Japanese Officials Concerned About Yen’s Strength

July 19, 2010

The dollar recovered 0.4% against the yen amid rumors BOJ might ease if yen stays near 85 per dollar level.  The dollar also gained 0.7% against the kiwi, 0.2% versus the loonie, and 0.1% relative to the Swiss franc, Aussie dollar, Chinese yuan and sterling.  The greenback slipped 0.3% against the euro.

The Hungarian forint faltered on news that talks with the IMF had broken down.

Japanese markets were closed for Marine Day.  In the Pacific Rim, stocks fell by 1.5% in Australia, 0.8% in Hong Kong, 0.6% in Indonesia, 0.7% in New Zealand and 0.4% in South Korea.  China’s CSI-300 index rose 2.5%, however, and equities in Europe have been relatively stable.  While the British Ftse is 0.4% lower, stocks are up 0.2% in Germany and Spain and by 0.1% in France.

British gilt yields are steady.  Ten-year bund edged up on basis point.

Gold firmed 0.2% but is below the key $1200 level at $1191.10 per ounce. Oil slid under $76 to $75.91 per barrel.

Construction output in the euro area fell 1.0% in May and by 6.3% from a year earlier.  Output was 1.2% greater in April-May than in 1Q10, when such fell 1.9%.  Construction output in April-May was 6.0% lower than a year before, after having declined 9.6% between 1Q09 and 1Q10.

Euroland’s seasonally adjusted current account deficit of EUR 5.8 billion in May was similar to April’s EUR 5.6 billion shortfall.  The cumulative deficit over the twelve months to May equaled 0.5% of GDP.  On an unadjusted basis, the current account deficit more than doubled from EUR 7.5 billion in April to EUR 16.7 billion in May.  Portfolio investment inflows in May of EUR 63.9 billion surpassed direct investment outflows of EUR 17.2 billion.

Australian imports of AUD 18.4 billion in June were unchanged form May’s level.

Britain’s Rightmove house price index fell 0.6% in July and rose only 3.7% from a year earlier.  Rightmove officials expect home price increases in the first half of 2010 to be more than reversed in the second half of the year.

An academic advisor in China is urging diversification away from dollar-denominated Treasuries.

Moody’s downgraded Ireland’s credit rating to Aa2 from Aa1 but raised the outlook to neutral from negative.

Germany’s economics minister said the country was headed for faster growth in 2010 than the officials 1.4% projection.

Finnish producer price inflation remained at 5.2% in June.

According to international capital flow data released by the U.S. Treasury Department just before the weekend, foreign net purchases of U.S. securities dropped sharply to $33.0 billion in May from $110.3 billion in April and $158.8 billion in March.  There was a long-term portfolio capital inflow of $35.4 billion in May, down from a monthly average inflow of $71.3 billion in the first four months of 2010.  The broadest reported inflow, including short-term portfolio capital, was $17.5 billion, a little less than the monthly average in January-April of $22.1 billion per month.

The U.S. National Association of Home Builders will release its monthly housing index today.  Canada reports net securities transactions with non-residents, and Hungary’s central bank meeting is not expected to result in a rate change.  The Bank of Canada tomorrow will probably announce a second 25-basis point interest rate increase.

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

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