New Overnight Developments Abroad: Dollar Down For Second Straight Day

August 28, 2008

The U.S. dollar lost 0.9% against the Aussie dollar, 0.5% against the kiwi and Swiss franc, 0.4% against the euro, 0.3% versus the yen and 0.1% relative to the Canadian dollar.  The Nikkei and Ftse are up 0.1%.  The Dax and Paris Cac eased by 0.3% and 0.1%.  Bigger stock price changes occurred in Hong Kong (off 2.3%), Indonesia (-1.5%) , South Korea (-1.3%), Australia (+1.1%) and Thailand (+1.0%).

The yield on 10-year JGB’s eased 1.5 basis points to 1.43%, while sovereign bond yields in Europe edged a bit higher.

Oil firmed another 0.4% to $118.67/barrel amid worries about a storm in the Gulf of Mexico.  Gold also rose 0.4% to $837.80/ounce.

The Philippine central bank raised its key rate by another 25 bps to 6.0% to contain inflation, following increases in June and July.  Earlier real GDP in 2Q was reported to have advanced 2% from 1Q and 4.6% y/y.

Japanese sold Y 1.4 tln of foreign bonds last week, helping to generate a Y 1.845 trillion net inflow from transactions in stocks and bonds.  Carry trades were reversing amid high angst about the global financial system.

Australian business investment in 2Q shot up 5.7%, almost three times more than expected.

Bloomberg’s retail PMI for the euro area was below 50 for a third straight time in August but edged up to 47.7 from 46.0 in July despite a drop in the German component to 44.1 from 46.4.

Euroland M3 advanced 9.3% y/y in July after 9.5% in June and by 9.6% in May-July.  Private loans grew 9.4% in July, down from 9.9% in June and 10.8% y/y in March.  Mortgage lending and loans to non-financial firms each slowed slightly.  The credit crunch is biting, but money and credit still show excessive on-year expansion.

German unemployment fell 40K in August on a seasonally adjusted basis, four times as much as expected, and the jobless rate of 7.6% was below forecasts of 7.8% and its lowest since May 1992.  Labor statistics lag the business cycle.  The deterioration of many other indicators implies a worsening labor market trend in coming months.  Jobs rose 1.4% in the year to July, same as in the year to 2Q08.  German real plant and equipment orders fell 8% y/y in July and May-July.

South African producer price inflation accelerated from 16.8% in June to 18.9% in July, higher than forecast.

Statistics Norway predicted lower interest rates next year.

Suda of the Bank of Japan Policy Board said interest rates would need to rise when officials are confident that downside growth risks have disappeared, warning against the danger of letting down the guard against inflation risks just because commodity prices have softened recently.

There is a media report of a secret plan back in March by European, Japanese, and U.S. officials to have intervened if the dollar had kept falling then.

Italy’s PPI rose 0.5% m/m and 8.3% y/y in July.  Although that’s the highest 12-month advance since September 1995, it was below expectations.

Household borrowing in New Zealand rose 0.3% in July, suggesting cooling consumption.

Business sentiment among South Korean manufacturers softened a little in September.

French planned investment in 2008 has been scaled back since April.

In Britain, the CBI distributive trades survey printed at -46 in August after -36 in July and -9 in June.  Retail sales prospects are weakening in a hurry.  Meanwhile, the Nationwide house price index fell 1.9% m/m in August and by 10.5% y/y after a 12-month decline of 8.1% in July. 

Hong Kong’s trade gap was 2.37 times wider in July than a year earlier despite a robust 11.1% increase in exports.

Business sentiment in Portugal sagged in August to its lowest level since May 2006.  Belgian consumer prices slid 0.6% in August on lower energy costs but still rose 5.4% y/y.  Spanish home sales plunged 29.6% in the year to June.

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