New Overnight Developments Abroad: Stronger Commodity Currencies/Softer Yen

June 19, 2009

The dollar has lost 0.8% against the Australian dollar and 0.4% against the Canadian and New Zealand dollars.  The Australian dollar is closing the week again above 80 U.S. cents after bouncing off $0.785 earlier in the period.  The dollar is also off 0.6% versus sterling but up 0.5% relative to the yen as risk aversion subsides.  EUR/USD met resistance at $1.3950 and is up only 0.2% on net.  The Swissy is flat against the dollar.

Share prices mostly firmed in Asia.  Gains amounted to 3.3% in Thailand, 2.0% in Indonesia and Sri Lanka, 1.9% in India, 1.6% in Singapore, 1.4% in Taiwan, 0.9% in Japan, 0.7% in China, and 0.6% in South Korea.  This improvement spilled over into Europe, where the British Ftse and Paris Cac show gains of 1.7% and 1.1%.  The German Dax has lagged with an uptick of just 0.3%.

The 10-year JGB softened another basis point to 1.445% and dropped 7 bps for the week, most since mid-February.  Investors are encouraged that Japanese officials will endeavor to hold long-term yields down.  10-year bund yields climbed 4 bps, in contrast, following an upbeat economic message from EU leaders.

Oil at $71.77/barrel firmed 0.6% and remains stronger than the recent $70 pivot.  Gold is steady at $933.70 per ounce.

Iran’s spiritual leader Khamenei called Ahmadinejad’s victory a public endorsement of the Iranian establishment, but civil protest persists.  Iran’s political unrest has not really impacted currency trading thus far but has that potential in the future.

A draft statement has surfaced from the leaders of the EU’s 27 members meeting in Brussels, which 1) looks to a sustainable economic recovery, 2) rejects the need for additional fiscal stimulus, and reappoints Jose Barroso to a second 5-year term as EU Commission president.

Bank of Japan Policy Board minutes from May 21st addressed the question of when to exit quantitative easing and concluded policy should be guided by financial market developments and corporate financing conditions.  That was the meeting when the economic assessment got revised upward for the first time since 2006.  Japanese stock and bond transactions generated a net Y 423 billion outflow last week compared to a Y 655 billion outflow the week before.

German producer prices were unchanged in May, failing to fall for the first time since October and energy increased by 0.7%.  However, the 12-month drop of the PPI lengthened to 3.6% from 2.7% in April.  In the year to October 2008, the PPI had risen 7.3%.  Non-energy producer prices eased 0.3% m/m and 2.5% y/y.

Italian unemployment, like the German PPI data, conformed to analyst expectations.  Jobs fell 0.9% in the year to 1Q09, and the seasonally adjusted unemployment rate of 7.3% last quarter was up from 7.0% in 4Q08 and its highest since the first quarter of 2006.

Dutch consumer confidence worsened to a reading of minus 24 in June from minus 23 in May.

The Bank of Canada Governor again expressed concern about excessive Canadian dollar strength.  Canadian retail sales data get released at 12:30 GMT.  Wholesale turnover, released this past Wednesday, revealed a 0.6% drop in April and a 12-month decline of 7.9%.

Central banks in Mexico and Colombia are seen likely to announce further rate cuts later today.

No significant U.S. data releases are scheduled today.

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

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