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midday business briefing

Stories Report on Business is following today :

Why the Canadian dollar is rising

Russia has a view on the Canadian dollar: Da . The loonie is climbing rapidly this morning after reports that the Russian central bank plans to add the Canadian dollar to its international reserves. Sergei Shvetsov, the central bank's financial operations chief, reportedly told the Russian parliament this today. Interfax reported that Mr. Shvetsov said the central bank is making "technical preparations for operations in Canadian dollars." BMO Nesbitt Burns senior economist Sal Guatieri told the Reuters news agency it "plays into the theme of central banks diversifying out of greenbacks and looking for possibly safer havens and Canada looks relatively well compared with some other countries." For anyone interested, Google translates loon into gagara . Read the story

Gartman on the U.S. dollar

Dennis Gartman, the influential author of The Gartman Letter, says the U.S. dollar's decline is an "international vote" against the Obama Administration's policies, with an exodus of capital chasing better returns. Mr. Gartman wrote: "The dollar rallied from the time of the President's nomination into his inauguration and for a short period of time thereafter … However, since March, when it became clear that this Administration's philosophy was manifestly left-of-centre, capital has weakened steadily and indeed the dollar has become the currency of choice in the now all-important 'carry trade' as speculators and investors are confident and comfortable borrowing dollars, selling them and re-investing the proceeds abroad." The greenback sank to a 16-month low today.

U.S. data raise hopes

Some signals from the United States this morning worth noting. The number of workers seeking jobless benefits for the first time fell below the 500,000 level for the first time since January, consumer spending ticked up in October, and sales of new homes are at their highest in more than a year. But orders for big-ticket factory goods fell.

Tiny Bubbles

Asset bubbles are on the radar screen. Germany, China and Japan sounded alarm bells earlier this month, and, markets learned late Tuesday, Federal Reserve officials are also worried. And this morning, Russia's finance minister added his voice to the growing chorus. At issue is whether historically low U.S. interest rates and an ever-shrinking U.S. dollar may be paving the way for a speculative bubble. In minutes of its Nov. 3-4 meeting, released publicly Tuesday afternoon, Fed officials noted the threat for the first time. The Fed minutes showed that officials see the threat as "relatively low," but nonetheless are fretting that low rates "could lead to excessive risk-taking in financial markets."

Observers say the biggest threat of a bubble is in Asia, where money is chasing emerging market assets. At a conference in Moscow today, Russian Finance Minister Alexei Kudrin warned, too, that speculative capital is overheating Russian equities. "We, like many other markets, have received a large volume of short-term speculative money from the world markets," he said. "They have arrived, they are among us, and the index is inflated. It is overheated."

German banks face billions in writeoffs

The world's banking system is climbing back from the crisis, but the hangover remains. While Canadian banks may be an exception, the Federal Deposit Insurance Corp. warned yesterday that the number of troubled U.S. banks is rising, now topping 500, as the sector grapples with billions of dollars in bad loans. Today, the Deutsche Bundesbank said German banks may yet need to write off €90-billion more. Of that, the Germany central bank said in a yearly review, between €50-billion and €75-billion could be due to soured loans and a further €10-billion to €15-billion on collaterized debt obligations.

Related :

Bad loans, tight credit endanger U.S. recovery

Underwater mortgages dog U.S. housing

BMO paints a rosy picture for banking

Nortel sells another unit

Breaking up isn't that hard to do for Nortel Networks Corp. Another piece of the one-time technology giant, now in bankruptcy protection, went this morning as its Global System Mobile was sold to Telefonaktiebolaget LM Ericsson and Kapsch CarrierCom AG for $103-million (U.S.). An interesting side to the auction of the Nortel units: The company has clearly been attempting to preserve as many jobs as possible. On Monday, for example, it sold its optical networking and carrier ethernet business to Ciena Corp., which is offering jobs to at least 2,000 Nortel employees, or more than 85 per cent of the employees involved. This morning, the companies involved in the latest sales said about 680 workers would get job offers.

Japanese exports fuel hope

Japan's export trade is raising hopes that the country will escape a double-dip recession. Numbers this morning showed exports rose in October, largely on Asian trade, a good sign for a country that's clearly still in trouble and now grappling with deflation. "Japan's recovery will continue to be backed by exports and is unlikely to suffer a double-dip as some market players fear," Mitsubishi UFJ Securities economist Tatsushi Shikan told the Reuters news agency.

BMO Harris sees TSX rising

One of BMO Harris Private Banking's top officers is bullish on Canadian stocks, called for an increase of more than 8 per cent in the S&P/TSX composite index by the end of 2010. Chief Investment Officer Paul Taylor told Bloomberg News in an interview that he has boosted stock holdings to 55 per cent from 51 per cent. Among the Canadian holdings that represent 37 per cent of its overall investments are Royal Bank of Canada , Manulife Financial Corp. , Potash Corp. of Saskatchewan Inc. and Research in Motion Ltd. "We are bullish on Canadian equities," Mr. Taylor told the news agency. "Money-market rates are very low and so are bond yields. If you want income, you can get it in the Canadian equity markets."

Trade officials to meet

Of all the long-running sagas - Agrium's quest for CF Industries, the tussle over Opel, softwood lumber - few can match the Doha round of trade talks. This World Trade Organization issue has been ongoing since November 2001, and is set to pick up again when more than 150 trade officials meet in Geneva for three days beginning on Monday. It's a key issue as world trade struggles back from its collapse during the crisis. The Doha round has an important goal of opening up trade markets and boosting the fortunes of poorer nations. Who knows how much longer it will all take. The Reuters news agency this morning has a telling anecdote: The Swiss ambassador to the WTO recalls how negotiators met for three weeks in the 1950s to negotiate hat duties. By the time they had a deal, men's hats were out of fashion.

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