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Ukrainian Debt Still Not Financed

During early trading on Friday, the Japanese yen rose against the United States dollar. Despite having sharp drops over the last two weeks, it managed to retrace some of its losses. The greenback lost 0.3 percent versus the yen to a level of 82.19. On Thursday, it hit a 7-1/2 month peak of 82.84 yen. This marks the greenback’s strongest level versus the yen since early April of 2012.

Over the last two weeks, the United States dollar has risen 3.4 percent versus Japan’s currency. Much of the rise has been attributed to expectations that japan may embark on a new fiscal easing policy. On December 16, Japan will be holding snap elections. The Liberal Democratic Party is widely expected to win additional seats. The leader of the opposition party, Shinzo Abe, has made headlines in the last few weeks for his desire to adopt an unlimited monetary policy in Japan. The Liberal Democratic Party wants to set a two percent goal for inflation and have the Bank of Japan purchase bonds. These bonds would then be used to fund government projects. These objectives have hit world markets hard and caused many investors to sell of the yen. It has also caused a backlash in Japan and many citizens have advocated for more independence for the Bank of Japan.

The euro dropped by 0.2 percent versus the Japanese yen to a level of 105.92. On Thursday, it hit a seven month peak of 106.585. Europe’s common currency has risen slightly over the last week as expectations for the next bailout tranche in Greece have increased.  The Australian dollar also lost out against the euro during Friday’s early morning session.

Ukrainian Outstanding Debt

On November 20, the Ukrainian government managed to raise $1.25 billion in a bond sale. Despite the additional funds, the government is still running out of financing options for the $4.3 billion it owes in foreign-currency debt. To tide over the Ukrainian government, the International Monetary Fund has allowed Ukraine’s loan to be suspended until the end of this year. Ukraine wants the International Monetary Fund to extend the $15.4 billion suspension again to help the government fund operations.  

Ukraine’s economy was one of the hardest-hit in the world during the 2008-2009 global recession. Since recent debt crises in Europe have tamped down demand for exports, Ukraine’s steel production has suffered from a decline in buyers. Presently, Ukraine has the sixth highest risk of default among 93 countries. International reserves have dropped to their lowest levels since 2010 and are presently at $26.8 billion. Meanwhile, the Ukrainian Equities Index has fallen by 40 percent since the start of this year.

The Ukrainian economy has fallen by 14.8 percent since 2009 and dropped 1.3 percent since this time in 2011. Bonds in the nation are yielding 7.9 percent which is 6.187 higher than similar bonds in the United States. To garner investors, Ukrainian must pay this large amount.

To fix the lack of funds, some investors have advocated making a deal with Russia or the International Monetary Funds on gas prices. Ultimately, Ukraine will have to find an alternative to selling bonds. Currently, it sells off bonds each time it needs to fund its debt repayment to the International Monetary Fund. Ukraine will need to adopt IMF measures and budget cuts if it wants to get back into the black.

The Greek Bailout Tranche

Versus the United States dollar, the euro managed to hold steady at a level of $1.2886 on Friday. On Thursday, it hit a three-week peak of $1.2899. Much of the recent rise in the euro was caused by statements made by German Chancellor Angela Merkel on Wednesday. Despite an uneventful meeting of the Eurozone finance ministers earlier in the week, Merkel announced that the Eurozone could still decide to release aid money on Monday.

In recent weeks, the Eurozone has delayed giving Greece its latest aid tranche. The IMF and European Central Bank want to ensure that Greece holds to new austerity measures and budget cuts.

On Friday, the euro could see a strong movement after Germany releases data about business morale. The IFO business climate index is used to determine the health of the German economy. In October, it was at 100.00, but many analysts believe that it will drop to 99.5 in November.

Asian Currencies Expected to Rise

Although the week is not quite over yet, it appears like many Asian currencies may post their first weekly gain in a month. The Philippine peso led the growth with a 0.6 rise to 41.073 versus the United States dollar. The South Korean won advanced by 0.5 percent over the past five days to a level of 1,086.25 while the Chinese yuan rose 0.13 percent to 6.2277.

Meanwhile, investors from overseas added an additional $625 million into the stock markets in the Philippines, South Korea and Thailand. Much of the new growth was attributed to the preliminary release of China’s manufacturing index. According to the data, China most likely experienced its first increase in output for more than 13 months. In Taiwan, data from November 20 shows a higher-than-expected advance. Malaysia also reported a gross domestic product of 5.2 percent for the third quarter. Previously, it was expected to have just a 4.8 percent increase.

Despite appreciating for the week, the South Korean won lost some of its advances over the last three days. Many analysts have expressed concerns that the Korean government will try to stop the won from appreciating. On Thursday, Deputy Finance Minister Choi Jong Ku of South Korea announced that many of the changes in the won’s value were due to herd behavior. If required, the government would take action to stop the value from fluctuating excessively. Over the last year, the won has advanced 6.1 percent versus the greenback.

In Thailand, the baht appreciated by 0.1 percent over the last week to reach 30.72 against the United States dollar. The Indonesian rupiah remained stable at 9.628 while Vietnam’s currency dropped by 0.1 percent to 20,845. In Taiwan, the Taiwanese dollar advanced by 0.5 percent to reach a level of NT$29.140.

 

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