No Rate Hike in Australia Sends AUD Lower

February 2, 2010

The Aussie dollar relapsed 1.1% against its U.S. counterpart after a surprise decision by the Reserve Bank of Australia not to implement a fourth rate hike now.

The greenback otherwise slid 0.3% relative to the Canadian dollar and 0.1% against the euro, but has risen 0.3% against sterling and 0.1% versus the yen, Swiss franc and kiwi.

Stocks were mixed in the Pacific Rim.  Such rose 1.6% in Japan and 1.8% in Australia but fell by 1.3% in Taiwan, 1.2% in India, 0.7% in Sri Lanka and South Korea, and 0.5% in Thailand.  The German Dax and Paris Cac have rallied 0.6%, while the British Ftse has traded 0.3% higher.

Sovereign debt yields pushed slightly higher in Japan, Germany and Britain.

Oil and gold have a bid tone with overnight rises of 1.3% and 0.7% to $75.27 per barrel and $1113.20 per troy ounce.

Australia’s cash rate, which had been lifted by 25 basis points in each month of 4Q09, was left at 3.75% after the first Board meeting of 2010.  Analysts had anticipated a fourth increase of 25 basis points in light of a very strong labor market.  Instead, officials noted that lending rates have advanced already by close to 100 basis points, more than the central bank rate, that small firms are still finding credit conditions difficult, and that the global economic outlook is still uncertain because of such things as China’s intent to temper its recovery.  The statement did indicate nonetheless that more rate increases in Australian likely lie ahead.

Australian business conditions remained steady at +10 in December, but business expectations suffered a steep drop to +8 from +19 in November.  The Aussie commodity price index rose another 1.8% last month.

Private wages in New Zealand rose just 0.3% last quarter and by a nine-year low of 1.5% from the year-earlier quarter.

Japan’s monetary base recorded on-year growth of 4.9% in January, down from 5.2% in December, 5.6% in 3Q09 and 7.5% in 2Q09 but faster than the fourth quarter’s 4.4% increase.  The base expanded 5.9% last year, up from a mere 0.1% uptick in 2008.  The Bank of Japan had Y 122.4 trillion of assets at the end of last month, practically unchanged from the balance sheet total of Y 122.5 trillion at end-2009.

Britain’s construction purchasing managers index rose to 48.6 in January, best since February 2008, from 47.1 in December and 47.0 in November.

Euro area producer prices edged 0.1% higher in December and were 2.9% lower than a year earlier.  The PPI had fallen 4.4% in the year to November but risen 1.2% in the year to December 2008 and 4.6% in the year to December 2007.  Energy price deflation lessened from an on-year drop of 19.8% in July 2009, mainly due to energy costs, where the 12-month rate of decline narrowed from 19.8% in July to 5.6% in December.  The overall PPI increased 1.4% at an annualized rate between 3Q09 and 4Q09.

German retail sales volume recovered 0.8% in December, but their 12-month rate of drop held steady at 2.5%.  Retail sales fell 1.8% in 2009 as a whole after dipping 0.1% in 2008 and 1.2% in 2007.  The December result was close to expectations.

The latest reading of the Swiss SECO consumer climate index shows improvement to minus 7 from minus 14 the month before.

Motor vehicle sales in South Africa were 12% greater in January than a year earlier, their first on-year advance since March 2007.

Brazil’s manufacturing PMI improved to a 35-month high of 57.8 in January from 55.8 in December.

U.S. pending home sales and monthly auto sales will be released today.  The central bank in Romania appears likely to cut its interest rate tomorrow in light of the IMF’s readiness to proceed with its loan to that economy.

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

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