Yen and C-Dollar Showing Strength

January 5, 2010

The dollar rose 0.5% against sterling but has lost 0.5% against the Canadian dollar and yen.  The greenback also edged 0.2% lower against the New Zealand and Australian dollars.  It is 0.1% softer against the euro and steady against the Swiss franc.  The C$ is at its strongest level since late October.

Commodities are firm, with gold up 0.4% at $1122.90 per ounce and oil 0.1% higher at $81.63/barrel.

In the Pacific Rim, stocks continued to climb, gaining over 2% in Hong Kong, Pakistan, and Vietnam, 1.0% in Australia, 1.2% in New Zealand and Indonesia, and more than 0.5% in Malaysia, Singapore, India and the Philippines.  Japanese stocks firmed 0.3%.  In Europe, the Ftse is up 0.4%, but the Dax has dipped 0.1%.

Ten-year bund yields are up 2 basis points.  Gilts and JGBs are flat.

In China, an officials of the NDRC warned that hot money inflows may subject the yuan to new buying pressure.  Bini Smaghi, an ECB policymaker, urged Chinese officials to adopt a less rigid yuan policy.  Japanese Finance Minister Fujii is believed to have asked to step down over health reasons (he’s 77), but a final decision has not been made.

German labor statistics were again better than forecast but continue to be distorted by job creation policies, which saved over 300K jobs last year.  The number of unemployed fell 3K in December instead of rising 5-10K as forecast, and the unemployment rate held at 8.1%, just 0.4 percentage points greater than a year earlier.  The U.S. jobless rate, in contrast, is 3.2 percentage points greater than a year ago.  German employment in November was 0.5% lower than a year before. 

The National Bank of Romania announced a surprise 50-basis point cut in its monetary policy rate to 7.5%.  On-year inflation had risen to 4.7% in November from 4.3% in October, and domestic political uncertainty had increased.  But the leu initially took the central bank announcement in stride.

Japan’s monetary base accelerated to on-year growth of 5.2% in December from 3.8% in the year to November but was still lower than growth of 5.6% in the year to 3Q09.  Japanese domestic auto sales rose 36.5% in the year to December but posted a drop of 9.1% in 2009 as a whole.  The Fitch credit rating agency predicts a further rise in Japan’s debt/GDP ratio but sees a solid trade balance.

New home sales in Australia, where the central bank’s cash rate has been lifted three times,  rose 0.3% in November.

Consumer price inflation in the Philippines accelerated to an on-year rate of 4.4% in December from 2.8% in November.  Taiwanese consumer prices dipped 0.2% in the year to December, whereas wholesale prices increased 5.6%.  Thai consumer prices edged 0.1% lower in December but recorded a gain of 3.5% from a year earlier.

The British PMI index for construction edged up a tenth to 47.1 in December from 47.0 but printed below analyst expectations.

French consumer confidence unexpectedly eased to minus 31 from minus 30 in November.  That was the first drop in four months.

According to preliminary estimates, Euroland consumer price inflation climbed to an as-expected on-year 0.9% in December from 0.5% in November, minus 0.1% in October and minus 0.3% in September.   Inflation is now its highest since February 2009 but still a percentage point below target.

Norway’s PMI-manufacturing index improved 1.7 points to 50.4 in December, best since March 2008 even though the orders and production components remain under the 50 breakeven line.

In Hungary, producer prices firmed 0.5% in November and were 0.3% greater than a year earlier.

U.S. pending home sales, factory orders, auto sales, and weekly chain store sales get released today.  Hoenig of the Fed speaks publicly.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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