Dollar Recoups Some Losses

January 24, 2011

The dollar reversed a small part of last week’s losses, gaining 0.5% against the euro, 0.4% relative to the yen, and 0.3% versus sterling and the Canadian dollar.  The dollar also eased 0.1% against the Swiss franc and the Australian and Canadian dollars.  In the wake of President Hu’s trip to America, the yuan is unchanged.

Stocks in Japan and Australia rose 0.7% and 0.6%, but many other Pacific Rim bourses closes with losses, for example China and Indonesia (down 1.0%), Thailand (minus 4.3%) and Hong Kong (off 0.3%).  In Europe, the German Dax and Paris Cac are off 0.6% and 0.2%, while the British Ftse is up 0.2%.

Ten-year German bunds and British gilt yields slid by one and three basis points, while the 10-year JGB yield firmed two basis points. 

Oil prices fell 0.7%, and gold prices climbed 0.4%.

Euro area industrial orders shot up 2.1% in November on top of a 1.4% advance in October.  Their 12-month rate of increase accelerated to 19.9% from 14.8%.  Core industrial orders also went up 2.1% on month.  Overall orders in October-November were 1.3% higher than the 3Q level.  In November-over-October comparisons, orders went up 5.3% in Germany, 2.2% in Spain, and 1.5% in France but fell by 2.0% in Italy. 

Preliminary purchasing manager readings for Euroland, Germany and France reflected continuing solid momentum at the start of the current quarter but a widening gap between Germany and France on the one hand and other economies in the region on the other.  Price pressures are building but not getting passed onto to consumers for the most part.

  • Euroland’s composite index reached a six-month peak of 56.3 in January, up 0.8 points.  The services component rose a full point to 55.2, while manufacturing slid 0.2 points to an above-trend 56.9 score.
  • In Germany, new orders touched a record high.  The composite PMI had a reading of 51.0, 0.7 higher than in December and a 55-month peak.  Manufacturing dipped 0.5 to 60.2, while services improved 0.8 to 60.0.  German employment growth in services is picking up steam and heralding a long-awaited revival of consumption. 
  • The French composite index gained 0.6 points to 56.9, a four-month high.  An increase in services to 57.1 from 54.9 in December outweighed a drop in manufacturing to 54.3 from 57.2.  Scores above 50 connote increasing activity. 

Germany’s index of leading economic indicators rose by a brisk 0.9% in November, a further indication of strength in Europe’s largest economy.  Industrial production in neighboring Austria rose 1.6% on month and 6.5% on year in November.

The Bank of Japan Board began a two-day policy meeting, which is not expected to change interest rates.

Rate increases appear plausible later today in Hungary and Israel.

Australian producer prices edged only 0.1% higher in the fourth quarter of 2010, as a 4.4% drop in import prices counter-balanced a 0.7% increase in the domestic PPI.  The 12-month 2.7% rate of increase was 0.5 percentage points less than forecast.

Consumer prices in Singapore firmed 0.2% in December, lifting on-year inflation to a two-year high of 4.6%.  Industrial production in Taiwan was 18.2% greater in December than a year earlier. 

No U.S. or Canadian data releases are scheduled today.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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