Slightly Softer Dollar and Yen

April 29, 2010

The dollar and yen declined 0.4% against the Canadian dollar, 0.2% against the kiwi, Aussie dollar, euro and sterling and by 0.1% relative to the Swiss franc.

Japanese markets were shut for the first holiday of “Golden Week,” Day of the Showa.  They will be open Friday but closed next Monday through Wednesday.

Asian equities were mixed, with declines of 1.2% in China, 0.8% in Hong Kong and Australia, and 0.3% in South Korea and Taiwan but advances of 0.8% in Indonesia, 0.9% in Singapore, 0.7% in India and 0.5% in Thailand.  In Europe, the Paris Cac, British Ftse and German Dax have recovered 1.0%, 0.7%, and 0.5%.

The ten-year German bund yield edged up 1 basis point, and its gilt counterpart slid a basis point.

Oil prices climbed 1.2% to $84.24 per barrel, while gold eased 0.3% to $1168.50 per ounce.

News about Greece hasn’t really improved.  NYU Professor Roubini spoke of an alarming contagion that will carry risks of inflation and/or country defaults.  Bundesbank President Weber called the Greek debt crisis a burden for the euro that must be fixed swiftly.  Market movements, however, suggest some hopefulness that officials will avoid another Lehman Brothers fiasco in handling aid to Greece.

The FOMC did not abandon “extended period of time” language in yesterday’s released statement, suggesting a quarter or two before a rate hike.

Brazil’s central bank, on the other hand, implemented a 75-basis point increase of the Selic Rate to 9.5% in its first tightening since the Great Recession (see my review).

The Reserve Bank of New Zealand, like the Fed, left policy unchanged.  The statement from the RBNZ was somewhat less hawkish than I was expecting.

Overnight Euroland sentiment data signaled substantial improvement.

  • Overall business sentiment in the bloc rose 2.7 points to 100.6 in April.  The readings had been 89.6 six months earlier and 70.6 at the March 2009 low.  Analysts had anticipated a score of 99.4.  Sentiment improved 4.3 points in Germany and 2.0 points in France but fell by 1.4 points in Portugal.
  • Industrial sentiment improved three points in Euroland to minus 7.  It had been at minus 21 six months earlier and minus 38 in March 2009.
  • Consumer confidence in Euroland gained two points to minus 15 but was not very much better than minus 18 last October.
  • Service sector sentiment rose four points to +5.  Retail rose five points to minus 1.  Construction continued to lag with an unchanged reading of minus 25.
  • Euroland’s business climate index mirrored the business sentiment index, printing its first positive score, +0.23, since June 2008.  Such was minus 0.32 in March and bottomed at minus 3.48 in March 2009.
  • Capacity usage rose for the third straight quarter in Euroland, printing at 75.5% in 2Q after 72.3% in 1Q, 71.0% in 4Q09 and 69.6% in 3Q09.  Such remains lower than the 82.7% reading in the third quarter of 2008, however.

German labor statistics revealed faster improvement than forecast.  The jobless rate fell two-tenths to 7.8%.  Analysts looked for another 8.0% reading.  Unemployment contracted by 68K, the largest drop since February 2008 and seven times greater than forecast, plus March’s decline was revised to 42K from 31K reported initially.  Employment in March was 0.2% lower than a year earlier, only half the on-year decline that was posted in the final quarter of 2009.

Euroland M3 posted on-year dips of 0.1% both in March and the first quarter of 2010, meeting analyst expectations.  Loans to the private sector were 0.2% less than a year earlier.  Loans for mortgages and to corporations were up 2.6% and down 2.4% compared to a year earlier.  Weak money and credit growth is an old story.  The data are in part distorted by the high level of uncertainty and very low level of interest rates.  M1 was 10.9% greater than in March 2009.

Belgian consumer prices rose 0.4% in April, lifting the 12-month comparison to 1.80% from 1.66% in March and 0.60% in April 2009.  Spanish consumer prices were 1.6% higher than a year ago in April.  Housing permits in Spain were 20.3% lower in February than a year earlier.  Icelandic consumer price inflation slid to 8.3% in April from 8.5% in March.  Italian hourly wage inflation slowed to 2.3% in March from 2.1% in February.

Swedish retail sales volume rose 0.7% in March and by 4.1% from a year earlier.  This pick-up produced a 1.8% on-year rise in the first quarter.  Household loans in Sweden in March were again a robust 9.3% greater than a year earlier.  Consumer confidence in the country of 19.5 surpassed expectations, and one policymaker from Sweden’s central bank intimated that a first interest rate hike is coming soon.  Norwegian core retail sales (excluding auto and gasoline) dipped 0.1% on month but rose 13.3% on year in March.

The Nationwide British house price index posted a solid 1.0% monthly advance in April and was 10.5% greater than a year earlier.

South African producer price inflation rose to 3.7% in March from 3.5% in February.

New Zealand recorded a significantly bigger trade surplus of NZD 567 million last month than the surplus of NZD 335 million in February.

Scheduled U.S. data today include weekly jobless insurance claims and the Kansas City Fed index.

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



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