Actual finance blog

Brazilian President-elect Dilma Rousseff will appoint Alexandre Tombini as central bank head, signaling she’ll keep the policies that helped her predecessor slow inflation to about 5 percent last month from as high as 17 percent in 2003.

The 46-year-old Tombini, who has served as a board member since 2005, will replace Henrique Meirelles, 65, Brazil’s longest-serving central bank chief, two government officials said on condition that they not be named because the decision hasn’t been made public. Meirelles, appointed in 2003, will remain at the post until the end of President Luiz Inacio Lula da Silva’s administration on Dec. 31, one of the officials said.

The Bovespa index of most-traded stocks increased almost sixfold under Meirelles and the real more than doubled against the dollar, becoming the best performer amid the 16 most-traded currencies tracked by Bloomberg. By tapping Tombini, Rousseff is seeking to extend policies that helped Brazil win its first investment grade rating in 2008, said Tony Volpon, a Latin America strategist at Nomura Securities in New York.

“The fact that it is him instead of someone else ensures the central bank won’t be taken by a new heterodox philosophy — that there will be continuity,” Volpon said in a phone interview.

Tombini, who has a doctorate in economics from Illinois University, will need to be approved by the Senate before taking office.

Interest Rate Votes

Before joining the Brasilia-based central bank, Tombini was the senior adviser to Brazil’s executive director at the International Monetary Fund. He’s one of eight people who vote to set interest rates in Brazil. The individual votes aren’t made public.

The extra yield investors demand to hold Brazilian debt rather than U.S. Treasuries has fallen to 189 basis points from 1,446 basis points on Dec. 31, 2002, the day before Lula took office, according to JPMorgan Chase & Co.’s EMBI+ index.

Latin America’s biggest economy will expand 7.6 percent this year, the fastest pace in more than two decades, according to the median forecast in a central bank survey of about 100 economists.

Yields on interest rate future contracts rose across the board on Monday amid speculation that Rousseff would replace Meirelles and end the bank’s operational autonomy, potentially skewing policy in favor of economic growth at the expense of faster inflation.

‘Greater Control’

“Tombini has a good education, he’s a professional,” said Pedro Tuesta, a Washington-based economist for Latin America at 4Cast Inc. “The problem is that this gives the impression that Dilma wants to have greater control of the central bank check cash advance. I’m not saying that’s the way it is. She gives us that impression, and the impression has a certain base.”

The real weakened 0.81 percent to 1.7357 per U.S. dollar yesterday, while yields on interest rate futures contracts maturing in January 2013 dropped 2 basis points to 12.33 percent.

Central bank policy makers are appointed and removed by the country’s president and aren’t limited by set terms. Lula appointed Meirelles to replace Arminio Fraga at the start of his term.

Traders are wagering policy makers will be forced to resume interest rate increases early next year and push the benchmark interest rate to as high as 12.75 percent by the end of 2011, according to Bloomberg estimates based on interest rate futures.

‘Showdown Coming’

“There’s a wide gap between the market pricing in what is needed and what some policy makers are hoping to be able to accomplish,” said Gray Newman, chief Latin America economist at Morgan Stanley in New York, who expects the bank to raise rates to 12.5 percent next year.

“There’s a showdown coming,” said Newman. “The market is expecting a pretty significant series of rate hikes and yet I think the new policy team is trying to adopt measures that will allow the central bank to cut rates.”

Bond traders are betting Brazil will miss its inflation target for the first time since 2003 as commodity prices jump and concern builds that Rousseff will fail to curb spending.

Investor expectations for annual inflation over the next two years, implied by the yield difference between the government’s inflation-linked and fixed-rate notes, rose to 6.68 percent as of yesterday, the highest since November 2008. That gap, known as the breakeven rate, tops the 6.5 percent upper limit in the bank’s target range for consumer price increases.

By tapping a policy maker who has worked under Meirelles, a former head of global banking at FleetBoston Financial Corp. for more than five years, Rousseff may be seeking to ease investor concerns.

“The Brazil market has matured enough that the change in a member of the central bank doesn’t imply great movements in the market as long as we know the philosophical position of the new central banker,” said Alfredo Coutino, Latin America director for Moody’s Analytics. “A person from the same board should bring relative calm to the markets.”

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DUBLIN/LONDON—Ireland expects to “overcapitalize” its ailing banks and force them to sell more assets or transfer more loans to the country’s “bad bank” as part of an industry overhaul that may see more nationalizations.

Matthew Elderfield, Ireland’s financial regulator, said on Monday capital could be immediately injected into the banks and a “standby contingent capital facility” could be added as a backstop to restore confidence.

Finance Minister Brian Lenihan said intensifying structural reform of the banks is required under an international bailout of up to 90 billion euros ($123 billion, dollar figures U.S.) agreed late on Sunday.

Giving more clarity on what the accord means for banks, he said: “The whole question of seeing ‘are there other assets that can be got off the balance sheets whether by sale or by transfer to NAMA (Ireland’s bad bank),’ that’s on the agenda.”

The aim is to shrink the loan book to ease the funding strain, which has intensified after an exodus of deposits from lenders in the past six months, adding to Irish lenders’ dependence on ECB funding, which has risen to 130 billion euros.

Dublin said it will carry out more stress tests to determine how much capital banks need.

More than 10 billion euros of capital is expected to be injected into the top lenders, notably Allied Irish Banks, Bank of Ireland and nationalized Anglo Irish, with billions more available, if needed.

The banks need 30-40 billion euros for recapitalization, a German newspaper reported, citing senior European Union diplomats.

Elderfield said existing capital levels were adequate given the most recent data on loan losses, but investors now expected a bigger cushion. “It is clear … that market expectations on bank capitalization have risen globally,” he said.

The chairman of Anglo Irish said more bank nationalizations were likely following Dublin’s move to seek a bailout.

“It seems to me that there is at least as strong a case for saying that we need to take massive and decisive action quickly to produce at least two viable ongoing banks for the Irish system,” Alan Dukes told a meeting in Dublin.

“And the sooner and the more quickly we do that, the more quickly we will get to a position where we can return towards some kind of normality in our relationship with markets.”

BANK SHARES TUMBLE

Allied Irish could follow Anglo Irish in being fully nationalized, analysts reckon, as any more capital will leave it about 95 percent state-owned.

The implication of the comments by Dukes, a former finance minister, is that some of Ireland’s smaller lenders could be consolidated, including the functioning parts of Anglo.

“I am worried that we will have a kind of slowly-slowly, piece-by-piece change. Whereas what I think we need at this stage is a very strong decisive approach to whatever structuring it is,” Dukes said, adding that “banks with cleaned out balance sheets” were needed for Ireland’s recovery.

Scandal-hit Anglo Irish Bank was nationalized last year after it nearly collapsed from overexposure to the bloated Irish property and construction sectors, and loose lending practices.

Bank of Ireland shares tumbled 20 percent and Allied Irish fell 11 percent as investors gave a cagey response to the threat of further dilution plus deepening political fallout after the bailout.

Other European bank shares fell as the threat of contagion still hung over banks in Portugal and elsewhere.

Lifting the core Tier 1 ratio of the three big banks to 12 percent would cost about 8 billion euros, Reuters calculations show, with most of that set for Allied Irish. Each 1 percentage point rise in ratio would require about 3 billion euros more.

Extra capital could be needed if losses on residential property loans pick up. To restore confidence and reopen funding lines to banks, investors need to know banks can absorb any future losses, analysts said.

“In this respect, uncertainty over the implications of the four-year austerity plan for banks’ non-NAMA impairment levels adds to the challenge,” analysts at Davy said in a note.

Barclays Capital economists have estimated losses for the top three banks from non-NAMA loans could be 22 billion euros.

Lenihan signalled overseas assets will be sold, saying banks need to focus on domestic lending and “other surplus activities will have to be discarded”.

AIB has already sold prize assets in Poland and the United States, and last week halted the sale of its UK business due to a lack of interest.

Ciaran Callaghan, analyst at NCB in Dublin, said non-core portfolios are expected to be put up for sale at deep discounts, with government guarantees provided to limit future loan losses.

Lenihan said he had not seen “any push to have senior debt dishonoured” as part of the bailout discussions, easing concerns that senior bondholders could be forced to take a haircut.

Subordinated debtholders at Anglo Irish Bank and Irish Nationwide Building Society face key tests of their attempts to restructure their subordinated debt later on Monday.

Anglo Irish should get the first sign of whether its discounted exchange of 1.6 billion euros of subordinated debt will succeed when one group of bondholders votes on it.

Irish Nationwide is awaiting a London court ruling on a challenge by two subordinated bondholders, also expected to bear losses, which asked for the building society to be wound up.

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Beijing has the capacity to control surging prices while keeping economic growth on track, China’s main planning agency said Monday, in the latest effort to quell public anxiety about simmering inflation.

Conditions are right for cooling prices, despite worries over rising food costs, the National Development said Reform Commission said Monday on its website.

“This fear is understandable, but we can safely say that the current conditions in China are fully conducive to maintaining basic price stability,” the statement said. “This country has the capacity to keep the price level basically stable.”

The effort to defuse public unease came after Beijing announced its second bank reserve increase in two weeks on Friday in an effort to curb lending and cool inflation that rose to a 25-month high in October payday loan in 1 hour.

Many in China expect an interest rate hike to follow.

Food costs jumped 10.1 percent in October over a year earlier, boosting inflation to 4.4 percent, well above the government’s 3 percent target. That worries Chinese communist leaders who fear price hikes could trigger unrest.

Chinese stock markets have fallen amid investor fears a rate hike or tighter economic controls imposed to control inflation might further slow growth that has declined after hitting double-digit levels this year.

The planning agency said supplies of farm products such as poultry, eggs, grain and cooking oil are sufficient. It said the government has adequate reserves, even after droughts and other natural disasters this year.

The agency called on local authorities to ensure steady production and supplies and to better regulate markets to prevent any disruptions.

Economists say money flooding through the economy thanks to stimulus spending and bank lending helped push up October inflation.

China’s regulators also worry that soaring lending is fueling overspending on real estate and other assets and could leave banks burdened with unpaid loans if ill-considered projects default 500 payday loans.

Beijing has slammed the U.S. for monetary policies it says are flooding emerging economies with cash seeking higher returns due to low interest rates and the weakening U.S. dollar.

China’s Cabinet promised last week to ensure adequate supplies of coal, power, oil and gas and said it would impose price controls on daily necessities if required.

The government also has promised food subsidies for the poor and increases in pensions and minimum wages.

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California, Texas, Florida and New York, the four biggest states, all added jobs last month for the first time since May as the U.S. economic recovery stoked demand for labor.

California, the largest state, said yesterday that non-farm jobs rose by 39,000, the most since May 2006; Texas, the second- biggest, added 47,900 and Florida, with the fourth-largest population, gained 6,900. New York, the third-biggest state, said Nov. 18 it added 40,500 private-sector jobs, the most since April 2005.

The gains could help states shrink budget deficits that the Center on Budget and Policy Priorities says will likely total $140 billion in fiscal 2012, as new jobholders boost income- and sales-tax collections. States’ tax revenue grew about 6 percent in the three months that ended Sept. 30, the third consecutive increase, Goldman Sachs Group Inc. said.

“The outlook for the state and local sector has improved over the last several months, as revenues have picked up or at least stabilized in most states,” Goldman’s Alec Phillips said in a note to clients yesterday.

National employment rose in October for the first time in five months, the Labor Department said Nov. 5. Payrolls climbed 151,000, exceeding all estimates in a Bloomberg News survey of economists.

Gross domestic product expanded 2 percent in the third quarter, topping the 1.7 percent growth of the second period. Economists surveyed by Bloomberg News predict 2.4 percent expansion for the fourth quarter.

National Pick-Up

“It is mildly encouraging that we are seeing some kinds of labor-market improvements in certain parts of the country,” said Paul Dales, U.S. economist for Capital Economics Ltd. in Toronto. “We have seen that kind of pick-up in the national economy as well.”

The U.S. jobless rate was unchanged at 9.6 percent in October even with the expansion of payrolls. That was the case for the four biggest states: California’s held at 12.4 percent, Texas’s at 8.1 percent, Florida’s at 11.9 percent and New York’s at 8.3 percent.

That may indicate that improving economic conditions prompted more people to look for jobs, said Julia Thornton Snider, an economist at the Anderson School of Management at the University of California Los Angeles.

“It might mean young people are looking for their first jobs or people who had been discouraged are now hearing things are getting better and they are starting to look again,” she said in a telephone interview.

Reversal of Declines

The October job gains in New York, California and Florida came after declines in September, a month when Texas gained 3,700 jobs.

The jobless rate in California, with the world’s eighth- largest economy, has been 12 percent or more for the past 15 months, according to data compiled by Bloomberg.

The state, home to Silicon Valley computer makers Apple Inc. and Hewlett-Packard Co., had the nation’s third-highest unemployment rate in September, trailing only Nevada’s 14.4 percent, and Michigan, at 13 percent, according to U.S. Labor Department figures.

“October’s gain of 39,000 jobs marks the first solid month of recovery,” said Stephen Levy, director and senior economist at the Center for Continuing Study of the California Economy in Palo Alto. “If these gains are confirmed in the following months, California will have finally turned the corner.”

Texas Low for the Year

Texas gained 172,800 non-farm jobs in the last year, the state’s labor department said yesterday. The 8.1 percent October unemployment rate was the lowest of 2010, it said.

“Every major industry added jobs in October, with notable increases in construction employment,” Texas Workforce Commission Chairman Tom Pauken said in a news release.

Florida added 35,700 jobs in the last 12 months, the state said, the largest year-over-year growth since May 2007.

“We continue to see positive signs of stabilization and growth,” Cynthia R. Lorenzo, director of the Agency for Workforce Innovation, said in a statement. “Florida posted the largest decrease in the country last week in the number of people who filed for first-time unemployment benefits.”

New York state said Nov. 18 that its largest job gains over the past year were in professional and business services, with an increase of 31,700 positions, and educational and health services with 25,300.

City Gains

The gains were helped by an increase in private employment in New York City, the nation’s most-populous, which added 41,900 jobs in October, more than twice the 10-year average monthly gain. Jobs in professional and business services, such as legal, accounting and advertising, increased by 14,600.

“An important aspect of these jobs is that they tend to be well paying,” Kevin Jack, an economist at the state’s labor department, said in an interview.

States won’t return to full fiscal health anytime soon at the current rate of employment growth, said Nicholas Johnson, director of the State Fiscal Project at the Center on Budget and Policy Priorities in Washington.

“It’s great that it’s growing, but it’s growing slowly,” Johnson said. “We need rapid jobs growth to make up for all the lost jobs and the lost time.”

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A steep drop in microloan repayment in India does not threaten the health of the nation’s banking system, analysts and regulators say.

Many small borrowers in Andhra Pradesh state, which accounts for about a third of India’s microlending, stopped repaying their loans after a government crackdown on unscrupulous lending practices that allegedly contributed to dozens of suicides.

Now the crackdown on microlending _ small loans typically no more than a few hundred dollars _ seems to be spreading. Orissa state is also examining microfinance lending practices and wants to cap interest rates charged to borrowers, state finance minister Prafulla Ghadai told reporters Friday. The Reserve Bank of India is conducting its own review of microlending practices as well.

India’s commercial banks are the main source of financing for microfinance institutions, prompting fears that loan defaults could reverberate through the banking system, causing instability _ a concern regulators and analysts say is unfounded.

“There is no implication for the stability of the financial system,” Reserve Bank of India governor D. Subbarao said at the bank’s last policy review, in response to a question about microfinance institutions, or MFIs. “On a systemic level, the MFI issue is not likely to have any implications.”

Indian banks in the fiscal year ending March 2010 had up to 101.5 billion rupees ($2.2 billion) in loans outstanding to microfinance institutions, about twice as much as the prior year, according to the National Bank for Agriculture and Rural Development.

While banks are an important source of capital for microfinance institutions, microfinance institutions account for less than 1 percent of the banking industry’s outstanding loan book today, analysts say. That means even if the entire sector defaulted _ an unlikely scenario _ banks could absorb the losses.

“The banking sector is well protected,” said Angel Broking analyst Vaibhav Agrawal. “It’s not that big a deal.”

Banks have become the primary source of capital for microfinance lenders because of so-called “priority sector” lending requirements, which mandate that a bank give 43 percent of its loan book to underserved sectors like agriculture, small business and microfinance.

Lending to microfinance institutions has been seen as an efficient way to meet this requirement and commercial banks now provide about 80 percent of capital at most microfinance companies, according to the Microfinance Institutions Network, a group of 44 of India’s largest microfinance companies.

Microfinance Institutions Network estimates that total microfinance loans in India today are about $6.5 billion. If banks lend 80 percent of that, their exposure would be $5.2 billion.

That’s only 0.7 percent of banks’ 32 trillion rupees ($707 billion) total outstanding loans today, Agrawal said.

He said ICICI Bank, India’s largest private sector bank, has one of the largest proportionate exposures in the industry, with 23 billion rupees ($508.8 million) in microfinance loans, or 1.2 percent of its 1.9 trillion rupee ($43.0 billion) loan book.

He said public sector banks, like India’s largest lender, the State Bank of India, would likely have lower exposures because they have extensive rural branch networks that lend to local self-help groups directly rather than going through microfinance institutions.

SKS Microfinance, India’s largest microlender, said loan collections in Andhra Pradesh, which have been essentially frozen for a month, have begun to improve. The state accounts for about 27 percent of the company’s outstanding loans.

After the Andhra Pradesh government’s crackdown, SKS was blocked from collecting repayments at over half its village collection sites and 66 employees were arrested or detained by police, SKS spokesman Atul Takle said Friday.

All employees have been released, he said. Since the company restarted collections on November 15, it has been able to access 97 percent of collection sites.

Executives still worry that switching from a weekly to a monthly repayment schedule, per the government’s order, may reduce collections.

“We prefer the weekly model. That’s the way people can repay smaller sums of money. In a monthly set up they don’t have any place to save that money,” Takle said.

SKS warned stock exchanges Thursday that reduced collections in Andhra Pradesh could hurt the company’s revenue and profitability. It said repayment rates in other states remain 99 percent.

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Stocks are ending mixed after four days of declines brought on by talks over bailing out Ireland.

Retail stocks are among the day’s biggest gainers. Shares of Target Corp. are up 3.8 percent after the Minneapolis-retailer reported earnings that beat analysts’ expectations. Macy’s, JC Penny Co. and Costco all rose by 2 percent or more.

According to preliminary calculations, the Dow Jones industrial average is down 16, or 0.1 percent, to close at 11,008.

The S&P 500 is up less than 1 point to 1,179. The Nasdaq composite is up 6, or less than 0.1 percent, to 2,476.

Two shares rose for every one that fell on the New York Stock Exchange, where floor volume came to 954 million shares.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

NEW YORK (AP) _ Stock markets steadied themselves Wednesday after four days of declines as Ireland discussed a bailout with the European Union and Britain pledged support to help the struggling country.

The Dow Jones industrial average fell 1 point in afternoon trading, a day after the index posted its biggest loss since Aug. 11. Broader indexes rose slightly as energy and materials stocks rebounded and commodity prices edged higher.

A tame inflation report and another weak reading on the housing market did little to draw attention back to the U.S. economy. Shares of homebuilders including D.R. Horton Inc. and PulteGroup Inc. fell about 1 percent after the disappointing housing report came out.

Stock markets have been rattled around the world over the past week out of fear that Ireland will become the latest European country to need a bailout. Greece was bailed out in May after it became unable to contain runaway spending and lost the confidence of investors. Ireland is now struggling after a collapse in its housing market forced the country to take over three large banks payday loans.

“They’re going to backstop (Ireland) one way or another,” said Larry Rosenthal, president of Financial Planning Services in Manassas, Va.

Britain, which is not part of the 16-nation bloc that uses the euro, on Wednesday offered to provide additional support to Ireland beyond any help it gets from the European Union or the International Monetary Fund. That helped steady markets in Europe.

British banks would be among the hardest hit by an Irish default because they are among the largest holders of Irish bonds. Shares of HSBC and Barclay’s edged higher Wednesday.

Investors are concerned that a failure in Ireland could be just another step in a string of bailouts needed to help governments throughout Europe. Traders are also worried about big government debts in Portugal, Spain and Italy.

The euro rose slightly against the dollar Wednesday, but remains near its lowest level since late September.

The Dow fell 1.02, or less than 0.1 percent, to 11,022.48 in afternoon trading.

The Standard & Poor’s 500 index rose 2.72, or 0.2 percent, to 1,181.06. The Nasdaq composite index rose 13.62, or 0.6 percent, to 2,483.46.

Britain’s FTSE 100 rose 0.2 percent after falling earlier in the day. Germany’s DAX gained 0.6 percent, while France’s CAC-40 rose 0.8 percent.

Bond prices traded in a tight range. The yield on the 10-year Treasury note, which moves opposite its price, was unchanged at 2.85 percent compared with late Tuesday. Its yield is used as a benchmark for interest rates on mortgages and other consumer and corporate loans.

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Arch Coal Inc., the nation’s second-largest coal producer, has reportedly “expressed an interest” in rival Massey Energy Inc., the owner of the Upper Big Branch mine in West Virginia where 29 workers died in an April blast.

The New York Times reported Creve Coeur-based Arch as a potential suitor for Massey.

The newspaper, citing an unnamed source, said Massey has already received an offer from Alpha Natural Resources. Buyout rumors have been swirling around Massey for weeks, helping drive up the company’s stock price.

Massey CEO Don L. Blankenship on Wednesday said at an investor conference that any takover bids will be “fully vetted” by the company’s board.

Kim Link, an Arch Coal spokewoman, said the company “does not comment on M&A speculation.”

Beside Arch, steel giant ArcelorMittal is also said to have interest, according to the Times. Other reports indicate Coal India Ltd. is considering purchasing a mine from West Virginia-based Massey.

 

 

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Jai P. Nagarkatti, the chief executive of Sigma-Aldrich Corp., died this weekend of an apparent heart attack. He was 63.

The incident occurred Saturday afternoon when Nagarkatti was in his car. He had no previous history of heart trouble, said Kirk Richter, the company’s interim chief financial officer.

Nagarkatti, of Chesterfield, spent his entire career with the St. Louis-based company, starting in 1976. He became chief executive officer in 2006, and chairman of the board in 2009.

Sigma-Aldrich, which reported revenues last year of $2.1 billion, develops, makes and distributes biochemical and organic chemical products and kits used in scientific research, including genomic and proteomic research.

Nagarkatti was born in Hyderabad, India, and earned a Ph.D. in synthetic organic chemistry at Texas A&M University.

His 34-year career at Sigma-Aldrich spanned research and development, production, operations, sales and marketing.

Nagarkatti is credited with strengthening the life sciences and high technology company, which has 7,700 employees and offices in 40 different countries.

, Sigma-Aldrich’s chairman of the board, said, “The entire Sigma-Aldrich global organization mourns the loss of Jai and our thoughts and prayers are with his wife, Susan, and his daughter Shanti.”

Nagarkatti also served on the board of trustees of Washington University in St. Louis and the Missouri Botanical Garden, and was a board member of the St. Louis Science Center.

Rakesh Sachdev, another longtime Sigma-Aldrich employee, has been appointed chief executive and president.

 

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China renewed an attack on quantitative easing, citing the risk of increased prices in emerging economies, a day after the Group of 20 nations said the markets can adopt regulatory steps to cope.

China “doesn’t support” the monetary easing that causes “imported” inflation in developing countries, Commerce Minister Chen Deming told a forum today in Macau, a Chinese special autonomous region. The capital inflows increase the risk of “asset bubbles,” Jin Zhongxia, deputy director general of the international department at the People’s Bank of China, said at the same forum.

The Group of 20 offered emerging economies cover to limit currency swings and stem asset bubbles. The U.S. Federal Reserve fueled concern in emerging economies last week when it announced plans to buy $600 billion of long-term government bonds to reduce borrowing costs and spur growth in a second round of so- called quantitative easing.

“Major reserve-currency issuing countries excessively print money to get out of their own economic difficulties, posing a policy dilemma for emerging economies,” Jin said in Macau today, without naming any countries. “That will impose greater pressure on capital inflows, bigger bubbles in asset markets and inflationary pressure.”

Capital flows into emerging markets are running at $575 billion a year, 20 percent higher than before the world financial crisis, Goldman Sachs Group Inc. said in September. The U.S. dollar has weakened over the past three months against all 16 major market currencies tracked by Bloomberg.

Investment Restrictions

Countries from Brazil and Indonesia to South Korea imposed restrictions on investment inflows aimed at defusing the danger of hot money, or capital seeking short-term gains. The G-20 called on international regulators to compile a report on best practices on financial-security policies, including capital-flow tools.

Steps to impose restrictions on capital have increased as emerging-market currencies strengthened, with Brazil’s real climbing 21 percent against the dollar in the past 18 months, Chile’s peso up 18 percent, Thailand’s baht rising 16 percent and South Korea’s won appreciating 10 percent.

“In circumstances where countries are facing undue burden of adjustment, policy responses in emerging-market economies with adequate reserves and increasingly overvalued flexible exchange rates may also include carefully designed macro- prudential measures,” leaders of the G-20 nations said in a statement today following a two-day meeting in Seoul.

China plans to boost cross-border yuan-denominated trade with other countries 10-fold to 20 percent of total trade, or more than 2.5 trillion yuan, to reduce reliance on a few reserve currencies, Jin said, without specifying a target date.

Hu’s Pledge

At the Asia-Pacific Economic Cooperation forum in Yokohama, Japan, China’s President Hu Jintao today pledged in a speech to business executives a “steady” reform of its exchange rate policy, a day after U.S. President Barack Obama criticized it for keeping the yuan “undervalued.” China also “aims to balance the trade gap by boosting domestic demand,” including by increasing regional development, he said.

Hu’s remarks come as a spat between China and the U.S. over which country is doing more damage to global trade intensifies. U.S. officials have complained about the weak yuan giving China an unfair trade advantage, while Chinese policy makers say the Federal Reserve’s monetary easing poses risks for financial stability.

“In the next five years, we would be more open,” Commerce Minister Chen said in Macau. “We will stabilize existing exports, actively boost imports, so our trade balance account would be kept at a basically balanced, reasonable level.”

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Leaders from 21 Pacific Rim economies converged on Japan on Saturday for an annual summit to push for free trade, hoping for a show of unity after rancor over currencies soured the Group of 20 meeting a day before.

President Barack Obama, Chinese President Hu Jintao and other leaders of the Asian-Pacific Economic Cooperation forum were expected to agree to take steps toward a Pacific-wide free trade zone.

Obama’s failure to conclude a free trade agreement this week with South Korea, and the G-20’s refusal to go along with the U.S. stance of formally criticizing China’s controls on its currency highlighted reduced U.S. influence in the region _ at least on economic issues.

But in broader issues of diplomacy, Japan and others in the region are looking to the U.S. for a counterweight to China’s increasingly aggressive stance on many issues.

Most notably, relations between Japan and China are strained by conflicting territorial claims over islands in the East China Sea. That dispute flared up as the two sides squabbled over an incident in which a Chinese trawler collided with two Japanese coast guard vessels near disputed islands east of Taiwan.

With the mood still frosty, it remained unclear if Hu would meet with host Prime Minister Naoto Kan during his visit.

“If you talk to people in this region, they would tell you they are making very, very strong requests from this part of the world asking the U.S. to be more deeply involved,” said Ding Xueliang, a China expert at Hong Kong’s University of Science and Technology.

Tokyo’s ties with Moscow also are strained after Russian President Dmitry Medvedev visited an island off the northern coast of Japan that both nations claim. Kan was expected to meet with Medvedev later Saturday.

Obama, on the last stop of a four-nation Asian tour, vowed to deepen U.S. engagement in the region.

“America is leading again in Asia,” he said at a business conference on APEC’s sidelines, reaffirming his government’s desire to double U.S. exports in the next five years. “In this region, the United States sees a huge opportunity to increase our exports in some of the fastest-growing markets in the world.”

Kan, meanwhile, vowed to open Japan’s sluggish economy further for the sake of future growth, despite protests from farmers who fear the loss of subsidies and protective tariffs.

“We have to grow with the fast developing economies of the Asia-Pacific,” Kan told the business conference.

As a precaution against protests from farmers and other disruptions, some 21,000 police were standing guard near the summit venue in Yokohama, which 150 years ago was one of the first Japanese ports opened to foreign trade _ under pressure from American warships cash advance no fax.

The fractious G-20 summit in Seoul, South Korea, ended with an agreement to refrain from “competitive devaluations” but no consensus on a U.S. push to get China to let its currency rise.

The ill-will from that meeting threatened to carry over to the APEC talks, though currencies are not on the official agenda. About half the leaders from the G-20 meeting are attending APEC, which represents more than half the world’s GDP.

Still, the weekend summit in Yokohama is likely to be less contentious thanks to APEC’s informal nature and the widespread consensus among all attending about the need for freer trade.

“There is no pressure to be aggressive because it’s nonbinding,” said Philippine Foreign Undersecretary Antonio Rodriguez. “That’s the beauty of APEC.”

Washington accuses Beijing of deliberately keeping its currency, the yuan, weak to gain a trade advantage. That stance has been undermined, however, by the U.S. policy of printing money to boost the sluggish American economy, which is weakening the dollar and provoking complaints from Brazil, Germany and China.

Hong Kong’s chief executive, Donald Tsang, said Friday he fears the U.S. Federal Reserve’s decision last week to buy up $600 billion in U.S. debt last week, keeping interest rates low and the dollar weak, could flood emerging markets with cash seeking higher returns.

“International investors should tighten their seat belts and get prepared for unprecedented turbulence in currency markets, bond markets, stock markets and the property market,” Tsang told a business conference on APEC’s sidelines.

APEC, founded in 1989 to promote regional integration, aims to move toward creating a Free Trade Area of the Asia-Pacific, or FTAAP, including all its 21 economies and more than half of all world business.

Such a trading bloc might help harmonize various smaller trade, but it would not be forged by APEC itself, which is not a negotiating body.

Such a goal would likely be built from existing free trade agreements, such as the U.S.-backed Trans-Pacific Partnership, or TPP. It now includes only four small economies _ Brunei, Chile, New Zealand and Singapore _ but the U.S., Australia, Malaysia, Vietnam and Peru are in talks to join them.

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