Japan Sees Greater Hit to Economy Than First Estimated on Nuclear Crisis

Japan’s Economic and Fiscal Policy Minister Kaoru Yosano said the March 11 earthquake may result in a larger hit to the economy than previously seen, indicating a greater appetite for stimulus one month after the disaster. 

“The damage to the economy may be bigger than we initially expected,” Yosano told reporters today in Tokyo. “In addition to disruptions in the supply chain, we have the added seriousness of the situation with the nuclear power plant,” he said, referring to the Fukushima Dai-Ichi crisis that officials today said has a severity rating matching Chernobyl in 1986. 

Prime Minister Naoto Kan may need to turn to additional debt sales or to tax increases in coming months, given opposition at the central bank to funding deficit spending. A record of the Bank of Japan’s meeting last month showed today that officials refrained from any discussion of specific additional monetary stimulus they would be prepared to endorse. 

Stocks slid on concern that the economy faces a longer slump, with the Nikkei 225 Stock Average falling 1.7 percent. Consumers won’t be willing to spend until funds are deployed to the northeast and government rebuilding take hold, according to economist Noriaki Matsuoka. 

“There’s talk of a tax hike, but that risks exacerbating the drop in consumer confidence,” said Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “The BOJ will probably want to avoid increasing its monthly bond purchases because they think that would be similar to monetizing debt.”

Bond Underwriting

The central bank is barred by law from directly buying public debt from the government, and instead purchases 1.8 trillion yen ($21 billion) of the securities from lenders each month, an amount that’s been unchanged for two years. 

Confidence among merchants closest to Japan’s consumers tumbled at the fastest pace in March since the Cabinet Office began tracking the data in 2000, a survey showed last week. 

Analysts from Capital Economics Ltd. are now forecasting the economy will shrink 1.5 percent this year, revised from a previous estimate for gross domestic product to be unchanged. 

“GDP should then rebound as activity recovers from the initial shock and reconstruction spending kicks in, but the recovery will be held back by increases in taxes and cuts in other expenditure required to help pay for the government’s contribution,” economists led by Julian Jessop, chief international economist at Capital Economics, said in a note last week.

Damage Estimate

The Cabinet Office last month estimated damages from the earthquake and tsunami will be as much as 25 trillion yen, prompting several lawmakers to call for a stimulus package as large as 20 trillion yen. Those projections covered destruction to infrastructure while excluding wider implications to the economy, including how radiation will affect food and water supply. 

The government will make sure that victims of the nuclear disaster will be appropriately compensated and has asked Tokyo Electric to indicate when problems afflicting its nuclear reactors will be resolved, Kan told reporters today in Tokyo. He added that he wants opposition parties to help draft the government’s plans for reconstruction. 

Japan raised the severity rating of its nuclear crisis at Tokyo Electric’s Fukushima plant to 7 today, the highest reading. Increasing radiation has prompted the government to widen the evacuation zone and halt shipments of contaminated vegetables produced in regions surrounding the facility. 

Kan is aiming to compile the first stimulus this week that chief spokesman Yukio Edano says may be as much as 4 trillion yen. Finance Minister Yoshihiko Noda has said he wants to avoid selling new bonds to finance that first package, and today reiterated to lawmakers that it’s important for the country to demonstrate its commitment to fiscal discipline. 

Source: Bloomberg By Aki Ito and Keiko Ujikane

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Traders Bet Rising Interest Rates Delayed as Inflation Ebbs: Mexico Credit

Traders are betting for the first time in four months that interest-rate increases will be delayed after inflation slowed and Mexican central bank Governor Agustin Carstens signaled he’ll keep borrowing costs unchanged.

Futures contracts for the 28-day interbank rate, known as TIIE, show investors expect policy makers will increase the key rate from a record low of 4.5 percent as soon as August, according to data compiled by Bloomberg. As recently as April 4, they predicted Carstens would raise rates in July. In Brazil, where the central bank has boosted borrowing costs 100 basis points this year, futures indicate policy makers will increase the benchmark rate another 25 to 12 percent this month. 

Mexico is the only major Latin American country that hasn’t raised interest rates in the past year as consumer prices increase at the third-slowest pace in the region after Chile and Peru. While rising exports are fueling the expansion in Latin America’s second-largest economy, unemployment and slower private investment growth are helping keep inflation in check, Carstens said at a banking convention in Acapulco, Mexico, on April 7.

“We are seeing better signs of domestic demand recovery, but we still don’t think that’s going to force the hand of authorities to hike in 2011,” Gray Newman, chief Latin America economist at Morgan Stanley in New York, said in a telephone interview. “You can really divide up the region into two camps: the first camp is Mexico and the second camp is everyone else. In Argentina, Chile, Colombia, Peru, Brazil there’s a tremendous boom in private consumption. Mexico is the exception.”

Benchmark Yields

The yield on Mexico’s benchmark peso bonds due in 2021 fell 15 basis points, or 0.15 percentage point, last week and touched a two-month low of 7.43 percent yesterday, according to Banco Santander SA. The yield compares with 3.58 percent for 10-year U.S. Treasuries and 12.83 percent for similar-maturity Brazilian bonds denominated in reais. 

Inflation in Mexico slowed to 3.04 percent in the 12 months through March, the lowest level since May 2006. The rate is half the 6.3 percent recorded in Brazil, the region’s largest economy. Consumer prices in the U.S. rose 2.1 percent in February from a year earlier. 

“The Mexican economy still has enough slack to grow as it has been without generating inflationary pressures,” Carstens said on April 7, citing the country’s unemployment rate. 

Mexico’s jobless rate was 5.38 percent in February, compared with 3.24 percent in May 2008, according to the national statistics agency.

‘Mistake’

Mexico’s 6.1 percent contraction in 2009, the worst since 1995, means the economy still isn’t at levels from before the global financial crisis, according to Benito Berber, an emerging-market analyst at Nomura Securities in New York. Berber predicts the central bank won’t raise rates until the first three months of next year, in line with the median forecast in a survey of economists by Citigroup Inc.’s Banamex unit. 

“People are making a mistake when they compare Mexico to other countries in the region,” Berber said in a telephone interview. “Mexico never had the consumer demand they had. You have to remember that while Mexico contracted these other countries didn’t.” 

The International Monetary Fund and Mexico’s government raised their forecasts for economic growth in the past week. Gross domestic product will grow 4.6 percent this year after expanding 5.5 percent in 2010, the fastest in a decade, the IMF said yesterday. It previously predicted the economy would grow 4.2 percent.

Exports

Finance Minister Ernesto Cordero said Mexico may expand as much as 5 percent this year, up from a previous estimate of 4 percent, on U.S. demand for automobiles and other exports. The rebound in the U.S. last year helped drive Mexican exports to a record $298 billion. 

The central bank declined to comment because of its policy meeting this week, according to an official in the bank’s press office. 

Banco de Mexico will likely keep the lending rate unchanged at its meeting on April 15, according to the median estimate of 14 economists in a Bloomberg survey. 

Yields on the interbank rate futures contract maturing in July fell 4 basis points to 4.96 percent last week, indicating traders no longer expect a rate increase that month. The yield on the August contract fell 4 to 5 percent. They were both unchanged yesterday. In the past five years, the gap between the 28-day TIIE and the overnight rate has averaged 36 basis points.

Yield Spread

The extra yield investors demand to own Mexican dollar bonds instead of U.S. Treasuries was unchanged at 128 basis points at 8:44 a.m. New York time, according to JPMorgan Chase & Co. 

The cost to protect Mexican debt against non-payment for five years rose 1 basis point to 98, according to CMA. Credit- default swaps pay the buyer face value in exchange for the underlying securities or cash equivalent if the issuer fails to comply with debt agreements. 

The peso dropped 0.1 percent to 11.7658 per dollar. 

Inflation will quicken to 4.1 percent by August, increasing pressure on Carstens to raise borrowing costs, according to Alonso Cervera, chief Latin America economist at Credit Suisse Group AG. 

“If that materializes, there may be pressure on the central bank to react to that,” Cervera said in a telephone interview from Mexico City. “The central bank may be forced to do something as early as August.”

Breakeven Rates

The yield gap between debt tied to inflation and fixed-rate bonds, a gauge of investor expectations for annual price increases over the next five years, was 3.89 percent, according to data compiled by Bloomberg. The central bank has a target range of 2 percent to 4 percent. 

In Brazil, the so-called breakeven rate over the next two years was 6.81 percent. The government targets inflation of 4.5 percent, plus or minus 2 percentage points. 

“The mistake is to simply place Mexico in the same category as the rest of the region,” Morgan Stanley’s Newman said. “Mexico is the country whose performance looks most like a developed market, and it happens to be sitting in an emerging- markets region called Latin America.” 

Source: Bloomberg By Andres R. Martinez and Jens Erik Gould

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Gold Advances to Record on Weakening Dollar; Silver Tops $40

Gold rose, setting a record for the fourth time this week, as a weakening dollar boosted demand for the precious metal as an alternative asset and an inflation hedge. Silver climbed above $40 an ounce to a 31-year high. 

Gold rose to $1,476.40 an ounce in New York, the highest ever, after the dollar slid to the lowest level since December 2009 against a basket of six major currencies. Crude oil touched a 30-month high, and the European Central Bank yesterday raised borrowing costs from a record low to fight accelerating prices. 

“The Federal Reserve isn’t anywhere near an inflation fight as the ECB,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Gold’s move is about the weakness in the dollar. Inflation is the buzzword, and it’s the impetus behind the trade.” 

Gold futures for June delivery rose $16.60, or 1.1 percent, to $1,475.90 at 4:37 p.m. in after-hours trading on the Comex in New York. The metal settled up $14.80, or 1 percent, to $1,474.10 at 1:39 p.m. in floor trading. For the week, the metal gained 3.2 percent, the most since May. Gold for immediate delivery in London climbed as much as 1.2 percent to a record $1,475.52. 

Silver futures for May delivery advanced $1.056, or 2.7 percent, to settle at $40.608. After the close of regular trading, the price touched $40.945, the highest since January 1980, the year futures reached a record $50.35. This week, silver advanced 7.6 percent, the most since February. 

The difference between yields on U.S. 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for inflation, widened to as much as 2.64 percentage points, the most since March 2008. The Thomson Reuters/Jefferies CRB Index of 19 commodities rose to the highest since September 2008, led by gains in cotton.

ECB Raises Rates

The Fed has kept the benchmark rate at zero percent to 0.25 percent since December 2008 to stimulate growth. The ECB yesterday raised the main interest rate 25 basis points to 1.25 percent. 

“We just don’t hear anything about an inflation fight from the Fed,” Lesh said. “The Fed needs to move back to a neutral policy before they can even think of fighting inflation.” 

Gold extended gains after Congress and the President failed to agree on a federal budget. The dollar fell as much as 1 percent against the basket of currencies. 

“With the weakness in the dollar, the market is jittery about holding paper currencies and gravitating to the metals,” said Adam Klopfenstein, a senior market strategist at Lind- Waldock in Chicago. “The price of the metals reflects the chaos that will result from a lack of leadership from our Congressional leaders.”

Gold Over Dollars

Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter, advised clients to sell sterling and buy gold. Earlier this week, Gartman encouraged investors to sell Japanese equities and buy the precious metal. 

“With the monetary base skyrocketing, and with the U.S. dollar falling, gold has to move higher,” Gartman said. 

Silver held in exchange-traded products rose 27.57 metric tons to 15,423.09 tons yesterday, the highest level since at least February 2010, data compiled by Bloomberg from four providers show. 

Investors perceive silver as “a cheap vehicle with characteristics similar to gold as a store of value,” Morgan Stanley said in a report to clients today. The metal will average $31.39 this year, up 20 percent from a previous forecast, the bank said. 

Palladium futures for June delivery rose $13.95, or 1.8 percent, to $794.20 an ounce on the New York Mercantile Exchange, after touching a one-month high of $804. Platinum futures for July delivery gained $21.50, or 1.2 percent, to $1,812.10 an ounce on the Nymex. Earlier, the price reached $1,822.10, the highest since March 7. 

Palladium rose 2.5 percent this week while platinum gained 2 percent. 

 

Source: Bloomberg By Pham-Duy Nguyen  

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Treasury 10-Year Notes Slide for Longest This Year as Inflation Bets Rise

Treasury notes fell for a third week, the longest slump for benchmark 10-year securities this year, as traders bet inflation will accelerate, oil reached $113 a barrel and gold climbed to a record. 

An inflation gauge used by the Federal Reserve reached the highest level in a month as minutes of the central bank’s last meeting showed policy makers differed over whether to begin removing record stimulus. Data next week is forecast to show the consumer price index rose in March. The Treasury will sell $66 billion of notes and bonds next week. 

“The Fed’s acknowledging increasing inflation expectations,” said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, one of the 20 primary dealers that trade with the central bank. “That’s putting more pressure on yields. Momentum is going to be for higher rates.” 

The 10-year yield rose 14 basis points, or 0.14 percentage point, to 3.58 percent, from 3.44 percent on April 1. It touched 3.61 percent, the highest level since Feb. 18. The 3.625 percent note due in February 2021 fell 1 1/8, or $11.25 per $1,000 face amount, to 100 3/8. Two-year note yields increased one basis point to 0.81 percent in their third weekly rise, the longest stretch since November. 

Thirty-year bond yields climbed 16 basis points, the most since the week ended Feb. 4, to 4.64 percent. They touched 4.67 percent yesterday, the highest level since March 9.

Treasury Auctions

Treasuries also slid as the U.S. prepared to auction $32 billion of 3-year notes, $21 billion of 10-year debt and $13 billion of 30-year bonds in three daily sales starting April 12. 

A bond-market measure of inflation expectations that the Fed uses to help determine monetary policy, the five-year forward inflation rate, increased to 3.01 percentage points, the most since March 8. The measure has averaged 2.78 percent over the past five years. 

“Anticipation of inflation data and Treasury supply next week are sending Treasury yields even higher,” said Tom di Galoma, head of U.S. rates trading at Guggenheim Capital Markets LLC, a New-York based brokerage for institutional investors. 

The likelihood the Fed will boost interest rates this year is 36 percent, and the chance of one in the first quarter of 2012 is 70 percent, Federal funds futures contracts showed. The central bank has held the benchmark rate at zero to 0.25 percent since December 2008 to support the economy.

Dollar Slumps

The Dollar Index, which InterContinentalExchange Inc. uses to track the greenback versus the currencies of six major trading partners, sank to as low as 74.838 yesterday, the least since December 2009, as U.S. lawmakers struggled to reach a last-minute budget deal to avoid a government shutdown. 

U.S. government debt gained 0.8 percent during the 21-day government closure at the end of 1995 and the start of 1996, Bank of America Merrill Lynch indexes show. 

Fed policy makers were divided last month over whether to begin removing stimulus this year as they debated the path of policy after the completion of a $600 billion bond-purchase program, according to minutes of the March 15 meeting released this week. They have differed since then in public statements. 

The Fed is “near a tipping point” and risks over- stimulating the economy and generating inflation, Dallas Fed President Richard Fisher said yesterday in Dallas to the Society of American Business Editors and Writers.

Atlanta Fed President Dennis Lockhart said the Fed should take its time in withdrawing economic stimulus amid moderate growth and a quickening of inflation that will probably prove temporary. The economy has “a halting and fragile quality,” he said in a speech yesterday in Knoxville, Tennessee.

‘Transitory’ Increase

Fed Chairman Ben S. Bernanke said on April 5 policy makers must watch inflation “extremely closely” for evidence that rising commodity costs are having more than a temporary impact on consumer prices. If inflation expectations are stable and the rise in commodities slows, “the increase in inflation will be transitory,” he said after a speech in Stone Mountain, Georgia. 

The yield gap between 10-year Treasury Inflation Protected Securities and conventional U.S. notes, a gauge of trader expectations for prices over the life of the debt, reached 2.66 percentage points, the most since March 2008. The measure reached 2.74 percent in 2006 prior to the U.S. recession. It averaged 2.08 percent over the past five years. 

The consumer price index accelerated to 2.6 percent in March from a year earlier, from 2.1 percent in February, economists in a Bloomberg News survey forecast before the Labor Department reports the data on April 15. The Fed’s preferred measure of inflation, which excludes food and energy, increased at an annualized 0.9 percent in February.

Crude Climbs

Crude oil for May delivery climbed above $113 a barrel in New York yesterday for the first time since September 2008 amid skepticism Libyan output will rebound when fighting ends and as a weaker dollar increased demand for raw materials. Gold reached $1,475.60 an ounce. 

Treasuries also fell this week as the European Central Bank raised its main refinancing rate by a quarter-percentage point from 1 percent, where it had been since May 2009. 

Six- and three-month bill rates dropped as the Treasury cut to $5 billion from $200 billion the amount of outstanding Supplementary Financing Program bills it sells on behalf of the Fed in a program to support the financial system. The reduction was made as the U.S. approaches its debt limit. 

Six-month rates tumbled to a record 0.1048 percent. Three- month rates slid to 0.0203 percent, the lowest level since December 2009. 

Treasury yields are below levels seen in the past decade even as government borrowing increases. Ten-year rates climbed as high as 5.53 percent in 2001 as traders speculated on when the Fed would finish cutting borrowing costs. The rate has averaged 4.12 percent over the past 10 years. 

Source: Bloomberg By Daniel Kruger

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Euro Gains as European Central Bank Raises Interest Rates Before Fed, BOJ

The euro rose to a 15-month high against the dollar as the European Central Bank increased interest rates for the first time since the financial crisis and amid concern the U.S. is debasing its currency. 

The dollar fell for a second week versus the euro as U.S. lawmakers remained in a stalemate on a federal budget and the Federal Reserve plans to buy Treasuries through June to support faster economic growth. The yen weakened as the Bank of Japan added to economic stimulus to help the nation’s economy recover from last month’s earthquake. Higher yielding currencies, such as the Australian dollar, strengthened as signs of global growth boosted demand for riskier assets. 

“The underlying demand for the euro, because of the continued dislike for the dollar, is unrelenting,” said Ray Attrill, a senior foreign exchange strategist at BNP Paribas SA in New York. “The risk is that we’ll see U.S. interest rates trending lower at the same time that we get more confidence about further rate hikes in the rest of the world.” 

The euro rose 1.7 percent to $1.4483 in New York, from $1.4237 April 1. It touched $1.4444, the highest level since January 2010. The yen declined 2.6 percent to 122.76 per euro, reaching 123.08, the weakest since May 2010. Japan’s currency lost 0.8 percent to 84.76 per dollar.

ECB Acts

The ECB raised its key rate by 25 basis points to 1.25 percent April 7. The increase was forecast by all the economists in a Bloomberg News survey. 

“We did not decide that it was the first of a series of interest-rate increases,” ECB President Jean-Claude Trichet said during a press conference in Frankfurt. “We will continue to do in the future” what is appropriate “to ensure price stability,” he said. 

The rate increase came less than 24 hours after Portugal said it would request financial aid from the European Commission, becoming the third euro-zone country to do so after Greece and Ireland. A rescue package for Portugal may be worth as much as 75 billion euros ($107 billion), two European officials with knowledge of the situation said. 

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback versus the currencies of six major trading partners, including the pound and Canadian dollar, sank to as low as 74.838, the least since December 2009. It lost 1.3 percent to 74.855, from 75.833 last week.

Spending Measures

Congress failed to reach an agreement on spending measures for the 2011 fiscal year as of 5 p.m. New York time. The deadline to reach a resolution was midnight. 

The ECB’s decision to raise its main rate came as the central banks of other developed nations, including the U.S. and Japan, keep borrowing costs near zero to support their economies as they recover from the financial crisis. The Fed isn’t expected to raise its target funds rate until the first quarter of 2012 and the Bank of Japan will probably keep borrowing costs on hold for the next 12 months, the median estimates in two Bloomberg surveys show. 

The U.S. central bank has purchased $512 billion of Treasuries since November as part of its plan to acquire $600 billion by June. 

“Improved risk sentiment on the back of the global recovery is pushing the euro higher against the yen and dollar, especially now the market is convinced there will be further rate increases by the ECB,” said Hitoshi Asaoka, senior strategist at Mizuho Trust & Banking Co. in Tokyo, a unit of Japan’s second-largest bank.

Weak Yen

The yen dropped for a fourth straight week versus the euro, the longest losing streak in 20 months, on speculation the BOJ will continue with accommodative monetary policy to help its economy recover from a record earthquake on March 11. The BOJ April 7 unveiled a 1 trillion yen ($11.8 billion), one-year loan program to companies affected by the quake and tsunami as board members downgraded their economic assessment for the first time since October. 

A magnitude-7.1 aftershock, one of the strongest since the devastating earthquake March 11, struck Japan April 7 215 miles northeast of Tokyo, the U.S. Geological Survey reported on its website. None of the nuclear facilities reported distress, according to official and news media reports. 

Brazil’s real posted the best performance among the 16 major currencies after the government enacted measures to curb its rally that were weaker than some investors expected, and Finance Minister Guido Mantega said long-term appreciation of the currency is “inevitable.” 

The real rose 2.4 percent to 1.5689 per dollar. The currency has gained 48 percent since the end of 2008.

Brazil Tax

The government has changed tax rules three times since March 29 in an effort to slow the two-year surge in the real that’s crimping exporters’ profits. Mantega said April 6 the currency’s strength was, to some extent, “inevitable” due to the economy’s growth as he announced the government was broadening the scope of a 6 percent tax on foreign borrowing to include loans with maturities of up to two years from one year. 

Australia’s dollar rose for a third week versus the greenback after statistics showed the unemployment rate fell to 4.9 percent in March from 5 percent the previous month. Employers added 37,800 workers in March from the previous month, the statistics bureau said. 

Australia’s dollar gained 1.7 percent to $1.0564, reaching $1.0584, the strongest since it was freely floated in 1983. 

Source: Bloomberg By Catarina Saraiva 

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Gold Jumps to All-Time High on Concern About Inflation, Weakening Dollar

Gold rose to a record in New York and London as a weaker dollar and concerns about inflation and European debt boosted demand for the metal as an alternative investment. Silver climbed above $40 an ounce to a 31-year high. 

The European Central Bank yesterday lifted interest rates for the first time in almost three years to quell inflation even as Portugal sought a bailout. The dollar slid to the lowest level since December 2009 against six major currencies. Gold, which typically moves inversely to the greenback, has climbed on fighting in Libya and Japan’s earthquake and tsunami last month. 

“Inflation expectations are rising,” Walter de Wet, an analyst at Standard Bank Plc in London, said today by phone. European debt issues are “certainly adding support. Most of the rally the past few days has been on the back of the dollar weakening.” 

Gold futures for June delivery gained as much as $15.20, or 1 percent, to $1,474.50 an ounce and traded at $1,472.80 by 8 a.m. on the Comex in New York. Prices are up 3.1 percent this week, the most since December. The metal for immediate delivery in London was 0.9 percent higher at $1,471.56 after reaching $1,473.07. 

Gold futures reached a record 21,320 rupees ($483.70) per 10 grams (0.3 ounce) on the Multi Commodity Exchange of India Ltd. The country is the biggest gold consumer.

Libyan Stalemate

U.S. Army General Carter Ham, who commanded the opening phase of the allied military operation in Libya, yesterday said the overall conflict is settling into a stalemate between regime forces and rebel fighters. North Atlantic Treaty Organization commanders are deploying more warplanes in their effort to halt forces loyal to Muammar Qaddafi. 

The difference between yields on U.S. 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for inflation, widened to as much as 2.62 percentage points, the most in 33 months.

“Geopolitical risk in the Middle East and Africa, deepening inflation and the Black Swan risk of natural disasters” is boosting precious metals, GoldCore Ltd. analysts in Dublin said in an e-mail. “The gold and silver markets are experiencing a perfect storm. Debt concerns in the euro zone and in the U.S.” are supporting prices, the analysts said. 

President Barack Obama said he hopes lawmakers can reach a last-minute deal today to avert a government shutdown after a third round of talks with congressional leaders last night failed to end an impasse over the federal budget. 

Japan’s biggest aftershock since the March 11 earthquake yesterday left two dead and millions without power in the areas hit hardest by last month’s tsunami. The magnitude-7.1 temblor hindered efforts by Tokyo Electric Power Co. to prevent hydrogen explosions at its Fukushima Dai-Ichi nuclear plant.

Silver Surges

Silver for May delivery in New York climbed as much as 2 percent to $40.335 an ounce, the highest level since January 1980, the year futures reached a record $50.35. It last traded at $40.29. An ounce of gold bought as little as 36.48 ounces of silver in London today, the least since September 1983, data compiled by Bloomberg show. 

Silver held in exchange-traded products rose 27.57 metric tons to 15,423.09 tons yesterday, the highest level since at least February 2010, data compiled by Bloomberg from four providers show. 

Investors perceive silver as “a cheap vehicle with characteristics similar to gold as a store of value,” Morgan Stanley said in a report to clients today. The metal will average $31.39 an ounce this year, up 20 percent from a previous forecast, the bank said. 

Palladium for June delivery was up 2.7 percent at $801.35 an ounce after touching a one-month high of $804. Platinum for July delivery gained 1.6 percent to $1,818.70 an ounce. It earlier today reached $1,822.10, the highest price since March 7. 

Source: Bloomberg By Nicholas Larkin 

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Canada Dollar Rises to the Strongest Level Since 2007 as Oil Price Surges

Canada’s dollar appreciated to the strongest level in more than three years against its U.S. counterpart as crude oil, the nation’s largest export, rose above $111 a barrel for the first time since 2008. 

Canada’s currency briefly pared gains after a government report showed the economy unexpectedly lost jobs for the first time in six months in March. Oil rose as a fire burned at Libya’s Sarir field, bolstering concern that unrest in the region will further reduce supply. The U.S. dollar weakened against 14 of its 16 most-traded peers. Global stocks gained. 

“Equity markets are up, the U.S. dollar is weak and commodities are booming, which is a formula for Canadian dollar strength,” said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. in New York. “Canada’s data numbers are the second story.” 

The Canadian currency, nicknamed the loonie for the image of the aquatic bird on the C$1 coin, strengthened 0.3 percent to 95.50 cents per U.S. dollar at 9:39 a.m. in Toronto, from 95.82 cents yesterday. It touched 95.27 cents, the strongest since 2007. 

Crude oil for May delivery rose 0.8 percent to $111.20 a barrel in New York. It touched $111.90 a barrel, the highest since September 2008. Gold for June delivery surged to a record $1476.80 an ounce.

Raw Materials

 

The Thomson Reuters/Jefferies CRB Index of raw materials gained for the seventh consecutive day, increasing 0.5 percent. 

Raw materials, including oil and gold, account for about half of Canada’s export revenue. 

The MSCI World Index increased 0.6 percent, while the Standard & Poor’s 500 Index gained 0.3 percent.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against six of its major trading partners including the Canadian dollar, fell to 75.061, the lowest level since December 2009. 

Employment fell by 1,500 last month, Statistics Canada said today in Ottawa. The number was lower than forecast by all 25 economists in a Bloomberg News survey that had a median estimate of a 28,000 gain. The unemployment rate declined to 7.7 percent from 7.8 percent as predicted, as the labor force shrank by 14,900 people. 

Canada’s dollar remained higher after the report as investors focused on the 90,600 gain in full-time work, the biggest since September 2009. The increase almost matched the 92,100 drop in part-time employment, which was the biggest in records dating to 1976. 

“There’s a broader trend of a weak U.S. dollar so the market was quick to dismiss Canadian employment,” said Camilla Sutton, a Bank of Nova Scotia currency strategist in Toronto. 

Canadian government bonds fell, pushing the yield on the benchmark 10-year note up four basis points, or 0.04 percentage point, to 3.47 percent. The price of the 3.5 percent security maturing in June 2020 dropped 27 cents to C$100.24. 

Source: Bloomberg By Alexandra Harris  

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