“If we say no to everything, we leave the eurozone,” said Gikas Hardouvelis, economic advisor to outgoing Prime Minister Lucas Papademos.

Voters roundly rejected austerity measures in Sunday’s elections, booting out a coalition by the two mainstream parties and leaving the radical left-wing Syriza party charged with forming a government.

Its leader Alexis Tsipras was planning to write Wednesday to the highly indebted nation’s international lenders telling them that the country would renege on its austerity commitments.

Hardouvelis said on Skai Radio that Greece “has room for renegotiation” of austerity measures that it had agreed to take by 2015 under the bailout deal, “but we should not oversell it and think that suddenly something has changed in Europe because the people here have shouted no”.

“We have seen the reactions of European leaders… The only thing they are saying is that Greece is heading towards the exit of the euro,” said the former banker, adding that it was up to Greeks see their partners’ logic “because it is them who are giving the money”.

General elections on Sunday did not produce a clear winner but gave an overwhelming boost to Syriza which now has 52 deputies in parliament.

The main parties that have pledged to continue deficit-cutting reforms — New Democracy and socialist Pasok — now only send a combined 149 MPs to the 300-seat parliament, not enough for a re-run of the outgoing coalition.

On Monday, the International Monetary Fund said it was waiting for a new government to be formed in Greece before deciding on how to move forward.

Hardouvelis said “there are questions on securing” the latest tranche of international loans which the Kathimerini daily put at 5.2 billion euro ($6.74 billion).

“Why would they give us money?” if Greece broke its commitments, he said.

Even if the country relinquished servicing its debt by forgoing European money, “it could not do it, because we couldn’t pay wages and pensions,” warned Hardouvelis.

“Someone has to give us money”, otherwise “the country will collapse, closing borders… this is what we are trying to avoid.”

He said the presidential election victory in France of Socialist Francois Hollande was going contribute to an “emphasis on recovery and growth” in Europe, not just belt-tightening.

“But I do not see the Germans retreat on the stability pact” imposing rigid fiscal discipline on euro members, while the French could not afford the luxury of defying the markets which would see their debt costs soar, he said.

Meanwhile, analysts said political limbo in Greece over demands for renegotiation of debt rescues puts the country close to the eurozone exit and also poses grave dilemmas for the EU and notably Germany.

At UniCredit, a senior economist Gillian Edgeworth expressed a view broadly in line with the thrust of comments by several analysts. She said that official lenders to Greece must be in “emergency mode” and “working hard towards a solution.”

If Greece opted out of the eurozone, it would opt for a “large devaluation, spiralling inflation and a double-digit decline in gross domestic product.”

It would also choose “capital controls which will limit any movement of funds offshore” and “bank closures to facilitate re-denomination” and “widespread private sector defaults.”

“Meanwhile there is no guarantee that a bank run in Greece, were it to materialise, would not spill over to elsewhere in EMU (the eurozone),” she said.

Analysts agreed that the renewal of debt tension would undermine prospects for growth in Europe.

As political parties in Athens negotiate on the future of their country, and as the economically vital summer tourist season approaches, they also confront the European Union and International Monetary Fund with a central dilemma.

This is whether and how to compromise on rescue conditions, which new form of guarantees they could obtain in return, and the risk that any deal might undermine the credibility of other rescues and spark calls for renegotiations.

If Greece has to leave the 17-nation eurozone, the effects will make matters worse, probably far worse, for the Greeks, they broadly agree.

For the eurozone and the European Union, the consequences could be severe in terms of renewed tensions in other weak eurozone countries and turmoil as markets adjust, but overall the currency zone could absorb the shock.

However, if the turmoil forced a big eurozone country to seek a rescue, there are doubts about how the EU and IMF bailout funds would cope.

Edgeworth said that with the exception of the ECB, neither the EU nor the IMF had sufficient firewalls in place to deal with any request from Spain for a rescue.

The political effects of Greece leaving the eurozone, and the failure of attempts to keep it solvent, would be highly damaging for the political credibility of the EU, although analysts also say that such a crisis would increase cohesion among the remaining members.

At Capital Economics in London, economist Ben May said that the risks of Greece leaving the eurozone by the end of the year had risen.

Another election and more uncertainty could leave the government without funds to pay immediate bills but default could be avoided if a new election gave the two traditional parties New Democracy and PASOK enough votes to pursue reforms and obtain the next slices of rescue money.

Otherwise, eurozone policy makers might decide to force Greece out of the eurozone.

But Capital Economics also warned that new tensions over Greece could hit the high quality of German debt bonds if investors moved out of the eurozone or because of the costs to Germany of preventing a disorderly break-up of the currency bloc.

Analysts at Commerzbank said: “The horror scenario of Greece leaving the single currency might fuel capital flight from other countries of the periphery — which would force the European Central Bank to provide these countries with capital by printing money at an even greater speed.”

A few observers have wondered if an acute eurozone crisis might lead stronger countries to weigh the advantages of breaking away.

However, the head of the rating agency Fitch, Paul Taylor, told the German Spiegel magazine: “If the deutschemark were reintroduced, it would appreciate considerably against other currencies. Export industries, which are the motor of the German economy, would suffer.”

He concluded: “Germany isn’t going to tolerate that, even if one or more countries leave the eurozone.”

For brokers Oddo in Paris, Bruno Cavalier said that the Greek question was extremely simple: either Greece agreed to lose its remaining sovereignty and apply reforms required by creditors, or it took back its monetary sovereignty and cut its bridges with Europe.

He cited work on the process of accepting fatal disease, by psychologist Elisabeth Kubler-Ross, to the effect that there were four stages from denial, to anger, negotiation and acceptance.

Greece was going through the same process and had to accept a structural inability to live beyond its means on foreign debt, he said.

So far, analysts are not giving much attention to what would happen if there is no compromise over the rescue programme, if Greece does leave the eurozone, but stays in the 27-member EU and needs even more help.

The Conference Board said its Consumer Confidence Index was at 69.2 in April, down from 69.5 in March. Economists were expecting an increase to 70.

The Standard & Poor’s/Case-Shiller home-price index shows that home prices fell in February from January in 16 of the 20 cities it tracks.

A sign that the housing market is still struggling to recover.

The euro rose to $1.3189 in afternoon trading Tuesday, up from $1.3144 late Monday.

The dollar rose against the euro on Monday as worries about Europe’s debt crisis intensified. Those fears eased Tuesday after Spain was able to sell a better-than-expected $2.6 billion in debt. The country’s benchmark interest rate slipped below 6 percent Tuesday, a sign that investors are less worried about the Spain’s finances.

On Wednesday, traders will be closely monitoring the Federal Reserve statement after its two-day policy meeting ends.Fed Chairman Ben Bernanke will also hold a press conference Wednesday afternoon.

Economists don’t expect the Fed to make any changes to its policy, but traders are looking to see if the Fed hints as to whether it may need to take further steps to boost the economy.

In other trading, the British pound rose $.6131 from $1.6125. The dollar fell to 0.9110 Swiss franc from 0.9144 Swiss franc and to 98.87 Canadian cents from 99.20 Canadian cents.

The dollar rose to 81.26 Japanese yen from 81.16 yen. Jakarta Post

Japan’s Nikkei 225 index fell 0.3 percent to 9,533.48, as a strengthening yen hurt high-tech exporters. Hong Kong’s Hang Seng lost 0.7 percent to 20,871.23 and South Korea’s Kospi fell 0.3 percent to 1,969.69. Australia’s S&P/ASX 200 dropped 0.2 percent to 4,357.70.

Over the weekend, Dutch lawmakers failed to resolve differences over budget cuts needed to bring the Dutch deficit back within the European Union limit of 3 percent of gross domestic product.

The government is expected to resign within the coming days and call elections later this year, making it the latest European government forced out of office by the continent’s financial crisis.

Markets were also rattled by first-round results in France’s presidential election. Socialist candidate Francois Hollande garnered more votes than incumbent conservative President Nicolas Sarkozy.

Hollande wants to renegotiate a European treaty intended to limit excessive government spending in order to emphasize growth over austerity.

If Hollande wins a second-round election May 6, economists fear those steps would upset France’s delicate cooperation with Germany that has been key to Europe’s efforts to resolve its financial crisis.

U.S. stocks rose Friday on the back of stronger profits from Microsoft, McDonald’s and other major U.S. corporations.

The Dow Jones industrial average rose 0.5 percent to close at 13,029.26. The Standard & Poor’s 500 index rose 0.1 percent to 1,378.53. The Nasdaq composite index fell 0.2 percent to 3,000.45.

In energy trading, benchmark oil for June delivery was down 13 cents to $103.75 a barrel Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.16 to settle at $103.88 in New York on Friday.

The euro fell to $1.3187 from $1.3215 late Friday in New York. The dollar fell to 81.27 yen from 81.58 yen. The Times of India

Riyadh, Saudi Arabia’s capital city, is experiencing a construction boom, and swanky new towers to house people and accommodate trendy offices are sprouting out of the desert sands. The skyline is dotted with yellow clusters of cranes, worked by expatriate blue collar workers to ensure that in the future Riyadh is not short of shopping malls restaurants and expensive glass and steel showrooms. The Ritz Carlton Hotel where a visiting Indian delegation, out on a track-II odyssey, was put up is a massive structure, built lavishly on an area large enough to accommodate a large football stadium. The hotel’s gigantic dimensions demonstrate the scale of Saudi Arabia’s soaring ambitions, as well as the cornucopia of wealth the country’s unending oil reserves have provided to its citizens, especially the ranks of its growing elite.

But there is more to rising Riyadh, than grandeur, style or the unfulfilled psychological need for one-upmanship. Not far from the airport loom the vast outlines of brown structures, enclosed in a campus which runs along thousands of acres. This is the Princess Nora bint Abdulrahman University, the largest women only university in the world. The university, with laboratories, libraries, a hospital and mosques has a mind-boggling capacity to accommodate 50,000 students.

It is here that the kingdom, challenging its ultra-conservative antecedents will provide its students access to subjects as varied and modern as business administration and science. The ambitious project of educating women on an industrial scale, however, has a downside. While the university will churn out educated women in droves, their employability after their graduation will hit the wall of the country’s conservative culture. Already, Saudi Arabia’s educated work force of women, not small by any standards, is finding it hard to break into jobs that have remained male bastions, reinforced by stereotypes that women’s role in society cannot and should not cross the boundaries of domesticity. The bottom line is that reforms, enforced in driblets are unlikely to work. Sooner than later, the changing demands of Saudi Arabia’s society, fed increasingly on the internet and quality education, will impose pressures on the country’s leadership to evolve a more liberal regime that disallows gender discrimination, especially in the work-place. By Atul Aneja, The Hindu

The yuan closed at 6.3150, down 0.19 percent from Friday’s close. It had opened sharply weaker than the central bank’s midpoint fixing, but even at its weakest point remained within the boundaries of the old trading band in effect prior to the recent move announced over the weekend.

It traded as low as 6.3250 per dollar – 0.46 percent weaker than the midpoint and 0.3 percent weaker from Friday’s close – just within the previous 0.5 percent limit and well shy of the new 1 percent band that went into effect Monday.

“We think this decision reflects PBOC’s desire near-term for greater two-way price action and intra-day volatility… to better cope with more volatile and somewhat smaller balance of payment inflows into China,” Barclays analyst Olivier Desbarres said in a note to clients.

The yuan weakened in opening trades as some dealers anticipated downward pressure due to the dollar’s global strength.

Before trading began, the central bank set its daily midpoint at 6.2960, weaker than Friday’s fixing of 6.2879. The fixing followed the bank’s normal pattern of setting a weaker midpoint in response to a rise in the dollar index overnight.

A weaker currency would provide a cushion for exporters struggling with flagging demand from Europe and the United States, China’s two biggest trading partners.

But Beijing has a history of allowing the currency to rise ahead of major international gatherings, and there are two coming up. The International Monetary Fund’s meetings are next week, and the Strategic and Economic Dialogue between the United States and China is expected in early May.

The yuan has consistently traded weaker than the central bank’s midpoint since mid-March, leading some to anticipate broader depreciation following the central bank’s move giving the yuan more freedom of movement.

The midpoint fixing is the base rate that the central bank uses to flag the government’s intentions for the yuan’s value.

The recent trend of the yuan trading weaker than the midpoint is a result of dollar strength amid the euro crisis, traders say.

“Recently, the euro is weakening, dollar index has been consistently rising, people see the midpoint rising in response, so it’s normal for people to take a bit of a (long dollar) position,” said a trader at a joint stock bank in China.

He added that expectations of the currency’s movement would now be based more on signals from the market rather than expectations about central bank policy.

MORE VOLATILITY COMING

The immediate impact on the market’s daily operations is likely to be limited. The yuan has not hit the boundaries of the previous 0.5 percent trading band at all in 2012.

Daily movements have been mostly confined to a range of 100 to 200 pips, or about 0.2 to 0.3 percent, on the China Foreign Exchange Trading System (CFETS), the China’s main onshore forex trading platform.

But volatility is likely to increase gradually. Traders expect that the People’s Bank of China’s widening of the band will mean the currency eventually moves more than 200 pips a day, possibly even 400 pips on occasions, over the next 12 months.

“Market movements will become sharper. It also shows the central bank’s attitude – they will not try to control market volatility. We will live or die by our own skill,” said a trader at a European bank in Shanghai.

The widening, which was widely expected, has also not altered market expectations of a gradual yuan appreciation of around 2 to 3 percent this year, traders said.

Though the immediate impact will be limited, some analysts also saw the move as a signal of further pro-market reforms in the pipeline.

“This move also implies that Beijing sees now as the right time for pushing forward some key financial reforms,” Qu Hongbin, co-Head of Asian Economics Research for HSBC.

“Chief among the financial reforms is capital account liberalization. This will also be mutually supported by further reform actions in RMB internationalization, domestic bond markets and banking sector,” he said, referring to the yuan using an abbreviation for renminbi, an alternate name for the currency.

Still, some traders cautioned that the move does not alter the fundamental nature of China’s onshore forex market, which remains tightly controlled by the central bank.

“Actually, even after this expansion, control is still in the hands of the central bank. The impact isn’t that large,” said the joint stock bank trader.

Indeed, the widening of the band would not prevent ad hoc interventions in the market by the central bank in response to sharp swings. Such interventions can be difficult to confirm, but traders and analysts widely believe they occur periodically. The Times of India

If we look at a long-term correlation between the Dow Jones FXCM Dollar Index and the S&P 500 (as a benchmark for underlying investor sentiment), it is clear that the link between the two is exceptional and fundamentally derived. In other words, when global investors need safety, they transfer their assets to the deep liquidity of the US Treasury and money markets – having to buy the dollar along the way. That being the case, why was the greenback struggling at the beginning of last week when equities were tumbling?

While the world’s most liquid currency is a near-eternal safe haven, a funding currency status is an unusual role. With the Fed’s aggressive regime of rate cuts and expansive stimulus effort these past years, though, the flood of cheap funds has encouraged large scale borrowing for investments abroad. That is where the negative reaction to positive sentiment comes in. It is also is a complicating factor in the most recent deleveraging move. In the previous three weeks, the benchmark 10-year Treasury yield broke congestion above 2.10 percent and surged to a four-month high. This had the notable influence of weakening the currency’s role as a funding currency and thereby offering the dollar a fundamental boost to counteract stubborn buoyancy for traditional risk measures. That said, when risk slid this past period (normally bolstering the dollar’s appeal), the positive influence was offset by a drop in the benchmark yield (reviving its funding status).

We must respect the balance between the dollar’s safe haven appeal and its unnatural (but persistent) role as a funding currency under firm risk appetite winds. That said, it is important to understand what the most prolific catalysts for these market dynamics are. For risk aversion, we have plenty of drivers with potential energy. The renewed Euro-region financial trouble is a clear leader, but we should also follow the pace of the US 1Q earnings season as it hits high gear as well as commentary issued by Fed officials. These can materially change the balance of sentiment as well as the US benchmark yield.

Over the coming week, the docket for Fed speakers is relatively robust. The market is carefully combing through the rhetoric from each speech. At this point, the convictions of the various members are well-known and thereby priced in. To change the consensus on the possibility of another stimulus expansion (which is losing favor) or the timetable for the Fed’s first rate cut (now seen before 2014), we need to see someone change their position. Another interesting nuance for rate watchers, the consensus for the current voting members isn’t as important as the balance amongst the opinions of those that will be voters in 2013.

For market participants, stimulus is a boon. For dollar traders, it is a burden. Therefore, a shift away from balance sheet expansion from the Fed would be an encouraging factor for the US dollar – by both curbing errant speculation and by changing its status from outright funding currency to one that is closer to neutral. Yet, the Fed isn’t the only central bank acting to stabilize the system. The ECB, Bank of Japan and People’s Bank of China have all boosted risk trends through their own efforts. Dollar traders need to keep a global view. By John Kicklighter, The Sreet

In March 2011, the World Gold Council identified India as a key driver of global gold demand. It made the following observations:

At more than 18,000 tonnes, Indian households hold the largest stock of gold in the world.

Gold purchases in India accounted for 32 per cent of the global total in 2010.

The vast majority of the Indian population (70 per cent) lives in villages, which have traditionally formed the source of more than two-thirds of Indian gold demand.

INDIA’S GOLD DEMAND

The WGC research shows that by 2020 cumulative annual demand for gold in India will increase from the present level of 1,000 tonnes to more than 1,200 tonnes, or approximately Rs. 2.5 trillion, at 2011 price levels. Gold is a key factor in forex reserves management and assets of financial institutions. It is held in the form of jewellery, bullion, gold bars or coins by institutions and individuals and so on. The quantity of gold with religious institutions and households in India has never been assessed.

According to one estimate, of the world’s exploited stock of 140,000 tonnes of gold, WGC has estimated holdings of gold by Indian households at more than 18,000 tonnes. About 600 tonnes are held with RBI and an unestimated quantity is held by temples and religious institutions.

The Government and RBI decided rather late, or in the last quarter of 2009, to increase the gold component in the country’s forex reserves by about 200 tonnes (valued at over Rs 30,000 crore) by way of a purchase from the International Monetary Fund.

MAKE GOLD TRADABLE

While the overall stock position and central bank’s holding of gold are not that impressive, our country imports around 800 tonnes of gold annually, which is no mean quantity. The deployment of this precious metal to the advantage of the nation makes for a sorry story.

Gold should be restored its status as a store of value by making it tradable, secure and available in ‘paper’ form, against actual stocks of pure and standard gold.

It is high time gold is accorded the position it deserves in forex reserves management. The Centre could also consider an arrangement, through RBI or any other duly constituted authority, to trade in ‘paper gold’, against genuine tradable gold stocks. Mutual Fund ETFs are no substitute for this.

In India gold is popular for all wrong reasons. The fascination for this yellow metal as an ornament and as dowry has led to a reluctance among people to talk about gold in public.

From the retail investors’ point of view, unfortunately, Gold Exchange Traded Funds (ETFs) are yet to become popular and really tradable. Therefore, the common man is tempted to invest in ornament gold, which has several negatives such as difficulty in ensuring purity, making charges, security-related issues and inadequate liquidity.

The infamous money-lender takes advantage of the helplessness of the common man by luring him with loans against jewellery at high rates of interest. He would offer unimaginably high amounts of loan against each 10 gram of gold, with the ultimate motive of robbing the owner (the pledged gold is sold or forfeited by the money-lender as the loan plus interest grows much beyond the real value of gold pledged in less than a year). This trend, hopefully, has been reversed with the recent RBI directive to follow prudential norms in regard to the loan-to-value ratio.

INSTITUTIONAL CHANGE

The time is ripe for authorities to think in terms of dedicated professional institutions at the regional/state level, which will handle gold from a banking angle. An apex body should be equipped with linkages for import and export of gold and gold products with borrowing and lending capabilities.

States like Kerala have successfully intervened in other similar sectors like chits/kuris and lotteries, which were also areas of exploitation by vested interests. Private players had to fall in line and function with discipline and self-regulation.

Establishment of ‘Gold Corporations’ with state participation could also be debated. Such an institution can act as a depository where the gold possession of individuals now in bank lockers and the pledged gold can find a safe shelter, provided the purity can be ensured, and the ‘Corporation’ can find the resources and skill to deal in gold and retain the customers’ confidence. By M G Warrier, The Hindu

At 1700 AEST, the Australian dollar was trading at 103.03 US cents, up from 103.05 US cents at the last local close on Thursday. It was also buying 78.7 euro cents, 64.9 pence and 83.7 yen.

Commonwealth Bank currency strategist Peter Dragicevich said the currency rallied early on Tuesday afternoon following the release of stronger than expected Chinese trade data.

Official Chinese data showed the country recorded a trade surplus of $US5.35 billion in March, a stark turnaround from a $US31.48 billion deficit in February.

 However, Mr  Dragicevich said the Australian dollar dropped back as traders took a closer look at the data.

‘‘The headline number was stronger than expected, but once traders looked through the details they saw that import growth into China was actually a little bit weaker than expected.

‘‘That put some downward pressure on the Aussie later in the day but it has remained relatively range-bound today.’’

Mr Dragicevich said Chinese data was likely to be the main driver of the Australian dollar’s movements this week.

China will release gross domestic product data for the March quarter on Friday, which is expected to show a weaker result than previous quarters.

He said a series of speeches from US Federal Reserve board members later this week could help boost the Australian dollar.

‘‘There are a lot of Fed voting members speaking in the next few days and a lot of them are at the dovish end of the spectrum, so it will be interesting to see whether they indicate whether there is further scope for monetary easing (in the US).

‘‘Any sign that the door is still open (to easing) will weigh on the US dollar and provide support for the Aussie.’’ Sydney Morning Herald

According to the Bureau of Economic Analysis, personal income rose by $28.2 billion, or 0.2 percent, while disposable personal income (DPI) increased by $18.9 billion, or 0.2 percent, in February. January’s personal income estimates were revised downwards to 0.2 percent from 0.3 percent. Meanwhile, personal spending soared by $86.0 billion, or 0.8 percent, notably higher than the 0.4 percent gain seen in the previous month. Economists had called for a 0.4 percent increase in personal income and a 0.6 percent gain in personal spending.

Consumer spending is a key indicator of economic health, and is particularly valuable in forecasting inflationary pressures as it used by the Federal Reserve as a primary gauge of inflation. The stronger spending figures seen in recent months, combined with the improving labor market could support a review by the Fed to increase their benchmark interest rates earlier than late 2014.

Immediately after the data release, the greenback fell against most major currencies, but quickly regained its footing to rally higher against its peers. At the time of this report, the dollar had strengthened by 10 pips against the Australian dollar to trade at around $1.0385. By Tzu-Wen Chen, The Street

The dollar eased to 83.30 yen in Tokyo, down from 83.87 yen in New York late Wednesday.

The euro was changing hands at $1.3238 and 110.27 yen, compared with $1.3211 and 110.22 yen on Wednesday.

Japan logged a trade surplus of 32.9 billion yen in February, after posting a record trade deficit in the previous month, according to data released just before trading started.

The figure beat market forecasts of a 110 billion yen deficit in February, according to a poll by Dow Jones Newswires and the Nikkei business daily.

Immediately after the data was announced, the dollar eased to 83.13 yen from 83.45 yen beforehand.

The dollar was rising on dip-buying but the upside was knocked by Japan’s trade figures, said Marito Ueda, senior managing director at FX Prime Corp.

“The dollar temporarily fell on the trade data, but that alone is not enough to change the upward trend in the dollar,” he told Dow Jones Newswires.

The dollar strengthened against other Asian currencies, rising to Sg$1.2640 from Sg$1.2633 on Wednesday, to 1,132.00 South Korean won from 1,128.60 won, and to 43.10 Philippine pesos from 43.05 pesos.

It also firmed to 9,188.00 Indonesian rupiah from 9,175.00 rupiah and to 30.77 Thai baht from 30.74 baht, while staying flat at Tw$29.54. The Times of India