In testimony delivered Thursday before a Congressionally appointed committee investigating the financial crisis, Bernanke said that statutory gaps were an important reason for the buildup of risk in the system but that even when regulators had the tools they needed they did not use them well.

“Once a crisis occurs, timely and effective action by the government is critical to containing the severity of financial disruptions and their economic effects…However, the crisis revealed large gaps in the government’s ability to respond quickly, effectively, and with minimum cost to taxpayers and the economy,” Bernanke said.

In a lengthy analysis of the financial crisis, Bernanke said the government did not do enough to protect consumers in the marketplace and to force large financial institutions to strengthen their internal risk-management systems or to curtail risky practices.

“Regulators had recognized these problems in some cases but did not press firms vigorously enough to fix them,” he said.

Much of Bernanke’s testimony focused on the immediate triggers of the crisis as well as longer-term structural weaknesses in the financial system. He blamed the “shadow banks” (financial entities that are not regulated depositories that help channel savings into investment);
poor risk management by insurers and investors, the permissive standards of lenders that allowed many households; businesses and financial firms to take on more debt than they could handle; among other factors.

Bernanke’s remarks were delivered on the second day of hearings by the Financial Crisis Inquiry Commission, which is charged with writing the official account of the causes financial crisis and the subsequent response by U.S. regulators. The government, invoking emergency powers, issued more than $2 trillion in loans since 2008 to help keep key companies alive.

Thursday’s event on Capitol Hill is the final public hearing before the commission issues its report in December. The hearing’s second witness, Sheila Bair, chairman of the Federal Deposit Insurance Corp. and among the most vocal critics of the “too-big-to-fail” bailouts, is scheduled to testify after Bernanke.

By Washingtonpost.com

The Institute for Supply Management said that its index of manufacturing activity reached 56.3 points in August, up from 55.5 in July. A reading above 50 signals growth.

Economists polled by Thomson Reuters had predicted the index would slip to 53 points.

The news overshadowed a disappointing report from the payroll company ADP, which said private employers cut 10,000 jobs last month, a sign that the American economy is struggling to grow.

In early trading, the Dow Jones industrial average was up 223.34 points, or 2.2 percent. The broader Standard & Poor’s 500-stock index rose 26.41, or 2.5 percent, while the technology heavy Nasdaq rose 55.19, or 2.6 percent.

With shares rising, Treasury prices dropped and interest rates rose. The yield on the 10-year Treasury note was 2.51 percent after settling late Tuesday at 2.47 percent.

In London, the FTSE 100 was up 120.49 points, or 2.3 percent, while the DAX in Frankfurt rose 125.59 points, or 2.1 percent. The CAC 40 in Paris was 105.08 points, or 3 percent, higher.

Earlier, Australia’s S&P/ASX 200 index, jumped 2.1 percent to 4,495.70 after the growth figures were released, though China’s Shanghai index dropped 0.6 percent to 2,622.88 as many mainland investors doubted the uptick means the slowdown in China’s rapid growth has been halted.

Japan’s Nikkei 225 recovered some of Tuesday’s sharp declines — it closed up 102.96 points, or 1.2 percent, at 8,927.02 after hitting a 16-month closing low the previous day.

The sharp rise on Wall Street was surprising given the disappointing ADP report and the forecast for the Institute for Supply Management’s monthly manufacturing report, which will be released later.

Employers are avoiding making any new hires in large numbers because of the uncertain direction of the economy. They are also worried about the potential impact of government health care and financial regulation reforms as well as possible increases in taxes. With unemployment still high, people concerned about their jobs have cut back on spending, which has further slowed growth.

The ADP report is often considered a gauge for the government’s monthly employment report, which is released Friday. The Labor Department’s data also includes government employment so it is a broader reading on the jobs market.

Economists expect the government report to show 100,000 jobs were cut last month, but that was largely due to laying off temporary census workers. Private employers likely added just 41,000 jobs last month. Overall, the unemployment rate is expected to have climbed to 9.6 percent last month from 9.5 percent in July.

Shares have been volatile over in the last month because traders are unsure about the direction of the economy. Data continues to point to meager growth, but exactly where the pace of growth settles remains a question. By sending stocks lower throughout August, traders were betting that weak growth will eventually be a drag on corporate earnings.

Wednesday’s rally thus far has been largely because of better than anticipated economic data.

In China, figures from the state-affiliated China Federation of Logistics and Purchasing showed manufacturing growth up for the first time in four months in August. It said its purchasing managers index — a gauge of business activity — rose to 51.7 points in August from 51.2 in July. Numbers above 50 show manufacturing activity expanding

Investors were also cheered by figures showing that Australia’s economy grew a seasonally adjusted 1.2 percent in the April-June quarter as demand from China and elsewhere in Asia increased exports of iron ore and other commodities. The rise, the highest for three years, was more than the 0.9 percent anticipated.

How the markets fare Wednesday, though, will likely hinge on the survey out of the United States.

“Markets are still data-driven at the moment and very fickle, so today’s gains could easily turn depending on data from the U.S.,” a trader at Spreadex, Phil Gillett, said.

By NYTimes

The MSCI World Index of stocks has dropped 4.4 percent in August, heading for the biggest monthly decline since May, on concern that the economic rebound is slowing. Before today, gold gained 13 percent this year, reaching a record $1,266.50 an ounce in June.

“Gold is the primary beneficiary of this general angst over the economy,” said Matthew Zeman, a metal trader at LaSalle Futures Group in Chicago. “The flight-to-safety bid is back on, and Treasury yields are a joke now. That’s a good setup for gold to go higher.”

Gold futures for December delivery rose $8.20, or 0.7 percent, to $1,247.40 an ounce at 9:58 a.m. on the Comex in New York. A close at that price would mark the biggest gain for a most-active contract since Aug. 16. This month, the metal has climbed 5.4 percent, the most since April.

The Standard & Poor’s 500 Index fell for a second straight day, extending a 5.4 percent loss this month. Treasury 10-year notes are headed for the biggest monthly gain since the end of 2008, when the Federal Reserve slashed the benchmark interest rate to between zero and 0.25 percent to revive the economy.

“There’s a lot of skepticism about the U.S. being a safe haven going forward,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “If people aren’t comfortable in Treasuries, they’re going to shift into gold.”

Silver, Platinum

Silver futures for December rose 19.6 cents, or 1 percent, to $19.27 an ounce on the Comex. The metal is also headed for a monthly gain.

Platinum and palladium, which have wider industrial applications than gold, are headed for monthly losses.

Platinum futures for October delivery fell $13.60, or 0.9 percent, to $1,519.50 an ounce on the New York Mercantile Exchange. Palladium futures for December delivery lost $3.90, or 0.8 percent, to $496.20 an ounce.

By Pham-Duy Nguyen

The prospect of a renewed effort by the U.S. central bank to drive down already super-low borrowing costs raises the issue of whether such measures can help stimulate a recovery that is faltering due to a lack of consumer demand.

The sorry state of the U.S. economy, despite all the monetary and fiscal firepower the Fed and the Treasury have deployed, already befuddles the experts. Worries about a double-dip recession are rampant, and were the topic du jour at the Fed’s annual Jackson Hole conference.

Speaking at the event on Friday, Fed Chairman Ben Bernanke signaled he would be willing embark on yet another round of asset purchases should the economy weaken further, even if he currently believes that will not happen.

But there is a growing fear within and outside the central bank about whether the risks of such purchases outweigh the benefits. One concern is that it may take an ever larger amount of bond buying to get the same effect.

“If it’s buying Treasuries, which is what the Fed is talking about lately, I think it has low returns period, and maybe diminishing returns to scale,” said Alan Blinder, Princeton economist and former Fed vice chair, on the sidelines of the Fed symposium.

That’s partly because most of the impact of Fed easing, especially that which is accomplished through unorthodox means, comes from the “announcement effect” on market expectations, rather than the purchases of securities themselves.

In an example of just how meek the effects of unconventional policy might be, Larry Meyer, a former Fed governor now with Macroeconomic Advisers, once estimated that $100 billion in Treasury purchases might lead only to a 0.10 percentage point drop in long-term interest rates.

DROP IN THE BUCKET

So just how much bond buying would the U.S. central bank have to do to get reticent consumers spending again?

The figures bandied about are eye-popping. When the Fed first embarked on its policy of asset purchases, known as quantitative easing, Goldman Sachs economists estimated Fed credit to the banking system might have to expand to as much as $4 trillion to $5 trillion in order to grapple with the scope of the financial crisis.

According to Meyer, the Goldman estimates were in line with those of Fed staffers. However, the central bank’s policy committee saw this as complicating an eventual exit strategy, and stopped well short.

Instead, the Fed, in addition to slashing official borrowing costs to effectively zero, bought over $1.5 trillion in Treasury and mortgage bonds, bringing its balance sheet to a still-lofty $2.3 trillion from pre-crisis levels around $850 billion. Back then, this tack was widely seen by investors as the Fed pulling out the big guns.

But the policy, coupled with the government’s $800 billion stimulus, has not exactly gone as planned. While analysts say the measures likely prevented an even worse outcome, the U.S. economy, after rebounding from its worst recession since the Great Depression, seems to be slipping again.

“A gazillion dollars in stimulus and this is the best we can do?” said Keith Springer at Capital Financial Advisory Services, in Sacramento California.

Unemployment, currently at 9.5 percent, shows no sign of coming down and manufacturing, which had led the recovery, appears to be running out of steam.

“We’ve got to do something different because what they did before hasn’t worked,” said Allen Sinai, chief global economist at Decision Economics, also at the Jackson Hole event.

MONETARY DEPLETION, FISCAL EXHAUSTION

The problem is that conventional policy tools look spent.

Politicians in Washington, having spent billions of dollars rescuing the banking system and the economy from the brink, are now bickering over large budget deficits, so another major fiscal stimulus package looks unlikely.

The Fed, in the meantime, says there is plenty it can do to ease monetary conditions further. Earlier this month, officials announced they would begin using the proceeds from maturing mortgage bonds to buy more Treasuries, thereby preventing bank reserve credit from slowly shrinking.

The central bank has also argued it could bolster its commitment to keep interest rates low for an extended period, or lower the rate it pays on bank reserves, but those approaches appear on the backburner for now.

Bernanke made it clear that buying Treasuries is the most likely and palatable course of action if the economy goes off track.

Unfortunately, an economic slowdown is already under way. Revisions to second-quarter gross domestic product showed the economy limping along at a 1.6 percent annualized growth rate. Economists now see the possibility of a negative reading for the third quarter.

Despite this grim outlook, Bernanke faces stiff opposition from some of the more hawkish members of the Fed, who believe further easing could have problematic consequences.

“The Fed cannot do much to affect economic activity right now, which is slow because of the devastating hit to wealth suffered by consumers in 2008 and 2009,” said Dean Croushore, professor of economics at the University of Richmond and a former Philadelphia Fed economist.

“The Fed’s latest actions are thus unlikely to have a positive impact. They simply keep a large volume of excess reserves at banks, threatening higher future inflation.”

By Pedro Nicolaci da Costa

The most actively traded gold contract, for December delivery, was recently down $1.50, or 0.1%, at $1,236.20 an ounce on the Comex division of the New York Mercantile Exchange.

Federal Reserve Chairman Ben Bernanke Friday said he’s ready to do what it takes to support an economic recovery that’s been losing steam. Bernanke said he expects the U.S. economy to continue growing in 2011 and subsequent years, signaling further Fed action may not be needed. Still, he stressed the U.S. central bank is ready to act if needed to bolster the economy and to avoid deflation, for which he sees no significant risks at this time.

“That immediately puts a little spook into the gold,” said Bob Haberkorn, senior market strategist with Lind-Waldock in Chicago.

Gold is often bought as a hedge against inflation. But at the same time, it is often considered a safe-haven asset, and Bernanke’s comments about slower economic growth are supportive for the metal in this role.

The metal is also facing some headwinds from a stronger U.S. dollar, which makes dollar-denominated gold pricier for purchasers using other currencies, which can hamper demand.

Earlier in the day, gold had moved higher as the ICE Futures U.S. Dollar Index pulled back after the government revised the second quarter GDP estimate from 2.4%, to 1.6%, compared with economists’ expectations for a larger cut to 1.3%.

Although the data were slightly stronger than expected, “it’s still bad,” Haberkorn said. “It’s nothing anyone’s getting excited about.”

Because gold isn’t as linked to economic cycles as industrial commodities like oil and copper, it is often considered a refuge thought to hold its value more strongly than other assets like equities or currencies during economic turmoil.

On Thursday, gold futures declined slightly as stronger-than-expected jobless data shaved off some of the metal’s recent haven premium, but losses were kept in check as the market remains fretful about the pace of the economic recovery.

Earlier in the week, the precious metal gained after data showed U.S. new-home buying dropped, demand for U.S. manufactured durable goods increased far less than expected, and existing home sales plunged to their lowest level in 15 years.

By Matt Whittaker

The greenback dropped to its lowest level since Jan. 19 against the Swiss franc, which has been on an upward march in recent days. The dollar was also down slightly against the yen, despite Japanese officials again ramping up their rhetoric against recent yen strength.

Gains in U.S. equity markets also helped higher-yielding currencies, including the euro and the Canadian, Australian and New Zealand dollars, to advance against the greenback. The greenback also fell against the U.K. pound. Sterling was supported by the lift in market sentiment and strong U.K. retail sales, which rose above a three-year high in August.

Markets are awaiting comments out of the annual meeting of the world’s top central bankers in Jackson Hole, Wyo., for further direction.

“A clearly laid out explanation of the Fed’s actions and a sense of understanding of the extent of the slowdown might help alleviate market stresses” and put further downward pressure on the dollar, said Andrew Wilkinson, senior market analyst at Interactive Brokers in Greenwich, Conn.

Thursday morning, the dollar was at 84.57 yen, from 84.71 yen late Wednesday, while the euro was at $1.2752, up from $1.2650, and 107.85 yen from 107.16 yen. The U.K. pound was at $1.5582 from $1.5447, while the U.S. dollar was at 1.0229 Swiss francs from 1.0307 francs.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.758 from 83.275.

The rebound in the euro and other riskier currencies doesn’t mean investors have become more optimistic about global growth, analysts at TD Bank said. Rather, it reflects expectations that this week’s run of what they termed ghastly U.S. data will prompt the Fed to plan further extraordinary measures to boost the economy.

The highlight of the Aug. 27-28 meeting of central bankers and academic experts is likely to be Federal Reserve Chairman Ben Bernanke’s speech, which kicks off the meetings Friday morning. The Fed chief could provide hints on what the U.S. central bank’s next move might be. In turn, this could influence monetary-policy decisions at central banks from the other big economies.

Investors will “hang on every nuance of Fed Chairman Bernanke’s speech at Jackson Hole for clues,” the analysts at TD Bank said.

The euro’s gains came on the back of gains in Asian and European stock markets, and also followed better-than-expected results from a German consumer-sentiment index.

Market research group GfK said its consumer-confidence index edged up to 4.1 points for September, and was also better than previously thought in August, with that month’s figure revised up to 4.0 points from 3.9.

Still, the euro’s rebound was tempered by ongoing concerns about countries on the euro zone’s periphery. Analysts say the common currency would be particularly vulnerable to a global slowdown because countries engaged in deep fiscal consolidation would be unlikely to collect the tax revenues they have projected.

Currencies of countries that are heavy exporters of commodities, such as the Australian, Canadian and New Zealand dollars, benefited from the lift in global equity markets.

Much of the focus in currency markets remains on the yen, after senior Japanese Vice Finance Minister Motohisa Ikeda said the Bank of Japan should promptly take appropriate steps to support the economy, suggesting his desire for the central bank to ease monetary policy further in the near term.

His remarks are the latest example of growing government pressure on the central bank to act in the face of a strong yen that threatens Japan’s export industry. The Bank of Japan may soon accept such requests, as officials there recently said they are ready to act depending on the market conditions.

“Direct intervention…still feels a distant threat,” said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole CIB in London. “Instead, the more likely candidate remains an expansion of Japanese non-conventional monetary policy.”

By FRANCES MCINNIS

Yields on 5-year notes dropped to the lowest level since December 2008 before the government’s $36 billion auction of the securities. The 2-year note yield was within 2 basis points of the record low as evidence the U.S. economy is stalling sustained demand for relative safety.

“Treasuries are rallying as the economic news across the board has been tremendously bad for the economy,” said Jason Rogan, director of U.S. government trading in New York at Guggenheim Partners LLC, a brokerage for institutional investors. “This was another terrible number for the housing market. It just adds to the overwhelming nervousness in the market right now.”

The yield on the 10-year note decreased 3 basis points, or 0.03 percentage point, to 2.46 percent at 10:14 a.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent security maturing in August 2020 advanced 10/32, or $3.13 per $1,000 face amount, to 101 15/32. The yield touched 2.4157 percent, the lowest since January 2009.

The 2-year note yield slid 1 basis point to 0.49 percent after touching a record low 0.4542 percent yesterday. The yield on the 5-year note decreased 2 basis points to 1.30 percent after touching the 20-month low of 1.2775 percent. The 30-year bond yield dropped 7 basis points to 3.50 percent after touching 3.46 percent, the lowest since March 2009.

Yield Curve

The extra yield investors demand to hold 30-year bonds over 2-year notes decreased to 3.02 percentage points, the narrowest level since April 2009, reflecting concern the U.S. economic recovery is stalling.

Orders for durable goods advanced a less-than-expected 0.3 percent in July after a revised 0.1 percent drop in the previous month, the Commerce Department reported. The median forecast in a Bloomberg News survey of 75 economists was for a 3 percent increase.

The department also said that sales of new homes unexpectedly dropped 12 percent last month to a record low 276,000 annual rate after a revised gain of 12 percent in June. The median forecast of 74 economists was for little change.

The National Association of Realtors reported yesterday that sales of existing homes tumbled a record 27 percent last month after a revised 7.1 percent reduction in June.

“The data supports the price action,” said Sean Murphy, Treasury trader in New York at Societe Generale. “With each disappointing number, it brings to the market the idea that the Fed may need to act with more quantitative easing.”

Fed Bond Buying

In an attempt to bolster the economy, Federal Reserve policy makers said on Aug. 10 that the central bank would maintain its holdings of securities at $2.05 trillion to prevent money from draining out of the financial system.

The Fed will purchase about $18 billion of U.S. debt by the middle of September using the money from principal payments on its holdings of agency debt and agency mortgage-backed securities. The central bank bought $1.35 billion of Treasuries yesterday, increasing the total to $7.51 billion since the program began Aug. 17. Fed Chairman Ben S. Bernanke will discuss the outlook for the economy on Aug. 27 at a conference in Jackson Hole, Wyoming.

Long-term Treasury yields have fallen to levels that are becoming unattractive, according to DZ Bank AG, citing trading patterns.

The 14-day relative strength index slid to 23.59 today for 30-year bond yields and 27.42 for 10-year note yields. Readings below 30 indicate yields may increase.

‘Warning Signal’

“It’s a warning signal,” said Andy Cossor, the Hong Kong- based chief market strategist for Asia at DZ Bank, Germany’s fifth-largest lender. “The market’s had a good run. Any further downside progress in yield will be more and more difficult.”

At yesterday’s $37 billion two-year Treasury note auction, the securities drew a record low yield of 0.498 percent. The sale’s bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.12, compared with an average of 3.19 at the past 10 auctions.

The five-year Treasury notes being sold today yielded 1.320 percent in pre-auction trading, dropping from 1.796 percent at the previous sale on July 28. Investors bid for 3.06 times the amount on offer last month, compared with the average of 2.72 times for the past 10 auctions.

The $7 billion sale this week of 30-year Treasury Inflation Protected Securities, or TIPS, drew a yield of 1.768 percent, the lowest ever for sales of the debt dating to 1998. The bond auction’s bid-to-cover ratio was a record high 2.78.

The government will auction $29 billion in seven-year debt tomorrow. Altogether, the $102 billion of notes being sold this week is the smallest total for this combination of securities since May 2009.

By Cordell Eddings and Susanne Walker

The hard money loan has really some of the stricter terms and conditions that hurdles the decision of the borrowers to avail these funds for their purpose. Even the FHA loan givers specify some of the stiff terms and clauses due to which the people hardly go for it. The eligibility criteria and the requirements for availing these facilities completely vary from one state to another. The hard monetary finances are purely asset based and the lender always try to supervise the property before approving the loans you have applied for. The common citizens, however, are benefitted in several ways by the finances offered by the FHA lender.

The hard money loans being collateral-based, the loan seekers hardly opt for these alternatives. But when it becomes extremely important to manage for some finance in certain circumstances, they are not left with any other choice. In case, if they have some time in hand to accumulate the amount, they search for other ways, but seldom prefer these loan options. Being a property-based fund, the lenders in this case do not really bother about the credit score of the loan seeker and even if he maintains a bad credit record, he can easily get it approved at the cost of his asset. In case of the FHA loans, the FHA lender provides for a fixed rate of interest that attracts more and more people towards availing these financial facilities.

Another fact about the hard money finances is that unlike traditional loans, these funds do not take too long in getting approved. The approval time that is generally taken by the traditional loans is quite long and thus, in case of immediate needs, the loan seekers knock the door of these finances other than opting for any other alternative. The main reason behind it getting less time is that there is no checking of credit scores or history that would consume the time. But in case of the FHA finance, the FHA lender sees to it that a particular borrower fulfills at least the minimum requirement in terms of the credit scores.

If you want to get your hard money fund approved easily, you must examine your property and try to keep it look good and well-maintained so that the lenders get impressed and provide you the finance for your immediate needs. Even in case of Federal Housing Administration loans, it is advised to go through the clauses and terms specified by the FHA lender thoroughly to avoid any confusion at later stages.

By 9999Articles

The yen rose against all 16 major counterparts after a conversation between Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa failed to yield a plan to curb its rally. The dollar also gained. The euro reached the lowest in almost six weeks versus the dollar after data showed services and manufacturing growth in the 16-nation area slowed in August.

“The policy makers had a phone conversation, and they confirmed that there’s not a consensus on foreign-exchange intervention,” said Win Thin, a senior currency strategist at Brown Brothers Harriman & Co. in New York. “People had been talking about intervention, and that kind of took it off the table.”

The yen strengthened 0.9 percent to 107.83 per euro at 11:24 a.m. in New York, from 108.83 on Aug. 20, and touched 107.71, the highest since July 1. It appreciated 0.5 percent to 85.17 per dollar, from 85.62. Japan’s currency touched 84.73 per dollar on Aug. 11, the strongest since July 1995. The euro fell 0.4 percent to $1.2660 and touched $1.2647, the lowest level since July 13.

The dollar rose against most major counterparts before reports this week forecast to show sales of existing U.S. homes dropped 12.9 percent in July and gross domestic product slowed to a 1.4 percent annual pace in the second quarter, down from the 2.4 percent rate calculated last month.

Euro-Area Slowing

The Japanese currency extended gains after a Markit Economics index based on a survey of euro-area purchasing managers declined to 56.1 from 56.7 in July. Economists expected a reading of 56.3, according to a Bloomberg News survey. A report showed earlier manufacturing in Germany, Europe’s biggest economy, slowed.

Japanese Chief Cabinet Secretary Yoshito Sengoku said currency intervention wasn’t discussed between Kan and Shirakawa in their telephone conference today. Sengoku said the policy makers exchanged views on the economic situation and the foreign-exchange market.

“People are watching to test again the resolve of the BOJ and the prime minister,” said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. “In this kind of environment, there is still more downside in dollar-yen, to 80.”

The yen has advanced 14 percent this year in the biggest gain among its developed-world counterparts, according to Bloomberg Correlation-Weighted Currency Indexes. The euro has dropped 9.4 percent, while the dollar is up 3.5 percent. The yen typically strengthens in times of financial turmoil as Japan’s trade surplus means the nation doesn’t rely on overseas lenders.

Intervention Speculation

The Japanese currency’s surge has increased speculation the country’s leaders will step in to halt its appreciation. Japan hasn’t intervened in the currency market since March 2004, when the yen was at about 109 per dollar. Central banks intervene in the foreign-exchange market when they buy or sell currencies to influence exchange rates.

The New Zealand and Australian currencies briefly surged against their U.S. counterpart on a rise in global stocks as more than $1 trillion in corporate takeovers this year stoked investor confidence in equities.

The Stoxx Europe 600 Index advanced 0.6 percent. The Standard & Poor’s 500 Index fluctuated after increasing as much as 0.9 percent.

“This rebounding of the stock market put on the risk-on trade,” said Hidetoshi Yanagihara, a senior currency trader at Mizuho Financial Group Inc. in New York. “The market is now waiting for the housing data this week.”

Australian Election

The Australian dollar slipped 0.1 percent to 89.27 U.S. cents, after rising to 89.83 cents and falling to 88.33 cents. It weakened 0.6 percent to 76.04 yen. New Zealand’s currency rose 0.1 percent to 70.71 U.S. cents and fell 0.6 percent to 60.22 yen.

The Aussie earlier fell as neither Prime Minister Julia Gillard nor opposition leader Tony Abbott obtained an outright majority in the Aug. 21 vote, meaning one side must win negotiations with independent lawmakers to form a government.

The franc fell 0.2 percent to 1.3165 per euro after rising to 1.3106, near the 1.3074 record set July 1. Swiss central bank President Philipp Hildebrand said this weekend that the bank’s leeway to counter possible gains through currency purchases is limited by the bank’s inflation mandate, according to a report in Tages-Anzeiger.

“We’d reached our limits at the point where a possible additional expansionary monetary policy would spark inflation over the longer term,” Hildebrand told the newspaper in an interview published today. A “lot hinges on the actual situation” such as the state of the Swiss economy and the inflation outlook when assessing interventions, he said.

By Catarina Saraiva and Bo Nielsen

Purchases of new and existing houses dropped 12 percent to a 5.01 million annual pace, the lowest since March 2009, according to the median forecast of 54 economists surveyed by Bloomberg News. Durable-goods bookings climbed 3 percent last month, the survey showed.

“The economy is stuck in a rut,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “We lost the momentum in the second quarter and now we’re really struggling to regain any momentum at all.”

Another report this week may show the economy grew from April through June even less than previously estimated, one reason why employment and consumer spending have failed to pick up. Federal Reserve Chairman Ben S. Bernanke may shed more light on policy makers’ outlook this week when he addresses central bankers from around the globe.

Bernanke will speak on Aug. 27 at the Fed Bank of Kansas City’s annual symposium in Jackson Hole, Wyoming. Earlier this month policy makers said the recovery was “more modest” than they had projected, prompting them to take additional steps to revive growth. The chairman may provide more insight into the central bank’s decision to maintain its asset holdings in a bid to prevent money from draining out of the banking system.

Sales Drop

Sales of previously owned homes slumped 13 percent in July to a 4.68 million annual rate, according to the survey median before an Aug. 24 report from the National Association of Realtors. Commerce Department figures the following day will show demand for new houses was little changed at a 330,000 annual rate, the survey showed. New-home sales reached a record- low 267,000 pace in May, the month after a government tax credit expired.

The incentive worth as much as $8,000 propelled demand earlier in the year as buyers rushed to qualify ahead of the April 30 deadline for signing contracts and original June 30 deadline for closing deals. Sales have since plunged, indicating Americans lack the confidence to take on such a large purchase.

“There is definitely a pullback in demand,” Richard Dugas, chief executive officer of Pulte Group Inc., said in an interview Aug. 20. “We really need the economy to improve and job creation to take hold before people feel comfortable stepping into a home.”

Builder Outlook

Pulte, the largest U.S. homebuilder by revenue, on Aug. 4 reported its first quarterly profit since 2006 after a tax benefit and sales boost from its purchase of Centex Corp.

Orders for goods meant to last at least three years increased in July after falling 1.2 percent and 0.7 percent in the previous two months, economists project another Commerce Department report on Aug. 25 will show.

Business investment in capital equipment, including computers and machinery, is one of the remaining bright spots in the economy.

That may explain why shares of machinery makers are outperforming builder shares and the broader market. The Standard & Poor’s Supercomposite Machinery Index has climbed 10 percent so far this year, compared with a 12 percent drop in the S&P Supercomposite Homebuilder Index. The S&P 500 Index is down 3.9 percent since Dec. 31.

Since the advance estimate for second-quarter growth was released on July 30, reports have shown the trade deficit swelled in June more than the government had projected, inventories grew at a slower pace and there was less of a rebound in commercial construction.

Less Growth

The Commerce Department’s update on Aug. 27 will therefore show gross domestic product grew at 1.4 percent pace, the weakest quarter of the recovery that began in the middle of last year, rather than the 2.4 percent rate calculated last month.

Claims for jobless benefits, due from the Labor Department on Aug. 26, retreated to 491,000 last week from a nine-month high of half a million the prior week, the survey showed. The surge in applications over the past month indicates the labor market may be taking a turn for the worse as the economy slows.

President Barack Obama last week seized on the jump in claims to draw attention to stalled legislation aimed at helping small businesses.

The Democrats have proposed a plan that would ease the terms of loans guaranteed by the Small Business Administration and provide $12 billion in tax breaks to small businesses. Action was blocked by Republicans who criticized the proposal as being similar to the $700 billion bank bailout of 2008.

Jobs and the economy are likely to be key issues in November elections that will determine which political party controls congress for the next two years of Obama’s term.

By Courtney Schlisserman