Finance Blog number 1

South Korean manufacturers’ confidence rose for the first time in three months after the government raised its economic-growth forecast for Asia’s fourth-biggest economy.

An index measuring expectations for January climbed to 90 from 85 a month earlier, according to a survey of 1,488 manufacturers released by the Bank of Korea today in Seoul. A measure of non-manufacturing companies’ expectations was unchanged at 84 for the third straight month.

The economy will expand about 5 percent in 2010 after growing 0.2 percent this year, the Ministry of Strategy and Finance said this month, raising its forecasts. The country posted a current-account surplus for a 10th month in November, the central bank said yesterday.

South Korea’s economy expanded 3.2 percent in the third quarter, the fastest pace in seven years, boosted by exports and local spending. Overseas shipments will increase 9.3 percent in 2010, after declining 0.1 percent this year, the Bank of Korea said on Dec. 11.

Today’s report showed an index measuring the outlook for exports gained to 104 from 98 a month ago, and a gauge for the domestic sales outlook in January rose to 100 from 98.

The Bank of Korea surveyed the manufacturers and 802 non- manufacturers between Dec. 14 and Dec. 21.

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Goldman Sachs’ banking titans and top congressional Democrats don’t often see eye to eye — executive pay caps, anyone? But here’s something the megabank and Capitol Hill agree on: One of the best ways to get financing to worthy small businesses is through a little-known community lending vehicle called a CDFI.

Taken together, Goldman Sachs and the federal government have earmarked more than $300 million to invest in these local financiers in 2010. Compared to Wall Street’s bailout billions, that’s pennies on the dollar, but for CDFIs it’s a jackpot. Next year’s funding pool is almost three times bigger than any they’ve ever had before.

A CDFI is a Community Development Financial Institution, a certification conferred by the Treasury Department. The program gives low-interest government loans, grants and tax credits to organizations that specialize in economically developing low-income and otherwise underserved markets.

CDFIs were a hot topic at the small business lending forum Treasury Secretary Timothy Geithner convened last month to brainstorm solutions to the ongoing credit crunch small companies face. Wary of lending to firms struggling through the recession, banks slashed their small business credit this year.

That left CDFIs, which specialize in riskier loans, scrambling to pick up the slack. Funding requests surged. For the 2010 fiscal year, the CDFI Fund received applications totaling $467 million, a 97% jump from 2009.

Entrepreneur William Ortiz-Cartagena turned to the Opportunity Fund, a California CDFI, for the $10,000 loan that launched his San Francisco parking logistics company. Gentle Parking now has a staff of 12.

"It was very hard to start this company, because traditional lending institutions were just ‘no, no,’ just not even see me in the door," Ortiz-Cartagena told attendees at the lending forum. "I couldn’t even get an appointment with a traditional institution."

Opportunity Fund got Ortiz-Cartagena the money he needed and walked him through the steps of starting a business. "They really sit down with you and make sure that first your business plan is viable — that it can be successful — and then help you throughout the process," he said.

The success CDFIs have had getting money out into communities through the downtown is now being rewarded. For fiscal year 2010, Congress appropriated $247 million for the Treasury’s CDFI Fund, a funding level President Obama signed into law last week. That’s a giant jump from the $107 million the fund got in 2009.

Goldman Sachs (GS, Fortune 500) added more financial fuel with the "10,000 Small Businesses" initiative it launched last month. Over the next five years, Goldman Sachs will dole out $300 million to CDFIs across the U.S. A bank spokesman said $50 million of that money will be distributed through grants, with loans making up the other $250 million.

Community development financiers routinely depend on bank loans and philanthropic donations to fill their coffers, but Goldman’s cash wad is of record size. It’s the largest single-source CDFI funding pool specifically dedicated to small business financing, according to Mark Pinsky, CEO of the Opportunity Finance Network, an industry trade group.

Goldman Sachs said it chose to work through CDFIs because of their track records and community expertise 500 fast cash payday loan.

"They have deep knowledge of local markets and relationships with the borrowers and businesses that are the least-served by the traditional banking system," said Alicia Glen, managing director of Goldman Sachs’ Urban Investment Group.

First at bat

The first CDFI to get an infusion of Goldman capital is Seedco Financial in New York City. The organization landed a $20 million loan, which it will in turn begin lending out early next year.

Part of the money will go to create a new financing program aimed at more mature small companies. Seedco will target businesses that have been around for at least three years, generate annual revenue of $300,000, and have five or more employees.

"We believe that in the $50,000 to $250,000 — and even up to $750,000 — loan amount range, we will be able to have a more material positive impact," said Lesia Bates Moss, president of Seedco Financial.

Targeting small but established companies serves a key goal of both Seedco and Goldman Sachs: Financing job creation.

For one small engineering firm in New York City, a recent Seedco loan is translating directly into financial salvation and two new jobs.

Founded in 2003, IAQ Systems grew steadily until the end of 2008, when the recession hit home.

"We have been hammered on the payment part," IAQ founder and President Sai Barade said. "We were not getting paid on time, and the demand was such that we had to deliver. The ends were not meeting; there was a big gap."

Late last year IAQ landed a contract with the New York City school system that will yield $8 million over three years. But to get that work moving, IAQ needed a loan to make payroll and cover overhead costs.

The company previously tapped bank lines of credit, but "at the end of 2008, all the banks were shrinking away from giving us any lines or loans," Barade said.

Seedco Financial turned around a $200,000 loan within two weeks. "Seedco was very responsive," Barade said. "They understood where we were." The company has 10 employees now and plans to soon add two more.

It doesn’t take even $200,000 to create jobs, though. Opportunity Fund, the San Jose, Calif., lender that financed William Ortiz-Cartagena’s parking business, has an average loan size of $7,000. Its target borrower has one to five employees.

"There is this credit crunch for small businesses, and there is this reality that we need more loans to flow to small business if we are going to have a robust job creating recovery," said Eric Weaver, Opportunity Fund’s CEO and founder.

Opportunity Fund has developed a niche lending to day care and health care providers who work out of their homes. Its interest rates typically run from 6% to 8%.

"For a very small amount of capital, you can start or expand that business," Weaver said. "It is hard work, but it is very important work and it is real income to a family." 

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Singapore’s consumer prices fell the least in eight months in November as food and transport costs climbed amid an economic recovery.

The consumer price index slid 0.2 percent from a year earlier, after falling 0.8 percent in October, the Department of Statistics said in a statement in Singapore today. The median forecast of six economists surveyed by Bloomberg News was for a 0.4 percent drop. Prices rose 0.4 percent from October, without adjusting for seasonal factors.

Rising commodity and food prices, coupled with an improving global economy, have sparked concerns that inflation will accelerate and derail Asia’s recovery. That’s prompted policy makers in Australia, Vietnam and India to start raising interest rates or signal they may remove monetary stimulus soon.

“As the economy is expected to continue its recovery, the outlook is for a moderate positive trend in inflation into next year,” said David Cohen, an economist with Action Economics in Singapore.

Singapore’s gross domestic product climbed an annualized 14.2 percent last quarter from the previous three months, the second consecutive expansion as the island exited the deepest recession since independence in 1965.

The central bank, which uses its currency rather than interest rates to manage price gains, forecasts inflation will be about zero this year. It said in October it will maintain a no-appreciation stance in its exchange rate policy, refraining from further monetary easing after opting for a de-facto devaluation of the Singapore dollar in April to counter collapsing exports.

Policy Changes

The Singapore dollar has gained about 3.2 percent in the past six months against the U.S. currency. It fell 0.5 percent to S$1.4119 against the U.S. dollar as at 12:55 p.m. local time.

Australia and Vietnam raised interest rates this quarter to contain inflation. In India, where wholesale food prices are rising at the fastest pace in 11 years, central bank Governor Duvvuri Subbarao said this month that monetary policy, while an “ineffective instrument” to rein in food costs, may be needed to damp inflation expectations.

Bank of Korea Governor Lee Seong Tae said this month the central bank shouldn’t wait too long before gradually raising interest rates, held at a record-low 2 percent since February.

Food prices, which make up 23 percent of Singapore’s consumer price index, rose 0.7 percent in November from a year earlier, after climbing 0.8 percent the previous month. Transport and communications costs climbed 2.4 percent, while housing prices slid 4.6 percent.

Consumer prices will probably rise 0.3 percent in 2009 and 2.8 percent next year, according to the median forecast in a quarterly survey of economists by the Monetary Authority of Singapore released Dec. 9. The central bank forecasts inflation will average 2.5 percent to 3.5 percent in 2010.

“We expect inflation to return modestly by year end and for it to continue climbing in the first quarter next year,” said Matt Hildebrandt, an economist at JPMorgan Chase & Co. in Singapore.

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General Motors is killing off another well-known brand — Saab, a quirky line of cars known for angular roof lines and ignition keyholes between the front seats — after talks with a Dutch would-be buyer collapsed.

GM, Dutch automaker Spyker Cars and the government of Sweden, where Saabs are made, were in discussions as late as Friday morning. Spyker said the sale was too complicated to complete quickly. GM declined to elaborate on why the deal failed.

GM plans to begin liquidating the brand early next month. However, the Detroit automaker will continue to honor warranties and provide service and spare parts to current Saab owners once the Saab dealerships close, Automotive News reported Friday. The auto trade publication also reported that the brand has 218 U.S. dealers.

Enthusiasts appreciated touches like placing the ignition lock between the front seats rather than on the steering column. Saabs were also known for unusual design, with flatter front windshields and sloping rear windshields that gave the cars an almost backward silhouette.

Saab was also a pioneer in turbocharged engines, beginning with the release of the Saab 99 in the 1970s, and the first carmaker to offer heated seating, in 1971.

GM bought a 50 percent stake and management control of Saab for $600 million after it split from Swedish truck maker Scania in 1989. It bought full ownership in 2000 for $125 million more.

Even after the GM takeover, Saab remained closely associated with Sweden and its history of making safe, reliable cars personal loan for poor credit. But GM never made money on the acquisition. Industry analysts complained Saab lost its distinctiveness in the crowded market for luxury cars under GM, which stripped it of its angular design.

"More and more frequently, they were using GM platforms and sheet metals, moving away from that uniqueness based on styling," said Tom Libby, an independent Detroit-area auto analyst.

It’s the third time this year GM has failed to sell an unwanted brand. In September, auto industry magnate Roger Penske scrapped plans to buy Saturn after he was unable to find someone to make them when GM stops making them in 2011. GM is phasing out Saturn.

And last month, GM halted a deal to sell the European Opel brand to a group led by Canadian auto parts maker Magna International Inc. GM will keep Opel, which, unlike Saab, it considers critical to its international plans.

GM did successfully sell Hummer, which will go to Chinese heavy equipment maker Sichuan Tengzhong Heavy Industrial Machinery Corp.

Saab employs about 3,400 people worldwide, most of them at its main plant in Trollhattan, Sweden. It also has a parts distribution center and a design center in separate locations in Sweden and an engine plant in Finland.

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A five-foot robot sits in Jon Wheatley’s chair during most U.S. investor presentations, listening, speaking, and watching the meeting as Wheatley maneuvers it from a laptop in London. The shtick draws attention to Wheatley and his company, social media Web site DailyBooth.com, but the robot (provided by one of his investors) serves a purpose: Wheatley cannot set foot in the United States.

The 22-year-old Brit’s deportation came from an innocent mistake. When immigration officials pulled him aside during a three-month trip to Silicon Valley last summer, he mentioned he might talk to an attorney about trying to get a visa to stay and build his company there.

Officials deported him, quashing his immigration plans. Wheatley now works nights to match U.S. business hours while his American cofounder, Ryan Amos, runs the Mountain View, Calif., company. "I’m completely bummed out about it," says Wheatley. "It’s something we really shouldn’t have to be dealing with."

Stories abound of smart, motivated foreigners eager to live here, start a business and create jobs amid the nation’s worst economic recession in decades. But no visa exists specifically for entrepreneurs.

Their contributions could be huge: a quarter of American tech companies — including Google (GOOG, Fortune 500), Yahoo (YHOO, Fortune 500) and Intel (INTL) — have foreign-born founders. In Silicon Valley, half of all tech company founders hail from outside America, according to a study by Vivek Wadhwa, a Harvard researcher and Duke engineering professor. These entrepreneurs typically either came here as children or waited years to get their green cards, Wadhwa says. Today, that backlogged process may take decades. It’s a massive reverse brain drain, as skilled foreigners go elsewhere.

"Let these people in and you would way more than double the number of successful startups in the United States," says Paul Graham, whose venture capital firm, YCombinator, provided seed financing to Wheatley’s business.

Graham wrote a blog post proposing that the U.S. issue 10,000 visas each year earmarked specifically for entrepreneurs. The suggestion unleashed a grassroots groundswell and a lobbying Web site, StartupVisa.com. One lawmaker has taken up the cause: U.S. Rep. Jared Polis, D-Colo., introduced a legislative measure last week that would include entrepreneurs in the EB-5 visa class, which is now reserved for foreign investors in U.S. businesses.

The measure is already drawing criticism. "We don’t want this to be another backdoor immigration policy where people just buy their way in," says Rick Oltman, national media director of Californians for Population Stabilization, which wants to eliminate illegal immigration and reduce legal immigration. "We would be skeptical of the government’s ability to monitor this stuff, because of they have not done a good a job of it in the past instant payday loans."

Few would claim that inviting educated people to create jobs and wealth is bad for the economy. Chile has thrown its doors wide open, not only offering permanent visas to entrepreneurs but paying them up to $30,000 to visit the country and another $30,000 to start a business. The government will even pick up the office rent for the first five years.

But laying out the welcome mat in the United States is tricky. Paperwork and bureaucracy mire existing visa rules, and immigration officials are far from hospitable. Audits and investigations are common at companies that hire foreign nationals.

"I have never seen this kind of crackdown on businesses," says Sheela Murthy, an immigration lawyer in Owings Mills, Md. The paperwork required to bring on foreign workers is extremely complicated, and any mistake can result in fines totaling thousands of dollars per violation, she says. "If you don’t dot all your i’s and cross all your t’s, you could be shut down."

A new visa class would mean sorting out a myriad of details, like how the government determines who qualifies as a legitimate entrepreneur. One idea: A board of venture capitalists, entrepreneurs and lawyers could screen those visa applications. The government could set benchmarks, requiring, for example, that a founder own at least 10% of a company that has raised $250,000 within the past year.

Another idea: Create a "gold card" class of investors, whom the government has vetted and trusts. Any investment their firm makes in a foreign national’s business means an automatic green card for that company’s founder.

Of course, there’s a clear pitfall to tying immigration status to business success: Startups fail. What happens to the visa then? Boulder venture capitalist Brad Feld proposes requiring the entrepreneur to start another company within a year or the visa expires.

Despite pressure to do something — anything — to improve the job market, Congress isn’t likely to move any time soon on the startup visa proposal. Lawmakers are tied up slugging it out over health care reform and aren’t likely to take a serious look at immigration reform for at least another year. Even then, controversy over illegal immigration could overshadow or kill the measure.

In the meantime, Wheatley is doing what he can to build his business in the United States — even sending his robot to business mixers. "It’s a little weird sometimes, but we have to make the most of the situation," he says. 

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The cities of the mountain West have felt the recession as deeply as any in the nation, although the pain has not been spread evenly, according to a report Tuesday.

Denver emerged as one of the strongest cities in the six-state region on a number of measures, according to the report by Brookings Mountain West, a partnership between the Brookings Institution and the University of Nevada.

“Phoenix, Boise, and Las Vegas… remained three of the most troubled metropolitan areas in the entire nation in the third quarter, with all residing in the weakest quintile of metros on a combined measure of overall economic performance,” researchers wrote. “Still, metros like Colorado Springs, Albuquerque, and Denver have only been moderately affected by the recession and seem poised to renew their upward trajectory as the pace of recovery quickens.”

Denver’s unemployment rate averaged 7 payday loan.1 percent in the third quarter, below the 100-city average of 9.6 percent. It ranked 14th of the 100 cities in terms of unemployment rate — with 1 signifying the strongest-performing metro and 100 the weakest-performing — and ninth in terms of change in the unemployment rate over the 12 months ending in September.

The city also fared well on housing prices: over the 12 months through September, Denver house prices were up 1.6 percent, compared with an average drop of 3 percent.

But foreclosures remained a problem, with the city ranking 76th out of 100 in terms of real-estate-owned properties per 1,000 mortgageable properties.

Denver ranked 70th for gross metropolitan product, and 57th for employment growth.

Click here for the full report.

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The initial lineup has been announced for the annual Country Thunder concert in Florence, scheduled for April 14-17:

• April 14: The Grascals, Eric Church and Neal McCoy.
• April 15: Collin Raye, Jo Dee Messina, Gary Allan and Miranda Lambert.
• April 16: Love & Theft, Trailer Choir, Randy Houser, Big Kenny, Kevin Costner & Modern West and Keith Urban.
• April 17: Jason Jones, Kate & Kacey, Gloriana, Luke Bryan, Willie Nelson and Kid Rock Faxless payday loans.

For a limited time, general admission seats are being sold for $99 for all four days. VIP and reserved seats range from $200 to $500.

Camping sites range from $89 to $159.

For more and to purchase tickets: www.countrythunder.com.

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ST. LOUIS — Holly Cunningham is expanding her business. Angela Watson is rebuilding her life.

Both are happening here, on the fourth floor of the St. Patrick Center, where holiday orders for goodies such as Lemon Heaven cookies and Holly Dolly dessert bars pour in.

It’s the busiest time of the year for Cunningham’s Hollyberry Baking Co., and she has turned to the region’s biggest provider of homeless services to help meet the demand.

St. Patrick is the only homeless services agency in the country to operate an in-house business incubator. In October, the agency opened a licensed commercial kitchen at the incubator and has since doubled its number of tenants, including the popular treat baker.

Cunningham, a Webster Groves mom, admits that it seemed an unlikely fit for her suburban business. Before taking the plunge, she said she gave her biggest sales pitch ever to employees, certain they would have trepidation about working downtown in a building that caters to transients.

She even ran the idea past some of her customers, making sure she wasn’t going completely off track. Support was overwhelming from both employees and customers, she said.

Watson is one of the four St. Patrick Center clients Cunningham has hired. Living in a women’s shelter and enrolled in a recovery program for drug addiction, Watson says the work experience and paycheck will help her get back on her feet and have job skills to get her permanent employment.

"I take life a day at a time," Watson said, as she packed fresh-baked dessert bars into clear plastic bags. "I’m a go-getter."

For Cunningham, the new kitchen at St. Patrick Center serves a dual purpose for her 11-year-old business. She can expand without the expense of adding on to her current business in case the uptick is only temporary. And she can tap into a ready-made work force that has been trained through various programs the center offers.

In turn, the social service agency has a new partner to hire those who many employers shun. In a climate of high unemployment, being homeless — often with a drug addiction or criminal record — makes finding work that much more challenging.

Cunningham and her employees train and supervise the St. Patrick clients working in the center’s kitchen.

"Having an established company here gives us a better grasp of food manufacturing and food distribution," said St. Patrick Center CEO Dan Buck.

St. Patrick Center received a $3.5 million federal grant to renovate two floors of its building at 800 North Tucker Boulevard, including space for a business incubator, which opened last year and now has 15 companies renting space. The businesses share a reception area and conference rooms, with access to office equipment such as a copy machine and postage meter. They pay for office space based on square footage.

The National Business Incubation Association says St. Patrick stands alone nationally as the only known center specifically catering to the homeless that has started an in-house business incubator.

"People are going to pay attention to this, especially given the current economic climate," said Corinne Colbert, spokeswoman for the association, which estimates there are 1,100 incubators in the country.

The U.S. Commerce Department’s Economic Development Administration, pleased with St. Patrick Center’s success, last month awarded the agency an additional $250,000 grant. It will be used to help buy more equipment for the culinary suite, which replaced a seldom used wood shop no fax cash advance. With the additional equipment, seven companies will be able to share the space, including two catering companies, a barbecue-sauce manufacturer, gourmet-popcorn maker and a company that specializes in whole-grain products including frozen waffles. In addition to startups, St. Patrick Center continues to look for established businesses such as Hollyberry to expand into the incubator.

"We’re encouraging companies to expand with a social conscience," Buck said.

The kitchen is a more practical work area than the wood shop, Buck said. Construction jobs are down, but there is always a need for food service and food production, he said.

"It’s an economic sector that is actually hiring," said Buck.

Outside the culinary suite, other businesses are using the St. Patrick incubator to grow their futures. Heaven Sent is one of them.

While in prison for dealing drugs, Lamond Allen repaired the dining hall’s stoves and refrigerators. That tinkering came in handy when his 7 1/2 year sentence ended two years ago.

With the help of St. Patrick Center, Allen got into a program that certified him in HVAC work. With that training, he started Heaven Sent, a building maintenance business.

He currently has a contract with the U.S. Department of Housing and Urban Development to clean up and make safe foreclosed homes, including checking for gas leaks.

Allen has two employees, one an ex-con who went through the same training program as Allen, and another living in transitional housing.

"My whole focus is giving someone a chance," Allen said. Moving his business from his home into St. Patrick Center has helped him navigate the various trappings of a new business including legal, financial and insurance needs. If there is any question on how to run a business, the staff at the incubator, headed by Jan DeYoung, is there to lend a hand.

"They’re my lifeline," Allen said. And through the incubator, he has begun building relationships with other businesses. For example, he hired A.U. Innovative Land Management for a hauling job.

Cathey Allen and Ren

Options traders are growing less bullish on the yen after efforts by Japanese officials to boost the world’s second-biggest economy and a U.S. jobs report led to the currency’s biggest weekly decline in a decade.

Japan’s currency plunged 2.5 percent against the dollar and 1.3 percent versus the euro on Dec. 4 after the U.S. Labor Department said employers cut the fewest jobs since the recession began. The yen sank 4.5 percent versus the greenback for the week, the most since February 1999 and retreating from a 14-year high. Traders sold yen and bought dollars on speculation interest rates in the U.S. will increase before June.

“The improving U.S. jobs market suggests the Federal Reserve won’t stand pat on interest rates longer than the Bank of Japan,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a unit of Itochu Corp. Increased U.S. borrowing costs would lead traders to favor using yen to finance higher-yielding investments, leading to more losses for the Japanese currency, he said.

Options showed declining bets the yen will rise. The odds for a gain to 84.5 yen per dollar by the end of March from 90.56 last week fell to 38 percent from 80 percent on Nov. 30, data compiled by Bloomberg show. Chances of a decline to 92 versus the dollar by Dec. 31 reached 63 percent. Options grant buyers the right to purchase or sell an asset at a predetermined price.

Weekly Tumble

The yen tumbled 3.6 percent versus the euro last week, the sharpest slide since the five days to April 3. The yen also fell 4.5 percent against the dollar, the most since the week ended Feb. 19, 1999, when it slumped 5.9 percent. The yen’s biggest drop during the week came after the U.S. Labor Department said payrolls dropped by 11,000 last month, the smallest decrease since the recession began.

The yen traded at 89.90 per dollar as of 11:53 a.m. in Tokyo from 90.56 last week, and was at 133.87 versus the euro from 134.54.

“What the job numbers do is firm up expectations that the Fed interest-rate hike is coming,” said Camilla Sutton, a strategist in Toronto at Bank of Nova Scotia, the nation’s third-largest lender. “That should be a strong-dollar story.”

Federal-funds futures contracts on the Chicago Board of Trade show a 43.3 percent probability the U.S. central bank will raise its target rate for overnight bank borrowing to 0.5 percent by June from the current range of zero to 0.25 percent, up from 12.6 percent odds a month ago.

‘Finally Turning’

UBS AG expects the Fed to set its key rate at the top end of its 0.25 percent range in April and follow with a quarter- point increase in June. The jobs report and last week’s gains “suggest the greenback is finally turning,” Mansoor Mohi-uddin, the Zurich-based bank’s global head of currency strategy, wrote in a note to clients.

The yen was the best performer against the dollar among the 16 most-traded currencies the past four years, Bloomberg data show. It surged to 84.83 on Nov. 27, the strongest since July 1995, from 124.13 in June 2007. The yen tends to advance amid financial turmoil because Japan’s trade surplus reduces reliance on foreign capital.

Record low U.S. interest rates have kept the dollar under pressure at the expense of the yen, making the greenback the favorite for so-called carry trades, where investors raise funds in countries with low borrowing costs and use the proceeds to invest in countries with higher returns.

Benchmark rates of as low as zero in the U.S. and 0.1 percent in Japan compare with 3.75 in Australia and 2.5 percent in New Zealand.

Libor

The London interbank offered rate, or Libor, for three- month loans in the U.S. currency has been below the equivalent yen rate since Aug. 24. In the decade before then, the dollar rate averaged 2.94 percentage points more than the yen rate.

Contracts betting the yen would climb against the dollar rose to 51,710 on Nov. 27, the most since May 2008, according to the Commodities Futures Trading Commission in Washington based on contracts at the Chicago Mercantile Exchange. As recently as June, there more contracts betting on a decline than a gain.

Such “extreme” positioning may suggest that the decline in the yen represents traders unwinding “long” positions rather than an outright bet on the currency’s depreciation, Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co. in New York, said in a note to clients on Dec. 4.

The median estimate of more than 30 strategists surveyed by Bloomberg is for the yen to end March at 92 to the dollar and 136 to the euro.

‘Urgent Steps’

Fujio Mitarai, head of Japan’s largest business lobby, called on the government to take “urgent steps” on Nov. 27 to curb gains in the yen, which make Japanese exports less competitive and threaten corporate profits. The same day, Finance Minister Hirohisa Fujii said in Tokyo the nation will “do what is necessary” and he may contact U.S. and European officials to act.

Exports make up about 12 percent of Japan’s economy, compared with 6 percent in the U.S. The nation’s gross domestic product is forecast to shrink 5.7 percent this year, according to the median estimate of economists surveyed by Bloomberg. That compares with a contraction of 2.4 percent in the U.S.

The Bank of Japan announced an emergency 10 trillion yen ($113 billion) credit program on Dec. 1 to combat falling prices and the stronger yen. The spread between dollar- and yen-based Libor narrowed to 2.72 basis points on Dec. 4 from as much as 7.25 basis points on Sept. 8.

Stimulus Plan

“The BOJ’s action worked,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc. a unit of Nippon Telegraph & Telephone Corp. “Stopping the yen’s advance will require additional spending from the government.”

A stimulus plan worth as much as 4 trillion yen may be agreed upon today, Chief Cabinet Secretary Hirofumi Hirano said last week. The government planned to announce the measures on Dec. 4 before disagreements between Prime Minister Yukio Hatoyama’s ruling Democratic Party of Japan and coalition partners, who want a larger package, caused a delay.

Bonds to be issued in the fiscal year starting April 1 may reach 146.2 trillion yen compared with a revised 132.3 trillion yen this year, according to Citigroup Global Markets Japan Inc.

“There is probably enough in the policy action in Japan by the government and the BOJ to argue for further upside on cross- yen currencies near term,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney.

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The euro rose against the dollar Thursday after the European Central Bank hinted it would slowly start withdrawing emergency liquidity while the yen fell amid fears Japan may move to weaken its currency.

Though the ECB at a meeting left interest rates at record lows, its president, Jean-Claude Trichet, said the next 12-month refinancing operation for banks would be the last. The bank also lifted its economic growth forecast for 2010.

The euro neared a 16-month high around $1.5140 and rose against the yen but it gave up some gains when Trichet said plans to wind down some emergency programs were not a signal that interest rates may be about to change.

"He hinted that they’ll do something about an exit policy, so the first knee-jerk reaction was euro positive, but he’s not ready to endorse a full exit quite yet, so it’s really neither overly supportive of, nor detrimental to, the euro," said Boris Schlossberg, head of research at GFT Forex in New York.

Ultra-loose monetary policy tends to undermine a currency’s value because it increases money supply and risks inflation.

The euro rose 0.3% to $1.5085 and 1.1% to ¥132.94.

The euro got a modest boost when Bank of America (BAC, Fortune 500) said it would repay bailout funds to the U.S. government. That increased risk appetite and suggested banking sector improvement.

The yen was under pressure for the second straight day after the Bank of Japan said this week it would provide new three-month funding to banks to combat deflation and after top officials warned that the currency had grown too strong.

The dollar was up 0.8% at ¥88.15, off a 14-year low of of ¥84 no fax pay day loan.82 plumbed last week.

BOJ Governor Masaaki Shirakawa said the central bank does not target foreign exchange for monetary policy but "if the bank’s easy stance becomes widely known in markets, it will have certain effects on the currency market in the long run."

Sterling fell 0.3% to $1.6575 while the dollar fell 0.3% to 0.9989 Swiss francs.

Trichet, Bernanke speak

Analysts said Trichet had to walk a fine line as any hint of a rate rise would prompt traders to bid up the euro, especially as the U.S. Federal Reserve has said it would keep its own rates low for an extended time.

"He’s saying the outlook for economic growth is still uncertain, which means he’s not overly confident, and it seems that is capping the euro gains," said Hidetoshi Yanagihara, senior FX trader at Mizuho Corporate Bank in New York.

In Washington, Fed Chairman Ben Bernanke made his case for a second term in testimony before Congress, telling lawmakers the Fed’s forceful actions have prevented a devastating crisis from turning into something even worse.

Bernanke also pledged to maintain price stability and said fiscal deficits eventually have to come down. Some analysts have worried that rising U.S. debt and deficits will undermine the dollar further and eventually provoke higher inflation.

In separate remarks, U.S. Treasury Secretary Timothy Geithner reiterated the importance of a strong dollar and said the United States must persuade the world it will be more fiscally responsible. 

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