Near-Term Dollar Direction Unclear

May 18, 2011

The dollar is 0.1% softer than its Tuesday close at 1.4256 per euro.  It had slumped from a 17-month high of $1.4941 on May 4 to a low of $1.4064 on May 13 before partly recovering this week, but traders are unsure whether the correction has paused or ended.  One continuing cue is stock market performance.

Against other currencies, the dollar has declined 0.4% against the yen and 0.7% versus the kiwi.  It is unchanged against the yuan and Canadian dollar and up by 0.4% relative to sterling, 0.2% versus the Aussie dollar and 0.1% against the Swiss franc.

Stocks recovered 1.1% in Indonesia, 1.0% in Japan and The Philippines, 0.8% in China, 1.6% in South Korea, 0.7% in Taiwan, 0.5% in Hong Kong and 0.2% in Australia.  The Paris Cac and British Ftse show gains thus far today of 0.8% in Europe, and the German Dax has risen 0.6%.

Little change has occurred in 10-year sovereign yields.  The JGB is steady at 1.6%.  German bunds edged a basis point higher, while British gilt yields are off a basis point.

Oil and gold prices climbed 1.6% and 0.9% to $98.49 per barrel and $1493.70 per troy ounce.

Japan’s tertiary index, a gauge of service-sector activity, plunged 6.0% in March, swinging from a 12-month rise of 2.0% in February to a drop of 2.9% in March.  The wholesale turnover component fell 9.6%, while retail dropped by 7.6%.  The results were hammered by the nation’s natural disaster.

Australian labor costs climbed 0.8% last quarter but eased in on-year terms to 3.8% from 3.9%.  Aussie skilled labor vacancies slid 0.4% in March.  New Zealand producer output prices rose 1.7% on quarter and 4.2% on year in 1Q11.  Producer input prices were up 2.2% from 4Q10 and 5.3% above their level a year earlier.

Malaysian consumer prices advanced 0.2% in April and accelerated to a 12-month increase of 3.2% from 3.0% in March.  Malaysian GDP last quarter was 4.6% greater than a year before, slightly less than its 4.8% rise in the year to 4Q10.

Bank of England minutes revealed the same split vote in May as occurred in each of the three previous monthly meetings, with Andrew Sentance voting for a 50-basis point rate hike, Dale and Weale seeking a 25-bp advance, and the other six policymakers favoring no change in the 0.5% Bank Rate.  Adam Posen’s quest of an increase in the asset purchase program ceiling of GBP 250 billion was again rejected by the other eight committee members, who voted to retain a limit of GBP 200 billion.

The claimant count of British unemployment went up 12,400 in April, most in 15 months, and the claimant jobless rate unexpectedly ticked up to 4.6% from 4.5%.  The ILO jobless rate, in contrast, of 7.7% in the first quarter was lower than forecast.  Wage inflation remain subdued in 1Q11.  The rise from 1Q10 was 2.3% with bonus pay included and 2.1% excluding such.

Construction output in the euro area fell 0.3% in March after a 0.8% decline in February but was still 1.0% greater in 1Q11 on average than in the final quarter of 2010.  Construction output was 4.9% lower than a year earlier in March and fell by 2.0% between 1Q10 and 1Q11.

Danish consumer confidence rose 2.6% in May.  Spanish GDP growth last quarter was reconfirmed at the preliminary pace of 0.3% versus 4Q10 and 0.8% from the first quarter of 2010.  The Spanish indices of leading and coincident economic indicators respectively rose 0.6% and 0.1% in March.   Portuguese joblessness jumped sharply to 12.4% last quarter from 11.1% in 4Q10 and 10.1% in 4Q09.  Portuguese producer prices increased 0.7% on month and 6.5% on year in April. 

FOMC minutes get released today.  Canada reports wholesale turnover and the index of leading economic indicators.  Investors await Japanese 1Q GDP due tonight.

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

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