The demand for the 4 week US Auction bill drew a tentative
bid on Tuesday. This was partially due to the crowed auction calendar and a
near zero yield.
The US stock market on the other hand gained which damped
the overall bid for the government debt.
According to the analysts, the sale of 4 week bills received
a 4.32 ratio of bids which is less than those accepted last week.
Thomas Simons, money market economist at Jefferies & Co.
in New York said, "Dealers took 61.9 percent of the sale, more than last
week's 43.9 percent takedown as the buyside stepped away from this auction."
Simons further added, "Perhaps a crowded auction
calender drove away the buyside, but it looks like the level of the auction was
just too rich for investors to be too interested."
The bank to bank lending rates for three month euro reached
a five month high on Tuesday. Maria Fiorini Ramirez, president and CEO at Maria
Fiorini Ramirez Inc, said that it was a rolling crisis. She further added, ?"Just
when you think that everything has been sorted out, something else is going to
blow up on you."
The euro LIBOR/Overnight Index Swap spread which is a gauge
of the market stress rose by one basis point to 24 bps.
 The three month
dollar Libor stood at 0.53688 percent. It was previously recorded at 0.53719
percent on Monday.

Gold hit a record high of $1250 an ounce as the outlook for the Europe`s economic recovery looked bleak.
The ratings agency Fitch warned the United Kingdom that it faced a formidable challenge in its plan to cut expenses.
Spot gold traded as high as $1251.50 an ounce and at 0956GMT, it traded at $1.247.45 an ounce. In the late Monday trading, gold traded at $1,238.05.
US gold futures for August delivery was $1,254.50. It later gained $9.20 to trade at $1,250 an ounce.
Trade analyst at Commerzbank, Daniel Briesemann said,"It is mainly the fear of another slide into recession which is seeing demand for gold as a safe haven."
He further added that there was a lack of confidence due to the uncoordinated measures against the sovereign debt crisis and that this was affecting both the euro and the dollar.
Euro priced gold traded at $1,050.86 euros an ounce whereas gold traded in Pound Sterling hit an all time high of 869.87 pounds. Gold traded in Swiss Franc traded at 1,450.40 francs.
Technical analysts at Barclays Capital in a note said, "Gold in dollars broke through $1,232 retracement resistance, clearing the way for a retest of $1,250..., while gold in euro terms again made new bull market highs."

Britain has fined the US firm JP Morgan a staggering amount
of $49.12 million for failing to protect the clients` money.
In a statement, the Financial Services Authority (FSA) said
that JP Morgan had failed to protect client money of between $1.9 billion and
$23 billion between November 2002 and July 2009.
Margaret Cole, the head of FSA`s enforcement said, "This
penalty sends out a strong message to firms of all sizes that they must ensure
client money is segregated in accordance with FSA rules. Firms need to sit up
and take notice of this action -- we have several more cases in the pipeline."
According to the client money rules of FSA, the companies
have to protect the client?s money and keep them in segregated accounts with
trust status. JP Morgan failed to comply with this rule of the FSA. The error was undetected for seven years. No client suffered
any losses but the FSA was keen to stick to its guidelines.
The FSA recently had to handle accusations about failing to
spot and stop excessively risky banker behavior, a main trigger to the worst
financial crisis since World War II.
JP Morgan cooperated with FSA because of which the fine was
reduced by 30 percent as per the FSA guidelines. The original fine amount was 47.6 million pounds. JP Morgan
in London was unavailable for comment.

Dollar falls:
The share market rose as investors? risk aversion eased with
the strong US economic data. This rise led to the weakening of the US currency.
The Japanese currency Yen, which is considered as a low risk
due to low yield weakened due to the improving risk appetite.
The demand for the riskier currencies rose due to the
speculation that the US job data due to be released on Friday would be strong.
Marcus Hettinger, global currency strategist at Credit
Suisse in Zurich said,? "Equity markets are looking better today, At least
for today, we're seeing some stabilization in risk appetite."
The euro traded at $1.2285 a rise of 0.3 percent by 0936
GMT. The euro fell to its lowest of$1.2110 on Tuesday. This was the lowest
recorded by the euro in more than 4 years.
Both the Australian dollar and New Zealand dollar gained 1
percent pushing the US dollar index down 0.3 percent to reach 86.555
Japanese Yen faced general selling pressure which helped the
euro to gain 1 percent. The exchange rate of euro to yen was 114.17
The implied volatility of Euro/Dollar was at 15.5 percent.
The volatility had reached a high of 19 percent in late May.
 US Greenback sags, stocks rally:
On Thursday, the stocks hit a two week high whereas the US
dollar sagged. The commodity prices rose due to the improving inclination
towards risk investments.
 The demand for higher
yielding currencies like the New Zealand dollar hit a two week high against the
US dollar.
Investors were jubilant after data showed that the house
sales rose to a six month high in April.
David Buik, partner at BGC partners said, ?Yesterday's news
on U.S. pending home sales and auto sales are signs confidence is improving in
the economy.? Buik further said that they were also expecting a decent non-farm
payroll numbers which are expected to be out on Friday.
Global stocks measured using the MCSI index gained 1.4
percent; emerging markets stocks gained more than 2 percent.
The top European shares measured using the FTSEurofirst 300
index gained 2.1 percent. Shares like Banco Santander and Barclays gained the
most.
The continuous four day loss registered by the energy stocks
came to an end as the stocks gained 4.6 percent.
Dollar and yen weakened due to the improving risk appetite.
The dollar rose 0.5 percent against the yen to trade at
92.60 and against the euro t gained 0.9 percent to trade at 113.97 yen.

China`s benchmark repo rate eased marginally on Thursday as
the central bank`s operations improved the onshore liquidity.
The cash injections by the authorities in Singapore and the
falling currency futures helped the drop in interbank rates.
The interbank swap rates fell 14 basis points to 0.40 on
Thursday. The rates have been falling consistently for the past week. These
rates are derived from the Singapore dollar forwards and are implied yields.
Analysts are of the opinion that the improvement is due to
increased cash availability and a move in US dollar futures. The move in the US
dollar forwards is attributed to receiving US dollar forwards by the Monetary
Authority of Singapore.
A Singapore trader said," I guess it's just the fact that
the MAS has been giving out a lot of liquidity, receiving U.S. dollars, and the
situation in Europe seems to be taking a breather."
The three month Singapore dollar was quoted at an average of
0.539 percent.
The spread between LIBOR and overnight indexed swaps was 34
bps, the widest in 11 months.
Most of the analysts agree that the problem is because of
the solvency of European banks rather than the non availability of cash.
The 7-day bond repurchase rate fell more than 12 bps to
3.1526 percent.

 
On Wednesday, JP Morgan Chase & Co was
sued by Lehman Brothers Holdings Inc. Lehman brothers accused JP Morgan of
illegally siphoning billions of dollars of desperately needed assets triggering
bankruptcy.
 
Lehman brothers accussed JP Morgan of
accessing its internal distress information to extract $8.6 billion in
collateral in four days. Lehman filed for bankruptcy on September 15, 2008.
 
Acording to Lehman, JP Morgan knew about
the weakening position of Lehman and the officials including Chief Executive
Jamie Dimon decided to extract money from the collateral.
 
The complaint said, ?With this financial gun to Lehman's head, JPMorgan was able
to extract extraordinarily one-sided agreements from Lehman literally
overnight," the complaint said. "Those billions of dollars in
collateral rightfully belong to the Lehman estate and its creditors."  
Lehman and its official committee of
unsecured creditors are expecting $5 billion in damages. However, JP Morgan
spokesman Joe Evangelisti called the lawsuit meritless and added that the bank
would protect and defend itself from the lawsuit.
 
Lehman has also sued Barclays Plc to the
tune of $11.2 billion from the takeover of US assets.
 
Lehman's downfall is attributed to the
swelling of its balance sheet due to exposure to commercial real estate,
subprime mortgages and other risky sectors.
 
Lehman is the largest US company to go
bankrupt with $639 billion of assets

The talks between the US and China on
appreciating the Yuan ended on Tuesday. The US has given the nod to China to
maintain its current peg.
 
Chinese currency Yuan has been pegged to
the US dollar for the past 22 months without revaluation. The talks that
concluded at Beijing hint towards the possibility of China revaluing its
currency earlier than expected.
 
U.S. Treasury Secretary
Timothy Geithnersaid that revaluing of the Yuan was in
the best interest of China.  
However, Mark Williams at Capital Economics
said,"It leaves the U.S. administration wide
open to criticism that it is not speaking up for U.S. interests if China does
not restart reform soon."  
He further added that it seemed reasonable
to conclude that US officials were still confident about the revaluation of
exchange rate that was imminent.
 
Yuan depreciated in offshore forwards on
Tuesday which implied a 0.6 percent apreciation against the dollar in the next
year. A month ago the appreciation was expected to be around 4 percent.
 
Wang Han, senior
economist at research group CEBM in Beijing said, "The uncertainty hanging
over yuan reform is the reduced confidence in the euro, and nobody knows when
market sentiment will recover."  
With the G20 meeting in Toronto next month,
China wouldn't want fingers pointing at its currency peg as the reason for
global economic imbalances.

The shares of Foster’s Group, the Australian brewer gained as much as 8.7 percent on Wednesday as the company unveiled plans to demerge its Beer and Wine operations.

The plan gave raise to speculations on a possible takeover. The demerger which is expected to be completed by the second quarter of 2011 would yield Foster 100 million Australian dollars in annual savings.

Oil rate dropped below $70 a barrel on Tuesday, a drop of more than 2 percent. Investors were risk averse and migrated to the dollar from the euro.

U.S. crude oil fell 2.08 percent or 1.46 dollar to settle at 68.75 dollar per barrel. Crude traded in the range of $67.15 to $69.91 per barrel.

The head of Dubai’s Supreme Fiscal Committee said on Sunday that Dubai and the United Arab Emirates would implement emergency financial reforms to tackle the failing financial systems in their countries.
The head of Emirates group, Sheikh Ahmed bin Saeed al-Maktoum said that the committee was working towards establishing a comprehensive program to address the vulnerabilities in their financial systems.
At the opening of the two day MENASA economic form Sheikh Ahmed bin Saeed al-Maktoum said, “At a federal level, urgent steps are being taken to address the gaps in the UAE's legal and regulatory infrastructure.”
He further added that the Federal Government would issue a public debt law by the end of this year.
The Government is also expected to establish a debt management office to coordinate the raising of debt for Government related entities.
In Dubai, the debt decision making would be centralized through setting up a similar debt management unit.
In November 2009, Dubai said that it might freeze payments by Dubai World, its largest conglomerate, creating panic over sovereign debt.
Dubai World’s total debt is about $60 billion which includes liabilities. Dubai’s total debt is estimated between 80 and 100 billion U.S. dollars. Some analysts however say that the debt could be as high as 170 billion dollars.