Exchange traded funds (ETFs) surge higher Friday on reports of a ceasefire in Libya and after the Group of Seven agreed on coordinated action to stop the yen’s rise amid the disaster in Japan.
- The Group of Seven major industrialized nations pledged to join in a coordinated effort to weaken the Japanese yen. The yen has surged in the last week to post-war record levels following the Japanese earthquake and tsunami. A super-strong yen could cripple Japanese exports, further worsening the economic impact of the disaster that killed thousands and triggered an unfolding nuclear crisis. The last time the U.S. government intervened in currency markets was the fall of 2000 when it sold dollars and bought euros to bolster the fledgling European currency. That was also the last G-7 coordinated intervention in international currency markets. The ProShares UltraShort Yen ETF (NYSEArca: YCS) rose over 5% early Friday.
- The United Nations Security Council on Thursday approved the imposition of a no-fly zone over Libya and “all necessary measures” to protect civilians in the war-torn African nation. Meanwhile, air attacks aimed at Col Moammar Gadhafi’s forces were reportedly expected within hours. Libya’s foreign minister announced Friday an immediate ceasefire after the UN approved a no-fly zone, authorizing all necessary measures to protect civilians. The SPDR S&P Oil & Gas Exploration ETF (NYSEArca: XOP) is flat so far today.
- China on Friday ordered its banks to raise the amount of money they hold in reserves in another move to curb lending and cool a spike in inflation. The People’s Bank of China said banks must raise reserves by 0.5% of deposits. This is the third such move this year by the central bank and follows six reserve increases in 2010. Beijing is using a series of repeated, gradual hikes in interest rates and reserve levels to stanch a flood of lending that helped China rebound quickly from the global crisis but now is fueling pressure for prices to rise. Inflation is politically dangerous for China’s communist leaders because it erodes economic gains on which they base their claim to power. Poor families are hit hardest in a society where some spend up to half their incomes on food and millions have seen little benefit from three decades of economic reform. The iShares FTSE China 25 Index Fund ETF (NYSEArca: FXI) is mixed in early trading.
- Cisco Systems Inc., the world’s largest maker of computer networking gear, on Friday said its first-ever cash dividend will amount to 6 cents per share and will be paid on April 20. The company has said since last year that it would start paying a dividend equating to an annual yield of 1 percent to 2 percent, but had not specified the amount or precise timing. Technology companies like to hold on to their cash, investing it in their own growth rather than paying dividends. But several of them have started paying small dividends as they find their business maturing. Microsoft Corp. introduced a dividend in 2003 and now carries a 2.6% annual yield. Hewlett-Packard Co., which competes with Cisco in many fields, has a yield of 0.8% . The Semiconductor HOLDR ETF (AMEX: SMH) is trading even on Friday.
Gregory A. Clay contributed to this article
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