Dollar Starts September with a Drop

September 1, 2010

The dollar lost 1.5% against the Australian dollar, 0.9% versus the euro and kiwi, 0.6% relative to the Canadian dollar, 0.3% against sterling, 0.2% against the yen and 0.1% versus the Swiss franc.  The yuan eased again but by less than 0.1%.

Stocks jumped 2.1% in Australia, 1.7% in Indonesia, 1.4% in New Zealand, 1.3% in South Korea and India, 1.2% in Japan, 1.1% in Singapore and 0.7% in Taiwan.  Chinese equities fell 0.7%, but European stocks have climbed 1.6% in Paris, 1.3% in London and 1.0% in Frankfurt.

Keeping with these signs of less risk aversion, ten-year sovereign bond yields advanced six basis points in Japan and Germany and four bps in Britain.

And both oil prices, up 0.9% to $72.54 per barrel, and gold prices, up 0.5% to $1256.00 per ounce, increased.

Manufacturing PMI results for August were released for many economies overnight, and investors await U.S. readings due at 14:00 GMT.

  • Euroland’s 55.1 score was a tenth better than the preliminary indication but down from 56.7 in July and at a six-month low.  Jobs increased only in Germany, Austria, and the Netherlands.
  • Within the euro area, the German PMI was 58.2, three points less than in July and at a six-month low.  The French index rose to a four-month high of 55.1 from 54.7 in July and 53.9 in June.  Italy had a score of 52.8, down 1.6 points.  Spain’s reading of 51.2 compares to 51.6 in July.  Spain had the dubious distinction of completing a third year of uninterrupted sub-50 readings for jobs, meaning steady contraction in factory workers.  The Irish PMI slid 0.3 to 51.1, and the Dutch reading of 54.3 was 1.4 points less than in July.  The Greek PMI relapsed deeper into recession at 43.0 after 45.3 in July and 42.2 in June.
  • Britain’s manufacturing PMI reading of 54.3 was below expectations of 55.8 and down from 57.3 in July, 57.6 in June and 58.0 in both April and May.  Indeed, 54.3 constitutes a nine-month low, but orders, production, and jobs continue to grow.
  • Within eastern Europe, Poland’s PMI hit a 37-month high of 53.8 after a six-month low of 52.1 in July.  The Czech PMI was at 57.3 following a four-month low of 56.8 in July.  Russia’s index constituted a 28-month high of 52.9 and exceeded the long-term average reading of 52.1.  Hungary posted a 51.9 reading, down from 53.5 in July but still above the 50 demarcation between expansion and contraction.
  • The Swiss PMI was a bit of a big disappointment, dropping 5.5 points to 61.4.  Sweden’s PMI score of 60.6 was 3.6 points lower than July’s of 64.2.  Norway’s index fell below 50 to 49.2 in August from 54.9 in July and was the weakest reading since end-2009.
  • In Asia, Taiwan’s PMI of 49.2 was less than 50 for the first time in a year and a half.  South Korea’s 50.9 reading after 53.2 in July was likewise at a 17-month low.  India’s 57.2 score was down from 57.6 in July and a 27-month peak of 59.0 in May, and there were signs that inflation is heating up in South Asia’s main economy.  The Chinese manufacturing PMI returned to 51.9 after readings of 50.4 in June and 49.4 in July.  Growth is cooling but not collapsing in China.
  • The Turkish PMI slid to a six-month low of 51.3 from 52.8 in July.  South Africa posted a 50.3 reading following sub-50 scores in June and July.
  • Australia’s manufacturing PMI eased to 51.7 after improving to 54.4 in July from 52.9 in June.

The bigger news out of Australia was word that real GDP in 2Q10 had advanced by a stronger-than-forecast 1.2% after an upwardly revised 0.7% gain in the first quarter, and this data boosted the Aussie dollar back above the 90-U.S. cent level.  On-year GDP growth accelerated to 3.3% from 2.7% in the first quarter.  Exports (5.6%) grew faster than imports (3.0%), thanks to a 12.5% leap in the export/import price ratio.  Consumption gained 1.6% and 4.0% on year.  Investment went up 0.6% on quarter but 8.7% on year.

Australian commodity prices were 52.7% higher than a year ago in August.  New Zealand commodity prices slid for a third straight time in August.

Japanese motor vehicle sales growth accelerated sharply to 46.7% in the year to August from 15.0% in July.

German retail sales volume eased 0.3% on month in July, matching June’s outcome, and were unchanged from the 2Q10 average level.  Sales were 0.8% above the level in July 2009.

Danish retail sales firmed 0.3% in July but were 1.8% lower than a year earlier.

Italian wages edged up 0.1% in July and recorded on-year growth of 2.4%.

Sweden’s current account surplus in the second quarter was 19.3% smaller than the first-quarter surplus.The NIESR Institute revised projected Swedish growth upward to 4.3% this year and 3.4% in 2011.

Ozawa, who is challenging Japanese Prime Minister Kan’s DPJ leadership, warned that intervention may be used to stem yen strength.

Speculation continues that Bundesbank Bank President Weber’s chances have weakened for being promoted to follow Trichet in the ECB’s top job.

In a national prime time address marking the pull-out of U.S. troops in Iraq, President Obama asserted that a restored U.S. economy is the top priority.

Besides the ISM manufacturing purchasing managers survey, scheduled U.S. data today include the ADP estimate of private employment, auto sales, construction spending, and weekly oil inventories.  Brazilian monetary policymakers, COPOM, are not expected to change the key Selic rate today.

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

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