next key moving average support in the form of the 20-Day

Techs - EUR/USD Remains under pressure into Tuesday with the market considering a close below next key moving average support in the form of the 20-Day SMA at 1.4575. Below 1.4575 will open a deeper setback towards inter-day support at 1.4465. For now, a lower top is sought out below 1.4720, with any rallies intraday seen well capped ahead of this level. Overall, there is plenty of room for additional weakness from here, and only a break back above 1.4720 would delay short-term bearish outlook. USD/JPY Saw some intensely volatile price action on Monday with the market dropping sharply to 88.25, before a jackknife reversal into the close back to opening levels at 89.65. This has set up a very bullish hammer-like formation with the price action now likely signaling a short term bottom ahead of some fresh upside over the coming days. Look for today’s break back above 89.85 to provide additional confirmation with an upside extension likely extending to a minimum objective by 92.00. Back under 88.25 negates however and exposes the critical matched trend lows from late 2008/early 2009 by 87.15. GBP/USD The technical break of the major head & shoulders neckline by 1.6000 in the previous week has been showing some solid follow through thus far with the market trading as low as 1.5770. Ultimately, the pattern formation projects deeper setbacks over the coming days to a measured move objective at 1.5000, but we would caution bears with daily studies now oversold and more likely inclined to bounce a bit ahead of the next downside extension. As such, selling into rallies back into the 1.6100-16200 area is the favored strategy. USD/CHF Looks like it could be in the process of carving out a base after dropping to a fresh 2009 low by 1.0185 in the previous week. The market has since broken back above 1.0300 and now has its sights set on next resistance by the 20-Day SMA at 1.0390. A close above 1.0390 will be encouraging for bulls and open an acceleration of gains back towards 1.0500 over the coming sessions. We are long from 1.0215 and have trailed our stops to cost to eliminate any risk on the trade.

Flows – UK clearer, US prime name and Russian account buying GBP aggressively. Semi-official buying Eur/Jpy. Swiss private bank buying Eur/Usd; buy-side names on the offer. Large option related interest around the 90.00 level in Usd/Jpy.

Trade of the Day – No Trade: Currently long Usd/Chf @1.0215 and short Nzd/Usd. No new opportunities are presenting on Tuesday. We were also stopped from our Eur/Nzd long @2.0270.

P&L Update and Overview: Many of you have been asking for a way to better track trading results and open positions. In response to these requests and in an effort to be fully transparent, a simulated portfolio was created in June to track and mirror all recommendations and trades. Below is a return on equity curve since inception on June 1, 2009, along with an open and closed position tracker. I am hopeful that this will make things easier for you all.

England holds borrowing costs at the record-low and commits GBP 127B in asset purchases .

Mortgage approvals in the U.K. slipped to 52.3K in August from a revised reading of 52.4K in the previous month, which topped expectations for a rise to 51.5K, while secured lending for homes increased GBP 1.0B after falling GBP 0.2B in the previous month. At the same time, consumer credit fell for the second month as households repaid GBP 0.3B in debt, which is the most since April 1993, and the data foreshadows a dour outlook for private-sector spending as individuals face a weakening labor market paired with tightening credit standards. Nevertheless, as the Bank of England holds borrowing costs at the record-low and commits GBP 127B in asset purchases to shore up the ailing economy, the extraordinary efforts taken on by the government should help to stem the downside risks for growth and inflation as policy makers see the nation emerging from the worst recession since the post-war period.
A wild session of trade overnight with the slew of economic releases out of the UK appropriately resulting in an equal amount of volatility in Sterling. The initial data releases at 8:30GMT were tempered, with Q2 GDP coming in as expected, and mortgage approvals slightly exceeding analyst forecasts. However, the later release of CBI retail sales which shocked to the upside after coming in at +3 versus an expectation for a -14 print, sent the single currency off to the races, with notable losses highlighted in Eur/Gbp as a result. Eurozone economic sentiment data was also firmer, but failed to materially factor in price action, with the Euro weighed down by some USD supportive comments, and a reduction is risk appetite as reflected by lower US equity futures. Elsewhere, data in other regions was not promising with the Swiss UBS consumption indicator showing weakness, while retail sales out from Sweden were also surprisingly much weaker than consensus. Finally, the Russian rate cut today has also left a sour taste in many investor mouths, forcing a liquidation of some of their higher yielding and risky investments. In fact, news out that the Russian central bank would be looking to add Aussie and Cad to their reserves triggered a violent intraday swing in the Aussie and Cad crosses. Looking ahead, US Case Shiller (-14.25% expected) is due at 13:00GMT, followed by consumer confidence (57.0 expected) at 14:00GMT. On the official circuit, Fed Plosser is slated to speak at 23:00GMT.

higher lows and higher highs

The British pound strengthen against the greenback following the slew of economic data from the U.K. and remains to be the best performing currency on the day after halting the four-day decline. The GBP/USD has moved 92% of its daily ATR after reaching an intraday high of 1.5989, and the lack of momentum to break above 1.6000 is likely to hold the pair within a narrow range throughout the North American trade. As the outlook for future growth improves, the pound-dollar may continue to make higher lows and higher highs over the near-term to retrace the sell-off from the beginning of the month, and we may see the pair attempt to push back above the psychological resistance at 1.6000 over the week to fill-in the gap from the 200-SMA at 1.6032.

The Swiss franc continued to lose ground against the U.S. dollar, with the exchange rate rising to a two-week high of 1.0406 however, the two-day rally looks to be losing steam as the pair moves nearly 95% of its average true range. As a result, the dollar-franc may hold a narrow range throughout the day as the 30-minute RSI approaches overbought territory, and we may see the pair fall back over the week to cover divergence from the 100-SMA at 1.0325. Nevertheless, as the USD/CHF comes off the yearly low, a close above the 20-Day moving average could be indicative of a near-term reversal, and the pair may retrace the September decline over the following month as the economic outlook for the US improves.

progress to address

Building high quality capital and mitigating pro- cyclicality: We commit to developing by end-2010 internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage. These rules will be phased in as financial conditions improve and economic recovery is assured, with the aim of implementation by end-2012. The national implementation of higher level and better quality capital requirements, counter-cyclical capital buffers, higher capital requirements for risky products and off- balance sheet activities, as elements of the Basel II Capital Framework, together with strengthened liquidity risk requirements and forward-looking provisioning, will reduce incentives for banks to take excessive risks and create a financial system better prepared to withstand adverse shocks. We welcome the key measures recently agreed by the oversight body of the Basel Committee to strengthen the supervision and regulation of the banking sector. We support the introduction of a leverage ratio as a supplementary measure to the Basel II risk-based framework with a view to migrating to a Pillar 1 treatment based on appropriate review and calibration. To ensure comparability, the details of the leverage ratio will be harmonized internationally, fully adjusting for differences in accounting. All major G-20 financial centers commit to have adopted the Basel II Capital Framework by 2011.

· Reforming compensation practices to support financial stability: Excessive compensation in the financial sector has both reflected and encouraged excessive risk taking. Reforming compensation policies and practices is an essential part of our effort to increase financial stability. We fully endorse the implementation standards of the FSB aimed at aligning compensation with long-term value creation, not excessive risk- taking, including by (i) avoiding multi-year guaranteed bonuses; (ii) requiring a significant portion of variable compensation to be deferred, tied to performance and subject to appropriate clawback and to be vested in the form of stock or stock-like instruments, as long as these create incentives aligned with long-term value creation and the time horizon of risk; (iii) ensuring that compensation for senior executives and other employees having a material impact on the firm’s risk exposure align with performance and risk; (iv) making firms’ compensation policies and structures transparent through disclosure requirements; (v) limiting variable compensation as a percentage of total net revenues when it is inconsistent with the maintenance of a sound capital base; and (vi) ensuring that compensation committees overseeing compensation policies are able to act independently. Supervisors should have the responsibility to review firms’ compensation policies and structures with institutional and systemic risk in mind and, if necessary to offset additional risks, apply corrective measures, such as higher capital requirements, to those firms that fail to implement sound compensation policies and practices. Supervisors should have the ability to modify compensation structures in the case of firms that fail or require extraordinary public intervention. We call on firms to implement these sound compensation practices immediately. We task the FSB to monitor the implementation of FSB standards and propose additional measures as required by March 2010.

· Improving over-the-counter derivatives markets: All standardized OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end-2012 at the latest. OTC derivative contracts should be reported to trade repositories. Non-centrally cleared contracts should be subject to higher capital requirements. We ask the FSB and its relevant members to assess regularly implementation and whether it is sufficient to improve transparency in the derivatives markets, mitigate systemic risk, and protect against market abuse.

· Addressing cross-border resolutions and systemically important financial institutions by end-2010: Systemically important financial firms should develop internationally- consistent firm-specific contingency and resolution plans. Our authorities should establish crisis management groups for the major cross-border firms and a legal framework for crisis intervention as well as improve information sharing in times of stress. We should develop resolution tools and frameworks for the effective resolution of financial groups to help mitigate the disruption of financial institution failures and reduce moral hazard in the future. Our prudential standards for systemically important institutions should be commensurate with the costs of their failure. The FSB should propose by the end of October 2010 possible measures including more intensive supervision and specific additional capital, liquidity, and other prudential requirements.

14. We call on our international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard setting process, and complete their convergence project by June 2011. The International Accounting Standards Board’s (IASB) institutional framework should further enhance the involvement of various stakeholders.

15. Our commitment to fight non-cooperative jurisdictions (NCJs) has produced impressive results. We are committed to maintain the momentum in dealing with tax havens, money laundering, proceeds of corruption, terrorist financing, and prudential standards. We welcome the expansion of the Global Forum on Transparency and Exchange of Information, including the participation of developing countries, and welcome the agreement to deliver an effective program of peer review. The main focus of the Forum’s work will be to improve tax transparency and exchange of information so that countries can fully enforce their tax laws to protect their tax base. We stand ready to use countermeasures against tax havens from March 2010. We welcome the progress made by the Financial Action Task Force (FATF) in the fight against money laundering and terrorist financing and call upon the FATF to issue a public list of high risk jurisdictions by February 2010. We call on the FSB to report progress to address NCJs with regards to international cooperation and information exchange in November 2009 and to initiate a peer review process by February 2010.

16. We task the IMF to prepare a report for our next meeting with regard to the range of options countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system.

Modernizing our Global Institutions to Reflect Today’s Global Economy

17. Modernizing the international financial institutions and global development architecture is essential to our efforts to promote global financial stability, foster sustainable development, and lift the lives of the poorest. We warmly welcome Prime Minister Brown’s report on his review of the responsiveness and adaptability of the international financial institutions (IFIs) and ask our Finance Ministers to consider its conclusions.

Ministers and Central Bank Governors in this process of mutual assessment

1. We assessed the progress we have made together in addressing the global crisis and agreed to maintain our steps to support economic activity until recovery is assured. We further committed to additional steps to ensure strong, sustainable, and balanced growth, to build a stronger international financial system, to reduce development imbalances, and to modernize our architecture for international economic cooperation.

A Framework for Strong, Sustainable, and Balanced Growth

2. The growth of the global economy and the success of our coordinated effort to respond to the recent crisis have increased the case for more sustained and systematic international cooperation. In the short-run, we must continue to implement our stimulus programs to support economic activity until recovery clearly has taken hold. We also need to develop a transparent and credible process for withdrawing our extraordinary fiscal, monetary and financial sector support, to be implemented when recovery becomes fully secured. We task our Finance Ministers, working with input from the IMF and FSB, at their November meeting to continue developing cooperative and coordinated exit strategies recognizing that the scale, timing, and sequencing of this process will vary across countries or regions and across the type of policy measures. Credible exit strategies should be designed and communicated clearly to anchor expectations and reinforce confidence.

3. The IMF estimates that world growth will resume this year and rise by nearly 3% by the end of 2010. Subsequently, our objective is to return the world to high, sustainable, and balanced growth, while maintaining our commitment to fiscal responsibility and sustainability, with reforms to increase our growth potential and capacity to generate jobs and policies designed to avoid both the re-creation of asset bubbles and the re-emergence of unsustainable global financial flows. We commit to put in place the necessary policy measures to achieve these outcomes.

4. We will need to work together as we manage the transition to a more balanced pattern of global growth. The crisis and our initial policy responses have already produced significant shifts in the pattern and level of growth across countries. Many countries have already taken important steps to expand domestic demand, bolstering global activity and reducing imbalances. In some countries, the rise in private saving now underway will, in time, need to be augmented by a rise in public saving. Ensuring a strong recovery will necessitate adjustments across different parts of the global economy, while requiring macroeconomic policies that promote adequate and balanced global demand as well as decisive progress on structural reforms that foster private domestic demand, narrow the global development gap, and strengthen long-run growth potential. The IMF estimates that only with such adjustments and realignments, will global growth reach a strong, sustainable, and balanced pattern. While governments have started moving in the right direction, a shared understanding and deepened dialogue will help build a more stable, lasting, and sustainable pattern of growth. Raising living standards in the emerging markets and developing countries is also a critical element in achieving sustainable growth in the global economy.

5. Today we are launching a Framework for Strong, Sustainable, and Balanced Growth. To put in place this framework, we commit to develop a process whereby we set out our objectives, put forward policies to achieve these objectives, and together assess our progress. We will ask the IMF to help us with its analysis of how our respective national or regional policy frameworks fit together. We will ask the World Bank to advise us on progress in promoting development and poverty reduction as part of the rebalancing of global growth. We will work together to ensure that our fiscal, monetary, trade, and structural policies are collectively consistent with more sustainable and balanced trajectories of growth. We will undertake macro prudential and regulatory policies to help prevent credit and asset price cycles from becoming forces of destabilization. As we commit to implement a new, sustainable growth model, we should encourage work on measurement methods so as to better take into account the social and environmental dimensions of economic development.

6. We call on our Finance Ministers and Central Bank Governors to launch the new Framework by November by initiating a cooperative process of mutual assessment of our policy frameworks and the implications of those frameworks for the pattern and sustainability of global growth. We believe that regular consultations, strengthened cooperation on macroeconomic policies, the exchange of experiences on structural policies, and ongoing assessment will promote the adoption of sound policies and secure a healthy global economy. Our compact is that:

G-20 members will agree on shared policy objectives. These objectives should be updated as conditions evolve. G-20 members will set out our medium-term policy frameworks and will work together to assess the collective implications of our national policy frameworks for the level and pattern of global growth and to identify potential risks to financial stability. G-20 Leaders will consider, based on the results of the mutual assessment, and agree any actions to meet our common objectives.

7. This process will only be successful if it is supported by candid, even-handed, and balanced analysis of our policies. We ask the IMF to assist our Finance Ministers and Central Bank Governors in this process of mutual assessment by developing a forward-looking analysis of whether policies pursued by individual G-20 countries are collectively consistent with more sustainable and balanced trajectories for the global economy, and to report regularly to both the G-20 and the International Monetary and Financial Committee (IMFC), building on the IMF’s existing bilateral and multilateral surveillance analysis, on global economic developments, patterns of growth and suggested policy adjustments. Our Finance Ministers and Central Bank Governors will elaborate this process at their November meeting and we will review the results of the first mutual assessment at our next summit.

8. These policies will help us to meet our responsibility to the community of nations to build a more resilient international financial system and to reduce development imbalances.

9. Building on Chancellor Merkel’s proposed Charter, on which we will continue to work, we adopted today Core Values for Sustainable Economic Activity, which will include those of propriety, integrity, and transparency, and which will underpin the Framework.

Strengthening the International Financial Regulatory System

10. Major failures of regulation and supervision, plus reckless and irresponsible risk taking by banks and other financial institutions, created dangerous financial fragilities that contributed significantly to the current crisis. A return to the excessive risk taking prevalent in some countries before the crisis is not an option.

When we last gathered in April, we confronted the greatest challenge to the world economy in our generation.

1. We meet in the midst of a critical transition from crisis to recovery to turn the page on an era of irresponsibility and to adopt a set of policies, regulations and reforms to meet the needs of the 21st century global economy.

2. When we last gathered in April, we confronted the greatest challenge to the world economy in our generation.

3. Global output was contracting at pace not seen since the 1930s. Trade was plummeting. Jobs were disappearing rapidly. Our people worried that the world was on the edge of a depression.

4. At that time, our countries agreed to do everything necessary to ensure recovery, to repair our financial systems and to maintain the global flow of capital.

5. It worked.

6. Our forceful response helped stop the dangerous, sharp decline in global activity and stabilize financial markets. Industrial output is now rising in nearly all our economies. International trade is starting to recover. Our financial institutions are raising needed capital, financial markets are showing a willingness to invest and lend, and confidence has improved.

7. Today, we reviewed the progress we have made since the London Summit in April. Our national commitments to restore growth resulted in the largest and most coordinated fiscal and monetary stimulus ever undertaken. We acted together to increase dramatically the resources necessary to stop the crisis from spreading around the world. We took steps to fix the broken regulatory system and started to implement sweeping reforms to reduce the risk that financial excesses will again destabilize the global economy.

8. A sense of normalcy should not lead to complacency.

9. The process of recovery and repair remains incomplete. In many countries, unemployment remains unacceptably high. The conditions for a recovery of private demand are not yet fully in place. We cannot rest until the global economy is restored to full health, and hard-working families the world over can find decent jobs.

10. We pledge today to sustain our strong policy response until a durable recovery is secured. We will act to ensure that when growth returns, jobs do too. We will avoid any premature withdrawal of stimulus. At the same time, we will prepare our exit strategies and, when the time is right, withdraw our extraordinary policy support in a cooperative and coordinated way, maintaining our commitment to fiscal responsibility.

11. Even as the work of recovery continues, we pledge to adopt the policies needed to lay the foundation for strong, sustained and balanced growth in the 21st century. We recognize that we have to act forcefully to overcome the legacy of the recent, severe global economic crisis and to help people cope with the consequences of this crisis. We want growth without cycles of boom and bust and markets that foster responsibility not recklessness.

12. Today we agreed:

13. To launch a framework that lays out the policies and the way we act together to generate strong, sustainable and balanced global growth. We need a durable recovery that creates the good jobs our people need.

14. We need to shift from public to private sources of demand, establish a pattern of growth across countries that is more sustainable and balanced, and reduce development imbalances. We pledge to avoid destabilizing booms and busts in asset and credit prices and adopt macroeconomic policies, consistent with price stability, that promote adequate and balanced global demand. We will also make decisive progress on structural reforms that foster private demand and strengthen long-run growth potential.

15. Our Framework for Strong, Sustainable and Balanced Growth is a compact that commits us to work together to assess how our policies fit together, to evaluate whether they are collectively consistent with more sustainable and balanced growth, and to act as necessary to meet our common objectives.

16. To make sure our regulatory system for banks and other financial firms reins in the excesses that led to the crisis. Where reckless behavior and a lack of responsibility led to crisis, we will not allow a return to banking as usual.

17. We committed to act together to raise capital standards, to implement strong international compensation standards aimed at ending practices that lead to excessive risk- taking, to improve the over-the-counter derivatives market and to create more powerful tools to hold large global firms to account for the risks they take. Standards for large global financial firms should be commensurate with the cost of their failure. For all these reforms, we have set for ourselves strict and precise timetables.

18. To reform the global architecture to meet the needs of the 21st century. After this crisis, critical players need to be at the table and fully vested in our institutions to allow us to cooperate to lay the foundation for strong, sustainable and balanced growth.

19. We designated the G-20 to be the premier forum for our international economic cooperation. We established the Financial Stability Board (FSB) to include major emerging economies and welcome its efforts to coordinate and monitor progress in strengthening financial regulation.

20. We are committed to a shift in International Monetary Fund (IMF) quota share to dynamic emerging markets and developing countries of at least 5% from over-represented countries to under-represented countries using the current quota formula as the basis to work from. Today we have delivered on our promise to contribute over $500 billion to a renewed and expanded IMF New Arrangements to Borrow (NAB).

21. We stressed the importance of adopting a dynamic formula at the World Bank which primarily reflects countries’ evolving economic weight and the World Bank’s development mission, and that generates an increase of at least 3% of voting power for developing and transition countries, to the benefit of under-represented countries. While recognizing that over-represented countries will make a contribution, it will be important to protect the voting power of the smallest poor countries. We called on the World Bank to play a leading role in responding to problems whose nature requires globally coordinated action, such as climate change and food security, and agreed that the World Bank and the regional development banks should have sufficient resources to address these challenges and fulfill their mandates.

22. To take new steps to increase access to food, fuel and finance among the world’s poorest while clamping down on illicit outflows. Steps to reduce the development gap can be a potent driver of global growth.

23. Over four billion people remain undereducated, ill-equipped with capital and technology, and insufficiently integrated into the global economy. We need to work together to make the policy and institutional changes needed to accelerate the convergence of living standards and productivity in developing and emerging economies to the levels of the advanced economies. To start, we call on the World Bank to develop a new trust fund to support the new Food Security Initiative for low- income countries announced last summer. We will increase, on a voluntary basis, funding for programs to bring clean affordable energy to the poorest, such as the Scaling Up Renewable Energy Program.

24. To phase out and rationalize over the medium term inefficient fossil fuel subsidies while providing targeted support for the poorest. Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.

25. We call on our Energy and Finance Ministers to report to us their implementation strategies and timeline for acting to meet this critical commitment at our next meeting.

26. We will promote energy market transparency and market stability as part of our broader effort to avoid excessive volatility.

27. To maintain our openness and move toward greener, more sustainable growth.

28. We will fight protectionism. We are committed to bringing the Doha Round to a successful conclusion in 2010.

29. We will spare no effort to reach agreement in Copenhagen through the United Nations Framework Convention on Climate Change (UNFCCC) negotiations.

30. We warmly welcome the report by the Chair of the London Summit commissioned at our last meeting and published today.

31. Finally, we agreed to meet in Canada in June 2010 and in Korea in November 2010. We expect to meet annually thereafter and will meet in France in 2011.

The Bank of England voted unanimously earlier this month to hold the benchmark interest rate at 0.50%

The Bank of England voted unanimously earlier this month to hold the benchmark interest rate at 0.50% and to maintain its GBP 175B asset purchase program as policy makers held an enhanced outlook for the economy. The BOE minutes said “inflation would probably be higher in the short-term than the committee had thought a month ago,” while the rebound in economic confidence paired with the improved outlook for asset prices “could mark the start of a virtuous upward spiral for the economy.” However, the board held a caution tone and warned that there could be “false dawns” as the economy has yet to reach “the point where the level of spare capacity was shrinking,” and went onto say that “a larger asset-purchase program could still be justified” to encourage a sustainable recovery. At the same time, policy makers noted price growth is likely to be “extremely volatile” over the coming months as the board anticipates an upward revision in the 2Q GDP reading, and the comments suggests the central bank will maintain a neutral policy stance going forward as the outlook for growth and inflation improve.Minutes from this month’s Bank of England monetary policy meeting headline the economic calendar in European hours. The announcement itself produced no surprises with interest rates left at 0.5% and the magnitude of quantitative easing unchanged at 175 billion pounds. Just five days later, however, BOE chief Mervyn King gave resoundingly dovish testimony to House of Commons Treasury Committee, saying poor credit growth remains a direct drag on demand and revealing that policymakers are considering cutting the interest rate they pay on bank deposits to encourage idle reserves to be channeled into lending. The latter comment in particular sent the British Pound tumbling, with traders clearly caught off guard as the BOE was seemingly preparing for more, not less, monetary easing despite the recent uptick in leading economic indicators. This creates strong potential for sterling volatility as the markets dissect tonight’s release for any clues on how serious King and company are about the deposit rate idea and when (if ever) such an outcome may be expected.

commercial bank reserves at the Bank of England

The big news overnight has come out of the UK with Sterling getting whacked across the board following comments from BoE King who said that the central bank will look into ways to reduce the deposit rate with the intent to cap commercial bank reserves at the Bank of England. This more than offset the initial GBP bullish inflation data which came in higher than expected. BoE King also said that inflation was expected to be low for some time, this despite the higher print today. In the Eurozone, German ZEW managed to post another gain, but failed to exceed expectations which was seen weighing on the Euro somewhat. However, this did not deter the Euro from posting fresh inter-day highs on the Eur/Gbp cross. In Switzerland, industrial production was much weaker than expected, which was seen generating some fresh cross related interest in Eur/Chf. More talk on the US as a reserve currency with the Kazakh central bank saying that they would be looking to reduce their USD exposure over the longer-term, but did not foresee any massive central bank reduction of USD reserves in the near-term with no real alternative to the USD at present. Looking ahead, US retail sales (1.7% expected), PPI (0.8% expected) and empire manufacturing (14.5 expected) are all due at 12:30GMT, along with Canada new motor vehicle sales (5.0% expected). US IBD/TIPP economic optimism follows at 14:00GMT, along with business inventories (-0.8% expected). US equity futures point to a marginally lower open, while commodities are mixed.

Techs - EUR/USD With the daily RSI by 70 and the market looking stretched, we do not anticipate the current rally to extend much further before a healthy and necessary corrective pullback. Key resistance comes in by 1.4720 which represents the December 2008 spike highs and we look for a rally towards this level on Tuesday, with the market potentially just exceeding 1.4720, before the start of anticipated correction. STRATEGY: SELL @1.4725 FOR AN OPEN OBJECTIVE; STOP 1.4925. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON TUESDAY. USD/JPY We established a long position on Friday and have most recently moved our stops up to cost with overall price action quite choppy. However, our bias from here is for a more significant corrective bounce, with the daily studies looking to cross up from oversold after the market stalled on Friday by the 78.6% fib retracement off of the 2009 low-high. Monday’s bullish hammer-like close has been followed up with some positive momentum on Tuesday and a push back towards 92.00 is seen at a minimum before even considering bearish trend resumption. GBP/USD We continue to maintain a sell on rallies approach to this market with the view that the pair has made a meaningful high above 1.7000 this year. The ensuing price action is more choppy consolidation than any threat of a fresh upside extension beyond 1.7000. Arguably, the market could even be in the process of carving the right shoulder of a head & shoulders top that ultimately would project setbacks to 1.5000 over the coming weeks. Friday’s 1.6745 high is expected to cap any additional intraday rallies, while back under 1.6520 should now accelerate declines. Only a close above 1.6745 would give reason for concern. USD/CHF The market is looking extremely attractive to us at current levels with daily studies oversold and with no real reason to continue weakening after medium-term support at 1.0370 was finally taken out. A fresh 2009 low has been set on Tuesday at 1.0320 and we look for the latest bounce to open a break above 1.0425 on Tuesday to confirm bias and accelerate gains back into the 1.0500-1.700 area.

world on Google's shadow payroll.

Google's hidden payroll
By Carolyn O'Hara and Travis Daub, The Christian Science Monitor
WASHINGTON — Jayant Kumar Gandhi, a former software engineer in New Delhi, is one of hundreds of thousands around the world on Google's shadow payroll.
In his spare time, Mr. Gandhi runs a free computer help website and recently began running ads by Google on his homepage as part of Google Adsense, a program that pays website publishers for advertising space. When visitors click on the ads on Gandhi's site, Google makes a small profit from the advertiser, and in turn, pays a percentage of that profit to Gandhi.
Such clicks can translate into pennies — or dollars — a day for a Web publisher. "I had no intentions of using it for more than a week," Gandhi says. "I didn't believe the stories that Adsense paid decent money. I ignored them as a marketing gimmick."
But Gandhi's Adsense profits have exceeded his wildest dreams. He now earns about $1,000 a month from the program, the same salary he previously earned as a software engineer. His new income has allowed him to leave his job and return to school. "Today I am able to sponsor my higher studies because of Adsense," he says.
Since its launch in 2003, the Google Adsense program has revolutionized Web publishing, turning blogs and personal websites into potentially lucrative ventures.
It is easy to join. A Web publisher or blogger simply completes an online Adsense form. Google then places ads on the site, similar to those that appear next to search results on Google. The ads are contextually matched to content on the host site, so a blog post about having a headache might attract ads for pain-relief medicine.
Anyone with a site is eligible, and Web forums are awash in success stories of small online entrepreneurs placing ads on their sites, sitting back, and watching checks from Google roll in.
But it is Web entrepreneurs in the developing world who are reaping the greatest benefit from the program.
Because Adsense earnings can vary widely depending on a site's traffic or subject matter, many Web publishers in the developed world don't bother participating. Whereas a $25 monthly payout may not be worth the trouble to a blogger in Manhattan, it can mean the world to a blogger in Manila.
Andrew de la Serna runs a small search engine in Davao City, Philippines, and derives about 40% of his monthly income from Adsense. "It's great to do what you love to do and earn money from it at the same time," he says.
His earnings have allowed him to purchase a cellphone, develop new websites, and build up his savings account.
Dr. Rodolfo Rafael, who owns a small medical clinic in San Fabian, Philippines, says the Adsense earnings from his medical website allow him to "dream big" and reinvest in his medical practice.
Their experiences are shared across the developing world. In Cairo, Mohamed Sallam was grounded for health reasons from his job as an airline steward, and he now spends time maintaining a Web forum devoted to discussions of Islam. He earns most of his income, about $500 a month, from Adsense.
"The low cost of living here allows us to live comfortably on that income," he says. "My two sons want to try their luck. We have a high unemployment rate here and making money from Adsense would be the perfect solution for them."
Deepesh Agarwal, who runs a small cybercafe in Rajasthan state, India, draws about 90% of his income, or $1,500 a month, from his Adsense earnings. It is a princely sum in a state where the average income is just $300 a year.
"Adsense has changed my life," Mr. Agarwal says. "I can afford things that I was not able to before. I am planning to buy a new car. I can save for my future."
The program is a big revenue generator for Google, too. The company earned some $2.7 billion in Adsense revenues last year. Google refuses to disclose the exact percentage it pays out to Adsense member sites, but recent news reports have put that figure as high as 78.5 cents on the dollar.
"We do not disclose [the revenue share] for different reasons," says Brian Axe, an Adsense group product manager at Google. "But it is more than fair. [These success stories] bring a smile to our faces."
Still, many hurdles remain for Adsense users in the developing world, not the least being access to the Internet.
Payment checks from Google can be difficult to receive due to inefficient or non-existent national postal systems, and they can be even more difficult and costly to cash.
There are also legitimate concerns about people attempting to defraud the system, causing many to wonder whether the program has real sustainability. Some website owners try to increase their earnings by clicking on their own ads, and some create automated sites that exist solely to make money from Adsense.
"Google is actively looking for those kinds of sites," and removes ads from them, explains Eric Giguere, author of Make Money with Google: Using the Adsense Advertising Program.
Google has a clear interest in protecting the program that last year accounted for nearly half of its advertising revenues, and is quick to play down the threat of fraud. "Many times [the fraud] gets blown out of proportion," said Google's Mr. Axe. "I don't think it's an issue that would unravel the business."
For the time being, that "business" offers a rare opportunity to Web users in developing countries to participate on a level playing field with other websites all over the world.
Thanks to Adsense, a blogger in New Delhi can earn the same 5 cents for an ad-click as a blogger in Detroit. For many Adsense users in the developing world, that opportunity has become perhaps the most unintentional — and most successful — development program to spring from the online revolution.

A New Model For Getting Rich OnlineInvestors.

A New Model For Getting Rich OnlineInvestors Not Needed, Just a Site With Ads
By Yuki NoguchiWashington Post Staff WriterFriday, July 28, 2006; A01
For hundreds of thousands of people, the dream of making an Internet fortune works like this: Earn pennies at a time in exchange for allowing Google Inc. or Yahoo Inc. to place advertisements on a personal or small-business Web page.
Take Andrew Leyden, former House Commerce Committee counsel and founder of a dot-com venture that failed, who started PodcastDirectory.com, a search engine for podcasts. As the site's popularity rose from a hundred hits a month in 2004 to nearly a million now, Leyden started making the equivalent of an entry-level government worker's salary -- $30,000 to $40,000 a year -- simply because people clicked on ads. That allowed him to work at home in Chesapeake Beach, Md., trying to make more money by attracting still more traffic to his site.
"I went from literally 26 cents a week or something like that to several dollars an hour," he said, by using Google's AdSense software, which solicits bids from marketers who, in turn, pay to run ads on his site. "I get paid while mowing the lawn. I get paid while cleaning the garage. I get paid driving my wife to her office, buying groceries, seeing a movie, playing video games, or just surfing the Internet. That's really the nice thing about AdSense: No matter what I'm doing, people keep clicking and I keep getting paid."
A decade ago, the Internet dream was to score through venture-capital financing and by raising cash in public stock offerings. Now, people with creative ideas can get rich relatively quickly by permitting advertisers to piggyback on any Web site that attracts a lot of viewers. Technology can direct ads to more and more specific audiences, rewarding entrepreneurship on the smallest scale -- even Web pages filled with obscure and homemade content.
"We have a segment of customers called hopeful hobbyists" who have Web sites devoted to anything they might care about, from crochet to sailing, and who hope to eventually make enough money to quit their day jobs, said Willan Johnson, vice president of Yahoo Publisher Network, which launched a test version of its software last year.
David Miles Jr. and Kato Leonard, two 20-year-olds in Louisville, say they collect $100,000 a month from their year-old site, Freeweblayouts.net, which gives away designs that people can use on MySpace social-networking pages. One couple blogged about their home reconstruction and made money to help pay the mortgage on their new house. Jock Friedly's business, Storming Media LLC, allows users to download public documents; he used the money his Web site made on ads for new online ventures.
Companies like Google, in turn, also find profit in such sites. In the second quarter, Google got $997 million, or 41 percent of its revenue, through the network of Web sites that host ads through the AdSense system. Its software, like Yahoo's, prices ads based on popularity. When users click the ads, the software keeps detailed records, including the number of page views and the amount of commission the site's host earns from the ad -- all of which Web site owners can keep track of by logging on to their accounts. Every month, Google pays publishers by check or direct deposit.
Ad publishers must be approved through Google, to ensure that the ads don't subsidize pornography or gambling, or contain material that is racist, violent or related to illegal drugs. Among other things, Google says it watches to make sure people don't inflate their revenues by clicking on their own ads -- a practice known as "click fraud" that has plagued online marketing.
The popularity of making money this way also has led to creation of "made-for-AdSense" Web pages that contain little content and lots of ads, which critics say clutter the Internet and divert online searches.
The system depends on the cooperation of advertisers, who have to see that their money is well spent, said Jennifer Slegg, an online publisher who is a consultant on AdSense and Yahoo Publisher Network, and who makes roughly half her income from AdSense ads.
"I hear tons of stories about people who were facing bankruptcy but now are able to pay off their houses in full," she said.
The biggest moneymakers tend to be people who started sites to document their passions. Matther Daimler, 28, developed an obsession with finding the most comfortable seats on the long airline flights he took for business. He would look at a better-situated traveler and think: "He has more legroom. I want that seat next time."
In 2001, he took to cataloguing on his SeatGuru site all the seats on his usual United Airlines flight, rating them for best legroom, the most recline, access to video and audio entertainment, and proximity to different types of laptop power sources. Soon, at the request of people who read his site, he started taking information on other flights. He now keeps track of seats on 34 airlines.
Daimler and his wife now work full time on SeatGuru, which gets 700,000 visitors a month. About half of the site's revenue comes through AdSense -- $10,000 to $20,000 a month -- and the rest comes from ad deals that Daimler makes with companies directly.
Tracking clicks and the money they earn itself has become a passion for Leyden. "In the middle of the night I'll wonder how much I made," he said, so he'll check his page's status every 15 minutes.
The money that comes in acts like microfinancing for many sites, said Kim Malone, director of AdSense. "We're enabling creativity, 5 cents at a time."
Friedly, for example, started his company in Washington in 2001 to make it easier for contractors, scientists and researchers to find, download and purchase public documents. He reluctantly signed up to put ads on the site. "I was skeptical because when you sell something, you want to focus on the product, not refer people to other Web sites," he said.
But with more than 10,000 hits a day, the income started adding up. "I was surprised by how much we made. It was an excellent supplement to the business, because we didn't have to do a lot."
Friedly has since started PatentStorm LLC, a site where businesses can search patent records, without outside investment. "In essence, Google has turned into a venture capital or an angel investor in my business."
But if Google giveth, it also taketh away, Friedly said. As people put up more sites that compete with his for traffic, the number of hits on his main site has declined.

Google prefers that publishers

Question 2) Google's recent "images next to ads" policy is confusing. Could you please clarify so all publishers know what is and what is not allowed?
Answer 2) Google prefers that publishers avoid images that are lined up directly next to the ads so that it appears each ad is associated with an image. If the dimensions of the image are completely different than the dimensions of the ads, that's okay.
But if it appears to the user that the image is at all associated with the ads, that would be in violation of AdSense terms of service.
The general idea is Google does not want visitors clicking on ads because they have been deceived in believing the image is associated with the ad.
That leaves a lot of room for creative design, and it also means that AdSense graphic backgrounds and visuaQuestion 3) I occasionally see ads are actually placed by Google. Do publishers receive payment when those ads are clicked?
Answer 3) Yes! Whenever you see an ad for a Google service, Google is paying the publisher for that ad just as they would for any other ad. They are bidding in the auction and the publisher will be paid according to those bids.
This is also good news for those who wondered if Google was attempting to score a "free ride" by placing their own ads on the network.l frames are within terms of service.

AdSense Product Manager for ads quality

As an AdSense Product Manager for ads quality, I'm part of a group that works to make the ads on your site relevant for users. One of the ways we do this is through contextual targeting, which matches ads to the content of your webpages. With contextual targeting, our system parses and analyzes the content of your page, conducts an auction among the relevant ads, then serves the winning ads -- all in the blink of an eye! Pretty simple, right? Actually, matching relevant ads to the content of your pages is quite a scientific challenge involving semantic analysis and machine learning. It's a challenge that keeps me and my team busy. Our machines are very good at the matching process, but there are still a few cases where their definition of relevance differs from our human definition of relevance. In these few cases, the system might end up serving ads that don't seem immediately relevant to users. We understand that increased ad relevance contributes to a positive experience for users, publishers, and advertisers, so we're continuously working on ways to improve the relevance and quality of ads that appear on your sites.I'm excited to let you know that this week, we'll be rolling out a series of enhancements to AdSense's contextual targeting capabilities, which will more accurately match relevant ads to webpages. You won't need to update your AdSense account or ad code, as these changes will be applied automatically. In many ways these types of improvements are par for the course at Google - but I wanted to let you know about the kinds of improvements we've been focusing on. Please keep in mind that these changes won't affect how other types of ads are matched to your sites; for instance, you'll continue to see placement-targeted ads when advertisers bid to appear specifically on your pages.This is by no means the end of our efforts to perfect the system, but we believe that with these changes users will start to see even more relevant ads, advertisers will generate more attractive returns by finding the right users, and publishers should make more money over time.As always, we're interested in your feedback on these improvements!

Google-certified ad networks

We've been hearing your requests for new ways to generate revenue in AdSense, and new ways to maintain control over the ads that appear on your sites. With that in mind, we're pleased to announce plans to give you the ability to allow multiple Google-certified ad networks to compete for display ad space on your site. You may remember that we began to accept display ads served from qualified third-party vendors over a year ago, which helped increase the number of display ads competing on AdSense publisher sites. With this new change, participating ad networks can also bid in our auction to appear on AdSense sites. This new capability will help you generate the most profit for every ad that appears on your site, whether the ads come from AdWords advertisers or Google-certified ad networks.Who are these ad networks? They're ad agencies and companies that partner with advertisers and publishers to buy and sell ads on sites they don't own themselves (much like AdSense). You'll now be able to allow advertisers from these networks to compete with AdWords advertisers for your ad space. All reporting and payments will still run through AdSense as they always have, and the available ad formats will be the same as those offered for AdWords ads.We take the quality of ads delivered to your site seriously, so we'll be certifying all participating ad networks for adherence to our standards for user privacy, ad quality, and speed. You'll have control over which networks can show ads on your pages -- you can choose to opt out of receiving ads from specific networks, or all networks completely. This means you can continue to show ads from only AdWords advertisers if you like. Visit the Help Center to learn more about managing these account settings. We'll slowly begin allowing ads from Google-certified ad networks to appear on AdSense pages over the coming months, so you won't see an immediate impact on your ads or earnings. As new networks are certified, you'll see them appear in your account. This feature will initially be available to publishers in North America and Europe, but we hope to roll it out to additional parts of the world in the future.

We're happy to announce that publishers located in South Korea can now receive payments via Western Union Quick Cash.

We're happy to announce that publishers located in South Korea can now receive payments via Western Union Quick Cash. You won't need to wait for your checks in the mail, and AdSense won't charge you any fees to use this payment method. Please note that payments can only be picked up at the International Bank of Korea (IBK) and are only available in South Korean Won (KRW) currency.Sign up for payments by Western Union today by following these instructions. Two important things to remember: we can only send Western Union payments to individual publishers at this time, and the payee name on your account must exactly match the government issued ID card that you'll bring to pick up your payments. We also encourage you to review the information in our Help Center for more details about this payment method, including how you can picAs part of our continued efforts to give you more control over the ads that appear on your sites, we'd like to share two additional improvements to the Competitive Ad Filter:
Faster filteringIn the past, the Competitive Ad Filter sometimes took up to several hours to block URLs you'd entered. Knowing you've wanted a faster filtering system, we're excited to let you know that URLs added to your Competitive Ad Filter are now usually blocked within 30 minutes. We hope that this will help you quickly make changes to maintain a positive user experience on your sites. Increased filter list sizeAt the same time, a growing number of you have let us know that you're running out of space in your Competitive Ad Filter. Now, you can add up to 500 sites to your filter list, more than double the previous limit. As you add new sites, please continue to keep the possible revenue impact of filtering in mind. You might also find it helpful to review our tips for using your Competitive Ad Filter. We're continuing to work towards enhancing your ad controls, and we'd love to hear any suggestions you have. Feel free to leave us a comment below.k up your payments and when you'll need to pick them up by.

People have been asking me three questions about the AdSense program, and their new terms of service and AdSense support team have now clarified all o

People have been asking me three questions about the AdSense program, and their new terms of service and AdSense support team have now clarified all of these issues.
~~~~~~~~~~~~~~~~~
Question 1) Does Google allow other ads to run on the same page as AdSense Ads?
Answer 1) The official word is a qualified "yes".
You may not run ads that are designed to resemble AdSense ads. For example, Yahoo! Publisher Network ads look very similar to AdSense ads. While you can run YPN on your site, they may not appear on the same PAGES as AdSense ads.
However, contextual ads like those provided by Kontera, Intellitxt, Amazon and Chitika ARE allowed on the same pages as your AdSense ads!
While not the exact answer we were hoping for, this does clarify for us and opens many new options for publishers wishing to use others advertisements on their pages.
I have made a good deal of income with Kontera and Chitika, and am very glad to see that we may all apply for their programs and implement them on our pages without fear of losing our AdSense accounts.
Incidentally, I have written the ONLY book on making money with Kontera and am pleased to offer it to you today as a discount to celebrate this clarification from Google!

payment ratio

The People’s Bank of China introduced new tightening measures to cool the property market last month, as the economy showed no sign of slowing and investment growth continued well above the government’s target. The central bank increased the five-year benchmark mortgage rate from 5.31% to 6.12%. It also raised the required down-payment ratio from 20% to 30% in areas with rising prices.The average price for residential housing rose 15.2% last year, much higher than the rise of other price indexes. A spokesperson for the central bank said that the rise in housing prices could lead to financial risks, and that the rate rise would help guide the housing sector down the proper track. These were marginal steps, according to analysts, who expect the PBOC to raise other rates soon to slow the economy. Last October, interest rates were increased by 27 basis points.China’s fixed investment rose at an annual rate of 24.5% in the first two months of 2005, still well above the government’s 16% target. Along with other data reported for the period, it appears that China’s economy is growing much faster than the government would like, analysts say.Recent management changes at the country’s big state banks seem to suggest that the central bank is breaking down local governments’ resistance to tightening measures, according to analysts at HSBC Bank. This shows that Beijing is serious about reducing the excessive amounts of investment in the Chinese economy, they say.Premier Wen Jiabao said last month that government planners face a multitude of problems as they try to keep the economy growing at a rapid but sustainable pace.“Some people strongly demand that we raise the yuan’s value, but they haven’t given much thought to what sort of problems would ensue,” he said. “This is very irresponsible.”

Sir Howard Stringer, the Welsh-born head of Sony America, has been named chairman and CEO of the Japanese parent company. The gaijin CEO, rare in Japan and a first for Sony, may implement some drastic turnaround measures that would have been difficult for a Japanese manager to implement.The genteel Sir Howard, known for his people skills and sense of humor, will wield the corporate axe with an iron hand and kid gloves. He also will have to resolve Sony’s identity crisis. Is it an entertainment company or an electronics company, or both?Now that the Sony Walkman has been displaced by the Apple iPod, the Japanese company is losing its reputation for being first to market with the latest technology and quality products.The Oxford-educated executive was appointed to Sony’s top position only weeks after the company warned that profits at its electronics division would fail to meet their target for the second straight year.Sir Howard already has been credited with breaking down the management silos between Sony’s US entertainment and electronics operations, and he just might have the vision to steer Sony successfully into the broadband age.Last year, he oversaw the purchase of Metro-Goldwyn-Meyer and its film library. Now he has to find a way to convince consumers to tap into Sony’s media cache with advanced devices, such as the popular PlayStation Portable game console.Sir Howard, a former journalist who became president of CBS, has nine individual Emmys to his credit and is firmly grounded in the content side of the business. However, the decorated Vietnam War veteran has the guts, the talent and the versatility to succeed in his latest multicultural, and multi-media, challenge of helping Sony to realize its global potential. He plans to live in the UK with his family and travel regularly to Tokyo and New York.

Finance minister Alberto Carrasquilla of Colombia has pulled out all the stops to keep the country’s currency from rising against the slumping dollar. Sadly, nothing seems to work.The peso rose 16% last year, making it one of the strongest currencies in the world, to the chagrin of the country’s exporters, who complain they are losing their competitiveness despite a new free-trade agreement with the US.“Nobody wants to buy dollars because buying means losing money,” Carrasquilla says.Last year, the government and the central bank bought more than $3 billion in US currency in an attempt to curb the peso’s rise. The central bank slashed interest rates three times, bringing the benchmark rate down to 6.5%, but still the peso rose.Last December, President Alberto Uribe signed an executive order restricting the inflow of short-term investments by requiring international investors to keep their money in the country for at least a year. The capital controls proved virtually useless in stemming the peso’s appreciation and will be abandoned within the next few months, Carrasquilla said in a recent interview with US news service Bloomberg.The latest plan is for Colombia’s central bank to sell the government at least $1 billion in foreign reserves, which the government will use to help prepay international debt, Carrasquilla says. The dollar reserves were accumulated during the central bank’s foreign exchange market intervention.Colombia’s central bank is independent by law, but Carrasquilla is president of its seven-member board. He says that prepaying debt will help meet the International Monetary Fund’s requirement that Colombia trim its debt to less than 40% of gross domestic product. Draining off the central bank’s reserves could also spur some peso selling. Meanwhile, Carrasquilla says, the central bank will keep buying dollars.

For the world

Global Finance unveils its annual list of the best banks in developed markets around the world.
Revenues are rising, profits are up, prospects for growth are improving, and new opportunities are blossoming around the world. For the world乫s top developed market banks, the future?as well as the present?is looking rosier than ever. In many developed markets, banks enjoyed a year of strong growth in 2004 and look well placed to do the same this year.For many of the banks, however, notching up such good results has been challenging, to say the least. Markets, particularly in Europe, have been choppy, and many of those banks that have significantly increased their profitability have done so through aggressive cost-cutting or by focusing their resources on higher-margin business. Such strategies, of course, put the banks in prime position to repeat their successes in the years to come.As usual, in selecting the winning banks we considered factors that range from the quantitative objective to the informed subjective. Objective criteria were growth in assets, profitability, geographic reach, strategic relationships, new business development and innovation in products. Subjective criteria included the opinions of equity and credit ratings analysts, banking consultants and others in the industry. The winners are leading banks that may not be the largest, the oldest or the most diversified in a given country or sector, but rather the best?the bank with which corporations around the world would most likely want to do business.

Brazil’s central bank president Henrique Meirelles The Brazilian government may have put itself in a Catch-22 situation, as it fights inflation through interest rate hikes but chills domestic demand and cools economic growth prospects. While Brazil’s hyperinflation of the mid-1990s remains a bogey for the administration, local business and labor leaders charge that high interest rates are punishing jobs and investments.The central bank’s monetary policy committee (Copom) has been raising its Selic benchmark rate since September 2004, taking it to a 17-month high of 19.25% in March from a low of 16% in May 2004. While the hikes aim to keep inflation under control, observers contend that the government’s 5.1% inflation target for 2005 may be ambitious. They point to a 15% minimum wage hike and salary increases for judicial workers as ways in which the administration may itself be fueling inflation.There are signs that inflation is already stabilizing, though, having risen by a modest 0.58% in January and 0.59% in February. That still brings annual inflation to 7.4% for the 12-month period to February, which is higher than the stated 2005 target but below last year’s 7.6% and 2002’s 12.5%. Copom is expected to increase rates yet again in April, to a hefty 19.5%, in what may be the last upward adjustment for the year.In late February, an OECD report on Brazil noted, among other things, that lack of credit and high interest rates could threaten the country’s economic recovery by halting investments.Meanwhile, Congress in March revived a decade-old debate on granting the central bank autonomy. Opponents argue that central bank directors must be accountable to the government in order to ensure that monetary policy remains in line with public and private sector interests.

Narendra Patni, CEO, Patni Computers The McGraw-Hill Companies (MHC) made a long-awaited move and announced an intention to acquire a 55.67% stake in CRISIL, India’s leading credit rating agency, through S&P LLC, its wholly owned subsidiary. MHC currently owns 9.5% of CRISIL. Even though the proposed investment is small, at just $55 million, it is being viewed as a significant development since it indicates S&P's growing confidence in the Indian economy and could be a sign that more aggressive FDI flows are on their way.S&P’s move is by no means an isolated development. Global banks, too, are signaling their interest in investing in India by making small but strategic purchases of smaller regional Indian private sector banks or rapidly expanding their own banking presence. Canada’s Scotiabank has recently acquired a 7% stake in the Bank of Punjab. The current regulations do not allow foreign investors to hold more than 10% of the voting shares of private sector banks, but the view being taken is that this restriction will be eased soon. HSBC has said that it would pump in $243 million to organically expand its existing Indian operations.High-quality listed Indian banks from the public sector, too, are issuing equity, largely to provide an entry opportunity for foreign institutional investors. Punjab National Bank, one of the nation’s larger banks, floated 80 million shares in the first week of March, attempting to raise $650 million, with a 50% reservation for foreign institutional investors. That portion of the book was oversubscribed by 11 times within minutes of opening.The capital-raising bug is spreading to other sectors as well. Patni Computers, one of the stellar IT hardware stories in India, is looking at a $150 million ADR issue and a subsequent Nasdaq listing, cashing in on the growing demand for Indian equity.As foreign investors continue to lap up the India investment story, the foreign exchange inflow has continued unabated. According to the Reserve Bank of India, forex reserves climbed to a record $137.5 billion, largely due to sustained investment inflows.