Russia’s gold and foreign exchange reserves rose $4.0 billion in the week to July 25, to a new record high of $592.3 billion, the central bank said in a statement.

That follows an increase of $10.0 billion the previous week.

As of July 1, the central bank has introduced a new method for calculating its reserves based on international standards, although it hasn’t adjusted previous figures.

The bank now calculates reserves based on the market prices for securities of foreign issuers. Previously, the bank calculated the value of the securities based on the purchase price and the accrued interest.

The central bank doesn’t comment on developments in its reserve portfolio.

Russia’s reserves rose a massive 57%, or $173.4 billion, in 2007. The majority of the rise came before the global credit crunch hit in August. Large net capital inflows helped fuel a $114.3 billion rise in the reserves in the first seven months of the year, almost matching the $121 billion increase for the whole of 2006.

However, the ensuing turmoil in financial markets, prompted by the subprime mortgage crisis in the U.S., caused many investors to close ruble positions and reserves shrank some $10 billion in the following months.

The growth in Russia’s gold and foreign exchange reserves picked up again in the fourth quarter due to a recovery in capital inflows and the country’s current account surplus.

The dollar’s decline against the euro has also helped inflate the dollar-denominated value of the central Russian central bank’s euro holdings, which account for about 40% of the total.

   July 25       $592.3 bln RECORD HIGH
   July 18       $588.3 bln PREVIOUS RECORD HIGH
   July 11       $578.3 bln
   July 4        $574.3 bln
   June 27       $567.2 bln
   May 30        $548.6 bln
   April 25      $529.5 bln
   March 28      $506.8 bln
   Feb. 29       $490.7 bln
   Jan. 25       $479.4 bln
   Dec. 28       $474.0 bln 

Source: http://www.djnewswires.com/eu

Manufacturing activity in Japan has contracted for a fifth straight month while wage earnings and housing starts both fell from a year earlier, in further evidence that high energy prices and shrinking exports may push Japan into recession.

It was the fifth month in a row in recessionary territory for the Nomura/JMMA Japan Purchasing Managers Index (PMI), issued on Thursday, while wages fell in price adjusted terms by their most in five years as hard-pressed businesses cut back on bonuses.

The data, a day after dismal industrial output figures, saw only a muted reaction in markets as it merely reinforced the prevailing view that the Bank of Japan will keep interest rates at a low 0.5 percent for the rest of year.

Analysts say Japan may soon slip into recession but say it will likely be a shallow trough. [ID:nT76576]

The PMI index gives an early snapshot of the health of manufacturing and another weak month suggests the corporate sector, the key source of growth for the Japanese economy in recent years, is ailing.

“The Japanese manufacturing economy continued to suffer in the face of deteriorating domestic demand and rising cost pressures during the month,” Paul Smith, senior economist at Markit, said in a report issued together with the survey.

The PMI index edged up to a seasonally adjusted 47.0 in July from 46.5 in June, a six year low. But the index remained below 50, suggesting a contraction, for the fifth straight month on falling output and new orders. [ID:nTKV003160]

The output index, which reflects industrial production, fell to 44.2 from 44.4 in June, also below 50 for five months in a row and the lowest reading since January 2002.

Government data showed on Wednesday that industrial output in April-June for a second straight quarter, the first such drop in seven years, suggesting that the nation’s longest postwar growth cycle is fizzling out as high energy costs curtail business activity. [ID:nT109265]

As firms battle higher costs and with consumers unwilling to pay more at the shops, employees are also feeling the pinch.

Wage earners’ total cash earnings fell 0.6 percent in June from a year earlier, the first fall since December, as companies cut bonuses. If price rises are taken into account, their wages fell 2.9 percent, the sharpest annual drop since December 2002. [ID:nTKG003223]

“Corporate profits have declined recently and companies are trying to cut back their capital spending and salaries to their employees. That makes it harder for the households as prices are rising,” said Taro Saito, senior economist at NLI Research.

Housing starts, hit hard by a regulatory change a year ago ahead of the broader economic slowdown, fell 16.7 percent in June from a year earlier. This was a smaller fall than the market’s expected 18.1 percent drop but was the 12th straight decline.

The PMI survey showed the pricing pressure on businesses from high steel, energy and other commodity prices is not abating.

The input prices index, which measures the costs of buying raw materials, rose to a new series high of 78.5, pointing another month of considerable cost inflation.

“Inflation showed little sign of abating, although the falls in world crude oil prices in recent days may provide some welcome respite for manufacturers next month,” Smith said.

In June, Japan’s core annual inflation hit a new decade-high of 1.9 percent — but still lagged well behind a 27-year high of 5.6 percent in wholesale inflation faced by businesses due to surging oil and commodity prices.

A Reuters poll last week showed economists believe Japanese GDP contracted in the second quarter but will pick up slowly in the following July-September quarter. Preliminary GDP data for the April-June quarter will be released on Aug. 13. [ID:nT273170]

Source: http://www.afxnews.com

The Swiss franc rose against other major currencies on Thursday as a rise in Swiss consumer price inflation to a 15-year high supported views that interest rates in Switzerland will have to rise to fight inflation.

Consumer prices fell 0.4 percent from June as retailers slashed prices for clothes and shoes in summer sales but the annual inflation rate picked up to 3.1 percent, the highest rate since October 1993.

The franc ticked up 0.1 percent against the euro compared to the New York close, trading at 1.6316 per euro at 0626 GMT.<EURCHF=>

The franc rose 0.3 percent against the dollar to 1.0455 per dollar.<CHF=>

Interest rate futures are pricing in a high chance of a rate increase by the Swiss National Bank over the next 12 months, though markets have scaled back expectations over the last couple of days in the wake of weak economic data.

While the European Central Bank raised its benchmark rate at its last meeting to fight inflation, the Swiss National Bank opted to leave its target rate for the 3-month Swiss franc LIBOR unchanged at 2.75 percent at its meeting in June.

Source: http://www.afxnews.com