Peru banks eye longer NDF benchmark after new tax

Banks in Peru say the 65-day non-deliverable forward is becoming the new benchmark contract in the country’s domestic money market after the government taxed shorter-term forwards as the local currency rallied. The market has been in flux since late January when Peru, which is working to stem the volatility of its sol PEN=PE against the U.S. dollar, slapped a 30 percent tax on foreign investors’ profits from short-term forwards. The tax applies to contracts shorter than 60 days. Some commercial banks have said the tax has eroded NDF volumes and discouraged foreign investors from betting on Peru. In recent days a view has emerged that the 65-day contract, which is not subject to the tax, should be the new benchmark — at least on the local market. “Liquidity in one-month trades has declined and the market is already reacting and starting to trade the two-month (65-day contract). [Read the full article]

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European Union countries are united in their defence of the euro, Spanish Prime Minister Jose Luis Rodriguez Zapatero said on Friday. “We will defend the euro,” Zapatero told a news conference after announcing a proposal to overhaul Spain’s labour laws. The prime minister said much criticism of the single currency came from analysts from outside the euro zone. “It’s important to say again that the euro is a strong and stable currency …. All of the countries of the European Union support the euro and support all of the countries that belong to the euro,” Zapatero said. Speculation that euro members Greece, Portugal and Spain will struggle to pay their debts has shaken world markets in recent days. [Read the full article]

U.S. gold futures fell to their lowest in more than three months on Friday, ending the week 2 percent lower, as economic uncertainties led to heavy selling in gold and other investments perceived as riskier. * For the latest detailed report, click on [GOL/]. GOLD * April GCJ0 settles down $10.20 at $1,052.80 an ounce on COMEX division of NYMEX. * Range $1,069.40 to $1,044.50 — weakest since Oct. 30. * April was about 2 percent lower from last Friday’s close at $1,083.80. * Gold pressured as euro fell below key $1.37, the lowest level since May. [USD/] * CitiFX recommends exiting short euro/dollar trade as heavy support seen at $1.36 area. * Rise in sovereign risk in euro-zone countries to increase risk aversion, weighing heavily on gold – James Steel of HSBC. * April briefly traded higher after U.S. Jan. jobs report. * Payrolls fell unexpectedly in January, but unemployment rate surprisingly dropped to a five-month low. [Read the full article]

Currency speculators increased bets for further gains on the U.S. dollar in the latest week, according to Commodity Futures Trading Commission data released on Friday. The value of the dollar’s net long position rose to $5.84 billion in the week ending Feb. 2, its highest level since the week of March 24 and up from $3.11 billion in the previous week, according to Reuters calculations. The Reuters calculation for the aggregate U.S. dollar position is derived from the net positions of International Monetary Market speculators in the yen, euro, British pound, Swiss franc, Canadian and Australian dollars. [Read the full article]

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