The Finance Ministry and Bank Indonesia are optimistic that the recent slump in the financial markets will be just temporary, given that the country’s economy is in solid condition.
Investors scared off by events in Indonesia and abroad on Friday led the country’s benchmark stock index to its biggest single-day fall in almost seven months.
The rupiah also weakened overseas as investors reduced their holdings in Indonesian assets amid concern that the government’s regulatory framework would deter foreign investment. There were also fears that Greece’s withdrawal from the euro zone would siphon money from emerging markets.
Finance Minister Agus Martowardojo said he was optimistic that the nation’s economic growth was to remain strong, referring to the recent report issued by the Organization for Economic Cooperation and Development.
He said robust investment and a pick up in investment would be the key drivers in the domestic economy.
The Paris-based organization said in a report on May 22 that Indonesia’s economy “has continued to grow at a rapid pace, despite signs of slowing elsewhere in Asia and its impact on regional trade.”
The OECD predicted Indonesia’s economy will expand 5.8 percent this year and 6 percent next.
Hartadi Sarwono, a deputy governor at the central bank, acknowledged there had been a reallocation of assets from emerging market assets into safe-haven assets.
He also denied talk that Bank Indonesia would impose tight controls in foreign exchange, replacing the nation’s current free-floating foreign exchange system, which ensures the free movement of capital in and out of the country.
Investor Daily
FOREX-Euro pinned near 2-year lows as Spanish angst deepens - Reuters
* Euro stays near last week's low just below $1.25
* Spanish banking problems overtake worries about Greece
* Doubts grow whether Spain can support ailing banks on its own
LONDON, May 29 (Reuters) - The euro slipped against the dollar on Tuesday, edging closer to two years lows as investors and speculators sold the common currency on persistent worries over Spain's escalating borrowing costs and its weakening banking sector.
Analysts and traders said the euro could weaken to fresh lows in the near term given the extent of the concerns surrounding the euro zone debt crisis and the risk of contagion.
Worries about the cost of shoring up Spain's banking system kept Spanish debt yields elevated while the gap between them and German 10-year yields remained near euro era highs, as the risk grew that Spain may be forced to seek an international bailout.
The euro traded at $1.2530, off a day high of $1.2575 as demand from corporates and Middle East names faded.
Having failed to clear resistance at previous support around $1.2625 for three days in a row, the euro was vulnerable to another test of Friday's low of $1.2495, which marked its weakest level since July 2010. Bids just below $1.25 could offer some support, though further losses could see it drop towards $1.2450, where traders reported stop-loss sell orders.
"The widening of spreads between Spain and Germany and Italy and Germany keeps worries about the debt crisis very much alive," said Niels Christensen, currency strategist at Nordea in Copenhagen.
"I don't see the euro moving above $1.27. It's only a matter of time before it breaks $1.25. This is psychological support but it's not a big level like the January low was (around $1.2624) and that has clearly broken."
The euro gave up most of the gains made on Monday after Greek polls showed more support for pro-bailout parties ahead of the country's election on June 17. That had salved fears Greece may leave the euro zone.
PAIN IN SPAIN
Many traders expect further downside in the euro as they fear troubles at Spanish banks, hit by a property slump, could further complicate Madrid's efforts to rein in its debt.
Spanish 10-year bond yields hovered around 6.5 percent. A level of 7 percent is seen as critical. Euro zone countries that have previously requested bailouts did so soon after their 10-year yields rose above that mark.
"The bad news just keeps coming and if Spain were to ask for a bailout we would see the euro come under more pressure," said Steve Barrow, head of G10 currency research at Standard Bank.
"The euro remains a currency that is sold at every opportunity. We have revised our three- to six-month forecasts down to $1.15 from $1.20 earlier."
Spain's fourth-largest lender Bankia has asked for a bailout of 19 billion euros, in addition to 4.5 billion euros the state has already pumped in to cover possible losses on repossessed property, loans and investments.
Prime Minister Mariano Rajoy has ruled out seeking outside aid to revive Spain's banking sector, but many investors are sceptical that this will be possible.
Any buying in the euro may be curbed ahead of Ireland's referendum on Europe's new fiscal treaty on Thursday, although the market is cautiously optimistic that the Irish will support the treaty on fear that a "no" vote could add fuel to the fire.
Against the yen, the common currency fetched 99.75 yen , not far from a four-month low of 99.37 yen hit last week. The yen, along with the dollar, was supported by the market's risk averse mood.
The dollar stood at 79.55 yen, up 0.1 percent on the day and not far from a three-month low of 79.002 yen.
Forex Flash: Today's strategy for EUR/USD – Commerzbank, Danske Bank and UBS - NASDAQ
FXstreet.com (Barcelona) - The three banks have released their trade recommendations for the day. The Copenhagen based bank, Danske Bank, says in its daily technical report to go "short at 1.2560 for a 1.2300 objective. Stop 1.2692", while Commerzbank suggests to "reinstate shorts on rallies to 1.2625, 1.2800, and place a stop 1.2830.". UBS' Chris Walker, believes the cross will be at 1.25 in the next 3 months and at 1.15 in the next twelve months.
Germany's CPI came out worse than expected with YoY and MoM growth at 1.9% and -0.2% (instead of 2.0% and -0.1%), respectively. On the other side of the Atlantic, the Case/Shiller housing price index came in line with expectations, losing 2.6% in March with respect to the previous year.
The pair is currently trading at 1.2536, losing 0.06%.
Alternative lenders enticed to North West - bdaily.co.uk
Challenging market conditions are fuelling growth in the asset based finance industry and the number of debt funds in the North West.
That is according to Deloitte’s head of debt advisory in North West, Nigel Birkett.
Figures from the Asset Based Finance Association (ABFA) show that the share of facilities above £10m in the overall market has more than doubled from 4% to 9% between 2001 and 2011.
The trend demonstrates the growing maturity of the industry and its acceptance as a form of finance with larger corporates.
Recent years have seen the introduction of US financial heavyweights Wells Fargo and PNC to the UK market through Burdale Financial and KBC Business Capital.
Together with the established lenders in the market, this form of funding is becoming more accepted in the mid-market arena.
Mr Birkett, Partner, said: “The North West has a sizeable asset based lending industry which will only get stronger in the years to come.
“We recently advised on the £80m refinancing of WT Burden, which generated significant appetite from asset finance lenders.
“The number of debt funds is also increasing and can offer an alternative to traditional bank finance.
“Whilst debt funds to date have typically targeted larger companies, recent funds launched such as Metric Capital and Encina are focusing on the mid market.
“As banks continue to focus on strengthening their own balance sheets, increased liquidity appears some way off.
“The increased availability of alternative funding, including asset based lending and mid market debt funds, is therefore good news for corporates in the region.”
Forex: NZD/USD down as risk appetite remains subdued - FXStreet.com
FOREX-Euro edges up but Spain fears leave it vulnerable - Reuters
* Euro stays near last week's low just below $1.25
* Doubts grow that Spain can support ailing banks on its own
* Eyes on whether Spanish govt bond yield hits 7 pct
* EUR short covering may be curbed ahead of Irish referendum
LONDON, May 29 (Reuters) - The euro edged up against the dollar on Tuesday as investors cut hefty bearish bets in the currency, but worries about Spain's banking sector left it hovering close to its lowest levels in nearly two years.
Analysts and traders said the euro had good support at the $1.2500 level and Friday's trough of $1.2495, with bids around that area, but expected it would soon break lower given the extent of the concerns surrounding the euro zone debt crisis.
Worries about the cost of shoring up Spain's banking system lifted its debt yields on Monday, driving the gap between Spanish and German 10-year yields to euro era highs, as the risk grew that Spain may be forced to seek an international bailout.
The euro was up 0.2 percent at $1.2566, with traders citing demand from corporates and Middle East names.
Having failed to clear resistance at previous support around $1.2625 for three days in a row, however, the euro was vulnerable to another test of Friday's low, which marked its weakest since July 2010.
"We may see a bit of consolidation here but going forward we still have a euro that is very weak and vulnerable. The widening of spreads between Spain and Germany and Italy and Germany keeps worries about the debt crisis very much alive," said Niels Christensen, currency strategist at Nordea in Copenhagen.
"I don't see the euro moving above $1.27. It's only a matter of time before it breaks $1.25. This is psychological support but it's not a big level like the January low was (around $1.2624) and that has clearly broken."
The euro gave up most of the gains made on Monday after Greek polls showed more support for pro-bailout parties ahead of the country's election on June 17. That eased fears Greece may leave the euro zone.
Bids just below $1.25 may support the euro for now, though further losses could see it drop towards $1.2450, where traders reported stop-loss sell orders.
"Although pessimism over Greece is somewhat receding, worries about Spain are growing, with markets watching whether the Spanish bond yield will hit the seven percent mark," said Masafumi Yamamoto, chief FX strategist at Barclays in Tokyo.
Short-term, the euro may continue to be held up by bouts of short covering. Speculators bolstered short euro positions to record highs in the week ended May 22, leaving ample scope for a correction as they cut positions and book profits.
TROUBLES IN SPAIN
Many traders expect further downside in the euro as they fear troubles at Spanish banks hit by a bust in property could further complicate Madrid's efforts to rein in its debt.
Spain's fourth-largest lender Bankia has asked for a bailout of 19 billion euros, in addition to 4.5 billion euros the state has already pumped in to cover possible losses on repossessed property, loans and investments.
Prime Minister Mariano Rajoy on Monday again ruled out seeking outside aid to revive Spain's banking sector, though many investors are sceptical this will be possible.
Spanish 10-year bond yields rose above 6.5 percent on Monday. A level of 7 percent is seen as critical as euro zone countries that have previously requested bailouts did so soon after their 10-year yields rose above that mark.
Any buying in the euro may also be curbed ahead of Ireland's referendum on Europe's new fiscal treaty on Thursday, although the market is cautiously optimistic that the Irish will support the treaty on fear that a "no" vote could add fuel to the fire.
Against the yen, the common currency fetched 99.87 yen , not far from a four-month low of 99.37 yen hit last week. The yen, along with the dollar, was supported by the market's risk averse mood.
The dollar stood at 79.47 yen, not far from a three-month low of 79.002 yen.
The higher-yielding Australian dollar was up 0.4 percent at $0.9888, above last week's six-month low of $0.9690.
FOREX-Euro falls near 2-year low on Spain worries - Reuters UK
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