The aim would be to spur more borrowing, spending and economic growth.

Chairman Ben Bernanke said the Fed Reserve is open to purchasing more Treasury bonds to lower long-term interest rates and boost growth if the economy worsens.

“If we don’t see further improvement in the labor market, we will be prepared to take additional steps if appropriate,” Bernanke said at a news conference after the Fed’s two-day policy meeting.

The central bank noted hiring has weakened, consumer spending is rising more slowly and the economy needs more support.

It will continue the longer-term bond buying through the end of the year. The bank has been selling $400 billion US in short-term Treasuries since September and buying longer-term Treasuries. It says it will shift another $267 billion through December.

It left its key policy lever, the federal funds rate, at a record low near zero.

But extending Operation Twist might not provide much benefit. Long-term U.S. rates have already touched record lows. Businesses and consumers who aren’t borrowing now might not do so if rates slipped slightly more.

Move seen as ‘symbolic’

David Jones, chief economist at DMJ Advisors, said he expected the extension of Operation Twist to have only a slight effect on long-term rates, perhaps lowering them by about one-tenth of a percentage point.

“This move is largely symbolic,” Jones said.

The central bank also noted that Europe’s debt crisis threatens the U.S. economy. Fed officials will be watching for any breakthrough during a summit of European leaders in Brussels next week.

Later Wednesday, the Fed sharply lowered its outlook for U.S. economic growth and predicted the unemployment rate won’t fall much further this year.

In its updated quarterly forecast, the Fed said it expects the economy will grow no more than 2.4 per cent this year.

That’s much slower than its forecast in April, when it predicted growth as fast as 2.9 per cent. And it isn’t much better than the 1.9 per cent annual pace of growth in the first three months of 2012.

The Fed also predicted the unemployment rate will fall no lower than eight per cent by year’s end. The rate is now 8.2 per cent. In April, the Fed said the unemployment rate could be as low as 7.8 per cent at year’s end.

The central bank is also forecasting lower inflation. At its highest, it expects inflation to rise 1.7 per cent this year, well below its two per cent target. The decline is largely due to a steep drop in gasoline prices.

The Fed has held the federal funds rate low since December 2008. And it has said it plans to keep it there until at least late 2014.

Prepared to act further

The central bank said it is prepared to take further action as required.

John Canally, investment strategist at LPL Financial, says the Fed delivered just what investors expected and offered a hint at further easing.

“If there’s another misstep somewhere — in Europe … more weak data — the Fed’s going to do more,” Canally said.

For now, he said, the Fed wants to keep “some powder dry” in case there’s a meltdown in Europe. Canally also suggested that the Fed may be reluctant to be aggressive in an election year out of concern it could be seen as affecting the election.

But in a comment on Twitter, Justin Wolfers, an economics professor at the University of Pennsylvania’s Wharton Business School, suggested that the Fed might be on the cusp of going further.

Wolfers characterized their view as: “One more bad jobs report and we’ll do more.”

U.S. employers added just 69,000 jobs in May. Since averaging a healthy 252,000 a month from December through February, job growth has slowed to a lacklustre average of 96,000 over the past three months.

Source: AP

OTTAWA — Bank of Canada governor Mark Carney will unveil a redesigned $20 bill on Wednesday.

Read more:http://www.canada.com/news/Bank+Canada+unveil+bill/6553420/story.html#ixzz1tlzE7juq

The face of Swedish film director Ingmar Bergman will adorn the new 200 kronor note, while children’s author Astrid Lindgren will be the new face on the 20 kronor note, replacing the popular Selma Lagerlöf.

Former United Nations secretary-general Dag Hammarskjöld will feature on the 1,000 kronor note, opera singer Birgit Nilsson on the 500 kronor, film star Greta Garbo on the 100 kronor, and musician Evert Taube on the 50 kronor note.

“It’s been a difficult but stimulating task to pick a winner. All the contestants submitted ambitious and well worked suggestions, but in the end we were captivated by ‘The Cultural Journey’,” said Peter Egardt, a member of the Riksbank board of directors and chair of the banknote design selection jury, in a statement.

“The overall impression is a beautiful and user-friendly series of bills which are built on a well-weighed balance between something new and Swedish banknote tradition.”

Click here to see more images of Sweden’s new banknotes

At the moment New Zealand enjoys the most value for its agricultural exports because its currency is not as strong at Australia’s.

But John Wilson, from Fruit Growers Victoria is unsure whether a united currency would have an affect on apple imports from New Zealand.

He says while NZ producers enjoy a lower exchange rate, they have higher input costs.

He says there would be a lot of work to be done to equalise the two economies, in areas such as cost of labour.

Source: www.abc.net.au

The BRICS – Brazil, Russia, India, China and South Africa – have agreed to provide credit to each other in local currencies. Officials say the deal will facilitate economic growth in times of crisis.

China’s central bank set the daily reference rate for the yuan against the dollar at 6.2891 on Friday, marking the first time the rate has fallen below 6.29 since China began to reform its system for setting exchange rates in 2005.

“The change conforms to our expectations as China strengthens its reform of the mechanism to set currency exchange rates and shows some compromises with external pressures,” said Wang Tao, head of China economic research at UBS Securities Co Ltd.

Although the country has seen capital outflows since the fourth quarter last year, she predicted the yuan will appreciate by 2 to 3 percent in 2012.

Since the start of the year, the reference rate for the yuan’s exchange rate against the dollar has only increased by 0.19 percent. In January, China’s yuan depreciated by 0.17 percent.

Although the reference rate was set higher, the actual trading rate for the yuan against the greenback went down to 6.3062, showing that the demand for the yuan remains weak. The yuan is permitted to move as much as 0.5 percent either above or below the daily reference rate.

Some analysts said China’s increasing short-term external debt will bring the country under greater pressure to sell off yuan.

The amount of China’s outstanding short-term external debt stood at $500.9 billion by the end of 2011, up by 33 percent year-on-year, according to data released by the State Administration of Foreign Exchange on Thursday.

CONTINUE READING:

Link: http://europe.chinadaily.com.cn/business/2012-03/24/content_14903948.htm

Starting this year, major UAE banks will offer yuan bank accounts for corporate clients. This will be another step to boost the yuan’s role in the region, following a currency-swap agreement intended to promote bilateral trade, Nasser Saidi, chief economist of the Dubai International Financial Center, said on Tuesday.

The economist said the yuan will become the third-largest international currency by 2015, and he forecast that it will account for 20 percent of the currency basket for special drawing rights.

SDRs are supplementary foreign exchange reserve assets defined and maintained by the International Monetary Fund. They represent a claim to currency held by IMF members, for which they may be exchanged.

At present, SDRs can only be exchanged for US dollars, euros, sterling and the yen.

“China is now the world’s biggest exporter and second-largest economy. We need to have increased use of the yuan, not only in trade but also in finance.

“It is not just China that wants to internationalize its currency. The rest of the world needs the yuan to have a balanced economic structure,” he said.

China and the UAE signed a 35-billion yuan ($5.5 billion) currency swap agreement during Premier Wen Jiabao’s visit to the country in January, a sign of China’s growing political and economic ties with the Gulf region.

To promote the yuan’s internationalization, the government-owned Dubai International Financial Center has set up a payment system that allows clearing and settlements using the Chinese currency.

Dubai’s latest step has been to encourage its domestic banks to offer yuan accounts. Mashreq Bank PSC, National Bank of Abu Dhabi PJSC and Emirates National Bank of Dubai PJSC have taken steps in that direction, and according to Saidi, they will establish branches in Shanghai by early next year.

According to government figures, China-UAE bilateral trade has grown 35 percent annually over the past decade, reaching $35 billion in 2011. It is expected to reach $100 billion in 2015.

Yuan trading “now only accounts for 4 percent of our overall trade. Given the vast volume of bilateral trade, there is every reason for the scope to expand rapidly”, he said.

He said there are good prospects for expanded use of the yuan in financial transactions. China has developed the offshore yuan-denominated bond market (using so-called dim sum bonds), but Saidi said it’s necessary for the nation to nurture the domestic markets before fully opening up and allowing free capital movement.

“The 12th Five-Year Plan (2011-15) calls for flexibility of the yuan, but the most important thing is the sequence of the reform.

“I expect that by 2015, the debt markets in China should be equivalent to about 30 percent of GDP to hit around 31 trillion yuan,” he said.

As financially resourceful investors, the Gulf countries are seeking alternative high-yield investments beyond the European and North American markets. To that end, Saidi called for more Chinese companies to list in Dubai to diversify their investments into high-growth countries.

UAE companies, especially in the energy and real estate sectors, have shown an interest in listing in China once the international board in Shanghai opens, he added.

The internationalization of the yuan should proceed at its own pace and avoid rapid appreciation of the currency, according to Tse Yung-hoi, deputy chief executive officer of Bank of China International Holdings Ltd.

Tse said it’s critical to establish a good currency backflow mechanism and a well-rounded offshore center.

Source: chinadaily.com.cn

Mines Minister Obert Mpofu told theSunday Mail that cabinet last week had decided to tell mining companies to bring back earnings from their Zimbabwe operations which were deposited in offshore accounts.

“We have been liberal. It does not make sense that mining companies are operating in the country and keeping money in offshore accounts,” Mpofu told the Mail.

“An order has been issued and they should all bring the money back into the country because the economy is now dollarised.”

COTINUE READING:

Link: http://www.miningmx.com/news/markets/Zimbabwe-orders-miners-to-bank-locally-paper.htm