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Asian currencies may fall 10% this year

Sterling was steady against the dollar yesterday as risk appetite was boosted by optimism that policymakers may stave off a Greek default for now, but signs the Bank of England may adopt more stimulus measures hampered rallies. The pound was down slightly versus the euro, with the single currency supported on news international lenders are resuming their mission to Athens today and that euro zone finance ministers will meet in October to discuss the release of more aid, key for Greece to avoid default. Appetite for riskier assets like stocks and commodities and currencies, like the pound, which have a tight correlation to these assets, have been at a low ebb in recent sessions. Selling of those assets has gathered pace on worries about a possible default in the euro zone and cooling growth prospects. Against the dollar, sterling was close to flat on the day at $1.5640. Expectations have risen that the Bank of England will resort to more quantitative easing. BOE policymaker Ben Broadbent this week said the UK currency was likely to remain weak for some time and that a weak global economy would put downward pressure on inflation.
Data 07.00: Nationwide house prices came in as expected at 0.1%


The euro advanced against 13 of its 16 major counterparts before German lawmakers vote on changes to a European bailout fund. The single currency rallied versus the dollar, reversing a decline yesterday, on speculation German Chancellor Angela Merkel will gather enough support among her coalition for today's vote on the European Financial Stability Facility. The euro rose to $1.3610 this morning in London from $1.3540 in New York yesterday, when it lost 0.3 percent. The vote in Berlin on changes to the EFSF would allow the fund to buy bonds of distressed states and offer emergency loans to governments. The main opposition, Social Democrats and Greens have said they will vote with Merkel's government.
Germany to vote on EFSF expansion.


Federal Reserve Chairman Ben Bernanke said the US is facing a crisis with a jobless rate at or above 9 percent since April 2009, and that fiscal discipline would help spur the economic recovery. The chairman is contending with the most opposition on the Federal Open Market Committee in almost 19 years, with three policy makers opposing the central bank's decision last week to push down longer -term interest rates. The speech was Bernanke's first since the Fed announced on September 21 that it would replace $400 billion of short term debt in its portfolio with longer term Treasuries in an effort to further reduce borrowing costs and strengthen the flagging economy. US growth has stalled even as the Fed purchased $2.3 trillion in assets in two rounds of quantitative easing and held interest rates near December 2008.
Data 13.30: Unemployment Claims; 15.00: Pending Home Sales m/m.


•    An Asian benchmark currency index may drop 10 percent to the lowest level since March 2009 by year-end should losses widen at the same pace seen in 2008, according to technical analysis.  
•    The Australian and New Zealand dollars strengthened versus their US and Japanese peers, as Asian stocks reversed earlier losses, supporting demand for higher yielding currencies.


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