Dollar, Yen and Stocks Firmer

April 14, 2009

Overnight currencies movements reflect more risk aversion, but equity gains suggest easing economic worries.

The dollar eased 0.1% against the yen but is showing advances of 0.9% against the Swiss franc, 0.8% relative to the euro, 0.7% against the kiwi, 0.5% against the Australian dollar and 0.1% vis-a-vis the Canadian dollar.  Sterling is 0.3% firmer against the dollar.

Most stocks are higher.  A 0.9% drop in the Nikkei was a rare decline.  Advances in other Asian equity markets amounted to 4.6% in Hong Kong, 1.9% in Indonesia, 1.5% in India, 1.3% in Malaysia, 1.1% in Singapore, and 2.1% in Vietnam.  Stocks also gained 2.2% in Australia and 1.1% in New Zealand.  In Europe, equities are up 2.5% in Italy, 3.7% in Sweden, 1.8% in Germany, 1.5% in France, 1.3% in Britain and 1.0% in Switzerland. Better-than-expected profits reported by Goldman Sachs and that bank’s plan to pay back TARP money early have spurred the latest up-leg in equities.

Japan’s 30-year JGB auction was very well bid, producing the largest bid-cover ratio in a year. The 10-year JGB yield firmed 0.5 basis points to 1.455%, but gilt and bund yields are lower after the long Easter holiday break.

Oil and gold strengthened 1.5% and 0.1% to $50.82 per barrel and $896.50 per ounce.

This will be a busy day in the U.S. market, where the PPI and retail sales get released at 12:30 GMT followied by business inventories at 14:00 GMT.  Also, Obama is giving a major speech on the economy and his policy responses at Georgetown University at 16:30 GMT.  Bernanke, Fisher, Evans and Stern of the Fed each speak publicly today.

The Singapore dollar was devalued by a smaller-than-expected 1.5-2% against its currency basket.  This is how the Monetary Authority of Singapore eases monetary policy.  Singapore GDP fell 19.7% saar in 1Q09 after a drop of 16.4% at a seasonally adjusted annual rate in 4Q08.  On-year growth was negative 11.5%.

Monetary authorities in Saudi Arabia cut the rate on reverse repos to 0.5% from 0.75%, citing an easing of inflationary pressure.

Australian business conditions and business confidence readings improved 3 points each to -17 and -19 in March, but the labor market sub-index worsened further.

New Zealand retail sales firmed 0.2% in February, its first increase in three months and better than street expectations for another small drop, but the on-year change remained in the red at minus 6.9%.  Ex-auto sales dipped 0.1% from January.  Business sentiment plumbed to a 35-year low last quarter.

The U.S. will host meetings of the G-20 and G-7 in Washington on April 24th.

Swedish consumer prices firmed 0.3% and by just 0.2% on year in March.  Finnish consumer price inflation slowed to 0.9% y/y in March from 1.7% in February.  Danish consumer prices went up 0.4% and by 1.6% year-on-year in March.  Consumer prices in Bulgaria slid 0.3% m/m, trimming their 12-month gain to 4.0% from 5.4% in February.

Czech industrial production tumbled by 23.4% in the year to February.  The Czech current account improved to a surplus of CZK 17.13 billion in February from a deficit of CZK 1.52 billion in January, as the trade surplus more than doubled.

The French current account deficit narrowed to EUR 2.2 billion in February from EUR 2.5 billion in January.

Foreign direct investment into the Philippines plunged 52% in the year to January.

Surveys by the Bank of Canada reported yesterday indicated very tight corporate credit conditions but a somewhat less bearish business outlook reading of minus 22 after -34 at the end of 2008.

An ECB Council member, Orphanides, warned of a rising deflationary risk.  Euribor rates continue to grind lower.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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