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Moody’s Cut Japan’s Rating - 24.8.2011

Asian stocks were mostly lower again despite yesterday’s broad gains in European and US markets. Nikkei Stock Average declined by more than 1% by the end of the session even after policymakers indicated more measures to stimulate recovery. Gold prices fell today below 1850 dollars per troy ounce after touching yesterday a record high at 1912.80 dollars for September contracts. In foreign exchange markets, the dollar weakened somewhat yesterday against its major peers, but still currencies are being traded in tight ranges, with unusually low trading volumes, ahead of some key reports from the USA and Europe and a speech of the Fed president Bernanke on Friday, when volatility is expected to be rather higher. US Dollar The dollar weakened slightly yesterday against its counterparts, as investors’ optimism increased, boosting demand for higher-yielding currencies, after reports unexpectedly showed better than expected figures in Europe. In the aftermath however US data reaffirmed that economies are far from being in a good shape. Sales of new US homes declined in July more than projected, to the lowest level in five months, indicating the industry is struggling to stabilize two years into the economic recovery. Sales fell more than expected, by 0.7% to 298000 units a year after 300000 in June. Among important economic reports today we would underline durable goods orders statistics for July. The total number of orders is expected to increase by 2.3% in July after dropping by 1.9% in June, while the number of durables excluding transportation may have fallen by 0.5%. Euro The euro strengthened yesterday against the dollar and the Swiss franc after unexpectedly better than expected macroeconomic data was released. Almost all purchasing managers indices in Germany and the euro area as a whole remained unchanged or fell much less, than it was projected. In Asian trading hours today the euro weakened against the greenback, but still remains close to 1.44, amid concern that growth is slowing in Germany, Europe’s largest economy, and before a separate report forecast to show European industrial orders grew at a slower pace in June. New orders in the euro area may rise by 0.4% in June, after climbing by 3.6% in May. Euro zone officials meanwhile are discussing plans to accept noncash Greek government assets, including real estate, offered as collateral for a new round of rescue lending to Greece, according to the Wall Street Journal. Pair EUR/USD touched yesterday a week high 1.4499, but fell today back toward 1.4400. Japanese Yen The yen is still traded near its record highs against the dollar. Meanwhile Japan’s debt rating was lowered by Moody’s Investors Service, which cited “weak” prospects for economic growth that will make it difficult for the government to rein in the world’s largest public debt burden. Moody’s cut the grade by one step to "Aa3", with a stable outlook. According to the agency, rebuilding costs after the earthquake and continuing efforts to contain the nuclear crisis may make it hard for officials to meet their borrowing target this year, it said. Japan’s public debt is projected to reach 219% of GDP next year, according to the Organization for Economic Cooperation and Development. S&P lowered the nation’s grade to "AA-", equivalent to the current Moody’s grade, in January, and has the nation under review for a further cut. Finance Minister Yoshihiko Noda also said the government will release 100 billion dollars to fund loans by a state run export credit agency to aid exporters and spur purchases overseas. Nevertheless additional stimulus measures could not prevent Japanese stocks from declining today. Pair USD/JPY traded today in a tight range 76.53-76.86.
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