockpile of nuclear weapons materials is
large enough to build more than 120,000 nuclear bombs," said
Alexandra Toma, co-chairwoman of the Fissile Materials Working
Group.

                         Middle East

    Middle Eastern nations pursuing nuclear power for energy
such as the United Arab Emirates, Saudi Arabia and Qatar will
add to the supply of potentially vulnerable raw materials,
specialists say.
    "We're in a way returning to a sort of creeping
proliferation," said Hans Kristensen, director of the nuclear
information project at the Washington-based Federation of
American Scientists. "Once these countries start developing
nuclear power, you have a significant spread of technology and
material."
    While Iran is already producing its own enriched uranium,
saying it plans to generate energy for peaceful use, U.S.
officials fear the endeavor will spur neighbors to pursue the
same goal, further destabilizing the region.
    Not all countries are convinced of the danger, said former
Ambassador Gregory Schulte, who was the U.S. representative at
the UN's International Atomic Energy Agency in Vienna from 2005
to 2009.
    Syria constructed a reactor in the desert "and no one
notices for five years," Schulte said. Israel bombed the
reactor in September 2007.

For Related News and Information:
Top stories: TOP <GO>
Stories on Obama and terrorism: TNI EXE TERROR <GO>
Top government stories: TOP GOV <GO>

--Editors: Joe Sobczyk, Brigitte Greenberg.

To contact the reporters on this story:
Viola Gienger in Washington at +1-202-624-1990 or
vgienger@bloomberg.net;
Roger Runningen in Washington at +1-202-624-1884 or
rrunningen@bloomberg.net.

To contact the editor responsible for this story:
Jim Kirk at +1-202-654-4315 or
jkirk12@bloomberg.ne

no Estadão !!!! 05/04/10

http://economia.estadao.com.br/noticias/not_12114.htm

Sai no Jornal: OESP 05/04/2010

Apesar de ter dito para jornalista que não possuo investimentos em ações no momento, ela desenhou um cenário completamente diferente do que descrevi a ela.

Deixei claro que eu não tinha ações e que se tivesse uma posição em bolsa hj não teria ações, APENAS ETFs...

Ainda bem que o importante sobre ETFs ela registrou: Mitiga-se risco quando se opera um ETF vs operar 1 único papel qualquer. O pequeno investidor conservador, mas que opera renda variável, quer qualidade vs volatilidade de retornos. 

O mundo fica dizendo que o mercado financeiro precisa passar por uma maior regulaçao e controle. Tenho a impressão que os jornalistas tb teriam que passar pelo mesmo. Não estou falando em censura, óbvio que não. Mas em 17 anos de trabalho com finanças, TODAS AS VEZES, que conversei com algum jornalista, TODAS AS VEZES, disse A escreveram B..... Incroyable! Onde esta a evolução no jornalismo?

Se a caneta é uma arma, porque jornalista pode escrever o que quer e não o que ouviu. É que nem deixar atirar pra qualquer lado.....tipo: Olha escreva um artigo sobre ETFs qq coisa que estiver escrito neste sentido esta bom....Triste...a trasmissao de informaçao poderia ser muito mais qualitativa...quem sabe em 2016.

Noticia Realcionada: http://economia.estadao.com.br/noticias/not_12114.htm

Lembre-se: Ao contrario de operar ETFs, falar com um jornalista no Brasil é complicado, inseguro e de rentabilidade incerta.

Monster Global Employment Index up in March

The good news is that it gaining momentum worldwide...

Crude Oil breaking higher in NY

Chart of the day: China reversing higher

Good start for this week

All for U

Link to video Warren Buffett

Mais 3 reforços para o meu time

(Bloomberg) China Inflation, Industrial Production Accelerate

China Inflation, Industrial Production Accelerate (Update1)
2010-03-11 02:24:58.278 GMT


    (Adds lending data in fifth paragraph.)

By Bloomberg News
    March 11 (Bloomberg) -- China's inflation reached a 16-
month high, industrial output climbed and new loans exceeded
forecasts, adding to the case for the government to pare back
stimulus measures.
    Consumer prices rose 2.7 percent from a year earlier, the
National Bureau of Statistics said in Beijing today, compared
with the 2.5 percent median estimate of 29 economists surveyed
by Bloomberg News. A weeklong holiday may have boosted prices.
Production expanded 20.7 percent in the first two months of the
year after an 18.5 percent gain in December.
    Premier Wen Jiabao aims to hold full-year inflation around
3 percent after banks flooded the financial system with money to
drive a rebound from the global recession. Gross domestic
product grew 10.7 percent last quarter and central bank Governor
Zhou Xiaochuan said March 6 that anti-crisis policies, including
the yuan's peg to the dollar, must end "sooner or later."
    "With economic growth quickening to more than 10 percent
and record lending flowing through the financial system,
economic overheating is a high possibility," Qu Hongbin, chief
China economist at HSBC Holdings Plc in Hong Kong, said before
today's release. "The government will stay very proactive this
year and an inflation rate approaching 3 percent or topping the
target may trigger an interest-rate increase."

                        Lending Growth

    Banks extended 700 billion yuan ($103 billion) of new loans
in February, central bank data showed today. That compared with
1.39 trillion yuan in the previous month and 1.07 trillion yuan
a year earlier. The median estimate was for 600 billion.
    Stocks held gains after the data, with the Shanghai
Composite Index rising 0.4 percent as of 10:16 a.m. local time,
and the MSCI Asia Pacific index advancing 0.5 percent.
    M2, a measure of money supply, rose 25.5 percent, compared
with a 26 percent gain. The government targets 17 percent M2
growth for this year.
    Retail sales rose 17.9 percent in the first two months from
a year earlier, and urban fixed-asset investment gained 26.6
percent. Retail sales grew 22.1 percent in February, the bureau
said.
    Economists often look at January and February numbers
together to eliminate distortions caused by a one-week Lunar New
Holiday. China's 2010 data is also boosted by comparisons with
year-ago levels depressed by the financial crisis.

                       'Entire Toolkit'

    The government "will need to use the entire toolkit,
including higher policy rates and a stronger currency" to
achieve Wen's inflation target, Brian Jackson, an emerging-
market strategist at Royal Bank of Canada in Hong Kong, said
ahead of today's numbers.
    Trade data yesterday showed exports rebounding faster than
economists forecast, while a property market report showed
prices climbing by the most in almost two years.
    Commodity costs, reforms of China's energy and resource
pricing, and the effects of last year's expansion of credit may
add inflation pressures this year, China's top planning agency
told lawmakers last week. Baoshan Iron & Steel Co. and spirits
manufacturer Kweichow Moutai Co. are among companies to have
pushed up prices this year.
    Producer-price inflation climbed to 5.4 percent in February
from 4.3 percent in January, the statistics bureau said today.

                           Yuan Peg

    The central bank hasn't raised benchmark interest rates
since December 2007, before the financial crisis deepened. The
one-year lending rate is at 5.31 percent and deposit rate is at
2.25 percent. China has also effectively pegged the yuan at
about 6.83 per dollar since July 2008 to help exporters.
    The central bank has twice raised lenders' reserve
requirements this year. Deputy Governor Su Ning said this week
that those moves were to prevent monetary conditions becoming
"excessively loose" as the government continues to implement
what it describes as a "moderately loose" stance.
    Policy makers are targeting lending of 7.5 trillion yuan,
22 percent less than last year's actual figure, and pledging to
crack down on property speculation. The government has tightened
second-home mortgages and banks have scaled back favorable home
loan rates.

For Related News and Information:
Most-read stories on China: MNI CHINA 1W <GO>
Most-read China economy stories: TNI CHECO MOSTREAD BN <GO>
For top economic news: TOP ECO <GO>
For top China news: TOP CHINA <GO>
Credit crunch page: WCC <GO>
Government relief programs: GGRP <GO>

--Li Yanping. Editors: Paul Panckhurst, Chris Anstey.

To contact Bloomberg News staff for this story:
Li Yanping in Beijing at +86-10-6649-7568 or
yli16@bloomberg.net

To contact the editor responsible for this story:
Chris Anstey at +81-3-3201-7553 or
canstey@bloomberg.net

(Bloomberg) Roubini Says ‘Super Cautious’ China to Limit Yuan Gain to 4%

+---------------------------------------BCW---------------------------------------+

Roubini Says 'Super Cautious' China to Limit Yuan Gain to 4%
2010-03-07 17:10:17.90 GMT


By Ye Xie
    March 8 (Bloomberg) -- China will limit the yuan's
appreciation to 4 percent over the next 12 months because
of a "super cautious" outlook on the global economy, said
New York University Professor Nouriel Roubini.
    The central bank may end a 20-month peg to the dollar
as soon as the second quarter, allowing a 2 percent one-
step gain, and then let the currency strengthen another 1
percent to 2 percent in 12 months, Roubini said in an
interview in New York. The yuan rose 21 percent between
July 2005 and July 2008, when the government halted its
advance to protect exports during the global recession.
    Roubini's forecast is less aggressive than the median
estimate in a Bloomberg survey of 20 analysts for the yuan
to rise 5 percent to 6.50 per dollar by March 31, 2011.
Chinese central bank Governor Zhou Xiaochuan said on March
6 that the nation should be "very cautious" in exiting
policies adopted during the global financial crisis,
including the exchange-rate stance.
    "It will be less than what they did in 2005 when
everything was going right," Roubini, 51, who anticipated
the global financial crisis, said in the March 4 interview.
"They will move by a token amount. The world is much
cloudier in every dimension. They are super cautious."

                      'Hard Landing'

    Roubini, who chairs New York-based Roubini Global
Economics LLC, has become famous for his pessimistic
projections. In 2007, he correctly predicted a "hard
landing" for the world economy. He said last year that the
global economy would shrink through 2009, only for growth
to resume in the middle of the year.
     Jim O'Neill, the chief Goldman Sachs Group Inc.
economist who coined the term BRICs for Brazil, Russia,
India and China in 2001, said last month that "something
is brewing" on the yuan and predicted policy makers will
allow a one-time 5 percent gain. Twelve-month non-
deliverable forwards traded at 6.6505 per dollar,
indicating bets the yuan will rise 2.6 percent from the
spot rate of 6.8265.
    "We must be very cautious about the timing of
normalizing the policies, and this includes the renminbi
rate policy," Zhou said at a press briefing in Beijing,
using another term for the Chinese currency. A global
recovery "isn't solid," he said.

                     'Sooner or Later'

    China will exit its crisis policies "sooner or
later" as it balances growth and inflation concerns, Zhou
said. Regulators ordered banks to set aside more cash as
reserves and to curb lending after the economy grew 10.7
percent in the fourth quarter, the most in two years.
    Consumer prices probably climbed 2.5 percent in
February from a year earlier, the biggest increase since
October 2008, compared with 1.5 percent in January,
according to the median estimate from 29 economists. A
stronger currency would reduce import prices and may reduce
the need to sell yuan for dollars to maintain the peg.
    "A bit of move in the currency might help," Roubini
said. "If they move it by 2-3 percent, it won't make a
huge difference to inflation pressure. They are always
cautious and won't bow to the pressure from the U.S."
    While President Barack Obama has urged China to let
the yuan climb to aid U.S. manufacturers, Chinese
exporters say a gain of more than 2 percent may wipe out
profits.

                     Export Recovery

    China's overseas shipments rose 21 percent in January
from a year earlier, the fastest pace in 16 months. Fifteen
U.S. senators called for stiffer tariffs on China's imports
last week, accusing the country of artificially keeping the
yuan cheap. A stronger yuan would increase the purchasing
power of Chinese residents and reduce the country's
reliance on exports.
    "Most people are concerned about inflation, I am
worried about the export-led growth model," said Roubini.
"A weak currency and low interest rate is a massive
transfer of wealth from household income to enterprises. It
will take more than three, five years to change China's
model of growth."
    Options traders are increasing their bets on the
currency. Three-month implied volatility, a measure of
expectations for yuan price movements, showed traders
expected swings of 3.27 percent on March 4, a one-year
high, up from 1.07 percent on Jan. 1. The next day the
measure slumped to 2.8 percent as Premier Wen Jiabao said
China plans to keep the currency "basically stable."
    "The Chinese authorities will be in no rush to
further strengthen their currency," said Joe Craven, the
Asia-Pacific head of currencies and fixed-income at
UniCredit Markets & Investment Banking in Hong Kong. "I
view options volatility as being currently too high,
especially in the shorter-end of the curve."

--With assistance from Judy Chen in Shanghai, Belinda Cao
in Beijing and Bob Chen in Hong Kong. Editors: Sandy
Hendry, Laura Zelenko.

For Related News and Information:
Top currency stories: TOP FX <GO>
Currency forecasts: FXFC <GO>
Currency rates: XDSH <GO>
Currency returns: WCRS <GO>

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