New Overnight Developments Abroad: Rebound in Commodity-Sensitive Currencies

December 10, 2009

The U.S. dollar fell 1.3%, 0.9%, and 0.5% against the New Zealand, Australian and Canadian dollars.  The rand strengthened, too.

The greenback also lost 0.2% against sterling and 0.1% to the euro and Swiss franc, but it’s 0.5% higher against the yen.

Stocks fell 1.4% in Japan, 1.5% in Taiwan, 0.6% in Thailand and 0.7% in Australia.  Equities rose 1.1% in South Korea and 0.6% in China.  In Europe, stocks are trading up by 0.7% in France, 0.6% in Germany and 0.5% in Britain.

The yield on ten-year gilts is significantly higher.  Bund and JGB yields have edged up.

Oil and gold prices firmed 0.3% and 0.2% to $70.92 per barrel and $1123.60 per troy ounce.

Several central banks made rate announcements, all holding them steady.  None of the actions was a surprise.

  • The Bank of England retained its 0.5% Bank Rate and Gbp 200 billion ceiling on asset purchases.  The latter will be completed in two more months.
  • The Swiss National Bank quarterly policy meeting decided to leave the 3-month Libor target at 0.25%.  Determination to maintain a stable Swissy-euro cross was repeated.
  • The Bank of Korea made no change now in its 2.0% benchmark rate and reiterated that the “accommodative” stance will continue for the “time being.”
  • The policy board at Brazil’s central bank, COPOM, left its Selic rate at 8.75%.
  • New Zealand’s cash rate, 2.5% since April 30, was not changed, either.

Japanese core domestic private machinery orders dropped 4.5% in October and by 21.0% from a year earlier.  This followed a 10.5% spike in September and left October’s level 2.1% above the third-quarter average.  Officials expect a 1.0% quarterly increase in the fourth quarter.  Public-sector orders fell 14.4% in the latest month, while foreign demand for Japanese machinery advanced 15.3%.

Japanese domestic corporate goods prices edged 0.1% higher last month, cutting their 12-month drop to 4.9% from 6.8% in the year to October. Import prices firmed 0.4% but were 0.2% lower than a year earlier.  Stock and bond transactions in the week to December 5 generated a Y 495 billion capital outflow, 61% greater than the net outflow in the prior week of November 28.

Australia reported much better November labor statistics than expected.  That’s the only economy to have experienced three central bank rate increases thus far.  The jobless rate edged down a tenth to 5.7%, suggesting such has crested, and jobs increased 31.2K, six times more than forecast, after a gain of 27.2K in October.

Following Germany’s earlier cue, France and Italy reported disappointing industrial production data for October.

  • Italian production rose just 0.5%, only about a third as much as forecast, after slumping 5.1% in September.  Such were down 11.8% from October 2008.
  • French industrial output fell 0.8% on top of a 1.2% decrease the month before.  An increase of more than 0.5% had been anticipated.
  • A monthly decline of 1.8% in German industrial production was announced this past Tuesday.

German wholesale prices increased 0.7% in November, reflecting higher energy costs largely, and this halved the on-year decline to 3.2%.

Revised data showed a 0.6% increase of Italian GDP last quarter, indicating the recession has ended, but GDP was still 4.6% lower than a year before.

Concerns persist about the possibility of Greece defaulting.  ECB Governing Council member Nowotny was quoted saying that Euroland members with fiscal problems will not be underwritten by the rest of the bloc.

Norwegian consumer prices rose 0.3% on month and 1.5% on year in November.  The PPI advanced 3.6% on month and 4.8% on year.  The Norges Bank so far is the only European central bank to have tightened its key interest rate.

Swedish consumer prices were unchanged in November and 0.7% below year-earlier levels.

South Africa’s current account deficit narrowed from 3.4% of GDP in the second quarter to 3.2% of GDP last quarter, lowest since 2Q05.

U.S. and Canadian trade data get released today.  Weekly U.S. jobless insurance claims are also scheduled.

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

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