Week of May 22, 2011 thru May 28, 2011

US Tsy Text: China Doesn't Meet Stndrds To Be FX Manipulator

WASHINGTON (MNI) - The following is an excerpt from the U.S.
Treasury's semi-annual report to Congress on International Economic and
Exchange Rate policies published Friday:

With respect to exchange rate policies, ten economies were reviewed
in this Report, accounting for nearly three-fourths of U.S. trade. Many
of the economies have fully flexible exchange rates. A few have more
tightly managed exchange rates, with varying degrees of management. This
report highlights the need for greater exchange rate flexibility, most
notably by China, but also in other economies.

IMF Economist: Brazil May Have to Extend Capital Ctrls to FDI

By Daniel Horch

RIO DE JANEIRO (MNI) - The International Monetary Fund's Director
of Research, Olivier Blanchard, said Friday Brazil may have to extend
capital controls to foreign direct investment (currently excluded from
the IOF tax) to close down possible loopholes.

The Fund's senior economist spoke in Rio de Janeiro in a question
and answer session with journalists following the IMF's forum on
Managing Capital Flows in Emerging Markets.

Blanchard noted Brazil's FDI numbers had shot up since it imposed
its IOF tax on other kinds of capital.

IMF Official: Capital Controls May Aim at Weaker Currency

--QE2 Had Only "Marginal Impact" on Capital Flows to EMs

By Daniel Horch

RIO DE JANEIRO (MNI) - The International Monetary Fund's Director
of Research, Olivier Blanchard, said Friday emerging economies in
certain cases should intervene to weaken their currency, and the balance
of reserve intervention and capital controls should be chosen based on
the relative costs.

The Fund's senior economist spoke in Rio de Janeiro at the closing
press conference for the IMF's forum on Managing Capital Flows in
Emerging Markets.

US's McConnell: Medicare Reform Must Be Part Of Debt Hike Deal

--Senate Minority Leader: Biden Talks 'Only Discussions In Town'
--Debt Hike Provides 'Great Opportunity' To Fix Deficit
--Tax Reform, Social Security Fix Won't Be In Debt Hike
--Markets Must See Debt Deal Isn't 'Blue Smoke and Mirrors'

By John Shaw

WASHINGTON (MNI) - Senate Minority Leader Mitch McConnell Friday
said significant reform of Medicare is integral to a comprehensive
budget agreement and must part of the deficit reduction package that is
coupled with a vote this summer on increasing the statutory debt

Canada Data Preview:Canada Expected To Return To Growth In Mar

--Analysts Expect 0.2% Growth M/M, 2.6% Y/Y

By Karan Landge

OTTAWA (MNI) - Statistics Canada Monday is expected to report that
Canada's economy grew in March, both on a monthly and year-over-year
basis. Better manufacturing output, and higher wholesale trade should be
the main reasons behind the expansion in economic activity.

A consensus among analysts surveyed by Market News International is
for a 0.2% month-over-month increase In GDP -- following a 0.2% monthly
decrease in February -- +2.6% year-over year and growth of 3.7% vs. the
fourth quarter.

US BudgetRecap: Hill Leaders Shift Fiscal Hope On Biden Panel

--Vice President Biden Sees Broad Accord On $1 Trillion In Savings
--In Symbolic, Political Votes, Senate Defeats Four Budgets
--Senate Budget Committee Chairman Conrad Says Biden Talks Are Key
--Sen. Conrad: 'Makes No Sense' For Senate Dems To Offer Own Plan Now

By John Shaw

WASHINGTON (MNI) - In unusually frank assessments of the state of
fiscal policy deliberations on Capitol, both top Democratic and
Republican lawmakers said this week the traditional congressional budget
process is now virtually irrelevant and any hope for a fiscal agreement

Pimco's Gross: US Default Would Be 'Disastrous' For Dollar

By Ian McKendry

WASHINGTON (MNI) - Bill Gross, head of bond giant PIMCO, warned
Friday that a technical default by the U.S. government on its debt would
send the wrong signal to credit markets and that while it may not be a
negative for U.S. Treasury securities, it would be terrible for the

"I simply think a default of six, twelve days, eighteen days, not
only sends the wrong signal, but a disastrous signal to the world credit
markets," Gross said on CNBC Friday.

"It would result in not necessarily a negative for Treasury bonds,

Next Wk/US: Shortened Week Cumulates In May Jobs Data Release

By Theresa Sheehan

PRINCETON (SMRA) - Monday is a holiday in the U.S. but the
remaining four days are packed with economic data. There won't be much
to distract from the upcoming May data on employment and payrolls, but
the numbers will round out what is known about conditions in the second
quarter to-date.

The median estimate for May nonfarm payrolls is around an increase
of 200,000. This is roughly between the performance for the first
quarter average (+175,000 a month) and the April increase (+244,000).

Univ of Mich Final May US Cons Sentiment 74.3 Vs 72.4 Prelim

WASHINGTON (MNI) - The final reading of U.S. consumer sentiment
rose in May, and was abovew expectations, according to the
Reuters/University of Michigan Consumer Sentiment survey released

The index came in at 74.3 -- above median expectations of 72.4 --
vs. the initial reading of 72.4 reported earlier in the month and
above/below the 69.8 level reported at the end of April. The consumer
sentiment index was 67.5 in March and 77.5 in February.

The index's final reading for consumers' view of current conditions

IMF's Lipsky: Re CDS Pricing Greek Default; Mkts Change Minds

--Focused on Current Responsibilities, Not IMF Chief Candidacy

By Yali N'Diaye

WASHINGTON (MNI) - International Monetary Fund Acting Managing
Director John Lipsky Friday indicated that the market could change its
mind on the probability of a Greek default, just as they have in the
past for countries like Spain.

In an interview on Bloomberg TV, Lipsky added that there is no time
table regarding negotiations with Greece.

He declined, however, to comment on whether he was seeking the top
position at the IMF, stressing his focus is on his current