Dollar Mixed, Yellen To Be Nominated

The dollar stays soft against the european majors but recovers against the Japanese yen today. There is still no sign of resolution in the US debt issue for the moment, which could lead to the first government default in history. President Obama reiterated again that he would only negotiate on budget after Republicans agree to raise the debt ceilings without conditions. House speaker Boehner expressed his disappointment over the approach. US government is still in partial shutdown and markets are looking towards the October 17 deadline, when US will be running out of measures to fund governmental operations. DOW closed down -159.71 pts overnight at 14776.53. Asian equities are generally soft except Japan.

Its reported that Obama will finally nominate Fed vice Yellen to take up the Fed chairman job after Bernanke's term expires on January 31. Japanese prime minister Abe's advisor Hamada said that Yellen "probably won’t seek an exit from an accommodative policy immediately." And, he warned that yen could gain again in case Fed maintains stimulus longer than expected. And he urged the BoJ to be ready in case damage to Japan's economy becomes clear.

SNB president Jordan said that, "despite recent turbulence on foreign-exchange markets in emerging economies, the Swiss franc has settled against the euro since September 2012 at slightly above the minimum exchange rate of 1.20". And, "the SNB did not have to enforce the minimum exchange rate for over a year now." He warned that "risks in the world economy are still to the downside and the Swiss franc is still high." But, "with short-term interest rates close to zero, the minimum exchange rate can prevent an undesirable tightening of monetary conditions in the event that upward pressure on the Swiss franc should intensify once again."

The IMF lowered global growth projection to 2.9% in 2013, down from prior projection of 3.2%. For 2013, it expects growth to be at 3.6%, down from prior forecast of 3.8%. US growth is projected to be 1.6% in 2013, 2.6% in 2014, slightly down from prior forecast of 1.7% and 2.8% respectively. The eurozone economy is expected to contract -0.4%, revised up from prior -0.5%. For 2014, the eurozone is expected to grow 1.0%. UK growth in 2013 was revised up to 1.4%, a step up from prior projection of 0.9%. UK growth in 2014 was also revised to 1.9%, up from prior forecast of 1.5%.

IMF noted that, "the world economy has entered yet another transition." US is expected to drive global growth. While a US default "could seriously damage the global economy", it expected the government shutdown to end and "there'll be no problem raising the debt ceiling."