September 12, 2011
The Kuwaiti dinar (KD) exchange rate increased against the US dollar to 0.275 Kuwaiti dinar, and decreased against the euro to KD 0.375, the state’s official monetary body, the Central Bank of Kuwait (CBK), said on Sunday.The KD stabilized against the Sterling pound at KD 0.437, and kept to KD 0.003 per Japanese yen, whereas it went down at KD 0.311 per Swiss franc, the daily CBK bulletin said.
In other news, major US central bank events took place this week, without providing any assurance for risk appetite. The key disappointment was the lack of discussion of policy options by Fed Chairman Bernanke on Thursday, leaving ‘operation twist’ the most likely outcome of the Sept. 20-21 Fed meeting. President Obama’s $447 billion of stimulus package has delivered little to ease concerns and markets nervousness, stated National Bank of Kuwait’s (NBK) Weekly Money Markets Report.Back in Europe, hopes of coordinated policy actions fell steadily when the Bank of England (BOE) left policy unchanged, and the European Central Bank (ECB) removed their tightening bias while failing to signal more aggressive action.
The ECB tone was dovish as expected, saying that downside risks to growth have intensified and risks to price stability were now seen as balanced. While markets are already pricing rate cuts by the ECB, Trichet’s comments showed that the ECB seems highly sensitive to the upcoming news flow, which could imply that the reversal of prior rate hikes has become more likely. Greece remains the biggest negative factor with March 2012 Greek debt trading under 60 cents.
The situation slipped out of control on Friday when Juergen Stark resigned from the ECB Executive Board in protest over the bank expanding its bond-buying program that started with Greece.The euro was unable to sustain any rally and weakened to reach a low of 1.3627 on Friday, and closed the week at 1.3656. The Sterling pound on the other hand was supported above the 1.5900 level, as the BOE decision offered no quantitative easing bias.The Swiss National Bank (SNB) shook markets on Tuesday after it decided to re-run its 1978 strategy of setting a ceiling for the Swiss franc.
Indeed, the SNB announced that it would set a floor for the euro/franc cross of 1.20 and would intervene in the spot market to reinforce its commitment to achieving this target. The SNB short statement contained a commitment to intervene with the utmost determination and to buy foreign currencies in “unlimited amounts” to enforce the minimum target of 1.20.Meanwhile, the report stated that Japan’s new Finance Minister Azumi raised the prospects of an intervention as early as this weekend, by saying he will tell G7 ministers in this weekend’s meeting in France that Japan will take decisive steps against excessive foreign exchange (FX) moves.
Japan’s final second quarter (Q2) gross domestic product (GDP) figures showed the economy shrinking by a faster -0.5 percent but right in line with market expectation. On a seasonally adjusted annualized basis, the economy shrank by -2.1 percent year-on-year.
