Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that meetings of the International Monetary Fund over the weekend failed to resolve the tensions in global foreign exchange markets that have come to be known as the 'Currency Wars'. \
Markets are now expecting the US Federal Reserve to unleash a second round of quantitative easing from November 3 after very employment data over the weekend.
The US dollar continued to fall against some currencies. It fell to a 15 year low vs the Yen overnight, increasing the pressure on the Bank of Japan to ramp up its own programme of quantitative easing or money printing.
This 'beggar thy neighbour' race to the bottom in currency markets is putting huge pressure on currencies in developing nations and those that depend on commodity prices (including Brazil, India, Russia, Australia, South Africa and New Zealand), who are seeing their currencies rise.
Ukraine, Brazil and India and all indicated over the last week they will intervene to try to keep their currencies down in the face of mass money printing by America, Japan and China, which is refusing to let its currency rise vs the US dollar. Europe is also expected to join the race to the bottom, with growing noises of concern from the ECB about the rising euro.
Gold bounced back to US$1,350/oz as investors hunted for hard assets immune to the competititive devaluations of Fiat (paper money) currencies.
Meanwhile, China appeared to tighten monetary policy overnight to try to control the inflationary pressures coarsing through its economy as it builds up export surpluses and foreign reserve surpluses.
China temporarily raised reserve requirements for 6 banks by 50 basis points.
The pressure on China to let its currency rise as an automatic stabiliser to reduce these imbalances. China is set to announce a US$17.8 billion trade surplus for September. China's surplus for the year is expected to top US$200 billion, boosting its foreign reserves to US$2.5 trillion.
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