Russia-U.S. ties are developing at record speed

Russia-U.S. ties are developing at record speed under new
President Barack Obama, a senior Russian diplomat said Wednesday, warning
however against exaggerated expectations during his visit to Moscow.

The diplomat said the atmosphere of dialogue had changed radically under
Obama's administration after relations plunged to a post-Cold War low in the
last months of the George W. Bush presidency.

"Russia's relations with U.S. have in the last years never seen such an
active stage in their development in all areas," the diplomat, who asked not to
be named, told reporters ahead of Obama's visit in July.

In a rare inside view of the Foreign Ministry's current thinking on U.S.
policy, the diplomat said dialogue with the new administration "has radically
changed for the better.

"It is a pragmatic, business-like dialogue without any ideological layers
which very much darkened our cooperation with the last administration,
especially in the final period," the diplomat said. "A window of opportunity
has appeared. It would be a sin not to exploit it."

The diplomat said it was now time to drop the metaphor of pressing 'the reset
button' used to describe the revival in US-Russia ties as discussions were now
moving to another level.

Relations with the Bush administration deteriorated over Russia's war with
U.S.-ally Georgia and U.S. plans to deploy anti-missile defense facilities in
Central Europe, problems that have yet to be overcome. The Russian diplomat
admitted the issues currently being examined by experts ahead of the talks were
"complex and strategic.

"The more you look at the details the more difficulties come up. There should
not be excessive expectations. We will get what we get," he said.

The diplomat denied there could be any trade-off on sensitive issues, with
Washington for example giving ground on missile defense in return for Moscow
pressuring Iran in the nuclear standoff.

"Each problem has to be treated on its own," the diplomat said.

Russian officials have said an initial agreement with the U.S. on nuclear
arms cuts could be reached by the time Obama visits Moscow for the first time
as president July 6-8. But the diplomat acknowledged there were "fundamental
and radical differences" between the two sides over Georgia, after Russia
recognized its breakaway regions as independent in the wake of last year's war.

Even here, however, "anti-Russian rhetoric has diminished" and the
differences "will not have an impact on general relations," he said.

Perhaps the biggest sticking point remains the plan of the previous
administration to place missile defense facilities in the Czech Republic and
Poland, a project Moscow furiously claimed was aimed against Russia. The new
administration has yet to distance itself from the idea, with Obama pledging to
press ahead with the missile shield for as long as Iran was deemed a nuclear
threat.

The diplomat said Moscow was still awaiting a "concretization" of signals
from the U.S. on the missile shield, which Russia still deemed "an unnecessary
complication in bilateral relations.

"The new administration is listening to our arguments and we hope that in the
meeting between the presidents their position will become more concrete," he
said.

Issues that still need

Issues that still need to be addressed regarding Korean government's guarantee for Hana Bank's proposed USD bond could cause delay in pricing of debt; under law, only debt issued to non-residents eligible for guarantee; residents also eligible for guarantee as long as they buy bond in secondary amrket. Hana Bank looking to sell as early as next week 3-year government-guaranteed bond that market participants expect to amount to around $500 million. This "new guarantee eligibility wrinkle" has raised doubts over enforcement of same, also flags a possible delay in deal, says Brett Williams, senior credit analyst at BNP Paribas. Any long delay or inability to enforce such guarantee would send negative signal and won't bode well for commercial banks looking to raise funds in overseas bond market, say some market participants

The foundations of a bottom

The foundations of a bottom in the global business cycle appear to be in place, suggesting a turn for the better in economic news of the next 3-6 months, Barclays Capital says in a quarterly research publication, titled, "Global Outlook: Green Shoots Have Arrived." It's recommending investors position more aggressively in select regions and asset classes. "The beginnings of a global economic recovery are evident," said Larry Kantor, head of research. Recovery is underway in emerging Asia, after which the US should be watched as the next region to recover, Barclays says.

Treasury's Geithner promises

Treasury's Geithner promises more transparency in future payments from the Troubled Asset Relief Program. "I completely agree that the American people deserve to see much higher standards for transparency and acountability in the use of these resources," Geithner tells House committee. Tsy will publish precise terms of lending, and will require extensive reporting on how resources are going to be used, what its going to do to lending capacity and what's actually happening to lending. Tsy has also proposed "strong conditions" on compensation and dividends.

The People's Bank of China and Bank Indonesia

The People's Bank of China and Bank Indonesia said Monday they have signed a three-year currency swap agreement for CNY100 billion, or IDR175 trillion.   In a statement on its Web site, the PBOC said the pact aims to "support bilateral trade and direct investments to foster economic growth," and to provide short-term liquidity to stabilize financial markets.   The statement said both sides could extend the currency swap agreement.

Sterling kicks off the week on a high

Sterling kicks off the week on a high, with GBP/USD back above 1.41 for the first time in a week and EUR/GBP some penny and a half off last week's peak. Contributing factors are Rightmove reporting a 0.9% month-month rise in UK house prices, higher stocks, which is helping risk appetite, and oversold readings on the charts. Monday sees the BOE's 2nd two-part QE auction with results around 1300 GMT and 1445 GMT. Chartwise, BNP Paribas says GBP/USD above 1.4075 targets 1.4180 and possibly 1.4310 while EUR/GBP below 0.9170 targets 0.9130 and 0.90785 with resistance at 0.9210. EUR/GBP trades at 0.9160, GBP/USD at 1.4160.

Euro is advancing ahead of the open of U.S. stocks

Euro is advancing ahead of the open of U.S. stocks as futures point to a fourth straight day of gains. This has sent risk appetite higher, leading traders to sell the safe haven dollar. Fri morning in NY, EUR/USD was at 1.2919 from 1.2924 late Thu, and USD/JPY was at 98.36 from 97.63, according to EBS. EUR/JPY was at 127.09 from 126.20. GBP/USD was at 1.4018 from 1.3955, and USD/CHF was at 1.1911 from 1.1844 Thu.