Daily Digest

Daily Digest - November 10

Tuesday, November 10, 2009, 10:45 AM
  • Life without Prichard pension: Couple's savings could be gone by Christmas
  • Unemployment Rate in U.S. May Reach 13 Percent, Rosenberg Says
  • Bankruptcy filing is a blow to small business
  • The new faces of day labor (Las Vegas)
  • Unemployment Trust Fund Insolvent?
  • Tidal Wave Of New Defaults Arrives
  • Retro Appraisals Raises Doubts about Lenders' Past Valuations as Foreclosure Defense
  • Obama Pledges To Tackle Beijing On Yuan
  • Tougher Standards On Fund Fees May Be Near 
  • Watchdog: Treasury And FED Failed In AIG Oversight
  • Tax Refunds, Relief For Home Builders
  • Foreclosures Account For 20% Home Sales
  • Why Some Countries Are Stopping Their Stimulus 
  • Exit Strategies: The IMF Recipe 
  • China Woos Africa
  • Endless Summers
  • Utility Company Turns Restaurant Food Scraps Into Green Energy
  • Conference Spotlights Firms' Eco-Friendly Concepts

Economy

Life without Prichard pension: Couple's savings could be gone by Christmas (saxplayer00o1)

The life Alfred and Jacqueline Arnold spent their careers planning together could be gone by Christmas. They met on the streets of Prichard about 30 years ago.



He, the city's first black firefighter, was driving a truck to a blaze. She, the city's first female police officer, was directing traffic.



He put in 35 years of service, and she put in 40 years.



But none of the city's roughly 150 pensioners have received a check since Sept. 1. When the city filed for Chapter 9 bankruptcy late last month, it became clear that pensioners may go several more months without money.

Unemployment Rate in U.S. May Reach 13 Percent, Rosenberg Says (saxplayer00o1)

The U.S.. unemployment rate may rise to a post-World War II high of 13 percent in the aftermath of the recession, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.

Bankruptcy filing is a blow to small business (saxplayer00o1)

Advanta's bankruptcy comes just one week after another top small business lender, CIT Group, filed its own bankruptcy petition. Both companies were hit with a sharp rise in defaults as the recession deepened. Advanta's default rate reached 24% in September, up from 11% one year ago, according to the company's financial filings.

The New Faces Of Day Labor: Las Vegas (saxplayer00o1)

U.S. citizens are joining immigrants in store parking lots In the latest sign of the Las Vegas Valley’s economic free fall, U.S. citizens are starting to show up in the early mornings outside home improvement stores and plant nurseries across the Las Vegas Valley, jostling with illegal immigrants for a shot at a few hours of work.  

Unemployment Trust Fund Insolvent? (saxplayer00o1)

Back in August of this year I did an article that showed how bad the math was with the unemployment system.



Well, the math is just getting worse… back in August the total 2009 outlays had already hit a record but were well under $60 billion. Now they are approaching $100 billion, already almost 5 times the amount paid out in the year 2000.

Tidal Wave Of New Defaults Arrives (saxplayer00o1)

Now recasts are starting to come due for the first wave of option ARMs and there is some evidence the first wave of defaults is ahead of schedule. In a highly publicized report last September, Fitch Ratings predicted roughly $29 billion worth of loans would recast to higher monthly payments by the end of 2009 and an additional $67 billion would recast in 2010 and would not abate until 2012. 

Retro Appraisals Raises Doubts about Lenders' Past Valuations as Foreclosure Defense (saxplayer00o1)

According to Retro Appraisals, 70 percent of appraisals made for mortgage financing between 2005 and 2007 were overstated and inflated. They added that mortgage brokers, real estate agents, and lenders had close contact with appraisers, and most appraisal order forms have a line item asking the borrower or agent to write down the value that was needed from the appraiser.

Obama Pledges To Tackle Beijing On Yuan (M.W.)

Barack Obama will confront Chinese officials on the divisive subject of the yuan next week in a bold move which could anger America's largest creditor.

Tougher Standards On Fund Fees May Be Near (M.W.)

The Supreme Court may soon issue a ruling that puts more pressure on mutual funds to justify their fees.

Watchdog: Treasury And FED Failed In AIG Oversight (M.W.)

The fierce debate over bonuses for bailed-out executives was revived on Capitol Hill Wednesday as a government watchdog explained how some executives nearly brought down the financial system – then pocketed millions. Treasury Secretary Timothy Geithner is "ultimately responsible" for regulators failing to rein in massive bonus payments at AIG because he led the agencies that provided AIG's lifelines.

Tax Refunds, Relief For Home Builders (M.W.)

The new tax break for businesses signed into law on Friday will result in a windfall valued at hundreds of millions of dollars for the biggest home builders.

Foreclosures Account For 20% Home Sales (M.W.)

Twenty-one percent of single-family home owners are in a negative equity position. More than one fifth of all sales in September were foreclosure re-sales, up from 15 percent a year ago.

Why Some Countries Are Stopping Their Stimulus (M.W.)

The world is in uncharted territory. Policymakers are acting on the fly, without much in the way of historical precedence to guide them. How will equities, bonds, commodities, oil, gold, currencies and other investment vehicles fare in the post-stimulus-spending world?

Exit Strategies: The IMF Recipe (M.W.)

The IMF's seven principles to guide exit strategies to “pave the way for strong, sustained and balanced economic growth.”

China Woos Africa (M.W.)

China has big economic plans and ambitions in Africa that go beyond oil and minerals.

Endless Summers (M.W.)

An in-depth look at Larry Summers, head of the White House Economic Council.

Energy

Utility Company Turns Restaurant Food Scraps Into Green Energy (M.W.)

The East Bay Municipal Utility District, which provides water and wastewater treatment in the eastern San Francisco Bay Area, is turning food scraps from 2,300 Bay Area restaurants and grocery stores into electricity to help it power its wastewater facility.

Economy

Conference Spotlights Firms' Eco-Friendly Concepts (M.W.)

Every week, Alex and Nikhil collect 2,000 pounds of used coffee grounds and take them to a warehouse. There, in a damp indoor farm, the college friends grow gourmet mushrooms that are sold at local markets. Just a few months out of business school, they're on track to make more than $200,000 in their first year. The budding entrepreneurs' efforts were among 25 start-ups spotlighted during the sustainable business conference.

21 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - November 10

 

"The U.S.’s rating also might be at risk of a review if its fiscal position does not stabilize in the next couple of years, Riley was reported by Reuters as saying in a television interview."

 

  1A) Japan faces risk of ratings downgrade over debt (more info on Japan)

 

""Understanding that the real level of unemployment in October 2009 was closer to 22 percent than to the officially reported 10 percent is an important corrective," Corsi wrote, "especially if we are to appreciate the extent to which a Dow at or above the 10,000 benchmark is nothing more than another Fed-created bubble."

With millions of jobs outsourced to China and India under free-trade globalism, the dollar weakness that accompanies most recessions is not stimulative, he explained, largely because the U.S. has lost so many manufacturing jobs that are never returning to its shores."

(Posted here last Friday by r101958)

"Here is a more accurate number:

From SGS: "Adding the excluded long-term discouraged workers back into the total unemployed, unemployment more in line with common experience — as estimated by the SGS-Alternate Unemployment Measure — rose to about 22.1% in October, up from 21.4% in September. See the Alternate Data tab at www.shadowstats.com for a graph and more detail.""

 

 "Gross notes that over the last year alone the depreciating dollar means that every single Treasury purchased by China, Japan etc with a 1 to 2 % yield has essentially generated a negative 13 to 14% return. Yes, NEGATIVE 13 to 14% return."

 

"If India were to lift is gold share of FX reserves from 6% to 20%, where it was during the strong U.S. dollar policy days of 15 years ago, we estimate that gold would go to $1300/ounce.

If China were merely to copy what India just did and raise its share to 6%, then gold would go to $1,400/ounce, based on our in-house analysis.

If the USA were to go back to a 40% ratio of gold reserves to money supply (using the monetary base), where it was a century ago when the Fed was first created, from 17% currently, that would equate to three years’ supply of bullion, and alone take the gold price up to $2,750/ounce, based again on our research on price sensitivities to central bank buying activity.”"

"Banks around the world face increases in funding costs that could cut profits and hit their customers as they look to re­finance $7,000bn-plus in short-term debt expiring in the next three years with longer-dated bonds, according to research released on Tuesday.

Institutions seeking to reduce their reliance on short-term paper will have to pay up because interest rates are likely to rise and governments will stop supporting the financial system, the study by the credit rating agency Moody’s concludes."

"Moody’s estimates that a lender wanting to refinance a short-term government-guaranteed bond with 10-year paper could see costs rise nearly 7 percentage points"

  (More info)

"GMAC, a crucial player in the U.S. auto industry, has been unable to raise the $11.5 billion regulators said it needed after stress test results were announced in May. The Fed says the finance company is expected to close the gap with more money from the $700 billion financial bailout.

GMAC, already the recipient of $12.5 billion in taxpayer infusions, is negotiating with regulators over how much more it will receive."

"The global economic crisis is not over, said Harvard University professors Kenneth Rogoff and Niall Ferguson, challenging the G20 group of wealthy countries' assumptions that the world is on the road to recovery.

Public spending in the form of bailouts and stimulus packages will create a debt burden for the world's governments, the two professors told Bloomberg.

“The financial crisis may eventually morph into a government-debt crisis,” says Rogoff, former chief economist at the International Monetary Fund."

"Five days after announcing dozens of layoffs in its wholesale unit, Sprint Nextel Corp. (S) said it’s cutting hundreds more jobs – up to 2,500 – by the end of the year."

"As he seeks concessions from state workers to balance his first budget, Gov.-elect Chris Christie is examining the possibility of declaring a financial emergency in the state, according to an official familiar with his plans."

"The Nutter administration on Monday convened a meeting with City Council members to deliver more grim economic news: the city has a new and unexpected budget deficit, topping $30 million.

Top aides to the mayor told councilmembers that despite months of cutbacks, the government at this point has a $31-million deficit in the current fiscal year, which ends next July."

"The City of Grand Rapids is facing a budget deficit of nearly $28 million for the year beginning July first. Grand Rapid's City Manager says its been a horrible process."I can only tell you that I am personally devastated. I have never had to do anything like this. This is certainly the saddest days of my life," said Grand Rapids City Manager Greg Sundstrom.The cuts are the result of declining income tax revenues which are on pace to fall 15 percent, and the year is not over."

"State is "running out of money,' governor says in plea for cuts"

""Some say the deficit is not even as deep as we have described it. Some say the revenues are coming back, and others say Wall Street will bail us out. I suggest to you that that is wishful thinking, my colleagues," Paterson said. "And we do not have time to engage in it."

As soon as the $132 billion budget was created in April, fiscal critics were warning that it was built on overly rosy revenue projections and inflation-busting spending levels. Monday, Paterson joined in, warning lawmakers against making spending promises that cannot be kept or resorting to "phony solutions" for the deficit."

"The amount of revenue the Peach State pulled in from various taxes plunged 17.8 percent in October, the Georgia Department of Revenue reported Monday.

Georgia took in $1.14 billion last month, compared with $1.39 billion in October 2008."

"WINTER HAVEN - State Rep. John Wood, speaking at a City Commission meeting Monday evening, presented a bleak picture of continuing budget woes on the state level that will trickle down to cities.

"The overriding issue will continue to be money, or lack of it," said Wood, R-Winter Haven, who represents District 65, which encompasses much of northeast Polk County and a portion of Winter Haven.

This means there will be no state budget requests from local governments because the funds aren't available to fill them.

"The economy is having a great toll on our government. The budget is going to be an extreme challenge," Wood said, adding that legislators will be dealing with a $2.5 billion deficit."

"The national median price clocked in at $177,900, or 11 percent below the third quarter last year."

"Ambac reported that, should the OCI decide to initiate delinquency proceedings in order to protect the interests of its policyholders, an event of default could occur with respect to Ambac’s debt (that is, the holding company debt), which would in turn accelerate principal totaling $1.64 billion, as well as terminate credit default swap contracts insured by Ambac Assurance. This in turn could liquidiate mark-to-market claims for underlying exposures in swaps totalling approximately $23 billion, the company said."

"The city's teetering Off-Track Betting Corp. will seek permission to close as many as two-thirds of its 68 branches when it files a bankruptcy reorganization plan, The Post has learned.".....

"The state took over OTB from the city last year, after Mayor Bloomberg threatened to shut it down rather than spend taxpayer dollars to prop up a horse-betting operation.

One official said the state is in a bind because it could be on the hook for as much as $600 million in pension, health and other liabilities if OTB closes."

"Gov. Arnold Schwarzenegger estimated Monday that California's budget will fall out of balance by $5 billion to $7 billion this fiscal year, on top of a $7.4 billion gap already projected for 2010-11.

If true, state leaders would confront at least a $12.4 billion to $14.4 billion problem when Schwarzenegger releases his budget in January. California currently has an $84.6 billion general fund budget."

"The economic crisis revealed late-capitalism's central offense: Human beings are being transparently treated if they were mere transactions. And they're going postal over it."

"Without changes, the state is looking at a $2.3 billion pension appropriation next year, up from $1.4 billion, he said. Such an allocation would threaten state programs and services, he said. It would also add to a fiscal 2011 state budget gap estimated at up to $3 billion. The fiscal 2010 budget is already undergoing extensive and far-reaching changes to address a billion dollars’ worth of likely revenue declines and spending demands.

The state recently extended by two years its schedule for fully paying down its pension liability. Now another longer extension, one that may give systems the flexibility of delaying full funding until 2040, is getting serious attention on Beacon Hill. The current schedule calls for full funding in 2030."

"Now, Florida is headed for an even grayer future in the Baby Boomer retirement era, state economists and demographers predict. The consequences: worker shortages and severe strains on public pensions and government services.

By 2030, more than one in four state residents will be 65 or older – or 26 percent, compared to 17 percent today, the University of Florida Bureau for Business and Economic Research says"

"The unfunded liability is $ 130,000,000 and the mayor and council members are surely aware of this growing figure of an unfunded liability of the police and fire fighters pension retirement plan."

"Because of higher usage as well as recent market losses, the program faces $4.9 billion of unfunded liability, up from $2.7 billion a year ago. That amount, like a house loan, is amortized over a 30-year period.

The increase in liability has caused major concern among IPERS officials. While current retirements are not in jeopardy, the program faces major shortfalls in 20 or so years if the revenue equation isn't balanced now, they told the legislative Public Retirement Systems Committee Monday."

 

..........Everybody today seems to have one thing in common.

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Re: Daily Digest - November 10

Utility Company Turns Restaurant Food Scraps Into Green Energy (M.W.)

 

great, now my 9 year old has a new excuse for not eating her vegetables

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Re: Daily Digest - November 10

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Johnny Oxygen
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Re: Daily Digest - November 10

Good Read:

SOMETHING BIG IS ABOUT TO HAPPEN?

http://pragcap.com/something-big-is-abou-to-happen

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Earth Buzzed by Asteriod Nov 6th

A previously undiscovered asteroid came within 14,000 km of Earth last week, and astronomers noticed it only 15 hours before closest approach. On Nov. 6 at around 16:30 EST a 7 meter asteroid, now called 2009 VA came only about 2 Earth radii from impacting our home planet. This is the third-closest known non-impacting Earth approach on record for a cataloged asteroid.more.

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Johnny Oxygen
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Re: Earth Buzzed by Asteriod Nov 6th

They should rename the asteriod "Crap-your-pants".

Sheesh...If its not one thing it's another.

EndGamePlayer's picture
EndGamePlayer
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asteroid

well it was 7 meters in size. If they can spot a man with satillites - you'd think they could be watching for asteroids with all that technology. Just shows where their intentions lie.  EGP

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Re: asteroid
EndGamePlayer wrote:

well it was 7 meters in size. If they can spot a man with satillites - you'd think they could be watching for asteroids with all that technology. Just shows where their intentions lie.  EGP

Depending on its composition, this asteroid could have broken up in the atmosphere and not done much damage at all.  When I was at the University of Arizona (learning to be an even bigger nerd), one of the uber-nerds at the Lunar and Planetary Laboratory pointed me to this wonderful calculator used to estimate asteroid/comet impact effects on the earth.  Try it out... you just need to enter in a handful of parameters (the page gives advice on inputting some values) and it'll tell you the impact effects. 

http://www.lpl.arizona.edu/impacteffects/

I used the assumption that the asteroid was crystalline rock composition coming in at a typical speed and angle; the calculator's results showed it would likely break up in the atmosphere.  So you'd probably get scattered chunks of rock rather than a big honkin' crater. 

I love that calculator... I can't even guess at how many hours I've wasted playing around with it. Smile

- Nickbert

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Re: Daily Digest - November 10

Senate Dems move to curb Fed's powers

http://news.yahoo.com/s/ap/20091110/ap_on_bi_ge/us_financial_overhaul

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Davos
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Re: Daily Digest - November 10
idoctor wrote:

Senate Dems move to curb Fed's powers

http://news.yahoo.com/s/ap/20091110/ap_on_bi_ge/us_financial_overhaul

Gosh, Congress or the Fed. Both wolves. 

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Re: Daily Digest - November 10

Hello DavosSmile.....yeah take your pick which LOL.....we be in a heap of _____ no matter what.

Strange times getting stranger.....

Check this out......Asia Risks Bubble of 'Mind-Boggling Size': Economist 

http://www.cnbc.com/id/33820418

Maybe this bill will fix all of our problems......http://news.yahoo.com/s/nm/20091110/pl_nm/us_financial_regulation_dodd

I have my doubts lol.

 

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idoctor
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Re: Daily Digest - November 10

 

joemanc's picture
joemanc
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237 millionaires in Congress
Quote:

Talk about bad timing.

As Washington reels from the news of 10.2 percent unemployment, the Center for Responsive Politics is out with a new report describing the wealth of members of Congress.

Among the highlights: Two-hundred-and-thirty-seven members of Congress are millionaires. That’s 44 percent of the body – compared to about 1 percent of Americans overall.

Pitchforks!!!

http://www.politico.com/news/stories/1109/29235.html

Davos's picture
Davos
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Re: Daily Digest - November 10

4 G's and Joe please don't forget the torches....

Davos's picture
Davos
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Re: Daily Digest - November 10

Probably posted: Love the Obama reference...ROTFLMAO

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Sandman3369
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Re: Daily Digest - November 10

Barney "huhuhu" Frank can be dumped too... hopefully...

idoctor's picture
idoctor
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Re: Daily Digest - November 10

saxplayer00o1's picture
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Re: Daily Digest - November 10

World Bank: yuan to become alternative reserve currency

"SINGAPORE, Nov 11 (Reuters) - World Bank President Robert Zoellick said on Wednesday that the U.S. dollar's role as a reserve currency was "relatively secure", but the Chinese yuan will provide an alternative over time.

"Over the next 10-15 years, you will firstly see renminbi to be internationalised and provide an alternative," he said at a World Bank conference in Singapore.

Zoellick also said the U.S. should not be complacent about the dollar."

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idoctor
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Re: Daily Digest - November 10

Treasurer Geithner Believes 'Deeply' in Need for Strong Dollar

http://www.cnbc.com/id/33848497

 

Davos's picture
Davos
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Re: Daily Digest - November 10
saxplayer00o1 wrote:

World Bank: yuan to become alternative reserve currency

"SINGAPORE, Nov 11 (Reuters) - World Bank President Robert Zoellick said on Wednesday that the U.S. dollar's role as a reserve currency was "relatively secure", but the Chinese yuan will provide an alternative over time.

"Over the next 10-15 years, you will firstly see renminbi to be internationalised and provide an alternative," he said at a World Bank conference in Singapore.

Zoellick also said the U.S. should not be complacent about the dollar."

Diamond of a find. With these m*rons 10-15 years will become 10-15 months, 10-15 weeks, 10-15 days, or 10-15 minutes. WEll over 100 trillion of debt and no manufacturing surplus spells banana republic Zimbabwe style.

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spinone
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Re: Daily Digest - November 10

China Hints at Yuan's Departure From Dollar Peg
Published: Wednesday, 11 Nov 2009 | 7:53 AM ET Text Size By: Reuters

China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.

In its third-quarter monetary policy report, the People's Bank of China departed from well-worn language on keeping the yuan "basically stable at a reasonable and balanced level." It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.

"Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange rate formation mechanism," the central bank said in a 46-page monetary policy report.

The comments, published just days before a visit to Shanghai and Beijing by U.S. President Barack Obama, set out the possibility of a return to exchange rate appreciation that began with a landmark July 2005 revaluation.

The yuan strengthened by nearly 20 percent against the dollar until concern over the impact of the global financial crisis prompted Beijing to hit the brakes in the middle of last year to protect exporters.

The yuan has been stuck at around 6.83 per dollar ever since, drawing increasing ire from other countries, especially as it has followed the dollar downwards against other currencies.

The dollar has dropped 13 percent against a basket of major currencies including the yen and euro since mid-February.

Back to a Basket?

Some analysts have called for the return to a genuine basket of currencies, which the central bank said in 2005 it would use as a reference for the yuan.

"I think the wording change ... shows that it is an irresistible trend for China to resume yuan appreciation," said Xing Ziqiang, an economist at China International Capital Corp (CICC) in Beijing.

"It is not sustainable for the yuan to always be pegged to the U.S. dollar; after all, the repegging since late 2008 was just part of China's measures to address the global financial crisis, and now the impact of the financial crisis is fading, so the yuan should resume appreciation sooner or later."

The central bank's report came just hours after data that showed the world's third-largest economy had firmly put the worst of the global financial crisis behind it. Factory output growth surged to a 19-month high of 16.2 percent in October.

While exports were still down in year-on-year terms, economists pointed to the likelihood that they would start growing again soon.

Some analysts said the statement could have been timed to send a signal ahead of Obama's Nov. 15-18 visit to China.

Obama told Reuters on Monday that he planned to raise the currency issue during his trip.

However, Beijing is increasingly facing complaints about its currency from other emerging economies, which see an undervalued yuan as undercutting them in global markets.

No Sudden Shift

Those concerns were evident in a draft statement from APEC finance ministers circulated on Wednesday, in which they call for flexible interest rates and exchange rates as a way of redressing economic balances.

"We agreed that flexible prices, including exchange rates and interest rates, play a critical role in allocating resources efficiently, and can facilitate the adjustments needed to support balanced and sustainable global growth," said the latest draft statement by the finance ministers dated Nov. 10.

While the statement could change in its final form, a deputy Chinese finance minister was present at discussions on it, suggesting some level of agreement by Beijing on the wording.

However, analysts were quick to caution against expecting any sudden shift in the yuan's actual value, given China's penchant for carrying out any reforms gradually.

"The central bank's worries about capital flows, liquidity, and inflation signal growing pressure for yuan appreciation," said Ben Simpfendorfer, strategist with the Royal Bank of Scotland in Hong Kong.

"But I'm not looking for gains in the currency until the second quarter as the export sector still faces large challenges and margin pressure." Markets priced in a slightly greater appreciation over the coming year.

Offshore one-year dollar/yuan non-deliverable forwards (NDFs) fell to 6.6075 bid late on Wednesday compared with Tuesday's close of 6.6320.

Yuan appreciation implied by NDFs, which moves inversely with the forwards, was around 3.3 percent in a year compared with 3.06 percent before the announcement.

Xing with CICC said he was expecting even greater appreciation, of 3 to 5 percent next year, in the face of growing external and internal pressure.

"For China's own sake of balancing its economic growth and reducing its large surplus in the trade account, it is also necessary for the government to make the yuan more flexible."

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