Dollar dips as investors expect new Fed stimulus

NEW YORK: The dollar dipped against other major currencies Monday as investors bet the Federal Reserve would provide more stimulus to the lackluster US economy at its rate-setting meeting this week.

The euro was buying $1.2939 at 2200 GMT, up from $1.2928 at the same time Friday.

Against the Japanese currency, the European currency weakened to 106.53 yen from 106.64 yen late Friday, while the dollar edged down to 82.33 yen from 82.46 yen.

"We believe the weakness in the greenback reflects the market's expectations for easier monetary policy from the Fed," said Kathy Lien of BK Asset Management.

The US central bank's policy-setting Federal Open Market Committee opens a two-day meeting Tuesday. Stubborn high unemployment and the looming fiscal cliff challenge give the Fed every reason to expand its stimulus efforts, analysts said.

Gathering just before its "Twist" asset-swap operation expires at year-end, there are signs the FOMC will replace it with more outright bond purchases, or "quantitative easing," aimed at lowering interest rates to encourage businesses to invest and hire.

"Given the increasing uncertainty about America's looming fiscal crisis, the Fed is likely to signal that it will continue its outright purchases of mortgage and agency bonds worth $85 billion and maintain lending rates near zero until mid-2015," said Omer Esiner of Commonwealth Foreign Exchange.

"If the Fed signals that further easing next year is likely, the dollar could suffer."

Against the Swiss currency, the dollar fell to 0.9335 francs from 0.9343 francs late Friday.

The British pound fetched $1.6075, up from $1.6039.

Asian markets hit by US 'fiscal cliff' fears

HONG KONG: Fears the US economy is facing another huge economic crisis spurred a sell-off in Asian markets Thursday as Barack Obama's re-election raised the spectre of another dangerous stand-off in Washington.

Investors fear a deeply divided Congress will not be able to reach an agreement to avoid a so-called fiscal cliff at the end of the year that many say will send the United States back into recession.

Eyes are also on Beijing, where the Communist Party has kicked off its 18th congress, which will see the beginning of a once-in-a-decade leadership change.

Tokyo stumbled 1.27 per cent by the break, Hong Kong skidded 1.24 per cent, Sydney lost 0.85 per cent, Seoul was 0.89 per cent lower and Shanghai fell 0.87 per cent.

The initial upbeat reaction Wednesday to Obama's victory over Republican Mitt Romney was replaced Thursday with trepidation as the focus turned to the fiscal cliff, a combination of deep spending cuts and huge tax hikes to take effect on January 1.

The package is a major threat to the economy after a protracted but possibly reckless compromise was agreed last year between Democrats and Republicans in order to raise the country's borrowing cap.

If it kicks in, the United States' slow recovery from the financial crisis could be reversed and the economy tip back into recession, which would in turn deal a major blow to the global economy.

And with Democrats holding the Senate while the Republicans hold the House of Representatives analysts say a compromise could be as tough to find as last August, when the row over the spending limit saw the country lose its AAA sovereign debt rating.

"Immediately after the re-election parties ended, markets returned to the daunting issue of the US 'fiscal cliff'," Nicholas Smith, Japan strategist for CLSA in Tokyo, told Dow Jones Newswires.

Wall Street, which had favoured a pro-business Romney win, tumbled on Obama's victory.

The Dow dived 2.36 per cent, the Nasdaq shed 2.48 per cent and the S&P 500 lost 2.37 per cent.

Currency markets also reacted negatively.

The dollar fell to 79.87 yen in early Asian trade, from 79.96 yen in New York late Wednesday, as investors seek out the safe Japanese unit amid times of economic uncertainty.

And the euro was also hit by traders becoming more risk-averse. The single currency, which rose against the dollar Wednesday on expectations of continued loose US monetary policy under Obama, fetched $1.2757 in Tokyo, compared with $1.2767 in New York. It had reached $1.2860 on Wednesday in Asia.

The European currency also fell to 101.87 yen, compared with and 102.09 yen.

Market sentiment was also pressured after the European Union slashed its eurozone economic forecast and European Central Bank chief Mario Draghi warned that the eurozone's woes were beginning to hurt Germany, the bloc's powerhouse.

However, Greek lawmakers did manage to pass a crucial austerity package that opens the way for it to qualify for a fresh batch of bailout cash.

In China the week-long congress is expected to see the anointment of the country's next leaders, with the focus on the composition of the Communist Party's top governing body for signs of future policy direction.

In a speech to open the event President Hu Jintao called for the country's future leadership to "speed up the creation of a new growth model and ensure that development is based on improved quality and performance".

Oil prices rose, with New York's main contract, light sweet crude for delivery in December, adding 42 cents to $84.86 a barrel and Brent North Sea crude for December delivery gaining 41 cents to $107.23.

Gold was at $1,716.60 by 0300 GMT compared with $1,729.40 Wednesday.

Election over, Obama to face same weak economy

WASHINGTON - Americans have given President Barack Obama the benefit of doubt that he has the best fix for the ailing US economy.

In reality, there may not be much he can do to speed up growth and employment.

Obama edged out Republican Mitt Romney in the race for the White House on Tuesday, a victory made more difficult by voter frustrations over the sluggish pace of the economy's recovery and worries about sky-high public debt.

The president's best chance to kick-start faster growth is to remove the recession threat posed by the US$600 billion (S$733 billion) in tax hikes and government spending cuts known as the "fiscal cliff,"which is already weighing on business investment decisions.

And all the better if he can do that in concert with securing a longer-term deal that puts the budget on a more sustainable path - a tall order given the still-divided nature of Washington politics.

"Obama will have to nail down some of these fiscal issues in order to get the economy moving quickly," said Mark Zandi, chief economist at Moody's Analytics in West Chester, Pennsylvania."If he is unable to do that, we're going to be stuck."

The world's largest economy has struggled to achieve anything like strong growth since climbing out of the deep 2007-09 recession.

Annual gross domestic product expanded by an average of just 2.1 per cent over the last two years.

Only about 4.5 million of the 8.7 million jobs lost during the downturn have been recouped. About 23 million Americans are either unemployed or underemployed, many of them having to settle for part-time work.

Not only is government borrowing at an unsustainably high rate, with a debt now towering over $16 trillion, but the recession left lasting scars on the labour market that is likely to keep unemployment elevated for years to come.

What's more, growth is slowing overseas, crimping US exports.

POLITICAL GRIDLOCK REMAINS 

While Obama's Democrats retained control of the Senate, Republicans kept their grip on the House of Representatives, maintaining Washington's political gridlock.

During his first term, Obama was unable to bridge the divide between the two parties over how to trim the budget deficit and there is little to suggest it will be easier this time around.

He has called for slashing the deficit by more than US$4 trillion over a 10-year period through raising taxes for wealthy Americans and cutting defence spending, two steps that are unpopular with Republicans.

"Dealing with partisanship and gridlock in Congress will remain a major challenge, today's election result certainly does not make the situation any easier," said Harm Bandholz, chief US economist UniCredit Research in New York.

Full implementation of Obama's deficit-cutting plan would dent growth in 2013, and some economists expect he would offer some form of tax relief for households to soften the blow.

LEGACY OF A CRISIS 

Even if Obama manages to strike a deficit deal with Congress, it would likely add only a few tenths of a percentage point to economic growth given that it would not address the main problem holding the recovery back: the massive loss of wealth during the recession.

Median family net worth dropped 38 per cent between 2007 and 2010 as housing prices plummeted, the biggest decline for any period on record, and almost 11 million Americans are estimated to owe more on their mortgages than their homes are worth.

In addition, many of the jobs lost during the recession, particularly in construction and other housing-related areas like finance, may never come back. That could leave much of the US workforce lacking the skills employers need.

"The job situation is going to be problematic because my reading is the unemployment we suffer is to some large degree structural," said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago. "Even a strong economy will have a hard time reducing the employment rate to below 7 per cent."

The jobless rate stood at 7.9 per cent in October.

The economy is also being buffeted by the debt crisis in Europe and cooling demand in China, which has undermined demand for US businesses. Exports had accounted for about a third of growth since the recession ended.

"We are in a globalised economy with no healthy global engine for economic growth. That's a problem that cannot be easily fixed by Obama," said Laurenti.

Obama wins re-election, makes history again 
 
WASHINGTON - US President Barack Obama swept to re-election Tuesday, creating history again by defying the undertow of a slow economic recovery and high unemployment to beat Republican foe Mitt Romney.

Obama became only the second Democrat to win a second four-year White House term since World War II, when television networks projected he would win the bellwether state of Ohio where he had staged a pitched battle with Romney.

"This happened because of you. Thank you," Obama tweeted to his 22 million followers on Twitter as a flurry of states, including Iowa, which nurtured his unlikely White House dreams suddenly tipped into his column.

With a clutch of swing states, including Florida and Virginia still to be declared, Obama already had 275 electoral votes, more than the 270 needed for the White House and looked set for a comfortable victory.

There was a sudden explosion of jubilation at Obama's Chicago victory party as the first African American president, who was elected on a wave of hope and euphoria four years ago, booked another four years in the White House.

Romney's aides had predicted that a late Romney wave would sweep Obama from office after a single term haunted by a sluggish recovery from the worst economic crisis since the 1930s Great Depression and high unemployment.

But a huge cheer rang out at Obama headquarters when television networks projected Obama would retain Pennsylvania and its 20 electoral votes, and the party grew wilder as they called Wisconsin and Michigan.

The mood at Romney headquarters in Boston however had grown subdued throughout the evening as partisans stared at their smart phones.

Disappointed Republicans were seen leaving what had been billed as a celebration of Romney's expected triumph in central Washington.

Defeats in New Hampshire, where Romney has a summer home and Wisconsin, the home of Republican vice presidential nominee Paul Ryan were especially sickening for Republicans.

Early signs were that the election, while a building triumph for Obama would do little to ease the deep polarisation afflicting US politics, as Republicans racked up huge margins in safe states, though struggled in battlegrounds.

Exit polls appeared to vindicate the vision of the race offered by Obama's campaign, when top aides predicted that Obama's armies of African American, Latinos and young voters would come out in droves.

Polls also showed that though only 39 per cent of people believed that the economy was improving, around half of Americans blamed President George W. Bush for the tenuous situation, and not Obama.

The president, who made history by becoming America's first black president after a euphoric victory, carved a new precedent on Tuesday by defying the portents of a hurting economy to win a second term.

He awaited his fate in his hometown of Chicago, while Romney, a multi-millionaire former investment manager and Massachusetts governor was laying low in a hotel in Boston awaiting results.

As expected, television networks projected that Republicans would win the House of Representatives.

Democrats clung onto the Senate, and retained a seat in Missouri, where Senator Claire McCaskill fended off a challenge by Representative Todd Akin, whose remarks about rape and abortion sparked national outrage.

Both presidential candidates had earlier marked time while voters dictated their fates.

Romney appeared caught up in the emotion of seeing his name on the ballot for President of the United States and also saw an omen in a huge crowd that showed up at a multi-story parking lot to see his plane land at Pittsburgh airport.

"Intellectually I felt that we're going to win this and I've felt that for some time," Romney told reporters on his plane.

"But emotionally, just getting off the plane and seeing those people standing there... I not only think we're going to win intellectually but I feel it as well."

While Romney penned his victory speech, Obama took part in his election day tradition of playing a game of pick-up basketball with friends, including Chicago Bulls legend Scottie Pippen, after visiting a campaign office near his Chicago home.

The president, who like a third of Americans voted before election day, congratulated Romney on "a spirited campaign" despite their frequently hot tempered exchanges.

"I know that his supporters are just as engaged and just as enthusiastic and working just as hard today. We feel confident we've got the votes to win, that it's going to depend ultimately on whether those votes turn out," he said.

"I think anybody who's running for office would be lying if they say that there's not some butterflies before the polls come in because anything can happen," the president added later in a radio interview.

CBS News, quoting early exit polls, said 39 per cent of people approached after they had voted said the economy, the key issue, was improving, while 31 per cent said it was worse and 28 saw it as staying the same.

Voters were also choosing a third of the Democratic-led Senate and the entire Republican-run House of Representatives. But, with neither chamber expected to change hands, the current political gridlock will likely continue.

The US presidential election is not directly decided by the popular vote, but requires candidates to pile up a majority - 270 - of 538 electoral votes awarded state-by-state on the basis of population.
A candidate can therefore win the nationwide popular vote and still be deprived of the presidency by falling short in the Electoral College.

The election went ahead in New Jersey with thousands of people without power, and large areas devastated by superstorm Sandy which roared ashore last week killing more than 100 people.

Adora Agim, an immigrant from Nigeria, said the chaos shouldn't stop voting. "I have lived in a Third World country where your vote does not matter.

It's nice to be somewhere where it matters," she said, in Hoboken, New Jersey. The central message of Obama's campaign has been that he saved America from a second Great Depression after the economy was on the brink of collapse when he took over from Republican president George W. Bush in 2009.

He claims credit for ending the war in Iraq, saving the US auto industry, killing Osama bin Laden, offering almost every American health insurance, and passing the most sweeping Wall Street reform in decades.

Romney sought to mine frustration with the slow pace of the economic recovery and argued that the president was out of ideas and has no clue how to create jobs, with unemployment at 7.9 per cent and millions out of work.

Rape row Republican loses Senate race in Missouri: Networks 
 
WASHINGTON - Barack Obama's Democrats were on a path Tuesday to retain control of the Senate, holding on to a key seat in Missouri where the losing Republican candidate triggered a firestorm with comments about "legitimate rape."

Democratic Senator Claire McCaskill managed to fend off a challenge by Representative Todd Akin, whose remarks about rape and abortion sparked national outrage and prompted calls from his fellow Republicans to withdraw from the race.

Obama wins key state of New Hampshire: Networks 
 
WASHINGTON - President Barack Obama defeated Republican challenger Mitt Romney in the crucial battleground of New Hampshire, US television networks projected on Tuesday.

The triumph for Obama could help pave his way to re-election and spelled worrisome news for Romney's bid for the White House, as his campaign had pushed hard to prevail in the northeastern state that carries four electoral votes.

Democrats pick up Senate seat in Massachusetts: Networks 
 
WASHINGTON - The Democrats picked up a Senate seat Tuesday in Massachusetts, US media reported, in another discouraging sign for their Republican rivals trying to regain the majority in the upper chamber.

Elizabeth Warren, a Harvard professor and liberal firebrand who led the creation of a consumer protection bureau, defeated Senator Scott Brown, US television networks projected.

The seat was held for years by a lion of the Democratic party, the late Ted Kennedy.

Obama wins battleground Wisconsin: Networks 
 
WASHINGTON - President Barack Obama on Tuesday won the battleground state of Wisconsin, depriving Mitt Romney of a key target that could help him win the White House, US television networks projected.

Wisconsin has not voted for a Republican president since Ronald Reagan in 1984, but Romney picked Representative Paul Ryan from the Midwestern state as his running mate and both candidates campaigned heavily there.

With losses in Wisconsin and Romney's Massachusetts, the ticket becomes the first since George McGovern and Sargent Shriver in 1972 in which both the presidential and vice presidential candidates lost their home states.

WASHINGTON - Republican White House hopeful Mitt Romney picked up his first wins in two safe states on Tuesday while President Barack Obama won Vermont as expected, US television networks reported.

Romney won in Indiana and Kentucky, two states traditionally in the Republican column, and Obama prevailed in left-leaning Vermont, according to projections from US networks as polls closed in six states.

Polls also closed in Georgia, South Carolina and Virginia, although officials allowed polling to continue where there were long lines.

Networks said Virginia – which Obama won when he was first elected in 2008 and which would be vital in almost any Romney victory strategy – was too close to call, based on early exit polls and a small number of reported results.

The final opinion polls published before polling began showed the two candidates in a dead heat nationwide, but gave Obama a slight advantage in the handful of swing states like Virginia that will decide the race.

Each state has a quota of electoral college votes based on its population, and the eventual victor will be the candidate who tallies the most.

Polling was due to end in Ohio, the most important of the swing states, at 7:30 pm (0030 GMT), but reliable results were not expected for hours.

US economy growing 'gradually', says Fed report

WASHINGTON: The US economy is growing slowly amid slight improvements in retail sales and the depressed housing market, while hiring held steady, the Federal Reserve said in a report on Wednesday.

"Economic activity continued to expand gradually in July and early August across most regions and sectors," the Fed said in its Beige Book, a key report on current regional economic conditions that feeds it policy decisions.

Retail sales strengthened "somewhat" in July compared with softness in May and June, particularly at discount stores and online.

The pace of auto sales slowed "somewhat," but the Fed noted that it remained significantly above a year ago.

The ravaged housing market was showing signs of improvement six years after a price bubble collapsed.

"All 12 of the Fed's districts cited increases in home sales, home prices, or housing construction" in July and early August, it said.

The jobs outlook, with unemployment stuck above 8.0 percent for the past three years, appeared little changed.

"Most districts reported that employment was stable or growing only slightly," the report said.

Amid sluggish growth and high unemployment, upward wage pressure across the nation was "very contained."

Manufacturers continued to hire in almost all districts, but only "modestly," it said.

Demand has been strongest for skilled manufacturing and engineering jobs, and information technology services.

The Beige Book data will be used by the Federal Open Market Committee at its September 12-13 meeting as it reviews monetary policy.

Market hopes are high that Fed Chairman Ben Bernanke will give an early signal of the central bank's intentions on more stimulus in his keenly awaited speech Friday in Jackson Hole, Wyoming.

The FOMC, at its prior July 31-August 1 meeting, signalled it was ready to provide additional stimulus if warranted by economic conditions warranted.

Fed sees weaker growth but holds off stimulus

WASHINGTON: The Federal Reserve downgraded its assessment of the US economy on Wednesday, saying growth had slowed, but shied away from launching a fresh round of economic stimulus.

"Economic activity decelerated somewhat over the first half of this year," the Fed said at the conclusion of a two-day top-level meeting as it left current monetary policy in place.

The interest rate-setting Federal Open Market Committee (FOMC) said it expected "economic growth to remain moderate over coming quarters and then to pick up very gradually."

"The unemployment rate will decline only slowly," it said.

The bank also downplayed glimmers of hope that the housing market is starting to rebound, saying: "Despite some further signs of improvement, the housing sector remains depressed."

But there was no new action to juice the economy.

Instead bank policymakers reiterated their pledge to leave interest rates close to zero until the end of 2014 and reaffirmed their readiness to act.

The decision not to pull the trigger on new measures puzzled some analysts and investors.

The Dow Jones Industrial Average fell sharply after the Fed statement was published. It ended the day down 0.3 percent and under the symbolic threshold of 13,000 points.

Ryan Sweet of Moody's Analytics described the Fed's decision not to provide more stimulus or extend the time-frame for low rates as "a bit of (a) surprise move."

"There was a strong case for changing the rate guidance," he said, adding that "the odds of the Fed launching a third round of quantitative easing in September are lower."

The Fed vowed to "provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labour market conditions in a context of price stability."

The Fed has kept interest rates at historic lows, between zero and 0.25 percent, since December 2008 and dished out liquidity in a bid to spur recovery from the Great Recession.

With few tools left in the box and the outlook murky, the Fed has been reluctant to embark on a third round of asset purchases, or quantitative easing, dubbed QE3.

Chairman Ben Bernanke and his colleagues have preferred to wait and see whether a recent slowdown has been a blip, or a harbinger of worse times ahead.

All eyes will now be on US jobs and unemployment data slated for release on Friday, which could make or break the chances of more stimulus when the Fed meets again in September.

"This is the first time in five years of near-constant easing that I can remember the FOMC doing less than I expected," said Stephen Stanley, chief economist at Pierpont Securities.

"Instead, the committee put themselves on a state of heightened alert."

"Clearly, the heightened alert language is meant to send the signal that the FOMC is prepared to do something significant in September unless things get better."

Once again Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond, was the only dissenting voice. He voted against current policy, voicing concern about declaring a time period for low rates.

US jobless rate tumbles to 8.6% in November

WASHINGTON: The troubled US economy and President Barack Obama's embattled administration received a substantial confidence boost on Friday, as unemployment sank to a 32-month low of 8.6 percent in November.

Official figures showed the jobless rate fell sharply from 9.0 percent the previous month, as the economy created 120,000 new jobs.

After a year that saw joblessness linger around 9.0 percent, the report was welcomed with relief.

"Woo-hoo!" said Robert Brusca, chief economist at FAO Economics. "The jobs numbers are looking better."

Analysts also pointed to upward revisions of past reports as evidence that the strength of the labour market has been understated for months.

But while the Labour Department's report was one of the strongest since the global economic crisis began in 2008, it was not uniformly positive.

Economists pointed to a worryingly sharp drop in the number of people looking for work - which helped push down the unemployment rate further than would have been the case.

That could mean more and more jobseekers feel defeated by the relentless slog of finding a new position and are dropping out of the hunt all together.

And the net creation of 120,000 jobs was not as strong as expected, as government job cuts continued to eat into private sector gains.

The net gain was below the average 131,000 of the past 12 months.

But amid renewed global turmoil, the report offered a glimmer of hope that the United States is on the way to reassuming its role as an anchor for the world economy.

"Something good is stirring in the US economy," said Ian Shepherdson, chief US economist with High Frequency Economics.

The news could also provide a boost to Obama's hopes of re-election next November, giving him some defence against Republican claims that he has failed to get the economy back on track since the recession ended more than two years ago.

The unemployment rate now stands only slightly above the 8.5 percent rate that president Ronald Reagan faced at the same point during his successful 1984 re-election campaign.

But with recent data proving a sharp drop in unemployment can easily be reversed, Obama was careful not to declare victory prematurely.

"Despite some strong headwinds this year, the American economy has now created, in the private sector, jobs for the past 21 months in a row," Obama said, sounding a note of cautious optimism.

"That's nearly three million new jobs in all and more than half a million over the last four months," he said.

"We need to keep that growth going."

Obama and his advisers will also be acutely aware that his efforts can be eroded by the financial crisis sweeping Europe.

Attempting to press home the advantage, Obama demanded Republicans back soon-to-expire payroll tax cuts, which the administration says will help stimulate the economy.

Both sides, eager to court voters angry at the sour US economy ahead of the November 2012 elections, say they agree on extending the cut but differ bitterly on how to pay for it in an era of yawning government budget deficits.

But in a signal of the White House's determination to push the issue, Obama said lawmakers may have to stay in Washington until a deal is done.

"I expect that it's going to get done before Congress leaves, otherwise Congress may not be leaving. We can all spend Christmas here together."

"We're going to keep pushing Congress to make this happen," he said.

Republican lawmakers said the drop in unemployment was not enough.

"Any job creation is welcome news, but the jobless rate in this country is still unacceptable," said John Boehner, speaker of the Republican-controlled House of Representatives.

"The president's policies have failed."

Markets disappointed over failed US debt deal

TOKYO: Japan's finance minister said Tuesday financial markets were "very disappointed" over the failure of a US Congress "supercommittee" to reach a deal on reining in ballooning budget deficits.

"I can see that the markets are very disappointed," Finance Minister Jun Azumi told a regular news conference, referring to an overnight plunge on Wall Street.

The blue-chip Dow Jones Industrial Average fell 2.10 per cent to 11,548.14 while the broad-based S&P 500 index was down 1.85 per cent to 1,193.11.

"I think this could have an impact on the Tokyo markets," Azumi said early Tuesday.

The benchmark Nikkei 225 index at the Tokyo Stock Exchange, which closed at its lowest level since March 2009 on Monday, opened down 1.01 per cent.

The index then recovered some lost ground as the dollar rose above 77.00 yen from 76.92 yen in New York late Monday. A strong yen hurts exporters by reducing their repatriated revenue.

The index was hovering around the break-even point in mid-morning trade.

Azumi added markets had doubts over the ability of politicians in the United States and Europe to deal with deep-seated economic problems.

"Japan's political situation is more stable when it is compared with the rest of the world," he said, noting the success of Japanese lawmakers Monday in passing a 12.1-trillion-yen (US$157 billion) extra budget through parliament.

The third supplementary budget this year is aimed at boosting post-quake reconstruction and giving a fillip to an economy hit by slow global growth and a strong yen.

A US Congress "supercommittee" announced Monday it had failed to reach a debt deal, after angry partisan battles over the best way to revive the sluggish economy.

It confirmed widespread expectations that the 12-member committee would fail in its mission to cut US deficits by US$1.2 trillion over 10 years amid political feuds over tax hikes on the rich and cuts to social spending.

Global financial markets are already rattled by Europe's debt crisis and weighed down by the stuttering US economy.